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THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO, CANADA, JAPAN, NEW ZEALAND AND THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO MAY RESULT IN THE CONTRAVENTION OF ANY REGISTRATION OR OTHER LEGAL REQUIREMENT OF SUCH JURISDICTION
24 November 2021
EP Global Opportunities Trust plc (the "Company")
Legal Entity Identifier: 2138005T5CT5ITZ7ZX58
Further to the announcements made on 25 and 29 October 2021 and following a review of the strategic direction of the Company, the Board intends to change the Company's management arrangements by becoming a self-managed investment trust. The Board will assume overall control of the Company's investment policy and have overall responsibility for the Company's activities. It is proposed that the Company's present portfolio manager, Dr Sandy Nairn, will be appointed as an executive Director and Dr Nairn will have day-to-day responsibility for investment management. By becoming a self-managed investment trust, the Board believe it will be able to access a wider range of assets and investment management expertise, particularly in the private capital market. The Board believe there will be more flexibility to use third party managers where appropriate than there is when the manager is a large fund management company.
The Company has entered into heads of terms ("HoT") with Franklin Templeton Investment Trust Management Limited (the "Investment Manager") and Dr Nairn in respect of the new management arrangements. The arrangements are subject to finalisation of full legal documentation and approval of the new investment objective and policy as set out below. Under the HoT it has been agreed that Dr Nairn will commit a substantial proportion of his time to the management of the Company's investment portfolio. He will continue to work part-time for the Franklin Templeton group ("FT") and as part of this engagement he will be responsible for a new sub-advisory arrangement which the Company will enter into with FT.
The change in management structure is subject to the Company being approved by the FCA as a small registered alternative investment fund manager ("AIFM"). This is expected to take up to six months. Once the Company has been approved to act as its own AIFM, the current arrangement with the Investment Manager will cease and the sub-advisory agreement with FT will be entered into. New administration arrangements will be put in place at this point as well. It is anticipated that Dr Nairn will join the Board at this point. The Company will also, by resolution of the Board, change its name to Global Opportunities Trust plc.
As part of this proposal the Company wishes to make changes to its investment objective and policy so as to allow the Company to invest in a larger range of investments. In addition, while the Board believes that most shareholders will wish to maintain their investment in the Company, it recognises that some may wish to realise part, or potentially all, of their shareholding. In order that such shareholders will have the opportunity to do so, the Company intends to put forward a tender offer for approval by the shareholders (the "Tender Offer"). Such Tender Offer will be contingent on the new investment objective and policy (the "New Investment Objective and Policy") being approved by shareholders. The implementation of the change of management structure is also subject to the approval of the New Investment Objective and Policy.
The Company has today published a circular providing shareholders with full details of the proposed management changes, new investment policy and objectives and the Tender Offer (the "Circular"). A copy of the Circular will be submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism. The Circular will also be available on the Company's website (https://www.epgot.com/).
Details of the New Investment Objective and Policy
The Board believes that the Company's New Investment Objective and Policy will provide the Company with the flexibility to seek out value across asset classes rather than being constrained by a relatively narrow investment policy. The Company's original investment objective and policy were set in 2003 and reflected investment conditions that prevailed at that time. The intention then was to provide sufficient flexibility to avoid artificial constraints that could effectively force the Company into owning particular assets or classes of security. For this reason, the Company had the ability to own cash and bonds, if listed equities were not at appropriate valuations and to also allow some investment in unlisted equity securities where appropriate.
Following the financial crisis of 2008 and the subsequent extended period of negative real interest rates, conditions are now very different and many asset classes are more expensive. As a consequence, the Company has been forced to hold significant levels of cash where, because of central bank policy, there is a negligible or negative real return. The Company believes that there are more profitable opportunities available in private capital investments but, other than a limited ability to invest in unlisted securities, the current investment policy does not allow the Investment Manager to access the full range of private capital investments. The private capital opportunities would primarily be accessed through delegation to specialist third party managers (including through investments in investment funds) but it is expected that co-investment opportunities for direct investment may also be available. As a long-term capital vehicle with a closed-ended structure, the Company is ideally placed to take advantage of these opportunities. For these reasons it is important that some of the existing constraints on the Company's investment objective and policy be lifted. As such, the Company is seeking to amend its investment objective and policy so as to allow it to invest up to 30 per cent. of its total assets in private investments which the Company believes strikes the correct balance between liquidity and opportunity. This will allow the Company to adapt to the current investment conditions which are very different from those at launch.
Further detail on New Investment Objective and Policy
The private investments are likely to be focused on the provision of capital to boutique private capital managers. Dr Nairn has direct experience in this area through the creation of Edinburgh Partners, private equity investing and extensive industry contacts. The investments are likely to be made through funds which specialise in this area and also potentially through co-investments and unlisted equity investments. Valuation in such investments is typically quarterly with ad hoc valuations as required to recognise significant events. The allocation of resources to private capital will be determined by reference to the relative attractiveness of the investment whilst considering the liquidity, likely term of the investment and the associated cash-flow. The NAV will continue to be published daily.
It is anticipated that if the New Investment Objective and Policy is approved that the portfolio will initially be weighted as follows:
- Global equities: 40 - 60 per cent.;
- Specialist funds: 8-10 per cent. (including the existing investment in the Templeton European Long-Short Equity SIF);
- Private capital: 10 per cent.; and
- Bonds: 5 to 10 per cent.;
- Cash and cash-like instruments: 20-30 per cent.
Please note that these proportions will change over time to reflect shifts and valuations that create new opportunities. The use of third party advisors and managers is envisaged to take advantage of valuation anomalies that arise in specific niche areas of asset markets where the key to success and accessing these opportunities is specialist knowledge and experience. It is anticipated that the initial sub-advisory agreement with FT will cover equities, cash and bonds.
The Board acknowledges that the New Investment Objective and Policy increases the Company's exposure to private markets which are historically less liquid assets than those traded on the public markets. The Board believes that these are appropriate investments for the Company, particularly given the closed-ended nature of the Company and that such change in investment focus is in the best interests of the Company. The private holdings will be significantly less liquid than other holdings and as such the balance of the portfolio will be in holdings with high liquidity to ensure that the portfolio has the ability to take advantage of any new opportunities that may arise.
Details of the Tender Offer
While the Board believes that the proposals are in the best interests of the shareholders, it understands that some may wish to sell some, or all, of their shares. Subject to the approval of the New Investment Objective and Policy, it is proposed that the Tender Offer will be for up to 20 per cent. of the shares and will be at a discount of 2 per cent. to the NAV per share (plus costs and expenses of the Tender Offer). Shareholders (other than those shareholders identified in the Tender Documentation as restricted shareholders and certain overseas shareholders) will be entitled to tender up to 20 per cent. of their holding of shares (the "Basic Entitlement") and to apply to tender more than their Basic Entitlement.
The required shareholder authorities are being sought at the general meeting but the formal Tender Documentation will follow in early January 2022. It is anticipated that the Tender Offer will take place in late January or February 2022.
Share buyback authority
The Company's authority to repurchase its own Shares, which was granted at the last annual general meeting of the Company held on 21 April 2021, in respect of up to 14.99 per cent. of the Company's issued share capital as at the date of that meeting, will remain in force and be unaffected by the Tender Offer.
The increased investment flexibility will allow the Company to take advantage of a broader range of opportunities which should make the Company an attractive vehicle for a wider range of potential investors than the existing shareholder base. In particular, the Board believes that the different types of assets available will attract those investors who are looking for exposure to assets that may typically be reserved for institutional investors. Gaining new investors is an important component in ongoing discount control, which cannot solely rely on share buybacks, and the Board believes this will be assisted by the change in investment policy. The Board may use share buybacks, when appropriate, to narrow the discount to NAV at which the Shares trade. This will be done in conjunction with creating new demand and being aware of the liquidity of the Shares.
The Company's share buyback policy will no longer aim to keep the share price at close to NAV. The Board is offering Shareholders the opportunity to participate in a Tender Offer at this point which will give the Shareholders the chance to sell some or all of their shares at the Tender Price.
General meeting
The Proposals are subject to shareholder approval at a general meeting which is to be held at the offices of Dickson Minto W.S., 16 Charlotte Square, Edinburgh EH2 4DF on 17 December 2021 at 10.00 a.m.
At this meeting an ordinary resolution ("Resolution 1") will be proposed to adopt the New Investment Objective and Policy to the exclusion of all previous investment objectives and policies.
A special resolution, which is conditional on the passing of Resolution 1, will be proposed to approve the Tender Offer on the terms set out in the Circular and to give the Company authority to make market purchases pursuant to the Tender Offer.
The Board has chosen to seek authority to purchase a maximum of 8,500,00 shares, representing approximately 23 per cent. of the issued Share capital as at the date of this document. The maximum number of shares to be purchased under the Tender Offer will not be known until the Tender Price has been calculated. The Board and Dr Nairn do not intend to tender their Shares.
The Board considers that the resolutions to be proposed at the general meeting are in the best interests of the Company and its shareholders as a whole. Accordingly, the Board unanimously recommends that you vote in favour of the resolutions, as the Directors and Dr Nairn intend to do in respect of their own beneficial shareholdings. As of the latest practical date prior to the publication of this document the Directors hold 32,000 (which represent 0.09 per cent. of the Shares) and Dr Nairn holds 3,805,615 Shares (which represent 10.43 per cent. of the Shares.
Expected timetable
| 2021/2022 | |
| Publication of this document | 24 November |
| Latest time and date for receipt of Forms of Proxy from shareholders | 10.00 a.m. on 15 December |
| General meeting | 10.00 a.m. on 17 December |
| Tender Offer Documentation circulated | Early January |
| Tender Offer | End of January/February |
Defined terms used in this announcement have the meanings given in the Circular unless the context otherwise requires
For further information, please contact:
Dr Sandy Nairn 0131 270 3800
Kenneth J Greig 0131 270 3800
Franklin Templeton Investment Trust Management Limited
5 Morrison Street, Edinburgh EH3 8BH
24 November 2021
