The following letter was written to all Members in February 2015:
“I am writing on behalf of the Arsenal Fanshare Society Limited (the “Society”) to inform you that, with much regret, the Arsenal Fanshare Scheme (the “Scheme”) is likely to close in the near future. Effective immediately, therefore, the Scheme will not take in any further contributions, and all requests to redeem Fanshares are currently suspended, pending the potential sale of the Arsenal Holdings PLC Shares (“Shares”) held by the Scheme and a distribution of funds to members (less the costs of winding-up the Scheme and the Society).
“I know you will be interested in the background to this situation. The Scheme has faced two major problems: a lack of liquidity in the share market and a shortfall in funding.
“As you will be aware, Stan Kroenke, via his company KSE UK Inc (“KSE”) has a majority stake in Arsenal Holdings PLC, the company that owns Arsenal Football Club. According to published figures, this holding is currently 66.85%, 41,596 Shares. Red & White Securities Limited (“Red & White”), a wholly-owned subsidiary of Red & White Holdings Limited, the vehicle of Alisher Usmanov, holds 30.04% or 18,695 Shares. The Fanshare Scheme holds 116 Shares and is now the third largest shareholder.
“This means that out of a total of 62,217 available Shares, there are just 1,810 outside of these three hands. As a result, the Society has found obtaining additional Shares increasingly difficult to arrange. Understandably some shareholders do not want to sell, as they have an emotional attachment to Arsenal – most of the 360-plus who own just one share each fit into this category, and many others are also fans of the club. Holders who between them hold over 200 Shares cannot be traced. Accordingly, the lack of movement in the share market and the overall availability of Shares have caused problems. This has directly led to the second issue: a lack of ongoing funding to continue to operate the Scheme.
“The Directors have reluctantly come to the conclusion that Fanshare couldn’t continue for two main reasons:
“a) The business model for Fanshare was based on the Scheme being able to buy shares in Arsenal Holdings plc, the listed vehicle that owns Arsenal Football Club, and being able to market and grow the Scheme. Shortly after the launch of Fanshare, Arsenal was taken over by Stan Kroenke (via his company KSE UK Inc, which now has a majority stake currently at 66.8% or 41,596 shares). In addition, the other main shareholder, Red & White Securities Limited (“Red & White”, a wholly-owned subsidiary of Red & White Holdings Limited) started buying up shares in bulk and now holds 30% or 18,695 shares. Consequently, liquidity of shares has dried up substantially making purchasing shares very difficult for the Scheme. This means that out of a total of 62,217 Shares, there are only 1,926 Shares outside of these two hands. The Fanshare Scheme held 116 Shares and was the third largest shareholder. During its existence there were very few share sales.
“b) At the same time, because of the lack of shares available for the Scheme to purchase the running costs of the scheme came under extreme pressure – the charge of 2% of contributions to the scheme simply did not generate enough revenue to pay the administrative costs of running the Scheme. Had we been able to market the Scheme and grow as we intended this small charge would have been enough for the Scheme to become self-funding.”
Arsenal agreed to provide financial support for an initial period of 3 years and this was extended for a further year. It was always intended that the Scheme would become self-financing but as a result of the takeover by KSE it became more and more difficult to acquire sufficient numbers of shares to achieve this. Arsenal had no legal obligation to continue to provide financial support and its Board of Directors decided it no longer wanted to support the Scheme. The Fanshare Board tried on numerous occasions to persuade Arsenal’s Board to continue to support the Scheme but to no avail.
The Arsenal Fanshare directors discussed the position at length with Arsenal, and with Red & White, both of whom ultimately declined to offer any further assistance. The directors have spoken to many alternative fund administration groups about the possibility of them running the Scheme in place of Equiniti, but regrettably no viable candidate has been found due to the unusual nature of the Scheme.
Each year the running costs of the fund were in the region of £75,000. This was made up of administration costs, charged by the fund administrator Equiniti, plus legal and audit fees. All of the directors work entirely on a voluntary basis.
The first action was to suspend all future contributions and redemptions (withdrawals) which was undertaken in 2014 once it became clear the Scheme was untenable. Having done that, as no other resolution could be found the directors sought out interested parties, including the two big shareholders, to negotiate a sale of the shares the scheme helds. They did everything in their power to get the best price for the benefit of Fanshare holders. Once negotiations were concluded in March 2015 and the costs of winding up the Scheme were established, the directors collected the proceeds of the sale of shares, paid the remaining Scheme costs and distributed the remaining proceeds to Members in May 2015.
The Arsenal Fanshare Board are pleased that they managed to sell or transfer 60 shares to other supporters keeping as many of the shares the scheme held as possible in the hands of supporter custodians.
In any distribution, as per the Scheme Rules, the directors have to ensure that sufficient funds are retained by the Society to pay the winding-up costs, and the Rules provide on leaving the Scheme that a £50 exit fee would be levied on every member. However, the Board were able to reduce this amount to £40 per Member.
All settlement proceeds were posted to members registered addresses in May 2015. Any enquiries regarding uncashed/lost cheques should be directed to: firstname.lastname@example.org
The Fanshare scheme provider sent out closing balance cheques to all members in May 2015 and subsequently followed up all uncashed cheques since that date. If you believe you have not received your entitlement, please email email@example.com. There are some Fanshare members who have not cashed the cheques sent to them so the Society will endeavour to trace those members. Failing that it is likely they will be referred to the Unclaimed Assets Register. More details of this will be placed on this website in due course.
While the Arsenal Fanshare Scheme is now closed, the Arsenal Fanshare Society still exists but it is run off mode and effectively dormant. Members of the Society at the time of the closure of the Arsenal Fanshare Scheme remain members until the Society passes a resolution to wind up, which it intends to do at the first available opportunity. However, this resolution cannot be proposed until the Society has been dormant for three financial years. In the meantime, members (unless they wish to resign in which case please email firstname.lastname@example.org accordingly) will continue to receive the notice of annual general meetings and will be able to vote on the resolutions proposed. These are likely only to be approval of the accounts. Members will be contacted by email in relation to the annual general meeting when necessary.