TAU.L Regulatory News (TAU)

17 September 2018

Tau Capital plc

("Tau" or the "Company")

POSTING OF CIRCULAR TO SHAREHOLDERS

AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

On the 28 August 2018 the Company announced that TAU SPV (a subsidiary of the Company established and registered in accordance with the laws of the Netherlands) had conditionally agreed to dispose of the Company's indirect interest in Stopharm (the "Disposal"), which is the Company's sole remaining investment. Stopharm is a Kazakh company engaged in wholesale pharmaceutical distribution.

The Company has today posted a Circular to Shareholders (the "Circular") including a notice convening an Extraordinary General Meeting (the "EGM") to provide shareholders with the background to and to explain why the Directors consider the Disposal and a proposed amendment to the Company's Investing Policy (together, the "Proposal") to be in the best interests of the Company and Shareholders as a whole.

The EGM will be held at 10.00 a.m. on 4 October 2018, at IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP, British Isles, to consider the Resolution, which is set out at the end of the Circular.

The Circular, Notice of EGM and Form of Proxy will be available shortly on the Company's website at www.taucapitalplc.com.

An extract from the Chairman's Letter in the Circular is set out below.

All capitalised terms used throughout this announcement shall have the meanings given to such terms in the Definitions section of this announcement and as defined in the Circular.

On completion of the Disposal, the Company will no longer be classified as an investing company and will be classified as an AIM Rule 15 cash shell and as such will be required to make an acquisition or acquisitions which constitutes a reverse takeover under AIM Rule 14 (including seeking re-admission as an investing company (as defined under the AIM Rules)) on or before the date falling six months from completion of the Disposal or be re-admitted to trading on AIM as an investing company under the AIM Rules (which requires the raising of at least £6 million) failing which, the Company's Ordinary Shares would then be suspended from trading on AIM pursuant to AIM Rule 40. Admission to trading on AIM would be cancelled six months from the date of suspension should the reason for the suspension not have been rectified.

The attention of Shareholders is drawn to the Directors' recommendation that Shareholders vote in favour of the Resolution to be proposed at the EGM as set out below.

Further information, please contact:

RECOMMENDED PROPOSAL FOR THE SALE OF THE COMPANY'S INVESTMENT IN STOPHARM LLC AND AMENDMENT TO INVESTING POLICY

1. INTRODUCTION

As announced by the Company on 28 August 2018, TAU SPV (a subsidiary of the Company established and registered in accordance with the laws of the Netherlands) has agreed conditionally to dispose of the Participation Interest. The Company's indirect interest in Stopharm remains its sole remaining investment. Stopharm is a Kazakh company engaged in wholesale pharmaceutical distribution.

The purpose of this circular is to provide you with the background to and to explain why the Directors consider the Disposal and the proposed amendment to the Company's Investing Policy (together, the "Proposal") to be in the best interests of the Company and Shareholders as a whole and why they recommend that Shareholders vote in favour of the Resolution to be proposed at the EGM.

A notice convening an EGM to be held at 10.00 a.m. on 4 October 2018, at IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP, British Isles, to consider the Resolution, is set out at the end of this Circular.

2. BACKGROUND AND RATIONALE FOR THE PROPOSAL

The Company was established as a public limited company incorporated in the Isle of Man in April 2007 and its Ordinary Shares were admitted to trading on AIM in May 2007. The Company's Investing Policy and principal objective at that time was to invest in public and private businesses established in, operating in or with exposure to Kazakhstan and neighbouring countries.

In 2007, the Company raised from investors aggregate gross proceeds of USD 251 million and proceeded to invest these funds, through its Group entities, into a portfolio comprised of both public equity and private equity assets.

In 2012, the Company's Shareholders amended the Investing Policy of the Company to carry out an orderly realisation of the portfolio within a total timeframe of two years from the date of the new investing policy of July 2012. Given the prevailing economic conditions in Kazakhstan, it has taken the Company longer than initially anticipated to implement the Investing Policy.

The Company is now in the position where it has realised the entire portfolio with the exception of the investment in Stopharm. The Company has also progressively reduced the Company's operating cost base and distributed to Shareholders (by way of tender offers) all net cash not required to meet liabilities and operating costs.

In total the Company has completed four tender offers between 2012 and 2014 distributing an aggregate of USD 81.2 million.

Notwithstanding the Company's careful control of operating costs, the Company's cash reserves continue to reduce. As at 30 June 2018, the Company held cash (net of liabilities) of USD 0.57 million, and has estimated annual running costs of USD 0.48 million.

3. TERMS OF THE DISPOSAL

The Disposal will take place, conditional on shareholder approval of the Resolution, in the form of the transfer to the Buyer by TAU SPV of the entire Participation Interest for a consideration of KZT 443,850,000 (approximately USD 1.23 million at prevailing exchange rates).

Stopharm's audited results for the year ended 31 December 2017 recorded total revenues of KZT 37.4 billion (approximately USD 112.46 million) and a profit before tax of KZT 76.3 million (approximately USD 0.23 million). The audited total assets of Stopharm as at 31 December 2017 were KZT 14.3 billion (approximately USD 43.00 million), with net assets as at 31 December 2017 of KZT 2.1 billion (approximately USD 6.4 million).

The agreed sale price represents an impairment of approximately USD 4.9 million to the carrying value of Stopharm of USD 6 million contained in the Company's interim results for the six months ended 30 June 2017 as reported on 29 September 2017. This impairment has been reflected in the financial statements as at 31 December 2017.

The Participation Interest has been up for sale since 2012 and other than an offer announced on 29 September 2014 which never progressed, and an expression of interest announced on 30 June 2016, there have been no other offers.

The Transfer Agreement contains basic warranties as to capacity and authority and title, and no other warranties from TAU SPV. The Transfer Agreement also contains an undertaking from the Buyer, should the Buyer transfer the Participation Interest within 12 months of the closing date of the Transfer Agreement, to pay to TAU SPV 25% of any excess consideration received by the Buyer over the purchase price received by TAU SPV pursuant to the Transfer Agreement.

The Transfer Agreement requires that all relevant conditions need to be satisfied within 60 days from the date of execution of the Transfer Agreement, with completion occurring within five business days of the satisfaction of the final condition precedent.

The net proceeds from the Disposal will be used to provide additional working capital for the Company.

On Completion, the Company would cease to own, control or conduct all or substantially all, of its existing trading business, activities or assets and would therefore become an AIM Rule 15 cash shell.

The Directors consider that the terms of the Disposal are fair and reasonable insofar as the Company's Shareholders are concerned.

On completion of the Disposal, the Company will no longer be classified as an investing company and will be classified as an AIM Rule 15 cash shell and as such will be required to make an acquisition or acquisitions which constitutes a reverse takeover under AIM Rule 14 (including seeking re-admission as an investing company (as defined under the AIM Rules)) on or before the date falling six months from completion of the Disposal or be re-admitted to trading on AIM as an investing company under the AIM Rules (which requires the raising of at least £6 million) failing which, the Company's Ordinary Shares would then be suspended from trading on AIM pursuant to AIM Rule 40. Admission to trading on AIM would be cancelled six months from the date of suspension should the reason for the suspension not have been rectified.

Shareholders should be aware that if the Resolution is not passed, the Board will seek the cancellation of the admission of the Company's Ordinary Shares to trading on AIM followed by an orderly liquidation of the Company and the return all available cash to shareholders.

4. THE COMPANY'S CURRENT INVESTING POLICY

At the Company's annual general meeting held on 24 July 2012, the Investing Policy was amended to the Company's current Investing Policy as set out below (with references therein to the "date of the meeting" being 24 July 2012):

"The Directors are therefore proposing that an orderly divestment of the Fund's investments be undertaken in the following manner and over the following periods:

(a) no new investments in Private Equity investments (as defined in the Company's admission document dated 3 May 2007) will be made with effect from the date of the meeting;

(b) no new investments in Public Equities (as defined in the Company's admission document dated 3 May 2007) will be made by the Manager (as defined in the Company's admission document dated 3 May 2007) on behalf of Tau (Cayman) LP with effect from the date of the meeting without the prior approval of the Board;

(c) the sale of the liquid part of the portfolio of Public Equities will be implemented within a period of three months;

(d) the sale of the remainder of the portfolio of Public Equities will be implemented within a period of three to six months; and

(e) the sale of the portfolio of Private Equity investments will be implemented within a period of 12 to 24 months,

in the case of (c), (d) and (e) with the periods starting as from the date that a new investment manager is appointed, provided that the Board shall have the discretion to extend further any such period as appropriate in respect of any specific investment."

The circular to shareholders in June 2012, which contained the prior amendment to the Investing Policy, noted the following additional provisions:

"The Directors propose that the selection of a new investment manager is completed within one month after the Annual General Meeting.

As interests in the Public Equities and Private Equity portfolio are divested, the Directors intend to return the resulting cash to shareholders. This will allow for an orderly disposal of the Company's investments and minimise the potential impact that the Company's exit from such securities could have on their price.

The means by which any cash arising from the run-off of the Fund will be returned to shareholders has not yet been determined, but may include a combination of the purchase of own shares, a tender offer for the Company's shares and/or dividend payments. In order to simplify the means by which the cash can be returned, the Company proposes to amend its corporate form so as to become a company incorporated under the Isle of Man Companies Act 2006."

Following the amendment of the Investing Policy in 2012, the Company did appoint a new investment manager and amend its corporate form as proposed and has disposed of all of its portfolio of Public Equities.

5. AMENDMENT OF INVESTING POLICY

The Board proposes that, conditional on shareholder approval of the Resolution, the Company's Investing Policy shall be amended so that the following provisions shall be removed from the Investing Policy:

"(c) the sale of the liquid part of the portfolio of Public Equities will be implemented within a period of three months;

(d) the sale of the remainder of the portfolio of Public Equities will be implemented within a period of three to six months; and

(e) the sale of the portfolio of Private Equity investments will be implemented within a period of 12 to 24 months,

in the case of (c), (d) and (e) with the periods starting as from the date that a new investment manager is appointed, provided that the Board shall have the discretion to extend further any such period as appropriate in respect of any specific investment. The Directors propose that the selection of a new investment manager is completed within one month after the Annual General Meeting.

As interests in the Public Equities and Private Equity portfolio are divested, the Directors intend to return the resulting cash to shareholders. This will allow for an orderly disposal of the Company's investments and minimise the potential impact that the Company's exit from such securities could have on their price.

The means by which any cash arising from the run-off of the Fund will be returned to shareholders has not yet been determined, but may include a combination of the purchase of own shares, a tender offer for the Company's shares and/or dividend payments. In order to simplify the means by which the cash can be returned, the Company proposes to amend its corporate form so as to become a company incorporated under the Isle of Man Companies Act 2006."

and replaced with the following:

"(c) the sale of the portfolio of Private Equity investments will be implemented within a period of 6 months,

in the case of (c), with the periods starting as from 4 October 2018, provided that the Board shall have the discretion to extend further any such period as appropriate in respect of the investment in Stopharm LLP."

Accordingly, if the Resolution is approved, the amended Investing Policy will be as follows:

"(a) no new investments in Private Equity investments (as defined in the Company's admission document dated 3 May 2007) will be made with effect from 24 July 2012;

(b) no new investments in Public Equities (as defined in the Company's admission document dated 3 May 2007) will be made by the Manager (as defined in the Company's admission document dated 3 May 2007) on behalf of Tau (Cayman) LP with effect from 24 July 2012 without the prior approval of the Board;

(c) the sale of the portfolio of Private Equity investments will be implemented within a period of 6 months, in the case of (c), with the periods starting as from 4 October 2018, provided that the Board shall have the discretion to extend further any such period as appropriate in respect of the investment in Stopharm LLP."

6. EXTRAORDINARY GENERAL MEETING

The Company is seeking shareholder approval for the Disposal and amendment of its Investing Policy.

The EGM will be held at 10.00 a.m. on 4 October 2018 at IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP, British Isles. The Notice of the EGM is provided in Part 2 of this document.

The Resolution to be proposed at the EGM is an ordinary resolution which will require a simple majority of those attending and voting to be passed.

7. ACTION TO BE TAKEN

A Form of Proxy for use at the EGM is provided with this document. Whether or not you propose to attend the EGM in person, you are requested to complete and sign the Form of Proxy as soon as possible and in any event no later than 10:00 a.m. on 2 October 2018 and send the completed and signed form to the Company's registrars at IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP. Completion and return of a Form of Proxy will not prevent you from voting in person at the EGM should you so wish.

8. RECOMMENDATION

The Directors consider the Disposal and the amendment of the Investing Policy to be in the best interests of the Company and Shareholders as a whole and therefore unanimously recommend that Shareholders vote in favour of the Resolution.

DEFINITIONS

2006 Act the Isle of Man Companies Act 2006 (as amended from time to time)

AIM the AIM market of London Stock Exchange plc

AIM Rules the AIM rules for companies whose securities are admitted to trading on AIM as published by the London Stock Exchange from time to time

Articles the articles of association of the Company

Board the board of Directors at the date of this document

Buyer Aldar Orazbekovich Beisembayev, a citizen of the Republic of Kazakhstan

Company or TAU Tau Capital plc, registered in the Isle of Man with company number 008604V

Director a director of the Company at the date of this document

Disposal the disposal by TAU SPV of the Participation Interest

EGM the extraordinary general meeting of Company convened for October 2018

Form of Proxy the form of proxy for use in connection with the EGM

Group the Company and its subsidiaries

Investing Policy the current investing policy of the Company, as described in section 4 of this document

London Stock Exchange London Stock Exchange plc

Ordinary Shares ordinary shares of 1 penny each in the capital of the Company

Participation Interest the ownership right to 40.34999998% of the equity in the charter capital of Stopharm

Proposal the proposal by the Board for (1) the disposal by TAU SPV of the Participation Interest and (2) an amendment to the Company's Investing Policy

Resolution the ordinary resolution to be proposed at the EGM 

RIS Regulatory Information Service

Shareholders holders of Ordinary Shares

Stopharm Stopharm LLC, a pharmaceutical business established in Kazakhstan in which the Company has a 40.34999998% holding

TAU SPV TAU SPV 1 Cooperatief W.A., a subsidiary of the Company established and registered in accordance with the laws of the Netherlands

Transfer Agreement   the sale and purchase agreement between TAU SPV and the Buyer dated 25 August 2018 for the sale and purchase of the Participation Interest 

-ENDS-