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Embark Ventures

MMJ Announces Appointment of Embark Ventures as Investment Manager and Capital Management Initiatives

07/06/2019

On market share buyback

MMJ Group Holdings Limited (ASX: MMJ) (MMJ or the Company) is pleased to announce an on-market buy-back of up to 10m MMJ ordinary shares over the next 12 months (‘buy-back’) as part of its active approach to capital management.

In managing its investment portfolio and asset allocation, the Company is continually monitoring its investments and new investment opportunities in the Cannabis sector. Understanding the portfolio and noting the discount that the Company’s shares are trading to the net asset value per share of its investment portfolio, the Board have determined that an on-market buyback of MMJ shares is a meaningfully value accretive use of its funds.

The buy-back is from existing cash reserves and is expected to enhance shareholder returns.

Please refer to the attached Appendix 3C for further information relating to the buy-back.

Dividend policy

MMJ has decided to distribute 20% of its annual profit after tax after excluding unrealised gains and losses on investments in respect of financial years commencing after 30 June 2019.

The dividend would be payable within three months of each half year after the completion of the half year and annual financial statements. It would be MMJ’s intention that the dividend would benefit from available franking credits held by the Company.

Entry into agreement with Embark Ventures Inc.

On 15 April 2019 MMJ announced the proposed appointment of Embark Ventures (EBV) as manager of MMJ’s investments. Today MMJ advises that MMJ has executed an investment management agreement (IMA) with EBV. The IMA will become effective following MMJ shareholders approval of:

  1. The appointment of EBV under the terms of the IMA; and
  2. The issue of MMJ performance rights to EBV as part of EBV’s remuneration structure.

MMJ shareholders will shortly be receiving a notice of meeting for a MMJ shareholders meeting to be held in July 2019. The notice of meeting will include material details of the IMA together with the key terms of the performance rights.

MMJ confirms the following in respect of the appointment of EBV:

  1. A representative of EBV will be coming to Australia in July to conduct investor presentations and MMJ will announce an open briefing for shareholders and other interested parties to attend at this time.
  2. The MMJ Board formed the view that the appointment of a third party “manager” was a preferred option to appointing a Chief Executive Officer (CEO). The Board took into consideration that, with the appointment of EBV, MMJ receives access to a team of persons based in Canada, MMJ’s key investment market. Following its appointment, the MMJ Board will monitor EBV’s role and will reconsider the appointment of a separate CEO as necessary.
  3. The IMA and the terms of the performance rights reflect the material terms proposed in the MMJ announcement of 15 April 2019.
  4. The remuneration arrangements with EBV were negotiated on arm’s length terms and after an extensive period of assessment and negotiation with another party to take on the role of the manager of MMJ’s portfolio.
  5. The Board considers that the terms ultimately agreed with EBV under the IMA were materially superior (in MMJ’s favour) to the terms that were proposed by other party.

Peter Wall, MMJ Chairman, said: “The Board considers that the implementation of the buy-back and the dividend policy together with confirmation of the appointment of Embark Ventures, are important steps in addressing the 39% discount to the fair value of MMJ’s net asset value per share1. The Board looks forward to MMJ shareholders confirming the appointment of Embark Ventures in order to provide investors with certainty over MMJ’s operating structure and allow MMJ to ramp up its investment operations”.

Read the complete ASX release here.

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