THIS ANNOUNCEMENT IS NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES (INCLUDING TO U.S. PERSONS, AS SUCH TERM IS DEFINED UNDER REGULATION S OF THE U.S. SECURITIES ACT OF 1933, AS AMENDED, THE "SECURITIES ACT"), THE REPUBLIC OF SOUTH AFRICA, CANADA, AUSTRALIA, NEW ZEALAND OR JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.
3 June 2019
Sequoia Economic Infrastructure Income Fund Limited (the "Company" or "SEQI")
Issue under the Share Issuance Programme targeting £216 million
Further to the announcement on 14 May 2019 and in light of what the Board of Directors of the Company (the "Board") consider to be an attractive pipeline of investment opportunities in the economic infrastructure debt market, the Board has resolved to proceed with a partially pre-emptive issue of ordinary shares of no par value (the "Ordinary Shares") seeking to raise approximately £216 million of gross proceeds before expenses (the "Gross Issue Proceeds"), equivalent to up to 200 million new Ordinary Shares (the "New Ordinary Shares") (the "Issue").
The Directors have determined that the New Ordinary Shares will be issued at a price of 108.0 pence per New Ordinary Share (the "Issue Price"). The Company has provided an updated unaudited net asset value ("NAV") as at 13 May 2019 of 103.00 pence per Ordinary Share. The NAV excludes the dividend in respect of the period ended 31 March 2019 which had an ex-dividend date of 2 May 2019 and was paid on 30 May 2019. The New Ordinary Shares will be entitled to the interim quarterly dividend for the period ended 30 June 2019, expected to be declared in July 2019, after the closing of the Issue.
The Board recognises the importance of pre-emption rights to Ordinary Shareholders. Accordingly, 132,644,126 New Ordinary Shares are being initially offered to Qualifying Shareholders by way of the Open Offer pursuant to which they will be entitled to apply for 1 New Ordinary Share for every 8 existing Ordinary Shares held at 6.00 p.m. on 30 May 2019 (the "Record Date"). The balance of the New Ordinary Shares, together with any New Ordinary Shares not taken up by Qualifying Shareholders under the Open Offer, will be made available under the Placing and/or Offer for Subscription.
As at 3 June 2019, the Company had drawn an amount of approximately £175.3 million from its Revolving Credit Facility (the "RCF"). The Company intends to use the proceeds from the Issue (less expenses) (the "Net Issue Proceeds") to repay the drawn commitments under its RCF. Any remaining Net Issue Proceeds in excess of the amount drawn under the RCF are expected to be deployed into the Company's near term pipeline of opportunities, in accordance with the Investment Policy of the Company. Following deployment of the Net Issue Proceeds, the Company intends to re-draw on its RCF to invest in further pipeline opportunities as and when they become available.
The Issue is being conducted in accordance with the terms and conditions set out in the Prospectus consisting of a Registration Document published on 19 September 2018 (the "Registration Document") and a new Summary Document (the "Summary") and a new Securities Note (which updates the Registration Document) (the "Securities Note"), which are expected to be published later today following their approval by the Financial Conduct Authority (the "FCA"). The Registration Document, Securities Note and Summary together comprise the prospectus (the "Prospectus").
Stifel Nicolaus Europe Limited ("Stifel") is acting as sole sponsor, financial adviser and bookrunner to the Company.
Robert Jennings, Chairman of SEQI commented:
"This fundraise builds on another year of excellent progress and will enhance SEQI's ability to capitalise on the compelling pipeline of investment opportunities within the economic infrastructure debt market. Since the IPO in 2015, SEQI's disciplined approach to making investments has delivered a track record of value-accretive asset growth and sustained, long-term income to shareholders. We remain confident in our Investment Adviser's asset selection as the portfolio continues to be well diversified by geography and sector."
Pipeline and financing of opportunities
The Investment Adviser is currently engaged in various stages of negotiations on potential near term acquisitions with a total value in excess of £200 million. In addition, the Investment Adviser expects to see a steady stream of further investment opportunities. The acquisition of these potential investments is subject to, among other things, the approval of the Directors, and the Investment Adviser completing satisfactory due diligence in relation to such potential investments. Any such acquisitions will also be subject to agreement having been reached between the Investment Adviser and the relevant counterparty as to the terms.
Of the Investment Adviser's pipeline of near term opportunities approximately, 44.9 per cent. of the assets are senior secured debt instruments, 71.0 per cent. are floating rate instruments and 100 per cent. are private debt instruments. The anticipated composition of the potential investments by geographical region is 29.7 per cent. US, 20.4 per cent. UK and 49.9 per cent. Europe.
Approximately £109.3 million of the Company's assets will reach their expected maturity in the next 12 months, with approximately a further £340.1 million of redemptions scheduled over the remaining life of the RCF to December 2021. In practice, more redemptions are likely to occur allowing for prepayments over the period. This suggests that, should market conditions change and the Company be unwilling to pay back future drawings on the RCF by raising more equity capital, the Company expects to be able to prepay the RCF out of cashflow generated by the portfolio.
Environmental, Social and Governance ("ESG") Considerations
As part of the Company's investment process, the Company has committed to implement enhanced ESG considerations and is implementing a comprehensive ESG policy with the goal of full implementation by 2020.
In connection with the Company's commitment to implementing an ESG policy, the Investment Adviser has signed up to the United Nations Principles of Responsible Investment ("UNPRI"). Whilst these principles have historically been tailored towards equity investors, their scope has expanded to private debt. The UNPRI encompass all stages of the private debt process (origination, due diligence, documentation, holding period and exit decisions).
Further details will be available in the Securities Note, once published, and shareholders will be updated as the Company places further emphasis on ESG considerations as part of its investment process.
The Issue
The Issue is being implemented by way of an Open Offer, Placing and Offer for Subscription. The target size of the Issue is approximately £216 million before expenses. The target number of New Ordinary Shares to be issued pursuant to the Issue is 200 million at the Issue Price of 108.0 pence per New Ordinary Share. The Issue Price of 108.0 pence represents a premium of approximately 4.85 per cent. to the unaudited NAV per Ordinary Share as at 13 May 2019 of 103.00 pence and a discount of approximately 3.74 per cent. to the closing price of 112.20 pence per existing ordinary share on 31 May 2019.
The New Ordinary Shares issued pursuant to the Issue will rank pari passu in all respects with the existing Ordinary Shares. For the avoidance of doubt, the New Ordinary Shares will be entitled to the interim quarterly dividend for the period ended 30 June 2019, expected to be declared in July 2019, after the closing of the Issue.
The Board recognises the importance of pre-emption rights to Ordinary Shareholders. Accordingly, a substantial proportion of the New Ordinary Shares are being initially offered to Qualifying Shareholders by way of the Open Offer pursuant to which they will be entitled to apply for 1 New Ordinary Share for every 8 existing Ordinary Shares held on the Record Date (being 132,644,126 New Ordinary Shares).
The balance of the New Ordinary Shares (being 67,355,874 New Ordinary Shares), together with any New Ordinary Shares not taken up by Qualifying Shareholders under the Open Offer (including under the Excess Application Facility), may be made available, at the discretion of the Directors, under the Placing and/or Offer for Subscription. The Issue is not underwritten.
To the extent that the maximum number of New Ordinary Shares available to be issued pursuant to the Share Issuance Programme are not issued under the Issue, such New Ordinary Shares shall continue to be available for issuance under the terms of the Share Issuance Programme (announced on 19 September 2018).
Benefits of the Issue
The Board believes that proceeding with the Issue will have the following benefits:
• Providing the Company with the funds to repay the RCF which will allow the Company to re-draw funds under the RCF as and when investment opportunities arise without incurring cash drag;
• Allowing the Company to invest further capital in the identified available pipeline opportunities which should enable the Group to further diversify its Existing Portfolio;
• Creating the potential to enhance the NAV per existing Ordinary Share through the issuance of New Ordinary Shares at a premium to NAV per Ordinary Share, after the related costs have been deducted;
• Spreading the Company's fixed running costs across a wider base of shareholders, and benefiting from the reducing scale of charges for the Investment Adviser, thereby reducing the total expense ratio;
• Increasing the size of the Company which should help make the Company more attractive to a wider base of investors and improve market liquidity in the Ordinary Shares; and
• Increasing the size of the Company which should help make the Company more attractive to a wider base of borrowers and improve the Company's pipeline of opportunities.
Expected timetable
Open Offer |
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Record Date for entitlements to participate in the Open Offer |
6.00 p.m. on 30 May 2019 |
Ex-entitlement date for the Open Offer |
8.00 a.m. on 3 June 2019 |
Open Offer opens |
8.00 a.m. on 4 June 2019 |
Basic Entitlements and Excess CREST Open Offer Entitlements credited to CREST stock accounts (Qualifying Shareholders only) |
As soon as practicable after 8.00 a.m. on 4 June 2019 |
Recommended latest time for requesting withdrawal of Basic Entitlements and Excess CREST Open Offer Entitlements from CREST (i.e, if your Basic Entitlements and Excess Open Offer Entitlements are in CREST and you wish to convert them to certificated form) |
4.30 p.m. on 17 June 2019 |
Latest time and date for depositing Basic Entitlements and Excess CREST Open Offer Entitlements into CREST |
3.00 p.m. on 18 June 2019 |
Latest time and date for splitting Open Offer Application Forms (to satisfy bona fide market claims only) |
3.00 p.m. on 19 June 2019 |
Latest time and date for receipt of completed Open Offer Application Forms and payment in full under the Open Offer or settlement of relevant CREST instructions (as appropriate) |
11.00 a.m. on 21 June 2019 |
Placing and Offer for Subscription |
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Placing and Offer for Subscription open |
8.00 a.m. on 3 June 2019 |
Latest time and date for receipt of completed Offer for Subscription Application Forms and payment in full under the Offer for Subscription |
3.00 p.m. on 21 June 2019 |
Latest time and date for receipt of placing commitments under the Placing |
11.00 a.m. on 24 June 2019 |
Other key dates |
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Results of the Issue announced |
25 June 2019 |
Admission of the New Ordinary Shares to the Official List and commencement of dealings on the London Stock Exchange |
8.00 a.m. on 27 June 2019 |
CREST accounts credited in respect of New Ordinary Shares issued pursuant to the Issue to be held in uncertificated form |
On or around 27 June 2019 |
Dispatch of definitive share certificates in respect of New Ordinary Shares (where applicable) issued pursuant to the Issue |
On or around 1 July 2019 |
The Share Issuance Programme |
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Last date for Ordinary Shares to be issued pursuant to the Share Issuance Programme |
18 September 2019 |
The dates and times specified above are subject to change. In particular, the Directors may (with the prior approval of Stifel) bring forward or postpone the closing time and date for the Issue. In the event that a date or time is changed, the Company will notify persons who have applied for New Ordinary Shares pursuant to the Issue of changes to the timetable either by post, by electronic mail or by the publication of a notice through a Regulatory Information Service. References to times are to London times unless otherwise stated.
Admission to trading
Application will be made to the Financial Conduct Authority and the London Stock Exchange for all of the New Ordinary Shares issued pursuant to the Issue to be admitted to the premium listing segment of the Official List and to trading on the Main Market. It is expected that the results of the Issue will be announced through a Regulatory Information Service on or around 25 June 2019 and it is expected that Admission will become effective and that dealings for normal settlement in the Ordinary Shares will commence at 8.00 a.m. on or around 27 June 2019.
Further details
The ticker for the New Ordinary Shares is SEQI. The ISIN for the New Ordinary Shares is GG00BV54HY67 and the SEDOL is BV54HY6. The ISIN of the Basic Entitlements is GG00BJLSX395 and the SEDOL is BJLSX39. The ISIN for the Excess CREST Open Offer Entitlement is GG00BJLSX627 and the SEDOL is BJLSX62. The Company's LEI is 2138006OW12FQHJ6PX91.
Copies of the new Summary and Securities Note, when published, will be submitted to the National Storage Mechanism and will shortly thereafter be available for inspection at: www.morningstar.co.uk/uk/nsm as well as on the Company's website at http://www.seqifund.com/downloads. Terms used and not defined in this Announcement bear the meaning given to them in the Prospectus. The new Summary and Securities Note (which updates the Registration Document) will be published in due course.
For further information please contact:
Sequoia Investment Management Company Steve Cook Dolf Kohnhorst Randall Sandstrom Greg Taylor |
+44 (0) 20 7079 0480 |
Stifel Nicolaus Europe Limited Neil Winward Mark Bloomfield Gaudi Le Roux |
+44 (0) 20 7710 7600 |
Praxis Fund Services Limited (Company Secretary) Matthew Falla |
+44 (0) 1481 755530 |
Tulchan Communications (Financial PR) Martin Pengelley Elizabeth Snow Deborah Roney |
+44 (0)20 7353 4200 |
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The information contained in this announcement may constitute inside information. The person responsible for the release of this announcement on behalf of the Company is Praxis Fund Services Limited.
About the Company
The Company seeks to provide investors with regular, sustained, long-term distributions and capital appreciation from a diversified portfolio of senior and subordinated economic infrastructure debt investments. The Company is advised by Sequoia Investment Management Company Limited
IMPORTANT NOTICES
This announcement contains Inside Information as defined under the Market Abuse Regulation (EU) No. 596/2014.
This announcement is an advertisement and does not constitute a prospectus relating to the Company and does not constitute, or form part of, any offer or invitation to sell or issue, or an invitation to purchase investments of any description, or any solicitation of any offer to subscribe for, any securities in the Company in any jurisdiction nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducements to enter into, any contract therefor. Copies of the Securities Note and Summary to be published by the Company will be available from http://www.seqifund.com. A copy of the Registration Document is currently available from http://www.seqifund.com.
Recipients of this announcement who are considering acquiring New Ordinary Shares are reminded that any such acquisition must be made only on the basis of the information contained in the Prospectus (or any supplementary prospectus) which may be different from the information contained in this announcement and must not be made in reliance on this announcement. The subscription for New Ordinary Shares is subject to specific legal or regulatory restrictions in certain jurisdictions. Persons distributing this announcement must satisfy themselves that it is lawful to do so. The Company assumes no responsibility in the event that there is a violation by any person of such restrictions.
This announcement does not constitute and may not constitute and may not be construed as a recommendation regarding the issue or the provision of investment advice by any party. No information set out in this announcement is intended to form the basis of any contract of sale, investment decision or any decision to purchase securities. Potential investors should consult a professional advisor as to the suitability of an investment in the securities for the person concerned.
The value of Ordinary Shares and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested. Figures refer to past performance and past performance is not a reliable indicator of future results. Returns may increase or decrease as a result of currency fluctuations. Capital is at risk and investors need to understand the risks of investing. Please refer to the Prospectus for further information, in particular the "Risk Factors" section set out in both the Securities Note and the Registration Document.
Neither this announcement nor the information contained herein is for release, publication or distribution, directly or indirectly, in or into the United States, the Republic of South Africa, Canada, Australia, New Zealand or Japan or any other jurisdiction where to do so might constitute a violation of the relevant laws or regulations of such jurisdiction. The securities referred to herein have not been and will not be registered under the relevant securities laws of any such excluded territory.
This announcement does not contain, constitute or form part of an offer for sale of, resale of, transfer of or delivery of or the solicitation of an offer to purchase directly or indirectly, securities in the United States or to, or for the account or benefit of a U.S. Person (as defined in Regulation S of the Securities Act). The securities referred to herein have not been, and will not, be registered under the Securities Act or any other applicable securities laws of, or with any securities regulatory authority of, any state or other jurisdiction of the United States, and may not be offered, sold, resold, transferred or delivered, directly or indirectly, in the United States or to, or for the account or benefit of, any U.S. Person absent registration or an applicable exemption from the registration requirements of the Securities Act. The Company has not been and will not be registered under the U.S. Investment Company Act of 1940, as amended, and neither International Fund Management Limited (the "Investment Manager") nor Sequoia Investment Management Company Limited (the "Investment Adviser") will be registered as an investment adviser under the U.S. Investment Advisers Act of 1940, as amended. Consequently, investors will not be entitled to the benefits and protections of the U.S. Investment Company Act of 1940, as amended or the U.S. Investment Advisers Act of 1940, as amended. The shares of the Company will be offered and sold only to non-U.S. Persons outside the United States in reliance on Regulation S under the Securities Act. There will be no offer of the Company's securities in the United States. The distribution of this document may also be restricted by law in other jurisdictions.
This announcement does not constitute or form part of, and should not be construed as, any offer or invitation to sell, or any solicitation of any offer to purchase or subscribe for any Ordinary Shares or any other securities nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract or investment decision whatsoever, in any jurisdiction. This announcement does not constitute a recommendation regarding any securities.
The distribution of this announcement may be restricted by law in certain jurisdictions and persons into whose possession any document or other information referred to herein comes should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.
Subject to certain exceptions, the securities referred to herein may not be offered or sold in the United States, the Republic of South Africa, Canada, Australia, New Zealand or Japan or to, or for the account or benefit of, any national, resident or citizen of the United States, the Republic of South Africa, Canada, Australia, New Zealand or Japan, Australia, New Zealand or the Republic of South Africa. There will be no offer of the ordinary shares in the United States, the Republic of South Africa, Canada, Australia, New Zealand or Japan.
Certain statements in this announcement are forward-looking statements which are based on the Company's expectations, intentions and projections regarding its future performance, anticipated events or trends and other matters that are not historical facts. These forward-looking statements, which may use words such as "aim", "anticipate", "believe", "could", "intend", "estimate", "expect", and words of similar meaning, include all matters that are not historical facts. These forward-looking statements involve risks, assumptions and uncertainties that could cause the actual results of operations, financial condition, liquidity and dividend policy and the development of the industries, which the Company's businesses operate to differ materially from the impression created by forward-looking statements. These statements are not guarantees of future performance and are subject to known and uncertain risks, uncertainties and other factors that could cause actual results to differ materially from those express or implied by such forward-looking statements. Given those risks and uncertainties, prospective investors are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of such statements and, except as required by the Financial Conduct Authority, the London Stock Exchange or applicable law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Stifel Nicolaus Europe Limited ("Stifel"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for the Company and no one else in connection with the Issue. Stifel will not regard any other person as its client in relation to the Issue and will not be responsible to anyone other than the Company for providing the protections afforded to its clients, nor for providing advice in relation to the Issue, the contents of this announcement or any transaction, arrangement or other matter referred to herein.
Neither Stifel nor any of its directors, officers, employees, advisers, affiliates or agents accepts any responsibility or liability whatsoever for/or makes any representation or warranty, express or implied, as to the truth, accuracy or completeness of the information in this announcement (or whether any information has been omitted from the announcement) or any other information relating to the Company or its subsidiary, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss howsoever arising from any use of the announcement or its contents or otherwise arising in connection therewith.
The Company is incorporated in Guernsey and has been registered as a registered closed-ended collective investment scheme under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended. It is suitable only for professional or experienced investors, or those who have taken appropriate professional advice.
You are wholly responsible for ensuring that all aspects of the Company are acceptable to you. Investment in listed funds may involve special risks that could lead to a loss of all or a substantial portion of such investment. Unless you fully understand and accept the nature of the Company and the potential risks inherent in it you should not invest in the Company.
Further information in relation to the regulatory treatment of listed funds domiciled in Guernsey may be found on the website of the Guernsey Financial Services Commission at http://www.gfsc.gg/The-Commission/Pages/Home.aspx.
Information for Distributors
Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the Product Governance Requirements) may otherwise have with respect thereto, the Ordinary Shares have been subject to a product approval process, which has determined that such securities are: (i) compatible with an end target market of investors who meet the criteria of retail and professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment").
Notwithstanding the Target Market Assessment, distributors should note that: the price of the Ordinary Shares may decline and investors could lose all or part of their investment; the Ordinary Shares offer no guaranteed income and no capital protection; and an investment in Ordinary Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Issue. Furthermore, it is noted that, notwithstanding the Target Market Assessment, Stifel will only procure investors who meet the criteria of professional clients and eligible counterparties.
For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the New Ordinary Shares pursuant to the Issue.
Each distributor is responsible for undertaking its own Target Market Assessment in respect of the New Ordinary Shares and determining appropriate distribution channels.
Marketing disclosures pursuant to AIFMD (as defined below)
The Company is an externally managed alternative investment fund and has appointed the Investment Manager (the "AIFM"), as its alternative investment fund manager
Pursuant to Article 23 of AIFMD and the Alternative Investment Fund Managers Regulations 2013 (No. 1173/2013) and the Investment Funds Sourcebook of the FCA (the "UK AIFMD Rules"), the AIFM is required to make available to persons in the European Union who are invited to and who choose to participate in the Issue, by making an oral or written offer to subscribe for New Ordinary Shares, including any individuals, funds or others on whose behalf a commitment to subscribe for New Ordinary Shares is given (the "Subscribers") certain information (the "Article 23 Disclosures"). For the purposes of the Issue, the AIFM has made the Article 23 Disclosures available to subscribers in the 'Investor - Shareholder Information' section of the Company's website at: http://www.seqifund.com.
PRIIPS (as defined below)
In accordance with the Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products ("PRIIPs") and its implementing and delegated acts (the "PRIIPs Regulation"), the AIFM has prepared a key information document (the "KID") in respect of the Ordinary Shares. The KID is made available by the AIFM to "retail investors" prior to them making an investment decision in respect of the Ordinary Shares at http://www.seqifund.com.
If you are distributing Ordinary Shares, it is your responsibility to ensure that the KID is provided to any clients that are "retail clients".
The Company is the only manufacturer of the Ordinary Shares for the purposes of the PRIIPs Regulation and neither Stifel nor the AIFM are manufacturers for these purposes. Neither Stifel nor the AIFM makes any representations, express or implied, or accepts any responsibility whatsoever for the contents of the KID prepared by the Company nor accepts any responsibility to update the contents of the KID in accordance with the PRIIPs Regulation, to undertake any review processes in relation thereto or to provide the KID to future distributors of Ordinary Shares. Both Stifel and the AIFM and their respective affiliates accordingly disclaim all and any liability whether arising in tort or contract or otherwise which it or they might have in respect of the key information documents prepared by the Company. Investors should note that the procedure for calculating the risks, costs and potential returns in the KID are prescribed by laws. The figures in the KID may not reflect actual returns for the Company and anticipated performance returns cannot be guaranteed.
