Rose : Notice of EGM

Friday 21 November 2014

Rose Group Limited

(AIM: RGI)

NOTICE OF EXTRAORDINARY GENERAL MEETING

 Proposed cancellation of admission of ordinary shares to trading on AIM

Further to the announcement on 20 November 2014, Rose Group Limited ("Rose Group" or the "Company") announces today that it has now received a valid requisition notice from Direct Finance LLC ("Direct Finance") , which together with its affiliates beneficially owns and controls approximately 73.4 per cent. of the issued share capital of the Company, procuring the requisition of  an Extraordinary General Meeting ("EGM") to consider a special resolution for the cancellation of the admission of the Company's ordinary shares to trading on AIM.

Direct Finance has also informed the Company of its intention to vote in favour of the Resolution. The Board believes that the level of Direct Finance's interest in the ordinary shares of the Company is such that it is likely that the Resolution will be passed.

The Company intends to convene an EGM for 17 December 2014 at noon at Frances House, Sir William Place, St Peter Port, Guernsey, GY1 4EU and expects to send a circular to Shareholders (the "Circular ") later today containing notice of the EGM.

If the Delisting is approved at the EGM, the expected date for the proposed Delisting is 7.00 a.m. on 29 December 2014.  In accordance with Rule 41 of the AIM Rules, the Company has also today notified the London Stock Exchange of the proposed Delisting.

The full text of the letter sent to Shareholders from the Company's Chairman is copied below including the reasons given by Direct Finance for, and impact of, the proposed Delisting and details of what action Shareholders should take.

A copy of the circular to Shareholders will be available to view shortly on the Company's website: http://www.rosegroup.ru/en/

Capitalised terms used but not defined in this announcement have the same meaning as given to them in the Circular.

Enquiries:

Dear Shareholder

1.            Introduction

On 20 November 2014, Direct Finance, which together with its affiliates beneficially owns and controls approximately 73.4 per cent. of the issued share capital of the Company, procured the requisition of an extraordinary general meeting to consider a special resolution to cancel admission of the Company's shares to trading on AIM. Under Guernsey law, the Directors are obliged to convene such an extraordinary general meeting.

An Extraordinary General Meeting has been convened for 12.00 noon on 17 December 2014, at which Shareholders will be asked to consider and, if thought fit, to approve the Resolution in order to implement the Delisting. Details of the Extraordinary General Meeting are set out in the Notice of Extraordinary General Meeting at the end of this document.

Prior to receiving the requisition notice described above, the Directors have explored with Direct Finance the possibility of the Principal Shareholders making an offer, upon Delisting, to buy the Shares of the other Shareholders. However, no such offer has been forthcoming.

This letter sets out the reasons given by Direct Finance for, and impact of, the Delisting. Your attention is drawn in particular to section 3 below ("Impact of the Delisting ") which describes the impact of the Delisting on the Company and its Shareholders.

The Directors have also been informed that AMG, the Company's second largest shareholder, also intends to vote in favour of the Resolution. Given the intention of the Company's largest two shareholders, Direct Finance (together with its affiliates) and AMG, which together beneficially own approximately 89.5 per cent. of the voting rights in the Company, to vote in favour of the Resolution, the Directors make no recommendation as to the merits of the Delisting.   

The notice of Extraordinary General Meeting and the Form of Proxy are included at the end of this document.

2.            Reasons given by Direct Finance for the Delisting

Direct Finance believe that the Delisting should occur for the following reasons:

(a)          "Sectoral" sanctions and market sentiment

On 31 July 2014, the European Union adopted "sectoral" sanctions against various Russian government-controlled financial and other institutions. As noted by the Company in its published unaudited results for the six months ended 30 June 2014, this included Vnesheconombank which, in view of its indirect ownership and control of Direct Finance, is the ultimate parent company of the Company. Vnesheconombank is also subject to "sectoral" sanctions imposed under the laws of other jurisdictions including the United States of America, Canada and Norway. As a result of Vnesheconombank holding over 50 per cent. of the Company's Shares, the Company itself is subject to such "sectoral" sanctions adopted by the European Union and other jurisdictions.

As a result of the extension of sanctions to the Company, it is prohibited from, among other things, issuing new shares or other securities to persons in the UK, the rest of the European Union and other jurisdictions that have adopted "sectoral" sanctions. There is no indication that such sanctions will be lifted in the near future. Even if this were to occur, a number of emerging markets, and Russia in particular, are currently subject to negative market sentiment. Direct Finance believes that the UK equity markets in particular are widely viewed as being effectively closed to the majority of Russian issuers for the time being, and it is not clear when they will reopen.

As a result, Direct Finance is of the view that the Company's admission to AIM does not currently serve, and is not in the foreseeable future expected to serve, as a meaningful platform to provide access to capital. In addition, even if the Company were no longer subject to "sectoral" sanctions prohibiting the issuance of new equity, Direct Finance believes that the Company would not in the foreseeable future be able to issue shares to effect acquisitions as potential counterparties are unlikely to regard the Shares as an attractive form of consideration. Accordingly, Direct Finance believes that the continued admission of the Company to AIM does not afford it any advantage in terms of additional sources of funding relative to the ongoing cost of maintaining the listing.

(b)          Costs

There are significant costs associated with maintaining the Company's AIM listing, including the annual fees payable to the London Stock Exchange, nominated adviser fees and legal, accounting and other related professional costs. Cancellation of the Company's admission to AIM would reduce the Company's recurring administrative costs and fees in this respect by approximately US$1 million per year.

In addition, as a company admitted to AIM and by agreement of the Company's nominated adviser and Direct Finance, the Company has maintained a Board of at least six (and presently seven) Directors, with at least three Directors at any time being independent non-executive Directors. As further described in section 5 below, Direct Finance envisages that upon Delisting the size of the Board will be reduced. Among other consequences, this reduction in the size of the Board is expected to reduce the Company's costs for Directors' services and related expenses.

(c)           Greater flexibility

The Company is subject to numerous obligations under the AIM Rules as a result of its admission to AIM. These obligations include limitations relating to certain transactions, ongoing disclosure requirements and financial reporting obligations.

Recent current events have had a significant impact on the Russian operations of companies in the market. This volatile environment has required companies to make quick decisions in order to respond to evolving situations. Regulatory reporting and approval requirements to which the Company is currently subject under the AIM Rules have hindered its ability to act quickly and efficiently.

As a result of the admission of the Company on AIM, senior management is required to spend a significant amount of time ensuring compliance with the AIM Rules and other regulatory requirements, including reporting, disclosure and corporate governance requirements. As a result of the Delisting, the Company's senior management would be able to focus more on the ongoing business and operations of the Company.

(d)          Low liquidity

The admission of the Shares on AIM does not, in itself, currently offer investors the opportunity to trade in meaningful volumes or with any frequency within the public markets. The concentration of the Company's Shareholder base, of which the top two Shareholders (together with their respective affiliates) hold approximately 89.5 per cent. of the Company's issued shares, has resulted in limited trading liquidity in the Shares for a significant period of time.

Your attention is also directed to section 5 below ("Intentions of the Principal Shareholders following Delisting ") which sets out the Board's understanding of the Principal Shareholders' anticipated plans for the Company following Delisting, as explained to the Board by Direct Finance.

3.            Impact of the Delisting

The impact of the Delisting on Shareholders will include the matters described below. Shareholders should pay particular attention to the following potentially negative consequences of the Delisting:

(a)          Loss of liquidity

Cancellation in the trading of the Shares on AIM will further reduce the liquidity and marketability of the Shares as Shareholders will not be able to trade their Shares on AIM or any other public stock market or exchange, and no price will be publicly quoted for the Shares.

As a result, it will become more difficult for Shareholders to sell their Shares on commercially acceptable terms, if at all. As described more fully in paragraph 6 below, the Principal Shareholders intend to procure that the Company will establish a matched bargain settlement facility to serve as a limited platform for Shareholders and other persons to seek to buy or sell Shares. However, such a facility is likely to offer a substantially lesser degree of liquidity and potentially less attractive share prices than are currently available via the Company's AIM listing. 

The Company intends to maintain its existing CREST facility following Delisting. Shareholders will continue to be able to hold their Shares in dematerialised form (or alternatively to be issued share certificates in respect of their Shares), and the Shares will continue to be transferrable through CREST in accordance with the applicable procedures.

(b)          Control of the Company

Following Delisting, the Principal Shareholders will have the ability to control the day-to-day management of the Company and the ability of other Shareholders to influence the Company will be very limited. The interests of the Principal Shareholders may conflict with, and have a material adverse impact on, the interests of other Shareholders. In particular, the Principal Shareholders will be able to procure that the Company, among other things:

·           undertakes new share issuances or other alterations of the Company's share capital other than on a fully pre-emptive basis (which could materially dilute the      shareholdings   of other Shareholders), or on terms which are more commercially attractive to the Principal Shareholders than to other Shareholders;

·           incurs debt without seeking the consent of, or notifying, other Shareholders;

·           acquires assets which may or may not be in accordance with the current stated               strategy of the Group; and

·           terminates, amends or enters into key contracts which are material to the business of                 the Company without consulting other Shareholders.

(c)           AIM Rules

Following Delisting, the Company will no longer be subject to the AIM Rules. In particular, this means that, under the control of the Principal Shareholders, the Company will:

·        have the power to enter into a transaction which would have constituted a "reverse takeover" or a transaction resulting in a "fundamental change of business" under the AIM Rules without first having to seek the consent of the Shareholders (by way of an ordinary resolution);

·        be free to enter into a transaction which would have constituted a "related party transaction" under the AIM Rules without having to announce such transaction or confirm that the terms of the transaction are fair and reasonable (insofar as Shareholders are concerned);

·        not be under any obligation to disclose certain financial information to the Shareholders, such as half-yearly accounts, other than as required by Guernsey law. As such, the minority Shareholders may no longer receive material financial information in respect of the Company and, accordingly, the value of their investment; and

·        not be obliged to make public announcements of the kind that would be required for a company with shares admitted to trading on AIM.

(d)          Takeover Code

The Takeover Code currently applies to the Company and as such the Shareholders currently benefit from a number of protections contained in the Takeover Code. Upon Delisting, Emmanuel Blouin and Mark Holdsworth, among others, will resign from the Board with the result that none of the Company's Directors will be resident in the United Kingdom, the Channel Islands or the Isle of Man. Accordingly, the Company's place of central management and control will not be (and is not expected to be) in the United Kingdom, the Channel Islands or the Isle of Man and, pursuant to paragraph 3(a)(ii) to the Introduction to the Takeover Code, the Company will no longer be subject to the Takeover Code.

The Shareholders should note that, if the Resolution becomes effective, they will not receive the protections afforded by the Takeover Code in the event that there is a subsequent offer to acquire their Shares.

Brief details of the Takeover Code and the protections given by the Takeover Code are described below. Before giving your consent to the Delisting, you may want to take independent professional advice from an appropriate independent financial adviser.

The Takeover Code

The Takeover Code is issued and administered by the Takeover Panel ("Panel "). The Company is a company to which the Takeover Code applies and its Shareholders are accordingly entitled to the protections afforded by the Takeover Code.

The Takeover Code and the Panel operate principally to ensure that shareholders are treated fairly and are not denied an opportunity to decide on the merits of a takeover and that shareholders of the same class are afforded equivalent treatment by an offeror. The Takeover Code also provides an orderly framework within which takeovers are conducted. In addition, it is designed to promote, in conjunction with other regulatory regimes, the integrity of the financial markets.

The General Principles and Rules of the Takeover Code

The Takeover Code is based upon a number of General Principles which are essentially statements of standards of commercial behaviour. For your information, these General Principles are set out in Part 1 of the Appendix to this document. The General Principles apply to all transactions with which the Takeover Code is concerned. They are expressed in broad general terms and the Takeover Code does not define the precise extent of, or the limitations on, their application. They are applied by the Panel in accordance with their spirit to achieve their underlying purpose. 

In addition to the General Principles, the Takeover Code contains a series of Rules, of which some are effectively expansions of the General Principles and examples of their application and others are provisions governing specific aspects of takeover procedure. Although most of the Rules are expressed in more detailed language than the General Principles, they are not framed in technical language and, like the General Principles, are to be interpreted to achieve their underlying purpose. Therefore, their spirit must be observed as well as their letter. The Panel may derogate or grant a waiver to a person from the application of a Rule in certain circumstances.

Giving up the protection of the Takeover Code

A summary of key points regarding the application of the Takeover Code to takeovers generally is set out in Part 2 of the Appendix to this document. You are encouraged to read this information carefully as it outlines certain important protections which you will be giving up upon the Delisting. Your attention is drawn in particular to the following protections under the Takeover Code: (i) all holders of Shares must be afforded equivalent treatment and, moreover, if a person acquires 30 per cent. or more of the Shares in the Company (other than in the context of a voluntary offer to all Shareholders) such person would be required to make a mandatory offer to all of the other Shareholders; (ii) the holders of Shares must have sufficient time and information to enable them to reach a properly informed decision on any bid; where it advises the holders of Shares, the Board must give its views on the effects of implementation of the bid on employment, conditions of employment and the locations of the Company's place of business; and (iii) the Board would be required to act in the interests of the Company as a whole and must not deny any holders of Shares the opportunity to decide on the merits of a bid for the Company. 

(e)          Nominated adviser

Upon Delisting, the Company will cease to have a nominated adviser. The Company is currently required under the AIM Rules to consult with its nominated adviser on, for example, transactions constituting "related party transactions" under those rules, and to inform the nominated adviser of key decisions such as any proposed changes to the Board. Following Delisting, the Shareholders will no longer benefit from the protection provided by the nominated adviser.

(f)           Relationship agreement

There are currently relationship agreements in place between (i) the Company, Direct Finance and Aleksey Titov and (ii) the Company, Direct Finance and Kevin Hennessey (together the "Relationship Agreements "). The Relationship Agreements are intended to ensure the independence of the Company and afford certain protections to the Company. Pursuant to the Relationship Agreements, Direct Finance together with its affiliates undertakes, inter alia , to exercise its voting rights such that: (i) the Company is capable of carrying on its business independently of the Principal Shareholders; (ii) there does not cease to be a suitable balance on the Board between the independent Directors, the Shareholder-connected Directors and the other Directors; (iii) any transactions entered into between Direct Finance or any of its affiliates and the Company are made on an arm's length basis and on normal commercial terms; and (iv) no variations are made to the Company's articles of incorporation that would be contrary to the Company's independence from the Principal Shareholders. Upon the Delisting, the Relationship Agreements will cease to apply to Direct Finance and, accordingly, the Company will no longer have the benefit of the protections contained in these agreements.

Accordingly, as a result of the Delisting, the protections available to Shareholders are likely to be limited to those available under Guernsey law only.

4.            Corporate governance following Delisting

Upon Delisting or as shortly thereafter as practical, all of the current Directors intend to resign as Directors of the Company.  They will be replaced by other appointees nominated by the Principal Shareholders in due course.  It is also currently expected that Andrey Nesterenko will resign as Chief Executive Officer of the Company shortly following Delisting. Following Delisting, the Company will be under no obligation to appoint independent directors and has made no commitment to do so. However, the Principal Shareholders have informed the Board that they will procure that the Company will continue to:

(a)          hold general meetings in accordance with the applicable statutory requirements and the Company's articles of incorporation; and

(b)          deliver to Shareholders copies of the Company's audited annual accounts, including the Directors' report and the auditors' report, in accordance with the applicable statutory requirements.

5.            Intentions of the Principal Shareholders following Delisting

Direct Finance has explained to the Board that its predominant motivation in seeking Delisting is that it believes that as a result of EU "sectoral" sanctions the Company's admission to AIM cannot presently and is not likely in the foreseeable future to provide access to new capital, yet at the same time the Company incurs substantial costs in connection with maintaining the admission.

Direct Finance has indicated that, as part of cost-saving measures made possible by the Delisting, the Principal Shareholders intend to reduce the size of the Board. The Principal Shareholders believe that following Delisting the Board should comprise three persons in total, being two non-executive Directors and one executive Director. In view of the Principal Shareholders' controlling interest, the Board expects that at least the non-executive Directors, and potentially the other Director, will be connected to the Principal Shareholders.

Direct Finance has explained to the Board that the Principal Shareholders support the Company's business strategy, and have indicated that they presently have no intention to implement any material changes to this strategy. There can be no assurance that the Principal Shareholders will not do so in the future. The Board understands that, in the continuing belief that the Company's market capitalisation on AIM does not adequately reflect the value of the Group's business and its principal assets, the Principal Shareholders intend to explore ways to realise a part of that value. This may involve a sale by the Principal Shareholders of part or all of their Shares or a major transaction such as the sale or spin-off by the Company of a significant asset (for example, the Tsvetnoy Central Market or Microgorod "V Lesu").

However, the Directors understand that the Principal Shareholders have not decided on or developed a specific strategy to implement any of the foregoing or any other means of realising the value from their shareholdings or from any part of the Group's business or assets. Nor is there any assurance that any such transaction will be able to be achieved on terms that would be commercially acceptable to the Principal Shareholders or, if acceptable to the Principal Shareholders, on terms that would be acceptable to other Shareholders.

6.            Trading in Shares following Delisting

Following the Delisting, there will be no market facility for dealing in the Shares and no price will be publicly quoted for the Shares. As a result, it will become more difficult for Shareholders to sell their Shares on commercially acceptable terms, if at all.

However, while there can be no guarantee that Shareholders will be able to buy or sell Shares, the Principal Shareholders have informed the Company that they intend to procure that the Company will create and maintain a matched bargain settlement facility to allow the sale and purchase of Shares under certain circumstances.

Under a matched bargain settlement facility, Shareholders or persons wishing to acquire shares would be able to indicate to the matched bargain settlement facility provider that they are prepared to buy or sell Shares at an agreed price. In the event that the matched bargain settlement facility provider is able to match that order with an opposite sell or buy instruction, the matched bargain settlement facility provider will contact both parties and then effect the order. Shareholders who do not have their own broker may need to register with the matched bargain settlement facility provider as a new client. This process may take a significant time to complete and therefore, if and when a matched bargain settlement facility is established, Shareholders who may wish to avail themselves of this facility should commence such registration process at the earliest opportunity. The contact details of the matched bargain settlement facility provider, once arranged, will be made available to Shareholders on the Company's website: www.rosegroup.ru/en.

7.            Approving the Delisting

Under the AIM Rules, it is a requirement that the Delisting is approved by not less than 75 per cent. of the votes cast by Shareholders at the Extraordinary General Meeting. Accordingly, the notice of Extraordinary General Meeting set out at the end of this document contains a special resolution to approve the Delisting.

Under the AIM Rules, the Company is required to give at least 20 clear Business Days' notice of cancellation of the Company's Shares to trading on AIM. Additionally, cancellation will not take effect until at least five clear Business Days have passed following the passing of the Resolution.

Subject to the Resolution approving the Delisting being passed at the Extraordinary General Meeting, it is anticipated that trading in the Shares on AIM will cease at close of business on 24 December 2014 and the Delisting will take effect at 7.00 a.m. on 29 December 2014.

8.            Extraordinary General Meeting

Set out at the end of this document is the notice convening the Extraordinary General Meeting to be held at 12.00 noon on 17 December 2014 at which the Resolution will be proposed.

9.            Action to be taken

A Form of Proxy for use at the Extraordinary General Meeting is included with this document. The Form of Proxy should be completed in accordance with the instructions printed on it and returned to Computershare Investor Services PLC, The Pavilions, Bridgewater Road, Bristol, BS99 6ZY as soon as possible and, in any event, so that it is received no later than 12.00 noon on 15 December 2014. The completion and return of a Form of Proxy will not preclude a Shareholder from attending and voting in person at the Extraordinary General Meeting, should you wish to do so.

10.          Voting intentions

The Principal Shareholders (acting through Direct Finance) and AMG have indicated to the Company that they intend to vote in favour of the Resolution. The Principal Shareholders and AMG together beneficially own approximately 89.5 per cent. of the Shares. Therefore, assuming that the Principal Shareholders and AMG vote in the way in which they have indicated they intend to, the Resolution is expected to pass and the Delisting will occur.

In addition, Andrey Nesterenko, the Company's CEO and the only member of the Board who also holds Shares in the Company, intends, based on his own personal circumstances, to vote in favour of the Resolution. This decision is based on Andrey Nesterenko's personal investment preferences and should not be interpreted as a reflection on the proposed Delisting. 

Given that the Principal Shareholders and AMG, which together beneficially own approximately 89.5 per cent. of the voting rights in the Company, have indicated that they intend to vote in favour of the Resolution, the Board makes no recommendation as to the merits of the Delisting. Shareholders should carefully consider their own individual circumstances in determining whether or not they should vote, or procure votes, in favour of or against the Resolution.

Yours faithfully

Emmanuel Blouin

Non-Executive Chairman

Appendix

Part1: The General Principles of the Takeover Code

1.            All holders of the securities of an offeree company of the same class must be afforded equivalent treatment; moreover, if a person acquires control of a company, the other holders of securities must be protected.

2.            The holders of the securities of an offeree company must have sufficient time and information to enable them to reach a properly informed decision on the bid; where it advises the holders of securities, the board of the offeree company must give its views on the effects of implementation of the bid on employment, conditions of employment and the locations of the company's places of business.

3.            The board of an offeree company must act in the interests of the company as a whole and must not deny the holders of securities the opportunity to decide on the merits of the bid.

4.            False markets must not be created in the securities of the offeree company, of the offeror company or of any other company concerned by the bid in such a way that the rise or fall of the prices of the securities becomes artificial and the normal functioning of the markets is distorted.

5.            An offeror must announce a bid only after ensuring that he/she can fulfil in full any cash consideration, if such is offered, and after taking all reasonable measures to secure the implementation of any other type of consideration.

6.            An offeree company must not be hindered in the conduct of its affairs for longer than is reasonable by a bid for its securities.

Part 2: Detailed application of the Takeover Code

The following is a summary of key provisions of the Takeover Code which apply to transactions to which the Takeover Code applies. You should note that, upon the Delisting, you will be giving up the protections afforded by the Takeover Code.

Equality of treatment

General Principle 1 of the Takeover Code states that all holders of securities of an offeree company of the same class must be afforded equivalent treatment. Furthermore, Rule 16.1 requires that, except with the consent of the Panel, special arrangements may not be made with certain shareholders in the Company if there are favourable conditions attached which are not being extended to all shareholders.

Information to shareholders

General Principle 2 requires that holders of securities of an offeree company must have sufficient time and information to enable them to reach a properly informed decision on a bid. Consequently, a document setting out full details of an offer must be sent to the offeree company's shareholders.

The opinion of the offeree board and independent advice

The board of the offeree company is required by Rule 3.1 of the Takeover Code to obtain competent independent advice on an offer and the substance of such advice must be made known to its shareholders. Rule 25.2 requires that the board of the offeree company must send to the offeree company's shareholders and persons with information rights its opinion on the offer and its reasons for forming that opinion. That opinion must include the board's views on: (i) the effects of implementation of the offer on all the company's interests, including, specifically, employment; and (ii) the offeror's strategic plans for the offeree company and their likely repercussions on employment and the locations of the offeree company's places of business.

The circular from the offeree company must also deal with other matters such as interests and recent dealings in the securities of the offeror and the offeree company by relevant parties and whether the directors of the offeree company intend to accept or reject the offer in respect of their own beneficial shareholdings.

Rule 20.1 states that information about the companies involved in the offer must be made equally available to all offeree company shareholders as nearly as possible at the same time and in the same manner.