TIDMQOGT
RNS Number : 0189S
Quorum Oil and Gas Tech. Fund Ld
02 September 2010
Not for release, publication or distribution in, or into, the United States,
Canada, Australia or Japan.
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| Press Release | 2 September 2010 |
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Quorum Oil and Gas Technology Fund Limited
(the "Company")
Proposals for the approval of a replacement investment manager and
related matters
and
Notice of Extraordinary General Meeting
The Directors of Quorum Oil and Gas Technology Fund Limited (LSE:QOGT), a
registered closed-ended investment company incorporated in Guernsey, announces
that the Company is to seek shareholder approval for a series of proposals
including the approval of a replacement investment manager and related matters,
at an Extraordinary General Meeting ("EGM").
The EGM is to be convened for 2 p.m. on Tuesday 28 September 2010 at Ogier
House, St Julian's Avenue, St. Peter Port, Guernsey GY1 1WA.
Copies of the Circular have been posted to Shareholders and will be available
from QOGT's website www.q-ogtfund.com.
- Ends -
For further information:
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| Corporate Broker | |
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| Numis Securities | |
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| David Benda, Corporate Broking | Tel: +44 (0) 20 |
| | 7260 1275 |
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| d.benda@numiscorp.com | |
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Media enquiries:
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| Abchurch | |
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| Henry Harrison-Topham | Tel: +44 (0) 20 |
| | 7398 7702 |
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| henry.ht@abchurch-group.com | www.abchurch-group.com |
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Notes to editors:
Quorum Oil and Gas Technology Fund Limited ("Q-OGT") is a registered
closed-ended investment company incorporated in Guernsey to provide expansion
capital to companies which own and/or are developing proven proprietary
technology which may have a potentially significant effect on the oil and gas
industry. Q-OGT was admitted to the Official List of the UK Listing Authority
and to trading on the London Stock Exchange on 7 January 2008. Its stock market
EPIC is QOGT.L. Further information can be found at www.q-ogtfund.com.
The following information is an excerpt from the circular to Shareholders (the
"Circular") which has been posted. Copies of the Circular will be available
from QOGT's website www.q-ogtfund.com. Definitions used in the Circular apply in
this announcement unless the context otherwise requires.
Proposals for the approval of a replacement investment manager and
related matters
and
Notice of Extraordinary General Meeting
Introduction
The purpose of the Circular is to draw to a close the issues relating to the
Company's investment management arrangements. The directors consider that it is
in the best interests of the Company to resolve these matters as soon as
possible.
Therefore the Circular explains the reasons for, and seeks shareholders'
approval of, the appointment of SGW Capital Managers Limited (which term shall,
prior to SGW Capital Managers Limited's incorporation following receipt of any
necessary regulation approvals, include Sefton Partners LLP) ("SGW Capital
Managers") as the investment manager of the Company and, if that is not
approved, seeks to appoint a new board of directors who we understand intend to
appoint QOGT Inc. ("QOGT") as the Company's investment manager (the
"Proposals").
Background
Further to the circular and notice of extraordinary general meeting (the
"Original Circular") issued by the Company on 29 July 2010 relating to the
proposals for the approval of the appointment of SGW Capital Managers as
investment manager and the change of name of the Company to Global Oil & Gas
Technology Fund Limited, the Company announced on 17 August 2010 that, in light
of representations received from a number of shareholders, it intended to move a
proposal at the extraordinary general meeting due to be held on 19 August 2010
that the meeting be adjourned to allow for further consideration to the
Company's management arrangements.
That extraordinary general meeting was adjourned for the reasons stated on 17
August 2010 and due to new information which had come to light (detailed below)
which the directors were evaluating.
The directors continue to believe that it is appropriate for shareholders as a
whole to vote on the appointment of the Company's ongoing investment manager and
for SGW Capital Managers and QOGT to set out their respective plans for the
Company for all shareholders to consider. It is clear that a third alternative
exists - to appoint a completely different party. The investment manager and
the directors have kept this option under consideration since the original
investment management and advisory agreement was terminated with effect from 1
July 2010.
However, the Board believes that the only way that successful exits can be
achieved, and the faith that shareholders have shown in the Former Investment
Managers (as defined below) can be repaid, is for entities controlled by the
original management team (supplemented with additional personnel) to manage the
Company going forward. We also believe that it is in the best interests of the
Company for a permanent investment manager to be appointed as soon as possible.
New information in relation to the Company's share placing in 2009
Late on 8 August 2010, the directors became aware from Mr Sefton that QOGT and
Sefton Partners (formerly Quorum European Partners LLP) (together the "Former
Investment Managers") may have entered into an arrangement with an individual
relating to the Company's share placing ("Placing") in the autumn of 2009. On
11 August 2010, Mr Sefton provided the Company with a draft of an agreement
between the Former Investment Managers and the individual. This anticipated
guaranteeing the individual a 12% return on his investment in the Company on the
condition that he held his shares beyond 30 September 2010 (6% to be paid by the
Former Investment Managers and 6% by the Company) and a guaranteed return of the
purchase price he paid for his shares if he sold his shares between 30 June 2010
and 30 September 2010, subject to him giving the Former Investment Managers 30
days written notice of his intention to sell.
Until 8 August 2010, neither the Company nor its advisers (other than the Former
Investment Managers) were aware of any such arrangement.
The Company circulated the draft agreement on 11 August 2010 to QOGT, the
individual and Sefton Partners, as well as to Ms Dorosz in her personal capacity
as she was a director of the Company at the relevant time, as well as being
QOGT's principal, but had not disclosed this (or any similar) arrangement to the
Company. The Company asked each of them to confirm, to the best of their
respective knowledge and belief, that no agreement to the effect of the draft
agreement or to similar effect had ever been entered into on behalf of the
Company and/or on behalf of one or both of the Former Investment Managers with
the individual or any other party in connection with the Placing or any other
equity fundraising undertaken by the Company. The Company requested this
confirmation since it and its advisers were of the opinion that if this
arrangement had been entered into, it was material and should have been
disclosed to the market in the prospectus issued in connection with the Placing
or a supplementary prospectus.
Ms Dorosz provided confirmation in those terms on behalf of herself and of QOGT
on 13 August 2010 and the individual provided a similar confirmation on 16
August 2010. On 17 August 2010, Nabarro LLP on behalf of Mr Sefton wrote to
Norton Rose LLP, the Company's solicitors, to say that Mr Sefton had located a
copy of an agreement dated 15 October 2009, in substantially the same form as
the draft agreement, signed on behalf of each of QOGT (by Ms Dorosz), QEP (as
Sefton Partners then was) (by Mr Sefton) and the individual. Mr Sefton also
provided the Company with copies of emails relating to the signed agreement. It
appears from those emails that the agreement was concluded between QOGT and the
individual on 27 September 2009 and that Mr Sefton was then informed and asked
to document the agreement and to execute it on behalf of QEP (which he did).
Notwithstanding the above facts, Ms Dorosz has maintained, through her lawyers,
that she gave her confirmation in the honest belief that the agreement had not
been entered into and that the agreement was neither intended to be nor was
acted on. In addition, Ms Dorosz asserted that the agreement gave rise to a
trail commission arrangement common in transactions similar to the Placing. The
Company has noted and reserved its position as regards the explanation given by
Ms Dorosz but has made it clear to her lawyers that it does not agree that the
arrangements can be characterised as trail commission. The Company has also
made notifications that it considers to be appropriate to the UK Listing
Authority and Guernsey Financial Services Commission and Numis Securities
Limited, the Company's financial adviser and broker, has made a notification to
the Financial Services Authority.
On 25 August 2010 the UK Listing Authority notified the Company that, as the
Company was unaware of the existence of the agreement at the time of the
Placing, it would not be taking any action against the Company in connection
with its subsequent disclosure. The Company was informed that the letter and
correspondence would be placed on file and that copies would be passed on to the
Financial Services Authority for consideration of the position as regards the
individuals concerned.
Interim investment management arrangements
Pending the appointment of a replacement investment manager, Sefton Partners LLP
("Sefton Partners"), an entity authorised and regulated by the Financial
Services Authority, continues to provide sole discretionary investment
management services on an interim basis. This interim appointment will continue
until the appointment of a replacement investment manager following the end of
the extraordinary general meeting ("EGM") to be held at 2.00 p.m. on 28
September 2010 at which shareholders will consider such appointment. Details of
the interim appointment were set out in the Original Circular.
Potential Appointment of QOGT as Investment Manager
The directors are unwilling to propose the appointment of QOGT as investment
manager for a number of reasons:
1. "Offers" - neither we nor our advisers have received any information
to confirm or deny that any potential offer or bid for the Company or its assets
will actually be made if QOGT is appointed investment manager, but in the past,
a claim of an "offer" was made which, on investigation, was found to be
exaggerated and without substance.
2. QOGT's current incentive - QOGT, its group and its current team
retain the substantial majority of the Options (as defined below) granted to
date by the Company. These Options have exercise prices at or above the current
NAV and we continue to believe that this incentive should be sufficient to
encourage QOGT to find buyers of the assets and propose successful exits to the
Company.
3. Management style - our perception of the original management team was
that, while Ms Dorosz brought a significant amount of energy to the Company,
only Messrs Sefton and Goffin were willing and able to play the crucial role of
balancing that energy through their attention to detail and practicalities.
4. Company focus - QOGT has expressed its intent to the Board to focus
the limited cash resources of the Company on two projects, Project Cloud and The
Energy Network. The Board, having consulted major shareholders, considers these
projects to be speculative. Neither project interested Sefton Partners who
instead intend to focus on getting the existing companies cash flow positive and
exiting.
5. Administration - prior to the termination of the original investment
management and advisory agreement, we had requested the Former Investment
Managers to consider allowing the administrator to take greater responsibility
in order to establish a separate reporting line directly to the Board, thereby
improving the internal controls of the Company. Sefton Partners agreed to this
proposal (and SGW Capital Managers will do so); QOGT has refused it.
6. Conflicts of interest - we are looking for total transparency on
conflicts of interest which SGW Capital Managers has offered by agreeing to a
"no co-investment" rule; QOGT has not made any such offer.
7. Investment Advisory Committee - we felt that the advisory committee
has not been used to its maximum extent - it has been reported to, rather than
performing an advisory role. A number of members have conflicts given their
positions with the portfolio companies or the investment managers. At one
crucial meeting to discuss Ambercore and Project Cloud, Ms Dorosz attended for
at least part of the meeting by invitation, although she had previously told the
Board that she would not be present. Our proposal is to rationalise the
committee substantially, by asking those with conflicts to step down.
8. Offers for Ambercore - shareholders should note that on 9 July 2010,
Sefton Partners received an offer for the Company's direct and indirect interest
in Ambercore. This was rejected; although the headline number was $4 million,
only $250,000 was in cash, the remainder was "vendor take back" - i.e. paid by
Ambercore out of its assets, in which the Company already has a secured
convertible debenture. Therefore for $250,000 the Company would lose the
element of control in its current interest in Ambercore and be subordinated for
further funding to finance a project that the Board considers to be speculative.
We remain open to sensibly priced exits for the portfolio companies.
9. Interaction with the Board - we found interaction with QOGT, and Ms
Dorosz in particular, to be difficult before the disagreements between the
Former Investment Managers were brought to our attention and extremely
problematic thereafter. Most recently, we have been asking QOGT for its plans
for the Company and received no response - on which see further below.
Christopher Hill and I see our role as that of stewards for you, our
shareholders. We firmly believe that Sefton Partners (and subsequently SGW
Capital Managers) with the addition of Roland Wessel will be a better investment
manager than QOGT for the Company at this stage of its existence. But even if
we did not believe that to be the case, for the reasons set out above we think
it would be extremely difficult for us to perform our stewardship role to the
best of our abilities if QOGT were to be appointed investment manager. That is
why we are unwilling to remain on the board with QOGT as sole investment manager
and cannot therefore propose it to be investment manager.
Part A: Proposed appointment of SGW Capital Managers as investment manager
Details of SGW Capital Managers and a summary of the terms governing the
Company's proposed agreement with SGW Capital Managers (subject to any necessary
approvals from appropriate regulatory bodies) were set out in the Original
Circular. That summary remains accurate, save that Roland Wessel is currently a
consultant, working part time and in particular focussing on the investee
companies. Roland intends to become a full time partner subject to two
conditions: (i) regulatory approval and (ii) support being given, through
meetings with shareholders and in the vote at the EGM, for the plans of SGW
Capital Managers.
SGW Capital Managers' realisation plans
The following section has been prepared by SGW Capital Managers and sets out its
realisation plans:
"SGW Capital Managers believes that the investments in the current portfolio of
investee companies can be realised at net asset value or greater in an orderly
manner within a short period of time. Critical to this is stopping the drip
feed of investment monies which imperils both the Company itself and, through
lack of focus on core businesses, ultimately the investee companies themselves.
We are well advanced in achieving this and in parallel are advancing plans for
realisations. Details of our specific plans for each company are as follows:
Strata
Strata is the Company's largest and its most successful investee. Its
technology is excellent, its service standards exceptional and the area of
managed pressure drilling is, we believe, going to become more important in the
industry. Strata has the potential to become a significant international
drilling services company, and one that should attract a substantial acquisition
price from one of the major service companies. It has started its initial
contracts in Mexico and although progress there is slower than had been
expected, we believe Mexico will become an important market. We believe it is
key for Strata to expand into the Middle East, which is the core of the oil and
gas industry worldwide. QMENA and in particular Miles Walker have been key in
delivering a pipeline of opportunities to Strata that should transform its
growth. On a more negative note, the phasing out of equipment supply contracts
to Halliburton and costs associated with the delayed IPO earlier this year mean
that the financial year 2010 revenues will be at best flat and EBITDA will be
considerably reduced from last year. We support this strategic move although it
has the effect this year that overall revenue may drop, albeit that the
underlying revenues from the core services business continue to grow. It does,
however, mean that the headline numbers for Strata are not at their most
attractive at the moment.
In 2010 the Fund made a further $4.85 million investment in Strata to advance
the Mexico contract efforts with additional equipment. Neither the recent
capital nor the original investment has had the appropriate time to fully run
the investment course and build maximum value. With significant third party
capital available (pursuant to revised debenture terms currently being
negotiated by us) and continued strategic guidance, the value of Strata should
increase considerably from its current level. There is therefore a strong
argument that an immediate sale of the interest in Strata would not deliver the
greatest return, and that waiting a year will reap dividends.
However, we have received several enquiries from interested parties in South
East Asia, the Middle East and North America, from whom SGW Capital Managers is
confident it could receive firm bids for its interest in Strata. SGW Capital
Managers has also sought interested parties and currently is in discussion with
numerous groups that have shown interest directly in Strata. SGW Capital
Managers will be guided by shareholders as to whether they would like the
Company to move towards an immediate exit from Strata or hold until next year
with a view to increasing the return.
WellPoint
Wellpoint is the Company's second largest investment, at $17.5 million. It has
proved to be a stable but unspectacular investment, with some moderate revenue
growth and it is now roughly cash flow breakeven. The EBITDA profit in 2009 is
misleading on its face as most of the profit came from an insurance claim and a
one off payment from the QMENA licence. WellPoint has very limited working
capital and significant debts due this year to other funds managed by the Quorum
Group and deferred consideration to Sirocco, a vehicle owned by the original
shareholders of Bolo, the US business acquired in 2008. SGW Capital Managers
continues to be supportive of Wellpoint management and is working with them to
find a proactive solution to the current issues.
SGW Capital Managers is in early stage discussions with three parties who are
potentially interested in a proposal involving WellPoint, the Company's
investment in WellPoint or in acquiring WellPoint as a whole. These parties
have all stressed that their interest is conditional upon WellPoint achieving
EBITDA stability. SGW Capital Managers believes that this can be achieved
within 9 months and that the return on an exit by the Company will be in excess
of net asset value.
The alternative currently being advocated to WellPoint by Wanda Dorosz is that
WellPoint be merged with several other companies such as SR2020 and LxData and
that she can raise significant capital for such a merged entity. SGW Capital
Partners does not believe that this plan is plausible, and notes in particular
that Wanda Dorosz has suggested over the last nine months that she can raise
funds for Project TEN but that there has been no sign of them materialising.
SGW Capital Managers considers that the alternative plan is likely to lead to a
significant loss, dilution and execution risk on the investment in WellPoint and
the other companies that are merged with it and strongly recommends that such an
option is rejected.
LxData
LxData was always seen to be a breakthrough technology investment with
significant potential for profit with a higher degree of risk. The temperature
gauge has worked in field trials, the pressure gauge has yet to do so. However,
despite the temperature gauge's success in trials, market take up has been slow
to materialise. They are bidding on many tenders and have built up a reasonable
orders pipeline, but the long sales cycle has convinced the shareholders in
LxData that the business would benefit from a strategic capital partner or
purchaser with sales and distribution channel to commercialise the product.
They have engaged a top tier investment banker to advance this process. We
agree and have put in a small amount of capital, alongside the other
shareholders, to advance this process. SGW Capital Partners estimate that
proceeds could exceed net asset value. Initial indications of interest, which
should enable an estimate of value, are due in September and the Chairman of
LxData expects any transaction to be completed this calendar year.
Ambercore and Terrapoint
SGW Capital Managers have worked with the management of Ambercore and Terrapoint
to put the following plans in place. First, we are working to protect the
Terrapoint business, which is significantly revenue generating and EBITDA
positive on a stand-alone basis, and are in early stage discussions with
potentially interested acquirors of this business. We have also taken steps to
ensure that any legal or financial process can take place while leaving the
business of Terrapoint insulated from damage and able to go forward on a
stand-alone basis.
Second, we are in the final stages of negotiating a transaction with Jim Estill
on behalf of Canrock, a company in which Jim Estill has a significant
controlling interest, whereby Canrock can still pursue a potential sale of the
Project Cloud/Three2n intellectual property but through a process that protects
the interests of the Company in Ambercore and Terrapoint. In the opinion of SGW
Capital Managers, the terms of the transaction with Canrock enable the Company
to realise any potential upside on a sale of the Project Cloud IP, while also
protecting the Company's position, and are significantly better than those
proposed by Wanda Dorosz.
SGW Capital Managers look forward to the opportunity to further explain the
advantages to the Company and its shareholders of their approach.
SR2020
SGW Capital Managers have worked hard with the management of SR2020 to build
upon its pipeline of new business and also to ensure that SR2020 lives within
its own capital and income resources and at this time does not require further
drip-fed investment from the Company. This is gradually achieving traction and
recent proposed cash calls have been reduced or cancelled through our work with
management, although the cashflow position of SR2020 remains precarious.
We are currently working, both through our own contacts and in collaboration
with management, to advance two potential realisation routes for SR2020.
QMENA
The implementation of the QMENA project by Wanda Dorosz entailed the spending of
$7 million of the Company's money, principally to attract third party
investment. Despite many promises, however, no third party capital was raised,
principally because of an over-complicated structure which includes
software-style licences unsuited to the oil and gas services industry. We have
moved to refocus QMENA onto simpler, individual project plans, where QMENA has
very interesting and profitable opportunities. On the basis of this plan we are
in discussions with institutions who are interested in investing in and/or
acquiring either all or part of the QMENA business. We believe that this
approach will generate a return to shareholders in excess of net asset value and
are working to achieve this as quickly as possible.
If appointed on a permanent basis, SGW Capital Managers will continue to work
expeditiously towards an early realisation of the Company's investments and a
return of capital to shareholders.
Benefits of the proposed appointment
The Board believes that the proposed appointment of SGW Capital Managers is in
the best interests of shareholders and in particular brings the following
benefits:
Investment approach - the Board believes that it is appropriate at this stage of
the Company's development that the focus should move to achieving successful
exits from some or all of the current portfolio investments. The Board has
therefore directed Sefton Partners and will in due course direct SGW Capital
Managers that until further notice no investments should be made in companies
unconnected with existing investees, and that any follow-on investments in
existing investees should be made only where the investment can be shown to add
to the potential near to medium term realisation value. The Board is pleased
that SGW Capital Managers entirely agrees with this investment approach. The
immediate plan of SGW Capital Managers is to work with the investee companies to
refocus them on core activities and ensure that all become cashflow positive as
soon as reasonably possible. Following on from that, SGW Capital Managers plans
to rebalance the investment portfolio to focus on upstream oil services and in
particular companies and technologies that increase overall recovery rates,
optimise the reservoir, increase production rates and/or lower production costs.
The Board has notified SGW Capital Managers that it will determine in the
future whether the proceeds of any successful exits be distributed to
shareholders or reinvested in growth stage companies.
Improved commercial terms - the Board has negotiated improved commercial terms
for the Company under the proposed new investment management agreement. The
principal improvements are (i) a reduction in the management fee percentage (1.5
per cent. per annum of the Company's net asset value rather than 2.0 per cent.);
(ii) a revised charging basis (the fee will be calculated based on the
cumulative acquisition cost of unrealised assets (adjusted to reflect any write
downs) rather than the prevailing valuation of the directors); (iii)
significantly improved notice period provisions (including an ongoing 6 month
notice period (after an initial fixed period of 12 months) and no notice period
on a winding-up of the Company); and (iv) a 50 per cent. rebate to the Company
on any transaction fees charged to investee companies by SGW Capital Managers.
Management style - the Board believes that David Sefton and Mike Goffin have
played a crucial role in Company's development through their attention to detail
and practicalities and has found interaction with Sefton Partners to be
productive and beneficial to the Company. The Board expects this productive
relationship to continue with SGW Capital Managers and believes that SGW Capital
Managers best complements the Board's role as stewards for the Company's
shareholders.
Independent investment management - whereas the Company is a co-investor in a
number of the investee companies with two private equity funds managed by the
Quorum Group, SGW Capital Managers is an independent investment management firm
and, initially, its sole client will be the Company. The Board believes that
there is a benefit to shareholders in SGW Capital Managers being the sole
manager of the Company and managing the Company's assets without any potential
conflicts of interest.
In addition, SGW Capital Managers will undertake that it, its directors and its
clients (including any funds under its management) will not directly or
indirectly co-invest with the Company or any investee company of the Company.
Administration - the arrangements with SGW Capital Managers will involve Ogier
Fiduciary Services (Guernsey) Limited, the Company's secretary and
administrator, undertaking direct responsibility for all administrative
functions relating to the Company, which the Board believes is in line with best
market practice for listed investment companies.
Part B: Appointment of New Directors
If the appointment of SGW Capital Managers as investment manager of the Company
is not approved at the EGM it will be proposed to the EGM that three new
directors be appointed inter-conditionally (the "Potential New Directors") and
the current directors intend to resign at the conclusion of the EGM. The Board
understands that the Potential New Directors have all consented to act. Brief
biographical details of the Potential New Directors are set out below.
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| · | Bill Scott is an independent non executive director to |
| | a number of investment companies and funds. After |
| | being assistant investment manager with the London |
| | Residuary Body Superannuation Scheme he joined Rea |
| | Brothers, a private banking group. From 1997 - 2002 he |
| | was in charge of the Group's Guernsey based offshore |
| | private client investment management activities. Rea |
| | Brothers became part of the Close Brothers Group in |
| | 1999 and during that period he was director of Close |
| | Bank Guernsey Limited. Amongst others Bill sits on the |
| | board of 14 funds run by FRM Investment Management |
| | Limited. Bill is a chartered accountant, holds the |
| | securities institute diploma and is a member of the |
| | securities & investment institute. |
+---+---------------------------------------------------------+
| · | Jonathan Hooley is a Guernsey born chartered accountant |
| | who spent most of his career working as an |
| | international tax adviser in London. He is also a |
| | chartered tax adviser and a chartered director. |
| | Jonathan spent the larger part of his 30 year career |
| | with KPMG in London where he was made a partner in KPMG |
| | London's tax practice in 1987, subsequently becoming |
| | the head of KPMG's UK bank tax practice. On retiring |
| | from KPMG at the end of September 2007, Jonathan was |
| | appointed as the Chairman of the Channel Islands Stock |
| | Exchange. Jonathan's other directorships include the |
| | Rothschild banking companies in the Channel Islands and |
| | two UK listed investment funds based in Guernsey. |
+---+---------------------------------------------------------+
| · | Andrew Duquemin was formerly Managing Director of |
| | Collins Stewart Fund Management Limited, responsible |
| | for a company providing a range of fund management and |
| | corporate finance services to a number of open and |
| | closed fund structures and trading companies. He |
| | resigned to pursue a management buyout of the business |
| | which was successfully concluded in October 2006. |
| | Andrew is now Chairman of Elysium Fund Management |
| | Limited which acquired the business interests of |
| | Collins Stewart Fund Management Limited and is |
| | responsible for the strategic development of the |
| | company. Andrew serves as director on 14 boards |
| | including the Channel Islands Stock Exchange. He is |
| | also a director of Liberum Capital Limited ("Liberum |
| | Capital"), who we understand is advising QOGT. |
+---+---------------------------------------------------------+
Possible Appointment of QOGT
We have been supplied with a proposal regarding the appointment of QOGT as the
Company's replacement investment manager. The terms of this proposal are
available on the Company's website and the Board believes them to be extremely
generous to QOGT as they would, for at least six months, be paid more than they
were under the original investment management and advisory agreement with the
Company.
We have been led to believe that the Potential New Directors will appoint QOGT
as soon as possible as the Company's replacement investment manager and/or with
effect from the end of the EGM as interim manager. For the reasons set out
above, the current Board is unwilling to propose the appointment of QOGT.
The Board has requested that the Potential New Directors and Liberum Capital
provide confirmation of their acceptance of the proposed terms of appointment of
QOGT, but nothing has been provided to us.
Proposed Plans of QOGT
We have been seeking information on QOGT's proposed plans for the Company which
we understand have been disclosed to some shareholders but nothing has been
forthcoming. Therefore on 23 August 2010, the Company's advisers formally
requested through Liberum Capital that QOGT provide its proposals for the
Company and any realisation plans for its inclusion in this circular. No
information was provided by the deadline of 25 August 2010 or to date.
Further Information
Should any further information be provided prior to the EGM, the Company will
circulate that information to all shareholders by placing it on its website,
www.q-ogtfund.com.
Part C: Other Matters
Investment Advisory Committee
If SGW Capital Managers is appointed as investment manager, the Board intends to
make two material changes to the Investment Advisory Committee after the EGM.
First, the Board intends to request the resignation of any members of the
Investment Advisory Committee who have a conflict or potential conflict of
interest through a material business relationship with SGW Capital Managers, the
Former Investment Managers, or any of the investee companies. The Board would
like to thank any resigning members for their contribution to the Company's
development.
Second, the Board will seek to establish formal terms of reference with the
Investment Advisory Committee. As part of that, the Board proposes that the
Investment Advisory Committee will in future have direct responsibility to the
Company in providing the advice and assistance in relation to potential
investments (rather than indirectly via the discretionary investment manager)
and that the Company will be entitled to appoint and remove members of the
Investment Advisory Committee. The Investment Advisory Committee will continue
to have no discretionary authority to make investment decisions on behalf of the
Company.
Performance related remuneration
As a result of the termination of the original investment management and
advisory agreement with the Former Investment Managers, the existing options to
subscribe for shares in the Company (the "Options") granted to the Former
Investment Managers have become immediately exercisable and remain exercisable
until the tenth anniversary of their respective grant dates. These Options were
issued to the Former Investment Managers as part of the Company's fundraisings
and amounted to 20 per cent. of the fully diluted share capital of the Company
in issue as at 31 December 2009. The exercise price of the Options is the issue
price of the shares in the Company to which they relate (ranging from $9.59 to
$10.35), each increasing by 8 per cent. per annum, with that increase being
reduced on a US$ for US$ basis in respect of any distributions paid by the
Company.
Change of Company Name
If the resolution to appoint SGW Capital Managers as investment manager of the
Company is approved at the EGM, the Company intends to change its name to Global
Oil & Gas Technology Fund Limited.
If neither the appointment of SGW Capital Managers nor the Potential New
Directors are approved
If shareholders vote against all resolutions, the Board intends to interpret
such votes as direction from the shareholders to continue with the current
status quo pending the development of an alternative strategy. The Board will
continue to entertain any sensibly priced exit opportunities for the Company's
investments; whether they are from QOGT or third parties.
Extraordinary General Meeting
You will find at the end of the Circular a notice convening the EGM to be held
at 2.00 p.m. on 28 September 2010 at Ogier House, St. Julian's Avenue, St. Peter
Port, Guernsey GY1 1WA. At the EGM the following resolutions will be proposed:
Resolution 1, which will be proposed as an ordinary resolution, seeks
shareholders' approval of the appointment of SGW Capital Managers as the
Company's investment manager, subject to receipt of any necessary approvals from
appropriate regulatory bodies.
Resolutions 2 to 4, which will be inter-conditional and will only be put to
shareholders if Resolution 1 is not passed, are proposed as ordinary resolutions
and seek shareholders' approval of the appointment, as directors of the Company,
of the Potential New Directors.
Resolution 5, which will only be put to shareholders if Resolution 1 is passed,
will be proposed as a special resolution and seeks shareholders' approval of the
change of the name of the Company to Global Oil & Gas Technology Fund Limited.
Action to be taken
The only action that you need to take is to complete the accompanying form of
proxy for use at the EGM.
Shareholders are asked to complete and return the form of proxy in accordance
with the instructions printed on it to the Company's Registrar, Computershare
Investor Services (Jersey) Limited, Queensway House, Hilgrove Street, St Helier,
Jersey JE1 1AE or deliver them by hand during office hours to the same address
so as to be received as soon as possible and by not later than 2.00 p.m. on 26
September 2010.
Shareholders are requested to complete and return a form of proxy whether or not
they wish to attend the EGM.
Recommendation
The Board considers that the passing of Resolutions 1 and 5 to be proposed at
the EGM are in the best interests of the Company and its shareholders as a
whole. Accordingly, the Board unanimously recommends that the shareholders of
the Company vote in favour of Resolutions 1 and 5 to be proposed at the EGM.
Tom Price
Chairman
Postscript
The Company announced on 31 August 2010 that it had received on 27 August 2010 a
notice requisitioning a general meeting of the Company for the purpose of
considering resolutions (to be proposed as ordinary resolutions) for the
appointment of Bill Scott, Jonathan Hooley and Andrew Duquemin as directors of
the Company and for the removal of Tom Price and Christopher Hill as directors
of the Company.
Prior to receipt of this notice, having met the Potential New Directors on 19
August 2010 and having made a series of enquiries about their plans for the
Company (and the plans of QOGT and Liberum Capital), the directors had
determined in any event to give notice of an extraordinary general meeting.
This circular was therefore prepared but not circulated to shareholders pending
receipt of those plans, which have not been forthcoming for various reasons,
including concerns about the possible disclosure of the plans to Sefton
Partners. As a result, the Board offered to execute whatever confidentiality
agreement QOGT requires or, if that was rejected, either of the following two
possibilities:
First, that QOGT provide any information to Liberum Capital for Liberum Capital
to verify and then set out so that it could have been disclosed in this
circular, unedited.
Secondly, the Board offered QOGT a conditional corporate finance fee for any
disposals effected between now and either:
(a) the EGM (if a new board is appointed); or
(b) for a reasonable period (if no new board is appointed).
If firm offers for the Company or its assets were made at or above NAV, but
rejected by the Board, the Board would consider paying a portion of any fee,
save in the case of an offer for Strata. The fee was conditional on QOGT
withdrawing its threat to issue proceedings in respect of the termination by the
Board of the original investment management and advisory agreement with the
Former Investment Managers.
No response to these proposals was received.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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