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New Star intends to wind up Heart of Africa Fund

The company has agreed with the Financial Services Authority for the winding up of the fund

UK-based New Star Investment Funds has announced its intention to wind up Heart of Africa Fund due to reduced liquidty in the sub-Saharan markets. The company has agreed with the Financial Services Authority for the winding up of the fund.

In December 2008, New Star, with agreement from the fund’s depositary, Royal Bank of Scotland, had temporarily suspended dealing in the New Star Heart of Africa Fund due to weakening liquidity in the sub-Saharan markets.

New Star said that in the intervening weeks since suspension, it has become increasingly apparent that to reopen the fund to dealing would significantly disadvantage the remaining investors who would be left with a residual portfolio of increasingly illiquid stocks. Illiquid markets and poor prospects for new inflows into the fund were it to reopen mean there is little likelihood of the situation improving in the short term.

As a result, New Star and the fund’s depositary believe that another avenue must be explored to provide liquidity to investors. After due consideration, and in consultation with the Financial Services Authority (FSA), it has been agreed that the most appropriate course of action is to seek a winding up of the fund.

While there are several means of winding up the fund, New Star recognises the need to maximise value for investors and to return proceeds as quickly as possible. Therefore, the company believes that the most effective route to achieve this is to invite bids for the fund’s entire portfolio. This method has the advantage of realising the fund’s assets in one clean event as opposed to the current slow procedure of trying to effect individual disposals.

New Star has, therefore, agreed with the FSA an effective date of March 31, 2009, subject to formal approval, for the winding up of the fund. Conditional on the successful disposal of assets, investors could expect to receive the proceeds shortly after this date.

Jamie Allsopp, manager of the New Star Heart of Africa Fund, said: We regret having to take this action and realise that this is a disappointing outcome for investors. Having explored alternative routes, however, we believe the winding up of the fund is the best means by which we can restore investors’ access to their money.