REG - Axiom Euro Fin Debt - Publication of a Circular - Notice of EGM

Axiom European Financial Debt FundAnnouncement

01/08/2023 12:30

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RNS Number : 9411H  Axiom European Financial Debt Fd Ld  01 August 2023

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD
CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH
JURISDICTION

 

1 August 2023

 

Axiom European Financial Debt Fund Limited

 

Publication of a Circular containing a Notice of an Extraordinary General
Meeting

 

Axiom European Financial Debt Fund Limited ("AXI" or the "Company") has today
published a circular (the "Circular") which will shortly be sent to
Shareholders. Capitalised terms that are used but not defined in this
announcement shall have the meanings ascribed to them in the Circular.

 

The Board and the Company's Investment Manager, Axiom Alternative Investments
Sarl (the "Investment Manager" or "Axiom"), recognise the Company's strong
historic performance and the potential for the Company's strategy to evolve
and to provide attractive returns in the future. However, the Board is also
aware that the persistent discount at which the Company's shares trade and the
limited liquidity of the Company's shares have frustrated Shareholders.

 

While the Board and the Investment Manager understand that Shareholders are
supportive of the Company's strategy, they also believe that a significant
proportion no longer consider the closed-ended structure of the Company to be
optimal, particularly given that a substantially similar strategy, managed by
the Investment Manager, is available through an open-ended entity.

 

In light of the circumstances outlined above, the Board has carefully
considered the future of the Company and its business, taking into account
feedback from Shareholders. Consequently, the Board is now putting forward
proposals for the liquidation of the Company including options for
Shareholders to roll over their investment. These proposals include the
opportunity for Rollover Eligible Shareholders to receive shares in Axiom
Obligataire, a Compartment of an open-ended fund managed by Axiom with a
substantially similar investment policy to the Company. The Board believes
this will provide continuity for Rollover Eligible Shareholders who roll over
their investment in the Company, while mitigating the issues in relation to
which Shareholders have expressed their frustration. There will also be an
option for a cash exit.

 

The Circular contains a notice convening an extraordinary general meeting (the
"EGM") of the Company at which approval will be sought from shareholders for
the proposals. The EGM is to be convened for 10.00 a.m. on 29 August 2023 and
will be held at 1st Floor, Royal Chambers, St Julian's Avenue, St Peter Port,
Guernsey GY1 3JX.

 

A copy of the Circular will shortly be made available on the Company's website
at https://axiom-ai.com/web/en/axiom-european-financial-debt-fund-limited-2/#
(https://axiom-ai.com/web/en/axiom-european-financial-debt-fund-limited-2/)
and submitted to the National Storage Mechanism, where it will be available
for inspection at:

https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

 

 

 

Expected Timetable

                                                                                 2023
 Publication and posting of this Circular, the Form of Proxy and the Form of     1 August
 Election
 Latest time and date for receipt of Forms of Election or TTE Instructions       10.00 a.m. on 24 August
 Latest time and date for receipt of Forms of Proxy                              10.00 a.m. on 24 August
 CREST disablement, closing of the Register and Record Date under the Scheme     6.00 p.m. on 24 August
 Calculation Date of AXI FAV                                                     As at close of business on 25 August
 Extraordinary General Meeting                                                   10.00 a.m. on 29 August
 Effective Date for implementation of the Scheme and commencement of the         29 August or as soon as reasonably practicable thereafter
 liquidation of the Company
 Cancellation of: (a) listing of the AXI Ordinary Shares on the premium segment  As soon as reasonably practicable following the appointment of the Liquidators
 of the Official List; and (b) trading of the AXI Ordinary Shares on the Main
 Market
 Contract notes issued by CACEIS in respect of Obligataire Shares and            On or around 5.30 p.m. on 4 September or as soon as reasonably practicable
 Obligataire Institutional Shares issued pursuant to the Rollover Options        thereafter
 Cheques expected to be despatched and payments made by the Company in respect   On or around 12 September or as soon as possible thereafter
 of the Cash Option

 

Notes:

·           All references to times in this announcement are to
London times unless otherwise stated.

·           The dates and times specified above may be subject to
change. In the event of any such change, the Company will notify investors
either by post, by electronic mail or by the publication of a notice through a
regulatory information service provider to the London Stock Exchange.

 

 

Enquiries to:

 

 Axiom Alternative Investments SARL  +44 20 3807 0670
 David Benamou

 Winterflood Securities Limited      +44 20 3100 0000
 Neil Morgan

 

 

 

Extracts from the Circular

 

(References to pages or paragraphs and appendices below refer to the relevant
pages, paragraphs or appendices of the Circular and references to 'this
Circular' refer to the Circular).

 

2        Summary of the Proposals

Under the Proposals (if approved by Shareholders), the Company will be
liquidated and all of the AXI Ordinary Shares will ultimately be cancelled.

Under the Scheme, Rollover Eligible Shareholders will be entitled to roll over
their investment in the Company into New Shares in Axiom Obligataire.

The New Shares are new classes of accumulation shares in Axiom Obligataire. As
such, the relevant net income and net capital gains attributable to the
Obligataire Shares and/or Obligataire Institutional Shares will be re-invested
for the benefit of the relevant share class. If Rollover Shareholders would
prefer to receive periodic distributions from their shares in Axiom
Obligataire, they will have the option once they have received their New
Shares to convert, in accordance with the provisions of the Prospectus, all or
part of their Obligataire Shares and/or Obligataire Institutional Shares into
shares of an alternative share class of Axiom Obligataire in relation to which
periodic distributions are made.

Shareholders will also have the option to receive instead (in full
satisfaction of their rights in respect of the assets of the Company in the
winding up of the Company) a cash distribution equal to the Cash Distribution
Amount in respect of each AXI Ordinary Share with Cash Rights.

It should be noted that the Cash Distribution Amount will reflect the costs of
liquidating the non- cash assets required to be sold in order to fund the
distribution. In addition, the NAV per share of the Company reflects the mid
price of marketable securities (and of certain other investments) within the
Company's portfolio. Consequently, as non-cash assets that are sold to fund
the cash distribution are likely to be sold at the applicable bid price, the
Cash Distribution Amount will almost certainly be less than the AXI FAV.

Shareholders who elect or are deemed to elect for one of the Rollover Options
and who subsequently wish to redeem all or part of their investment in Axiom
Obligataire should be able to do so on a daily basis in accordance with the
provisions of the Prospectus of Axiom Obligataire at a price reflecting the
NAV per share as of the relevant valuation day of Axiom Obligataire.
Therefore, it may be in the interests of Rollover Eligible Shareholders to
receive the Obligataire Option (or, subject to eligibility, the Obligataire
Institutional Option), even if such Shareholders may ultimately wish to
receive cash in respect of all or part of their investment.

Axiom Obligataire is a Compartment of Axiom Lux. Axiom Lux is an open-ended
Luxembourg SICAV that is organised under Part I of the Luxembourg law of
17 December 2010 relating to undertakings for collective investment (as may
be amended from time to time) and which qualifies as a UCITS with the
Luxembourg financial regulator, the Commission de Surveillance du Secteur
Financier. Axiom Obligataire is open-ended with daily liquidity.

The investment policy of Axiom Obligataire is substantially similar to the
investment strategy of the Company.

Axiom Obligataire's strategy is focused broadly across the financial credit
universe, with investments ranging from covered bonds to contingent
convertible bonds. It focuses on subordinated bonds with an aim to achieve,
over a minimum 3-year investment horizon, a return (net of management fees)
similar to or greater than that of its benchmarks (ICE BofAML Euro Financial
Index (40%), ICE BofAML Euro Corporate Index (40%) and ICE BofAML Contingent
Capital Index (20%)).

Investors must have a securities account with CACEIS Bank, Luxembourg Branch
in respect of which the relevant know-your-client requirements of CACEIS Bank,
Luxembourg Branch have been satisfied in order to hold shares in Axiom
Obligataire and the Rollover Options are therefore available only to Rollover
Eligible Shareholders.

Further information on Axiom Obligataire, including details of its investment
objective and investment strategy, is set out in Part IV of this Circular.

It is proposed that the Proposals be effected by way of a scheme of
reconstruction (the "Scheme"). The Proposals require the approval of
Shareholders. If the Proposals are approved, and upon completion of the
Scheme:

·      Shareholders who are Rollover Eligible Shareholders will, unless
they submit a valid Form of Election or submit a valid TTE Instruction in
CREST, be deemed to have elected for the Obligataire Option. Under the
Obligataire Option, Shareholders will receive one Obligataire Share for every
one thousand AXI Ordinary Shares held at the Record Date, with fractions of an
Obligataire Share being issued (rounded down to four decimal places);

·      Shareholders who are Obligataire Institutional Eligible
Shareholders and who validly elect for the Obligataire Institutional Option
will receive one Obligataire Institutional Share for every one thousand AXI
Ordinary Shares held at the Record Date, with fractions of an Obligataire
Institutional Share being issued (rounded down to four decimal places); and

·      Shareholders who validly elect, or are deemed to validly elect,
for the Cash Option will receive a cash distribution in the winding up of the
Company equal to the Cash Distribution Amount in respect of each AXI Ordinary
Share with Cash Rights.

The Obligataire Option is the default option for Rollover Eligible
Shareholders and a Rollover Eligible Shareholder wishing to receive the
Obligataire Option does not need to submit a Form of Election or submit a TTE
Instruction in CREST. A Rollover Eligible Shareholder who does not submit a
Form of Election or submit a TTE Instruction in CREST will be deemed to have
elected for the Obligataire Option.

Any Shareholder who is not a Rollover Eligible Shareholder will be deemed to
have elected for the Cash Option.

The Company will liquidate sufficient assets to fund the cash distributions to
Shareholders who are not Rollover Eligible Shareholders and other Shareholders
who have elected to receive the Cash Option, plus an amount sufficient to meet
the liabilities of the Company under the Liquidation, including the Winding Up
Costs.

Under the terms of the Scheme, the remaining assets, comprising the entire
remaining business of the Company, will be transferred to Axiom Obligataire
and will accordingly continue to be managed by Axiom but under the investment
strategy of Axiom Obligataire, as to which see Section 3 below.

The purpose of this Circular is to explain the background to, and reasons for,
the Proposals and to convene the Extraordinary General Meeting to take place
on 29 August 2023 at which Shareholders' approval for the Proposals will be
sought. Notice of the Extraordinary General Meeting is set out in Part VII of
this Circular. The Board recommends that you vote in favour of the Proposals
at the Extraordinary General Meeting.

3             Background to the Company, Axiom Lux, Axiom
Obligataire and the Investment Manager

The Company

The Company was incorporated as a closed-ended investment company limited by
shares in Guernsey under the Companies Law on 7 October 2015. The Company
was admitted to trading on the Specialist Fund Segment (then the Specialist
Fund Market) on 5 November 2015, before its listing was transferred from the
Specialist Fund Segment to the Premium Segment of the Official List on
15 October 2018.

AXI's investment strategy is based upon five categories of investments,
including liquid and illiquid relative value, restructuring and special
situations and midcap origination, and its investment objective is to generate
income and capital gain. As of 31 May 2023, this strategy has had a return
of 5.00% per annum since its inception on 5 November 2015.

Axiom Obligataire

Axiom Obligataire is a Compartment of Axiom Lux. Axiom Obligataire is
open-ended with daily liquidity and is actively managed by Axiom Alternative
Investments Sarl, and by the same management team as the Company. Axiom
Obligataire invests across the whole financial credit universe, from covered
bonds to contingent convertible bonds, and with a focus on subordinated bonds.

Axiom Obligataire and the Company both focus on the same investment universe.
In addition, Axiom Obligataire also focuses on liquid securities.

Axiom Lux

Axiom Lux is an umbrella investment company with variable capital (société
d'investissement à capital variable) in the form of a société anonyme
(public company limited by shares) qualifying as a UCITS in accordance with
Part I of the Luxembourg law of 17 December 2010 on undertakings for
collective investments, as amended from time to time. As an umbrella
structure, Axiom Lux may operate separate Compartments, each being
distinguished from others by their specific investment policy or any other
specific feature. Within each Compartment, different classes of shares with
characteristics detailed in the Prospectus of Axiom Lux, may be issued. Axiom
Lux constitutes a single legal entity, but the assets of each Compartment are
segregated from those of the other Compartments. This means that the assets of
each Compartment are invested for the shareholders of the corresponding
Compartment and that the assets of a specific Compartment are solely
accountable for the liabilities, commitments and obligations of that
Compartment.

Further information about Axiom Obligataire is contained in Part IV of this
Circular and in the Prospectus. A copy of the Prospectus and the key
information documents for Axiom Obligataire are available on the website of
the Investment Manager at https://www.axiom-ai.com (https://www.axiom-ai.com)
. A paper copy of the Prospectus and the key information document can be
provided on request and free of charge.

The Investment Manager

The investment manager of the Company is Axiom Alternative Investments Sarl.
Axiom is a private limited liability company (société à responsabilité
limitée), incorporated in France on 6 November 2006 and registered with the
Registre de Commerce et des Sociétés de Paris under registration number 492
625 470. The Investment Manager is an independent French asset manager
authorised by the AMF under registration number GP-06000039.

Axiom Alternative Investments Sarl is also the management company of Axiom
Lux, having been appointed pursuant to a management company services agreement
dated 27 March 2015, to serve Axiom Lux as a designated management company
in accordance with the Luxembourg Law of 17 December 2010 relating to
undertakings for collective investment (as amended from time to time).

4             Benefits of the Proposals

The Directors consider that the Proposals are in the best interests of
Shareholders for the following reasons:

·      Rollover Eligible Shareholders will be provided with the
opportunity of continuity of exposure to debt instruments issued by European
financial institutions. Axiom Obligataire has an investment policy that is
substantially similar to AXI's investment policy, with the fund emphasising
different aspects of the wider strategy relating to European regulatory
capital instruments. The Directors and the Investment Manager therefore
believe the Proposals represent an attractive basis for Shareholders to take
advantage of future opportunities in the sector.

·      In the current market context, Axiom Obligataire has attractive
yields. As of 30 June 2023, Axiom Obligataire's yield to call in GBP is
10.93%. For further information on Axiom Obligataire's performance, yield and
other key metrics, please refer to the monthly factsheets which are available
on the Investment Manager's website and on request.

·      Axiom Obligataire is a UCITS and an open-ended investment vehicle
with daily liquidity. This will mean that shareholders in Axiom Obligataire
should be able to realise some or all of their investment on a daily basis in
accordance with the provisions of the Prospectus at a price reflecting the NAV
per share as of the relevant valuation day of Axiom Obligataire. This
structure will also ensure shareholders in Axiom Obligataire are no longer
exposed to the discount issues and low liquidity that has been problematic for
them as Shareholders of the Company.

·      The Obligataire Option and the Obligataire Institutional Option
avoid imposing a capital gains tax event on Eligible Shareholders.(( 1 ))

·      The Scheme also allows Shareholders to elect for the Cash Option.
Shareholders who elect for the Cash Option will receive a cash distribution in
the winding up of the Company equal to the Cash Distribution Amount in respect
of each AXI Ordinary Share with Cash Rights.

In light of the benefits outlined above, the Board believes that the Proposals
represent an attractive opportunity for the Company's Rollover Eligible
Shareholders to benefit from continued exposure to European regulatory capital
instruments, via a strategy overseen by its current, highly successful
management team, while mitigating the issues that have historically caused
frustration for Shareholders. The Proposals also provide an opportunity for
Shareholders who wish to do so to receive a cash distribution in the winding
up of the Company equal to the Cash Distribution Amount in respect of each AXI
Ordinary Share with Cash Rights.

5             Shareholders' entitlements

Obligataire Option

Obligataire Shares will be issued to Rollover Eligible Shareholders who
receive the Obligataire Option. Shareholders will receive one Obligataire
Share for every one thousand AXI Ordinary Shares held by such person as at the
Record Date (with fractions of a share being issued and rounded down to four
decimal places) and will become shareholders in Axiom Obligataire.

The Obligataire Option is the default option for Rollover Eligible
Shareholders and a Rollover Eligible Shareholder wishing to receive the
Obligataire Option does not need to submit a Form of Election. A Rollover
Eligible Shareholder who does not submit a Form of Election will be deemed to
have elected for the Obligataire Option.

Obligataire Institutional Option

Obligataire Institutional Shares will be issued to Obligataire Institutional
Eligible Shareholders who elect for the Obligataire Institutional Option.
Shareholders will receive one Obligataire Institutional Share for every one
thousand AXI Ordinary Shares held by such person as at the Record Date (with
fractions of a share being issued and rounded down to four decimal places) and
will become shareholders in Axiom Obligataire.

A Shareholder should submit a Form of Election or a TTE Instruction in CREST
if he or she is an Obligataire Institutional Eligible Shareholder and wishes
to elect for the Obligataire Institutional Option.

Cash Option

Under the Cash Option, Shareholders will receive a cash distribution in the
winding up of the Company equal to the "Cash Distribution Amount" (as defined
below) in respect of each AXI Ordinary Share with Cash Rights.

On the Effective Date, or as soon as reasonably practicable thereafter, the
Company shall allocate to the Cash Distribution Pool assets (which may include
cash) with a valuation (valued in accordance with the usual valuation
methodology of the Company) equal to the Cash Election Proportion multiplied
by the AXI FAV.

Any non-cash assets within the Cash Distribution Pool shall be realised and
Shareholders who elect (or are deemed to elect) for the Cash Option will
receive a distribution in respect of each AXI Ordinary Share with Cash Rights
held by them equal to the Liquid Cash Distribution Pool Value divided by the
number of AXI Ordinary Shares with Cash Rights (the "Cash Distribution
Amount").

It should be noted that the Cash Distribution Amount will reflect the costs of
liquidating the non- cash assets required to be sold in order to fund the
distribution. In addition, the NAV per share of the Company reflects the mid
price of marketable securities (and of certain other investments) within the
Company's portfolio. Consequently, as non-cash assets that are sold to fund
the cash distribution are likely to be sold at the applicable bid price, the
Cash Distribution Amount will almost certainly be less than the AXI FAV.

Shareholders who elect or are deemed to elect for one of the Rollover Options
and who subsequently wish to redeem all or part of their investment in Axiom
Obligataire should be able to do so on a daily basis in accordance with the
provisions of the Prospectus of Axiom Obligataire at a price reflecting the
NAV per share as of the relevant valuation day of Axiom Obligataire.
Therefore, it may be in the interests of Rollover Eligible Shareholders to
receive the Obligataire Option (or, subject to eligibility, the Obligataire
Institutional Option), even if such Shareholders may ultimately wish to
receive cash in respect of all or part of their investment.

Any Shareholder who is not a Rollover Eligible Shareholder will receive the
Cash Option. A Rollover Eligible Shareholder should submit a Form of Election
or a TTE Instruction in CREST if he or she wishes to elect for the Cash
Option.

6             Implementation of the Proposals

Consents and Approvals

The Proposals require the consent of Shareholders at an Extraordinary General
Meeting which has been convened for the purposes of considering the Proposals.
Both the ordinary resolution and the special resolution to be put to
Shareholders at the Extraordinary General Meeting are required to be passed in
order for the Proposals to be implemented. An ordinary resolution requires a
majority of votes cast (whether in person or by proxy) to be in favour. A
special resolution requires at least 75 per cent of votes cast (whether in
person or by proxy) to be in favour.

Notice of the Scheme has been given to the Guernsey Financial Services
Commission, although its consent is not required. The Takeover Panel has
confirmed that The City Code on Takeovers and Mergers will not apply to the
Scheme.

Unless all of the conditions to which the Scheme is subject (further details
of which are set out in Part III of this Circular) are satisfied, the Scheme
will not be implemented. In such circumstances the Board will revert to its
commitment to table a Discontinuation Resolution at the Company's annual
general meeting later this year. In the event that the Discontinuation
Resolution was passed, the Board would be required to formulate proposals to
be put to Shareholders within four months to wind-up or otherwise reconstruct
the Company.

The Scheme

Subject to the passing of the Resolutions at the Extraordinary General Meeting
(and satisfaction of the other conditions of the Scheme, full details of which
are set out in Part III of this Circular), the Scheme will take effect from
the Effective Date.

Under the Scheme (if approved by Shareholders), the Company will be placed
into voluntary liquidation under Guernsey law.

The AXI Ordinary Shares will be reclassified (in accordance with the Elections
made or deemed to have been made under the Scheme) as:

·      AXI Ordinary Shares with Obligataire Rollover Rights;

·      AXI Ordinary Shares with Obligataire Institutional Rollover
Rights; and

·      AXI Ordinary Shares with Cash Rights.

The Company's Liquidators will transfer the assets of the Company (excluding
the cash required to fund (i) the cash distribution payable in relation to
the Cash Option and (ii) the Winding Up Costs, including a provision for the
Liquidators' retention as described below, but otherwise constituting the
entire remaining business of the Company) to Axiom Obligataire. The
consideration for this transfer will comprise two elements:

·      the Obligataire Shares to be issued by Axiom Obligataire to the
holders of AXI Ordinary Shares with Obligataire Rollover Rights; and

·      the Obligataire Institutional Shares to be issued by Axiom
Obligataire to the holders of AXI Ordinary Shares with Obligataire
Institutional Rollover Rights.

The auditor of Axiom Lux will issue a valuation report on the value of the
assets to be transferred to Axiom Obligataire in accordance with the
provisions of Luxembourg law.

Holders of AXI Ordinary Shares with Cash Rights will instead receive (in full
satisfaction of their rights in respect of the assets of the Company in the
Liquidation) a cash distribution in the winding up of the Company equal to the
Cash Distribution Amount in respect of each AXI Ordinary Share with Cash
Rights.

The Company will request that the listing of the AXI Ordinary Shares is
cancelled as soon as reasonably practical following implementation of the
Proposals. The Reclassified Shares will not be admitted to the Official List
or traded on the London Stock Exchange.

Neither the Obligataire Shares, nor the Obligataire Institutional Shares will
be listed or traded on any stock exchange. Instead, liquidity will be achieved
through daily creation and redemption of the:

·      Obligataire Shares by Axiom Obligataire at a price reflecting the
NAV per Obligataire Share at the relevant time; and

·      Obligataire Institutional Shares by Axiom Obligataire at a price
reflecting the NAV per Obligataire Institutional Share at the relevant time.

The Company, the Liquidators, Axiom Obligataire and the Investment Manager
have entered into the Transfer Agreement, which is conditional upon (a) the
passing of each of the Resolutions; and (b) the approval of the winding up
and the appointment of the Liquidators.

The Liquidators' retention will comprise a reserve to be set aside for the
protection of potential creditors and to fund the costs of the Liquidation as
detailed in paragraph 3.3 of the Scheme. Any surplus from this reserve (which
would be expected to be de minimis) will be transferred to Axiom Obligataire
in due course for the benefit of the holders of Obligataire Shares and
Obligataire Institutional Shares (in proportion to the respective Elections
for the Obligataire Option and the Obligataire Institutional Option under the
Scheme).

Following implementation of the Scheme, the Company will be wound up.

Further details of the Scheme are set out in Part III of this Circular.

Tax

The attention of Shareholders is drawn to Part V of this Circular
("Taxation").

The Company has sought a tax clearance in respect of certain aspects of the
Scheme in the UK (as noted below). However, tax clearances have not been
obtained in respect of every aspect of UK taxation or in respect of any other
jurisdiction in which Shareholders are or may be located. Shareholders are
advised to take their own tax advice as to the tax consequences for them of
the Scheme. Shareholders will need to consider whether or not the Scheme
itself gives rise to any liability for them to pay tax.

 

UK taxation of Shareholders in relation to the Scheme

For Cash-Paid Shareholders, the cash distribution received by them in
satisfaction of their rights in respect of the assets of the Company in the
winding up of the Company should be treated as a capital distribution for tax
purposes. Accordingly, as a result of its receipt a Cash-Paid Shareholder will
be treated as disposing of its interest in the relevant AXI Ordinary Shares in
consideration for the cash distribution and for Cash-Paid Shareholders who are
UK-resident individuals any gain arising will be subject to capital gains tax
(at rates of up to 20%) and for Cash-Paid Shareholders within the charge to
corporation tax, any gain arising will be subject to corporation tax at the
Shareholder's relevant marginal rate.

The Scheme, through which the AXI Ordinary Shares will be exchanged for New
Shares, should not result in a charge to UK capital gains tax for individual
Rollover Shareholders, nor a charge to corporation tax on chargeable gains for
UK resident corporate Rollover Shareholders, on the basis that the transaction
should qualify as a "scheme of reconstruction" and the conditions of section
136 of the TCGA should be met.

The application of section 136 of the TCGA may however be restricted under
section 137(1) of the TCGA in the case of any Shareholder who alone, or
together with any connected persons, holds five (5) per cent. or more of the
AXI Ordinary Shares. Section 137(1) of the TCGA will not apply if the exchange
is effected for bona fide commercial reasons and does not form part of a
scheme of arrangements of which the main purposes, or one of the main
purposes, is avoidance of liability to capital gains tax or corporation tax.

Clearance has been obtained from HMRC under section 138 of the TCGA to confirm
that HMRC is satisfied that the Scheme will be effected for bona fide
commercial reasons and will not form part of any such scheme for the avoidance
of tax.

The New Shares will constitute interests in an offshore fund for UK tax
purposes. The Investment Manager intends to apply for the New Shares to be
recognised by HMRC as interests in a "reporting fund" for the purposes of the
UK regime of taxation of offshore funds. The effect of maintaining reporting
fund status for the New Shares throughout a Shareholder's relevant period of
ownership would be that any gains on disposal of New Shares would be taxed as
capital gains. However, there can be no guarantee that reporting fund status
will be maintained for the New Shares. Were the application for reporting fund
status to be unsuccessful or such status subsequently to be withdrawn for the
New Shares, any gains arising to Shareholders resident or ordinarily resident
in the United Kingdom on a sale, redemption or other disposal of relevant New
Shares (including a deemed disposal on death) would be taxed as offshore
income gains rather than capital gains, and so (for UK individual
Shareholders) subject to income tax at rates of up to 45%.

If and for so long as the New Shares constitute interests in a reporting fund,
then Axiom Obligataire is required to calculate and report the income returns
for each reporting period (as defined for United Kingdom tax purposes) on a
per-share basis to all relevant holders of New Shares. UK-resident individual
holders of New Shares, at the end of the reporting period to which the
reported income relates, will be subject to income tax on their proportionate
share of the excess (if any) of reported income over distributions paid in
respect of the reporting period. The excess reported income will be deemed to
arise to such UK holders of New Shares six months following the last day of
the relevant reporting period. On the basis of the investment policy of Axiom
Obligataire, it is expected that the distributions and excess reported income
of Axiom Obligataire will be subject to tax for Shareholders as interest
rather than as dividends, and accordingly Shareholders who are UK tax resident
individuals will be liable to income tax on the amount of such distributions
and excess reported income, at a rate of 20% for basic rate taxpayers, 40% for
higher rate taxpayers and 45% for additional rate taxpayers.

On the basis of the investment policy of Axiom Obligataire, it is expected
that the New Shares will be treated for corporation tax purposes as creditor
relationships within the loan relationships regime contained in Parts 5 and 6
of the Corporation Tax Act 2009 with the result that all returns on the New
Shares in respect of such a Shareholder's accounting period (including gains,
profits and losses and of which the distributions and reported income of Axiom
Obligataire will form components) will be taxed or relieved as an income
receipt or expense on a "fair value accounting" basis. Accordingly, such a
person who acquires New Shares may, depending on its own circumstances, incur
a charge to corporation tax on an unrealised increase in the value of its
holding of New Shares.

Further information on the United Kingdom taxation position may be found in
Part V of this Circular under the heading "United Kingdom".

 

Luxembourg tax considerations

Luxembourg UCITS, such as Axiom Lux, are tax exempt in Luxembourg with the
exception of a subscription tax (taxe d'abonnement) levied at the rate of
0.05% per annum based on the NAV at the end of the relevant quarter,
calculated and paid quarterly. Interest and dividend income received by a
Luxembourg UCITS may be subject to non-recoverable withholding tax in the
source countries. The Luxembourg UCITS may further be subject to tax on the
realised or unrealised capital appreciation of its assets in the countries of
origin. However, Axiom Lux may benefit from double tax treaties entered into
by Luxembourg which may provide for exemption from withholding tax or
reduction of applicable withholding tax rates. Distributions by the Luxembourg
UCITS as well as liquidation proceeds and capital gains derived therefrom are
made free and clear of withholding tax in Luxembourg.

7             Settlement arrangements

Dealings in AXI Ordinary Shares in CREST will be disabled with effect from 24
August 2023.

Contract notes in respect of Obligataire Shares and Obligataire Institutional
Shares to be issued to Shareholders who validly elect for either of the
Rollover Options will be issued by CACEIS on or around 5.30 p.m. (London time)
on 4 September 2023 or as soon as practicable thereafter.

Shareholders who elect (or are deemed to have elected) for the Cash Option
will receive their cash distribution winding up of the Company as follows:

·      Shareholders who hold their AXI Ordinary Shares in uncertificated
form will receive payment through CREST on 12 September 2023 or as soon as
practicable thereafter; and

·      payment of the cash distribution to Shareholders who hold their
AXI Ordinary Shares in certificated form will be made by cheque. All cheque
payments will be made in pounds sterling and will draw on a branch of a UK
clearing bank. Cheques will be despatched at the risk of the person entitled
to such payment by first class post on 12 September 2023 or as soon as
practicable thereafter. Cheques will be sent to Shareholders at the address
appearing in the Register or, in the case of joint holders, to the holder
whose name appears first in the Register in respect of the joint holding
concerned.

 1          Subject to receipt of HMRC clearance.

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