TIDMAXI
RNS Number : 9411H
Axiom European Financial Debt Fd Ld
01 August 2023
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM ANY JURISDICTION
WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF SUCH JURISDICTION
1 August 2023
Axiom European Financial Debt Fund Limited
Publication of a Circular containing a Notice of an
Extraordinary General Meeting
Axiom European Financial Debt Fund Limited ("AXI" or the
"Company") has today published a circular (the "Circular") which
will shortly be sent to Shareholders. Capitalised terms that are
used but not defined in this announcement shall have the meanings
ascribed to them in the Circular.
The Board and the Company's Investment Manager, Axiom
Alternative Investments Sarl (the "Investment Manager" or "Axiom"),
recognise the Company's strong historic performance and the
potential for the Company's strategy to evolve and to provide
attractive returns in the future. However, the Board is also aware
that the persistent discount at which the Company's shares trade
and the limited liquidity of the Company's shares have frustrated
Shareholders.
While the Board and the Investment Manager understand that
Shareholders are supportive of the Company's strategy, they also
believe that a significant proportion no longer consider the
closed-ended structure of the Company to be optimal, particularly
given that a substantially similar strategy, managed by the
Investment Manager, is available through an open-ended entity.
In light of the circumstances outlined above, the Board has
carefully considered the future of the Company and its business,
taking into account feedback from Shareholders. Consequently, the
Board is now putting forward proposals for the liquidation of the
Company including options for Shareholders to roll over their
investment. These proposals include the opportunity for Rollover
Eligible Shareholders to receive shares in Axiom Obligataire, a
Compartment of an open-ended fund managed by Axiom with a
substantially similar investment policy to the Company. The Board
believes this will provide continuity for Rollover Eligible
Shareholders who roll over their investment in the Company, while
mitigating the issues in relation to which Shareholders have
expressed their frustration. There will also be an option for a
cash exit.
The Circular contains a notice convening an extraordinary
general meeting (the "EGM") of the Company at which approval will
be sought from shareholders for the proposals. The EGM is to be
convened for 10.00 a.m. on 29 August 2023 and will be held at 1st
Floor, Royal Chambers, St Julian's Avenue, St Peter Port, Guernsey
GY1 3JX.
A copy of the Circular will shortly be made available on the
Company's website at
https://axiom-ai.com/web/en/axiom-european-financial-debt-fund-limited-2/#
and submitted to the National Storage Mechanism, where it will be
available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Expected Timetable
2023
Publication and posting of this Circular, the Form of 1 August
Proxy and the Form of Election
Latest time and date for receipt of Forms of Election or 10.00 a.m. on 24 August
TTE Instructions
Latest time and date for receipt of Forms of Proxy 10.00 a.m. on 24 August
CREST disablement, closing of the Register and Record 6.00 p.m. on 24 August
Date under the Scheme
Calculation Date of AXI FAV As at close of business on 25 August
Extraordinary General Meeting 10.00 a.m. on 29 August
Effective Date for implementation of the Scheme and 29 August or as soon as reasonably practicable thereafter
commencement of the liquidation of the
Company
Cancellation of: (a) listing of the AXI Ordinary Shares As soon as reasonably practicable following the
on the premium segment of the Official appointment of the Liquidators
List; and (b) trading of the AXI Ordinary Shares on the
Main Market
Contract notes issued by CACEIS in respect of Obligataire On or around 5.30 p.m. on 4 September or as soon as
Shares and Obligataire Institutional reasonably practicable thereafter
Shares issued pursuant to the Rollover Options
Cheques expected to be despatched and payments made by On or around 12 September or as soon as possible
the Company in respect of the Cash thereafter
Option
Notes:
-- All references to times in this announcement are to London
times unless otherwise stated.
-- The dates and times specified above may be subject to change.
In the event of any such change, the Company will notify investors
either by post, by electronic mail or by the publication of a
notice through a regulatory information service provider to the
London Stock Exchange.
Enquiries to:
+44 20 3807
Axiom Alternative Investments SARL 0670
David Benamou
------------
+44 20 3100
Winterflood Securities Limited 0000
------------
Neil Morgan
------------
Extracts from the Circular
(References to pages or paragraphs and appendices below refer to
the relevant pages, paragraphs or appendices of the Circular and
references to 'this Circular' refer to the Circular).
2 Summary of the Proposals
Under the Proposals (if approved by Shareholders), the Company
will be liquidated and all of the AXI Ordinary Shares will
ultimately be cancelled.
Under the Scheme, Rollover Eligible Shareholders will be
entitled to roll over their investment in the Company into New
Shares in Axiom Obligataire.
The New Shares are new classes of accumulation shares in Axiom
Obligataire. As such, the relevant net income and net capital gains
attributable to the Obligataire Shares and/or Obligataire
Institutional Shares will be re-invested for the benefit of the
relevant share class. If Rollover Shareholders would prefer to
receive periodic distributions from their shares in Axiom
Obligataire, they will have the option once they have received
their New Shares to convert, in accordance with the provisions of
the Prospectus, all or part of their Obligataire Shares and/or
Obligataire Institutional Shares into shares of an alternative
share class of Axiom Obligataire in relation to which periodic
distributions are made.
Shareholders will also have the option to receive instead (in
full satisfaction of their rights in respect of the assets of the
Company in the winding up of the Company) a cash distribution equal
to the Cash Distribution Amount in respect of each AXI Ordinary
Share with Cash Rights.
It should be noted that the Cash Distribution Amount will
reflect the costs of liquidating the non- cash assets required to
be sold in order to fund the distribution. In addition, the NAV per
share of the Company reflects the mid price of marketable
securities (and of certain other investments) within the Company's
portfolio. Consequently, as non-cash assets that are sold to fund
the cash distribution are likely to be sold at the applicable bid
price, the Cash Distribution Amount will almost certainly be less
than the AXI FAV.
Shareholders who elect or are deemed to elect for one of the
Rollover Options and who subsequently wish to redeem all or part of
their investment in Axiom Obligataire should be able to do so on a
daily basis in accordance with the provisions of the Prospectus of
Axiom Obligataire at a price reflecting the NAV per share as of the
relevant valuation day of Axiom Obligataire. Therefore, it may be
in the interests of Rollover Eligible Shareholders to receive the
Obligataire Option (or, subject to eligibility, the Obligataire
Institutional Option), even if such Shareholders may ultimately
wish to receive cash in respect of all or part of their
investment.
Axiom Obligataire is a Compartment of Axiom Lux. Axiom Lux is an
open-ended Luxembourg SICAV that is organised under Part I of the
Luxembourg law of 17 December 2010 relating to undertakings for
collective investment (as may be amended from time to time) and
which qualifies as a UCITS with the Luxembourg financial regulator,
the Commission de Surveillance du Secteur Financier. Axiom
Obligataire is open-ended with daily liquidity.
The investment policy of Axiom Obligataire is substantially
similar to the investment strategy of the Company.
Axiom Obligataire's strategy is focused broadly across the
financial credit universe, with investments ranging from covered
bonds to contingent convertible bonds. It focuses on subordinated
bonds with an aim to achieve, over a minimum 3-year investment
horizon, a return (net of management fees) similar to or greater
than that of its benchmarks (ICE BofAML Euro Financial Index (40%),
ICE BofAML Euro Corporate Index (40%) and ICE BofAML Contingent
Capital Index (20%)).
Investors must have a securities account with CACEIS Bank,
Luxembourg Branch in respect of which the relevant know-your-client
requirements of CACEIS Bank, Luxembourg Branch have been satisfied
in order to hold shares in Axiom Obligataire and the Rollover
Options are therefore available only to Rollover Eligible
Shareholders.
Further information on Axiom Obligataire, including details of
its investment objective and investment strategy, is set out in
Part IV of this Circular.
It is proposed that the Proposals be effected by way of a scheme
of reconstruction (the "Scheme"). The Proposals require the
approval of Shareholders. If the Proposals are approved, and upon
completion of the Scheme:
-- Shareholders who are Rollover Eligible Shareholders will,
unless they submit a valid Form of Election or submit a valid TTE
Instruction in CREST, be deemed to have elected for the Obligataire
Option. Under the Obligataire Option, Shareholders will receive one
Obligataire Share for every one thousand AXI Ordinary Shares held
at the Record Date, with fractions of an Obligataire Share being
issued (rounded down to four decimal places);
-- Shareholders who are Obligataire Institutional Eligible
Shareholders and who validly elect for the Obligataire
Institutional Option will receive one Obligataire Institutional
Share for every one thousand AXI Ordinary Shares held at the Record
Date, with fractions of an Obligataire Institutional Share being
issued (rounded down to four decimal places); and
-- Shareholders who validly elect, or are deemed to validly
elect, for the Cash Option will receive a cash distribution in the
winding up of the Company equal to the Cash Distribution Amount in
respect of each AXI Ordinary Share with Cash Rights.
The Obligataire Option is the default option for Rollover
Eligible Shareholders and a Rollover Eligible Shareholder wishing
to receive the Obligataire Option does not need to submit a Form of
Election or submit a TTE Instruction in CREST. A Rollover Eligible
Shareholder who does not submit a Form of Election or submit a TTE
Instruction in CREST will be deemed to have elected for the
Obligataire Option.
Any Shareholder who is not a Rollover Eligible Shareholder will
be deemed to have elected for the Cash Option.
The Company will liquidate sufficient assets to fund the cash
distributions to Shareholders who are not Rollover Eligible
Shareholders and other Shareholders who have elected to receive the
Cash Option, plus an amount sufficient to meet the liabilities of
the Company under the Liquidation, including the Winding Up
Costs.
Under the terms of the Scheme, the remaining assets, comprising
the entire remaining business of the Company, will be transferred
to Axiom Obligataire and will accordingly continue to be managed by
Axiom but under the investment strategy of Axiom Obligataire, as to
which see Section 3 below.
The purpose of this Circular is to explain the background to,
and reasons for, the Proposals and to convene the Extraordinary
General Meeting to take place on 29 August 2023 at which
Shareholders' approval for the Proposals will be sought. Notice of
the Extraordinary General Meeting is set out in Part VII of this
Circular. The Board recommends that you vote in favour of the
Proposals at the Extraordinary General Meeting.
3 Background to the Company, Axiom Lux, Axiom Obligataire and the Investment Manager
The Company
The Company was incorporated as a closed-ended investment
company limited by shares in Guernsey under the Companies Law on 7
October 2015. The Company was admitted to trading on the Specialist
Fund Segment (then the Specialist Fund Market) on 5 November 2015,
before its listing was transferred from the Specialist Fund Segment
to the Premium Segment of the Official List on 15 October 2018.
AXI's investment strategy is based upon five categories of
investments, including liquid and illiquid relative value,
restructuring and special situations and midcap origination, and
its investment objective is to generate income and capital gain. As
of 31 May 2023, this strategy has had a return of 5.00% per annum
since its inception on 5 November 2015.
Axiom Obligataire
Axiom Obligataire is a Compartment of Axiom Lux. Axiom
Obligataire is open-ended with daily liquidity and is actively
managed by Axiom Alternative Investments Sarl, and by the same
management team as the Company. Axiom Obligataire invests across
the whole financial credit universe, from covered bonds to
contingent convertible bonds, and with a focus on subordinated
bonds.
Axiom Obligataire and the Company both focus on the same
investment universe. In addition, Axiom Obligataire also focuses on
liquid securities.
Axiom Lux
Axiom Lux is an umbrella investment company with variable
capital (société d'investissement à capital variable) in the form
of a société anonyme (public company limited by shares) qualifying
as a UCITS in accordance with Part I of the Luxembourg law of 17
December 2010 on undertakings for collective investments, as
amended from time to time. As an umbrella structure, Axiom Lux may
operate separate Compartments, each being distinguished from others
by their specific investment policy or any other specific feature.
Within each Compartment, different classes of shares with
characteristics detailed in the Prospectus of Axiom Lux, may be
issued. Axiom Lux constitutes a single legal entity, but the assets
of each Compartment are segregated from those of the other
Compartments. This means that the assets of each Compartment are
invested for the shareholders of the corresponding Compartment and
that the assets of a specific Compartment are solely accountable
for the liabilities, commitments and obligations of that
Compartment.
Further information about Axiom Obligataire is contained in Part
IV of this Circular and in the Prospectus. A copy of the Prospectus
and the key information documents for Axiom Obligataire are
available on the website of the Investment Manager at
https://www.axiom-ai.com . A paper copy of the Prospectus and the
key information document can be provided on request and free of
charge.
The Investment Manager
The investment manager of the Company is Axiom Alternative
Investments Sarl. Axiom is a private limited liability company
(société à responsabilité limitée), incorporated in France on 6
November 2006 and registered with the Registre de Commerce et des
Sociétés de Paris under registration number 492 625 470. The
Investment Manager is an independent French asset manager
authorised by the AMF under registration number GP-06000039.
Axiom Alternative Investments Sarl is also the management
company of Axiom Lux, having been appointed pursuant to a
management company services agreement dated 27 March 2015, to serve
Axiom Lux as a designated management company in accordance with the
Luxembourg Law of 17 December 2010 relating to undertakings for
collective investment (as amended from time to time).
4 Benefits of the Proposals
The Directors consider that the Proposals are in the best
interests of Shareholders for the following reasons:
-- Rollover Eligible Shareholders will be provided with the
opportunity of continuity of exposure to debt instruments issued by
European financial institutions. Axiom Obligataire has an
investment policy that is substantially similar to AXI's investment
policy, with the fund emphasising different aspects of the wider
strategy relating to European regulatory capital instruments. The
Directors and the Investment Manager therefore believe the
Proposals represent an attractive basis for Shareholders to take
advantage of future opportunities in the sector.
-- In the current market context, Axiom Obligataire has
attractive yields. As of 30 June 2023, Axiom Obligataire's yield to
call in GBP is 10.93%. For further information on Axiom
Obligataire's performance, yield and other key metrics, please
refer to the monthly factsheets which are available on the
Investment Manager's website and on request.
-- Axiom Obligataire is a UCITS and an open-ended investment
vehicle with daily liquidity. This will mean that shareholders in
Axiom Obligataire should be able to realise some or all of their
investment on a daily basis in accordance with the provisions of
the Prospectus at a price reflecting the NAV per share as of the
relevant valuation day of Axiom Obligataire. This structure will
also ensure shareholders in Axiom Obligataire are no longer exposed
to the discount issues and low liquidity that has been problematic
for them as Shareholders of the Company.
-- The Obligataire Option and the Obligataire Institutional
Option avoid imposing a capital gains tax event on Eligible
Shareholders. ([1])
-- The Scheme also allows Shareholders to elect for the Cash
Option. Shareholders who elect for the Cash Option will receive a
cash distribution in the winding up of the Company equal to the
Cash Distribution Amount in respect of each AXI Ordinary Share with
Cash Rights.
In light of the benefits outlined above, the Board believes that
the Proposals represent an attractive opportunity for the Company's
Rollover Eligible Shareholders to benefit from continued exposure
to European regulatory capital instruments, via a strategy overseen
by its current, highly successful management team, while mitigating
the issues that have historically caused frustration for
Shareholders. The Proposals also provide an opportunity for
Shareholders who wish to do so to receive a cash distribution in
the winding up of the Company equal to the Cash Distribution Amount
in respect of each AXI Ordinary Share with Cash Rights.
5 Shareholders' entitlements
Obligataire Option
Obligataire Shares will be issued to Rollover Eligible
Shareholders who receive the Obligataire Option. Shareholders will
receive one Obligataire Share for every one thousand AXI Ordinary
Shares held by such person as at the Record Date (with fractions of
a share being issued and rounded down to four decimal places) and
will become shareholders in Axiom Obligataire.
The Obligataire Option is the default option for Rollover
Eligible Shareholders and a Rollover Eligible Shareholder wishing
to receive the Obligataire Option does not need to submit a Form of
Election. A Rollover Eligible Shareholder who does not submit a
Form of Election will be deemed to have elected for the Obligataire
Option.
Obligataire Institutional Option
Obligataire Institutional Shares will be issued to Obligataire
Institutional Eligible Shareholders who elect for the Obligataire
Institutional Option. Shareholders will receive one Obligataire
Institutional Share for every one thousand AXI Ordinary Shares held
by such person as at the Record Date (with fractions of a share
being issued and rounded down to four decimal places) and will
become shareholders in Axiom Obligataire.
A Shareholder should submit a Form of Election or a TTE
Instruction in CREST if he or she is an Obligataire Institutional
Eligible Shareholder and wishes to elect for the Obligataire
Institutional Option.
Cash Option
Under the Cash Option, Shareholders will receive a cash
distribution in the winding up of the Company equal to the "Cash
Distribution Amount" (as defined below) in respect of each AXI
Ordinary Share with Cash Rights.
On the Effective Date, or as soon as reasonably practicable
thereafter, the Company shall allocate to the Cash Distribution
Pool assets (which may include cash) with a valuation (valued in
accordance with the usual valuation methodology of the Company)
equal to the Cash Election Proportion multiplied by the AXI
FAV.
Any non-cash assets within the Cash Distribution Pool shall be
realised and Shareholders who elect (or are deemed to elect) for
the Cash Option will receive a distribution in respect of each AXI
Ordinary Share with Cash Rights held by them equal to the Liquid
Cash Distribution Pool Value divided by the number of AXI Ordinary
Shares with Cash Rights (the "Cash Distribution Amount").
It should be noted that the Cash Distribution Amount will
reflect the costs of liquidating the non- cash assets required to
be sold in order to fund the distribution. In addition, the NAV per
share of the Company reflects the mid price of marketable
securities (and of certain other investments) within the Company's
portfolio. Consequently, as non-cash assets that are sold to fund
the cash distribution are likely to be sold at the applicable bid
price, the Cash Distribution Amount will almost certainly be less
than the AXI FAV.
Shareholders who elect or are deemed to elect for one of the
Rollover Options and who subsequently wish to redeem all or part of
their investment in Axiom Obligataire should be able to do so on a
daily basis in accordance with the provisions of the Prospectus of
Axiom Obligataire at a price reflecting the NAV per share as of the
relevant valuation day of Axiom Obligataire. Therefore, it may be
in the interests of Rollover Eligible Shareholders to receive the
Obligataire Option (or, subject to eligibility, the Obligataire
Institutional Option), even if such Shareholders may ultimately
wish to receive cash in respect of all or part of their
investment.
Any Shareholder who is not a Rollover Eligible Shareholder will
receive the Cash Option. A Rollover Eligible Shareholder should
submit a Form of Election or a TTE Instruction in CREST if he or
she wishes to elect for the Cash Option.
6 Implementation of the Proposals
Consents and Approvals
The Proposals require the consent of Shareholders at an
Extraordinary General Meeting which has been convened for the
purposes of considering the Proposals. Both the ordinary resolution
and the special resolution to be put to Shareholders at the
Extraordinary General Meeting are required to be passed in order
for the Proposals to be implemented. An ordinary resolution
requires a majority of votes cast (whether in person or by proxy)
to be in favour. A special resolution requires at least 75 per cent
of votes cast (whether in person or by proxy) to be in favour.
Notice of the Scheme has been given to the Guernsey Financial
Services Commission, although its consent is not required. The
Takeover Panel has confirmed that The City Code on Takeovers and
Mergers will not apply to the Scheme.
Unless all of the conditions to which the Scheme is subject
(further details of which are set out in Part III of this Circular)
are satisfied, the Scheme will not be implemented. In such
circumstances the Board will revert to its commitment to table a
Discontinuation Resolution at the Company's annual general meeting
later this year. In the event that the Discontinuation Resolution
was passed, the Board would be required to formulate proposals to
be put to Shareholders within four months to wind-up or otherwise
reconstruct the Company.
The Scheme
Subject to the passing of the Resolutions at the Extraordinary
General Meeting (and satisfaction of the other conditions of the
Scheme, full details of which are set out in Part III of this
Circular), the Scheme will take effect from the Effective Date.
Under the Scheme (if approved by Shareholders), the Company will
be placed into voluntary liquidation under Guernsey law.
The AXI Ordinary Shares will be reclassified (in accordance with
the Elections made or deemed to have been made under the Scheme)
as:
-- AXI Ordinary Shares with Obligataire Rollover Rights;
-- AXI Ordinary Shares with Obligataire Institutional Rollover Rights; and
-- AXI Ordinary Shares with Cash Rights.
The Company's Liquidators will transfer the assets of the
Company (excluding the cash required to fund (i) the cash
distribution payable in relation to the Cash Option and (ii) the
Winding Up Costs, including a provision for the Liquidators'
retention as described below, but otherwise constituting the entire
remaining business of the Company) to Axiom Obligataire. The
consideration for this transfer will comprise two elements:
-- the Obligataire Shares to be issued by Axiom Obligataire to
the holders of AXI Ordinary Shares with Obligataire Rollover
Rights; and
-- the Obligataire Institutional Shares to be issued by Axiom
Obligataire to the holders of AXI Ordinary Shares with Obligataire
Institutional Rollover Rights.
The auditor of Axiom Lux will issue a valuation report on the
value of the assets to be transferred to Axiom Obligataire in
accordance with the provisions of Luxembourg law.
Holders of AXI Ordinary Shares with Cash Rights will instead
receive (in full satisfaction of their rights in respect of the
assets of the Company in the Liquidation) a cash distribution in
the winding up of the Company equal to the Cash Distribution Amount
in respect of each AXI Ordinary Share with Cash Rights.
The Company will request that the listing of the AXI Ordinary
Shares is cancelled as soon as reasonably practical following
implementation of the Proposals. The Reclassified Shares will not
be admitted to the Official List or traded on the London Stock
Exchange.
Neither the Obligataire Shares, nor the Obligataire
Institutional Shares will be listed or traded on any stock
exchange. Instead, liquidity will be achieved through daily
creation and redemption of the:
-- Obligataire Shares by Axiom Obligataire at a price reflecting
the NAV per Obligataire Share at the relevant time; and
-- Obligataire Institutional Shares by Axiom Obligataire at a
price reflecting the NAV per Obligataire Institutional Share at the
relevant time.
The Company, the Liquidators, Axiom Obligataire and the
Investment Manager have entered into the Transfer Agreement, which
is conditional upon (a) the passing of each of the Resolutions; and
(b) the approval of the winding up and the appointment of the
Liquidators.
The Liquidators' retention will comprise a reserve to be set
aside for the protection of potential creditors and to fund the
costs of the Liquidation as detailed in paragraph 3.3 of the
Scheme. Any surplus from this reserve (which would be expected to
be de minimis) will be transferred to Axiom Obligataire in due
course for the benefit of the holders of Obligataire Shares and
Obligataire Institutional Shares (in proportion to the respective
Elections for the Obligataire Option and the Obligataire
Institutional Option under the Scheme).
Following implementation of the Scheme, the Company will be
wound up.
Further details of the Scheme are set out in Part III of this
Circular.
Tax
The attention of Shareholders is drawn to Part V of this
Circular ("Taxation").
The Company has sought a tax clearance in respect of certain
aspects of the Scheme in the UK (as noted below). However, tax
clearances have not been obtained in respect of every aspect of UK
taxation or in respect of any other jurisdiction in which
Shareholders are or may be located. Shareholders are advised to
take their own tax advice as to the tax consequences for them of
the Scheme. Shareholders will need to consider whether or not the
Scheme itself gives rise to any liability for them to pay tax.
UK taxation of Shareholders in relation to the Scheme
For Cash-Paid Shareholders, the cash distribution received by
them in satisfaction of their rights in respect of the assets of
the Company in the winding up of the Company should be treated as a
capital distribution for tax purposes. Accordingly, as a result of
its receipt a Cash-Paid Shareholder will be treated as disposing of
its interest in the relevant AXI Ordinary Shares in consideration
for the cash distribution and for Cash-Paid Shareholders who are
UK-resident individuals any gain arising will be subject to capital
gains tax (at rates of up to 20%) and for Cash-Paid Shareholders
within the charge to corporation tax, any gain arising will be
subject to corporation tax at the Shareholder's relevant marginal
rate.
The Scheme, through which the AXI Ordinary Shares will be
exchanged for New Shares, should not result in a charge to UK
capital gains tax for individual Rollover Shareholders, nor a
charge to corporation tax on chargeable gains for UK resident
corporate Rollover Shareholders, on the basis that the transaction
should qualify as a "scheme of reconstruction" and the conditions
of section 136 of the TCGA should be met.
The application of section 136 of the TCGA may however be
restricted under section 137(1) of the TCGA in the case of any
Shareholder who alone, or together with any connected persons,
holds five (5) per cent. or more of the AXI Ordinary Shares.
Section 137(1) of the TCGA will not apply if the exchange is
effected for bona fide commercial reasons and does not form part of
a scheme of arrangements of which the main purposes, or one of the
main purposes, is avoidance of liability to capital gains tax or
corporation tax.
Clearance has been obtained from HMRC under section 138 of the
TCGA to confirm that HMRC is satisfied that the Scheme will be
effected for bona fide commercial reasons and will not form part of
any such scheme for the avoidance of tax.
The New Shares will constitute interests in an offshore fund for
UK tax purposes. The Investment Manager intends to apply for the
New Shares to be recognised by HMRC as interests in a "reporting
fund" for the purposes of the UK regime of taxation of offshore
funds. The effect of maintaining reporting fund status for the New
Shares throughout a Shareholder's relevant period of ownership
would be that any gains on disposal of New Shares would be taxed as
capital gains. However, there can be no guarantee that reporting
fund status will be maintained for the New Shares. Were the
application for reporting fund status to be unsuccessful or such
status subsequently to be withdrawn for the New Shares, any gains
arising to Shareholders resident or ordinarily resident in the
United Kingdom on a sale, redemption or other disposal of relevant
New Shares (including a deemed disposal on death) would be taxed as
offshore income gains rather than capital gains, and so (for UK
individual Shareholders) subject to income tax at rates of up to
45%.
If and for so long as the New Shares constitute interests in a
reporting fund, then Axiom Obligataire is required to calculate and
report the income returns for each reporting period (as defined for
United Kingdom tax purposes) on a per-share basis to all relevant
holders of New Shares. UK-resident individual holders of New
Shares, at the end of the reporting period to which the reported
income relates, will be subject to income tax on their
proportionate share of the excess (if any) of reported income over
distributions paid in respect of the reporting period. The excess
reported income will be deemed to arise to such UK holders of New
Shares six months following the last day of the relevant reporting
period. On the basis of the investment policy of Axiom Obligataire,
it is expected that the distributions and excess reported income of
Axiom Obligataire will be subject to tax for Shareholders as
interest rather than as dividends, and accordingly Shareholders who
are UK tax resident individuals will be liable to income tax on the
amount of such distributions and excess reported income, at a rate
of 20% for basic rate taxpayers, 40% for higher rate taxpayers and
45% for additional rate taxpayers.
On the basis of the investment policy of Axiom Obligataire, it
is expected that the New Shares will be treated for corporation tax
purposes as creditor relationships within the loan relationships
regime contained in Parts 5 and 6 of the Corporation Tax Act 2009
with the result that all returns on the New Shares in respect of
such a Shareholder's accounting period (including gains, profits
and losses and of which the distributions and reported income of
Axiom Obligataire will form components) will be taxed or relieved
as an income receipt or expense on a "fair value accounting" basis.
Accordingly, such a person who acquires New Shares may, depending
on its own circumstances, incur a charge to corporation tax on an
unrealised increase in the value of its holding of New Shares.
Further information on the United Kingdom taxation position may
be found in Part V of this Circular under the heading "United
Kingdom".
Luxembourg tax considerations
Luxembourg UCITS, such as Axiom Lux, are tax exempt in
Luxembourg with the exception of a subscription tax (taxe
d'abonnement) levied at the rate of 0.05% per annum based on the
NAV at the end of the relevant quarter, calculated and paid
quarterly. Interest and dividend income received by a Luxembourg
UCITS may be subject to non-recoverable withholding tax in the
source countries. The Luxembourg UCITS may further be subject to
tax on the realised or unrealised capital appreciation of its
assets in the countries of origin. However, Axiom Lux may benefit
from double tax treaties entered into by Luxembourg which may
provide for exemption from withholding tax or reduction of
applicable withholding tax rates. Distributions by the Luxembourg
UCITS as well as liquidation proceeds and capital gains derived
therefrom are made free and clear of withholding tax in
Luxembourg.
7 Settlement arrangements
Dealings in AXI Ordinary Shares in CREST will be disabled with
effect from 24 August 2023.
Contract notes in respect of Obligataire Shares and Obligataire
Institutional Shares to be issued to Shareholders who validly elect
for either of the Rollover Options will be issued by CACEIS on or
around 5.30 p.m. (London time) on 4 September 2023 or as soon as
practicable thereafter.
Shareholders who elect (or are deemed to have elected) for the
Cash Option will receive their cash distribution winding up of the
Company as follows:
-- Shareholders who hold their AXI Ordinary Shares in
uncertificated form will receive payment through CREST on 12
September 2023 or as soon as practicable thereafter; and
-- payment of the cash distribution to Shareholders who hold
their AXI Ordinary Shares in certificated form will be made by
cheque. All cheque payments will be made in pounds sterling and
will draw on a branch of a UK clearing bank. Cheques will be
despatched at the risk of the person entitled to such payment by
first class post on 12 September 2023 or as soon as practicable
thereafter. Cheques will be sent to Shareholders at the address
appearing in the Register or, in the case of joint holders, to the
holder whose name appears first in the Register in respect of the
joint holding concerned.
[1] Subject to receipt of HMRC clearance.
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END
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