9 February 2022

Alternative Liquidity Fund Limited

Publication of Circular and Notice of General Meeting

The Board of Alternative Liquidity Fund Limited (the "Company") announces that it has today published a circular (the "Circular") in respect of proposals relating to the proposed aggregate investment of between approximately £24.8 million and £30 million in the proposed issue of new Ordinary Shares by the Company by way of an initial placing, offer for subscription and intermediaries offer (the "Initial Issue") by the Waverton Concert Party and to set out the reasons why the Board recommends that you vote in favour of the Waiver Resolution to be proposed at the Extraordinary General Meeting.

The Circular contains a notice convening an extraordinary general meeting of the Company to be held on Monday 28 February 2022 at 9.00 a.m at Sarnia House, Le Truchot, St Peter Port, Guernsey GY1 1GR.

The text of the Chairman's letter, extracted from the Circular, is set out below. 

A copy of the Circular will be submitted to the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism and on the Company's website: https://alternativeliquidityfund.com/ .

Terms used and not defined in this announcement bear the meaning given to them in the Circular published today.

1             Introduction

The Company was established to provide liquidity to investors in alternative assets following the 2008-2009 financial crisis. Since 25 February 2019, when the Company's current investment policy was adopted, the Company has pursued a realisation strategy in relation to the Existing Portfolio. That purpose has largely been achieved and as at 30 June 2021, the Company had returned the majority of its assets to Existing Shareholders. It is currently anticipated that the remaining assets in the Existing Portfolio will be realised fully within the next 12 to 24 months.

At an extraordinary general meeting of the Company held on 6 September 2021, Shareholders voted in favour of a number of resolutions to give effect to proposals relating to the issue of a new class of Ordinary Shares, the appointment of Waverton Investment Management Limited ("Waverton") as investment manager of a new Ordinary Portfolio and the adoption of a new investment objective and policy of the Ordinary Portfolio. The Directors were also granted authority to allot and issue (or sell from treasury) up to 250 million new Ordinary Shares for cash on a non-pre--emptive basis. The new Ordinary Shares will also be admitted to trading on the Specialist Fund Segment.

With effect from Admission, the Company's existing class of ordinary shares will be re-designated as the "Realisation Shares" to reflect the Board's policy to return cash from the proceeds of the investments, and the Company's existing assets currently held within the Existing Portfolio will be attributable to the "Realisation Portfolio". New ordinary shares to be issued pursuant to the Initial Issue and the Company's proposed ongoing placing programme will be designated as "Ordinary Shares" and the assets attributable to that new share class will be the "Ordinary Portfolio".

Conditional on Admission, Waverton will be appointed as investment manager to the Company with responsibility for the management of the Ordinary Portfolio. The assets attributable to the Ordinary Portfolio will be invested in a diversified portfolio of assets which Waverton considers have attractive medium to long-term return potential across both quoted public market and unquoted private market opportunities.

The Company currently intends to publish a prospectus in connection with the Initial Issue and ongoing placing programme of new Ordinary Shares in Q1 2022.  The Company is targeting minimum gross proceeds of the Initial Issue of £50 million and maximum gross proceeds of the Initial Issue of £150 million. Ordinary Shares will be issued pursuant to the Initial Issue at £1.00 per Ordinary Share.

Waverton is a UK based investment management firm which, as at 31 December 2021, managed approximately £8.6 billion of assets for a variety of clients including private clients, funds and charities. In making investments, Waverton is at all times acting as agent for and on behalf of discretionary managed clients.

Waverton intends to procure an aggregate investment of between approximately £24.8 million and £30 million in the Ordinary Shares as part of the Initial Issue across investment mandates on a discretionary basis for private clients, funds and charities (the "Waverton Discretionary Mandates"). Waverton, persons acting with Waverton and the Waverton Discretionary Mandates (together the "Waverton Concert Party") are regarded as acting in concert for the purposes of the Takeover Code. 

Although the exact size of the aggregate investment by the Waverton Concert Party as part of the Initial Issue will not be determined until closing of the Initial Issue and will depend on the Initial Issue size and the investment decisions taken by the relevant portfolio managers at Waverton on behalf of their respective Waverton Discretionary Mandates, the Waverton Concert Party will not invest an amount in the Initial Issue which would result, on Admission, in it being interested in more than 49.9 per cent. of the total voting rights in the Company. However, the aggregate investment of the Waverton Concert Party in the Initial Issue could represent greater than 30 per cent. of the total voting rights in the Company following completion of the Initial Issue; accordingly, the participation of the Waverton Concert Party in the Initial Issue will be subject to the approval of the Independent Shareholders of the waiver of the obligation that would otherwise arise on the Waverton Concert Party to make a Rule 9 offer as the result of the acquisition of an interest in shares carrying 30 per cent. or more of the total voting rights in the Company.

The purpose of this document is to provide you with details of the proposed aggregate investment in the Initial Issue by the Waverton Concert Party and to set out the reasons why the Board recommends that you vote in favour of the Waiver Resolution to be proposed at the Extraordinary General Meeting.

2             Rule 9 of the Takeover Code and background to the Rule 9 Waiver

The proposed participation by the Waverton Concert Party in the Initial Issue gives rise to certain considerations under the Takeover Code. Brief details of the Panel, the Takeover Code and the protections they afford are described below.

Under Rule 9 of the Takeover Code, any person who acquires an interest in shares (as defined in the Takeover Code) which (taken together with shares in which he is already interested and in which persons acting in concert with him are interested) carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Code, is normally required to make a general offer to all of the remaining shareholders to acquire their shares.

Rule 9 of the Takeover Code also provides, inter alia, that where any person, together with any persons acting in concert with him, is interested in shares carrying not less than 30 per cent. but does not hold shares carrying more than 50 per cent. of a company's voting rights, a general offer will normally be required if any further interest in shares is acquired by any such person.

An offer under Rule 9 of the Takeover Code must be made in cash and at the highest price paid by the person required to make the offer (or any persons acting in concert with him) for any such interests within the 12 months prior to the announcement of the offer.

For the purposes of the Takeover Code, a concert party arises where persons acting in concert pursuant to an agreement or understanding (whether formal or informal) co-operate, to obtain or consolidate control of that company. Control means a holding, or aggregate holdings, of interests in shares carrying in aggregate 30 per cent. or more of the voting rights (as defined in the Takeover Code), irrespective of whether the holding or holdings give de facto control.

Waverton

Waverton (as agent on behalf of the Waverton Discretionary Mandates) intends to procure an aggregate investment of between approximately £24.8 million and £30 million in the Ordinary Shares as part of the Initial Issue. As at the date of this document, no member of the Waverton Concert Party holds any Existing Shares. As noted above, the exact size of the aggregate investment by the Waverton Concert Party as part of the Initial Issue will not be determined until closing of the Initial Issue and will depend on the Initial Issue size and the investment decisions taken by portfolio managers at Waverton on behalf of their respective Waverton Discretionary Mandates. It is currently expected that approximately 70 per cent. of the aggregate investment of the Waverton Concert Party in the Initial Issue will be allocated to private clients with an allocation of approximately 25 per cent. to funds and approximately 5 per cent. to charities, although this will depend on investment decisions at closing of the Initial Issue. In any event, the aggregate investment of the Waverton Concert Party in the Ordinary Shares will be capped so that, on Admission, the Waverton Concert Party will not be interested in more than 49.9 per cent. of the total voting rights in the Company.

The Panel has agreed, however, to waive the obligation on the members of the Waverton Concert Party to make a general offer that would otherwise arise as a result of the holding of interests in Ordinary Shares following participation by the Waverton Concert Party in the Initial Issue provided the approval, on a poll of the Independent Shareholders, is obtained at the Extraordinary General Meeting. Accordingly, the Waiver Resolution is being proposed at the Extraordinary General Meeting and will be taken on a poll.

For the avoidance of doubt, the Rule 9 Waiver applies only in respect of the interest in Ordinary Shares by members of the Waverton Concert Party resulting from their aggregate investment in the Initial Issue and not in respect of other increases in their respective interests in Shares.

In the event that the Waiver Resolution is approved by Independent Shareholders, the Waverton Concert Party will not be restricted from making an offer for the Company.

Further details concerning Waverton and the Waverton Concert Party are set out in Part 2 of this document.

The notice of the Extraordinary General Meeting, at which the Waiver Resolution will be proposed, is set out at the end of this document. 

If, following completion of the Initial Issue, the Waverton Concert Party will be interested in shares carrying not less than 30 per cent. of the Company's voting rights, further acquisition of interests in shares by the Waverton Concert Party will be subject to Rule 9 of the Takeover Code.

3             Additional considerations associated with the Waiver Resolution

Existing Shareholders should have regard to the following when considering the Waiver Resolution:

·      following the issue of Ordinary Shares pursuant to the Initial Issue, the Waverton Concert Party may hold a significant proportion of the Ordinary Shares. The interests of the Waverton Concert Party (and any individual member thereof) may conflict with the interests of the Independent Shareholders and/or the Company and in such circumstances, matters may not be resolved in a manner which Independent Shareholders consider to be in their best interests or in the interests of the Company;

·      pursuant to the New Articles, the Company's voting structure will change upon Admission so that, in respect of the Realisation Shares, at any general meeting of the Company each Realisation Shareholder will have, on a show of hands, one vote, and on a poll, a weighted vote determined by reference to the underlying NAV of the Realisation Shares and calculated in accordance with the New Articles. This weighted voting right will be calculated and fixed immediately following Admission and will not change as the return of capital for the Realisation Shareholders will be effected by way of an issue of redeemable B shares to Existing Shareholders pro rata to their shareholdings on the relevant record date and the subsequent redemption and cancellation of those B shares.

As an illustrative example, a Realisation Shareholder holding 100 Realisation Shares, and on the basis of the Company's NAV of US$0.1497 per Existing Share as at30 September 2021, and the prevailing GBP/USD exchange rate as at the date of this document, such Realisation Shareholder would have, on a poll, 11 votes in respect of the 100 Realisation Shares held. Each Ordinary Shareholder will have, on a show of hands, one vote, and on a poll, each Ordinary Shareholder will have one vote for each Ordinary Share held. However, it should also be noted that the prior class consent of the Realisation Shareholders will be required prior to, inter alia: any change being made to the investment policy which would materially affect the Realisation Portfolio; any change being made to the Articles in such a way as to materially affect the class rights of the Realisation Shareholders; and a resolution, other than the continuation vote resolution, being put to Shareholders in a general meeting in relation to the voluntary winding up of the Company;

·      the anticipated significant size of the Waverton Concert Party holding following completion of the Initial Issue may have an impact on the Company's future ability to attract new equity investors, which could in turn have an effect on the Company's ability to grow; and

·      in the event that Shareholders do not vote in favour of the Waiver Resolution, then the Initial Issue may still proceed but the Waverton Concert Party may not acquire Ordinary Shares in such an amount that would result in the Waverton Concert Party holding in excess of 29.9 per cent. of the voting rights of the Company on Admission, which may impact the size and/or likelihood of success of the Initial Issue.

4             The Extraordinary General Meeting

The Extraordinary General Meeting has been convened for Monday 28 February 2022 at 9.00 a.m. At the Extraordinary General Meeting, Shareholders will be asked to consider and, if thought fit, pass an ordinary resolution to be taken on a poll by the Independent Shareholders to waive the obligation on the Waverton Concert Party which would otherwise arise under Rule 9 as a result of the aggregate investment of the Waverton Concert Party in the Initial Issue.

The majority required for the passing of the Waiver Resolution is a simple majority of the votes cast (in person or by proxy) on the Waiver Resolution at the Extraordinary General Meeting.  Only Independent Shareholders may vote on the Waiver Resolution. 

The Extraordinary General Meeting will take place at the Company's registered office, Sarnia House, Le Truchot, St Peter Port, Guernsey GY1 1GR. 

5             Action to be taken in respect of the Extraordinary General Meeting

You will find enclosed with this document a Form of Proxy for use at the Extraordinary General Meeting. Whether or not you intend to be present at the Extraordinary General Meeting, you are requested to complete the Form of Proxy in accordance with the instructions printed on it and return it to Link Group at PXS 1, Link Group, Central Square, 29 Wellington Street, Leeds LS1 4DL so as to be received as soon as possible and, in any event, not later than 9.00 a.m. on 24 February 2022. Only Independent Shareholders may vote on the Waiver Resolution.

The completion and return of the Form of Proxy will not preclude you from attending the Extraordinary General Meeting.

6             Recommendation

The Board has received financial advice from Cenkos in relation to the Rule 9 Waiver. The Board, having been so advised by Cenkos, considers the Rule 9 Waiver to be fair and reasonable as far as the Independent Shareholders are concerned and in the best interests of the Independent Shareholders as a whole. In providing its financial advice to the Board, Cenkos has taken into account the Board's commercial assessments.

Accordingly, the Board unanimously recommends that you vote in favour of the Waiver Resolution to be proposed at the Extraordinary General Meeting.

The Directors intend to vote in favour of the Waiver Resolution at the Extraordinary General Meeting in respect of their own holdings of Existing Shares as at the date of the Extraordinary General Meeting, representing approximately 0.07 per cent. of the Existing Shares in issue as at the Latest Practicable Date.

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