Realisation opportunity and associated matters
MITON GLOBAL OPPORTUNITIES PLC
Proposals for changes to the Articles, a realisation opportunity for Shareholders and a change of the Company’s investment objective
11 September 2018
Miton Global Opportunities plc (the “Companyâ€) announces that it has convened a general meeting to be held on 5 October 2018 at 11.45 a.m., to consider the Proposals.
A circular will shortly be posted to Shareholders and made available online at https://www.mitongroup.com/private/fund/miton-global-opportunities-plc/.
PROPOSALS
The Company proposes in the Circular to:
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change the Articles so that the form of the Realisation Opportunity currently contemplated can be amended to provide the Company with additional flexibility;
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approve the form of the 2018 Realisation Opportunity, which provides Shareholders with the option to either:
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retain their current investment in the Company; or
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realise their investment in the Company, by making a Realisation Election which is intended to be satisfied in cash at the Realisation Price, which will represent a 1.6% discount to NAV per Ordinary Share as at Election NAV Determination Date; and
-
-
amend the index referenced in the Company’s investment objective and, as a consequence, the index used to calculate performance fees potentially payable, in certain circumstances, to the Investment Manager.
Further details are set out in the appendix to this announcement and in the Circular.
ACTION TO BE TAKEN
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all Shareholders to complete the Form of Proxy for use at the General Meeting by 3 October 2018; and
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only Shareholders wishing to make a Realisation Election, to complete the Election Form by 1 October 2018.
Before taking any action, Shareholders should read the Circular in its entirety and, in particular, the Risk Factors.
EXPECTED TIMETABLE
Election NAV Determination Date 27 September 2018
Election Submission Deadline, being the latest
time and date for receipt of the Election Form
and TTE Instructions in CREST from
Shareholders 1.00p.m. on 1 October 2018
Record Date 6.00 p.m. on 1 October 2018
Realisation Price and number of Elected Shares
Announced 2 October 2018
Latest date and time for proxy forms for the
General Meeting 11.45 a.m. on 3 October 2018
General Meeting 11.45 a.m. on 5 October 2018
Result of the General Meeting announced 5 October 2018
Result of the 2018 Realisation Opportunity
Announced 5 October 2018
Election Settlement Date: cheques despatched
and payments through CREST made and CREST
accounts settled 11 October 2018
Balancing share certificates despatched week commencing 15 October 2018
All times and dates in the expected timetable may be adjusted by the Company. Any material changes to the timetable will be notified via an RIS.
ENQUIRIES
Miton Group plc
David Barron
DDI: +44 (0) 20 3714 1474
Email: david.barron@mitongroup.com
Numis Securities Limited
Nathan Brown, Corporate Broking and Advisory
DDI: +44 (0) 20 7260 1426
Email: n.brown@numis.com
Frostrow Capital LLP
Company Secretary
Kerstin Rucht
Tel: 0203 709 8734
NOTES
A copy of the Notice of General Meeting will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: http://www.morningstar.co.uk/uk/nsm.
Capitalised terms used but not defined in this announcement will have the same meaning as set out in the circular to shareholders dated 10 September 2018 (the “Circularâ€).
APPENDIX
Introduction
The Articles provide for a Realisation Opportunity under which Shareholders may elect to realise all or part of their holdings of Ordinary Shares at the time of the 2018 AGM and at three yearly intervals thereafter.
The Directors have considered the structure of the Realisation Opportunity and have decided to put forward for Shareholder approval a proposal to (i) change the Articles so that the form of the Realisation Opportunity currently contemplated by the Articles, can be amended to provide the Company with additional flexibility and (ii) approve the form of the 2018 Realisation Opportunity. Shareholders will continue to have an opportunity to, but are not obliged to, realise all or part of their holding at this AGM and every third AGM thereafter.
It is also proposed at the General Meeting to amend the index referenced in the Company’s investment objective and, as a consequence, the index used to calculate performance fees potentially payable, in certain circumstances, to the Investment Manager under the Management Agreement. No performance fee is payable on Ordinary Shares and this will continue to be the case.
The Circular is document sets out the background to and details of the Proposals, including the terms of the 2018 Realisation Opportunity, explains the reasons why the Board considers that the Proposals are in the best interests of Shareholders as a whole, and convenes the General Meeting at which the resolutions required by the Act and the Listing Rules to implement the Proposals will be proposed.
The Board is recommending that Shareholders vote in favour of the Proposals. The Directors intend to retain their holdings of Ordinary Shares and will not participate in the 2018 Realisation Opportunity.
Background to the Proposals
Since the 2015 AGM at which the Realisation Opportunity was approved, the Company has delivered strong performance:
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total return on the Ordinary Shares in the period from the 2015 AGM to close of business on 5 September 2018, was 63 per cent. in NAV terms and 82 per cent. in Share price terms; and
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price of the Ordinary Shares relative to the NAV per Share has materially improved. Over the year preceding the 2015 AGM the Shares traded at an average discount to NAV of 10.3 per cent., whereas in the year preceding the publication of the Circular the Shares have traded on average at an average premium to NAV of 0.3 per cent.
The Board and the Investment Manager believe that the London-traded closed-end investment fund sector in which the Company invests continues to offer the potential for attractive long term returns. Therefore under the 2018 Realisation Opportunity the default option will be that Shareholders retain their Shares and Shareholders wishing to retain their Shares should not complete the accompanying Election Form. However, if Shareholders wish to realise their holdings of Ordinary Shares, they will have the option to elect to do so.
In the event that Realisation Elections are received, the 2018 Realisation Opportunity is intended to achieve an immediate cash exit for Elected Shares at a modest discount to NAV per Share funded by a placing of Elected Shares and/or a repurchase by the Company from a market maker by the Company. If a full cash exit cannot be achieved through these routes, the 2018 Realisation Opportunity will default to the current provisions of the Articles and all Elected Shares will be converted into Realisation Shares.
The Board believes that the structure proposed in respect of the 2018 Realisation Opportunity and future Realisation Opportunities has the following positive attributes:
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retains the principle currently enshrined within the Articles that Shareholders wishing to realise their holding of Ordinary Shares have the option to elect to do so;
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minimises the costs for both electing and ongoing Shareholders, and to mitigate the requirement for Portfolio assets to be sold in order to effect Realisation Elections;
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provides the potential for an immediate cash exit for Elected Shares at a modest discount to NAV per Share; and
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seeks to avoid the requirement to:
a) issue and admit to listing a new Realisation Share class, which may well be relatively illiquid in the secondary market;
b) publish a prospectus incurring material costs; and
c) create a Realisation Pool and manage a realisation of the underlying Portfolio assets on an orderly basis which would create for Elected Shares an exposure over an undefined period to stockmarket risk, including to the discounts at which closed-end investment funds may trade.
Details of the Proposals
Amendments to the Articles
Current provisions
The Articles currently require that Shareholders are given the opportunity to realise their Ordinary Shares by making a Realisation Election to convert all or part of their Ordinary Shares into a new class of shares, Realisation Shares, with effect from the relevant Reorganisation Date. In the event that the Company receives one or more Realisation Elections, the Company is required to, with effect from the relevant Reorganisation Date:
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convert Elected Shares into Realisation Shares;
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separate the Portfolio into two separate pools pro rata as between the Continuing Ordinary Shares and the Realisation Shares; and
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manage the assets comprising the:
a) Continuation Pool in accordance with the Company’s investment objective and policy; and
b) Realisation Pool in accordance with an orderly realisation programme aiming to make progressive returns of cash to the holders of Realisation Shares.
Proposed provisions
The Board is proposing to amend the Articles to revise the provisions relating to the Realisation Opportunity in order to provide the Directors with further discretion as to how to deliver the Realisation Opportunity, such that Elected Shares need not be automatically converted into Realisation Shares and the Portfolio need not be automatically split pro rata into two separate pools if the Company is able to arrange for Shareholders to realise all of the Elected Shares in a different way, including by way of a placing or by a repurchase by the Company from a market maker.
Further details of the proposed amendments to the Articles are set out in Part II of the Circular.
If the Proposals are implemented, the Realisation Opportunity scheduled to be provided to Shareholders this year, will be on the terms and conditions described under the heading “2018 Realisation Opportunity†below and set out in Part III of the Circular. In addition, if the New Articles are adopted, the Board will be able to put forward tailored proposals in relation to each subsequent Realisation Opportunity to ensure that the Realisation Opportunity can be delivered efficiently and in accordance with the best interests of the Company, at the relevant point in time.
2018 Realisation Opportunity
The Board proposes that Shareholders will have the following options in respect of the 2018 Realisation Opportunity:
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retain their current investment in the Company, which requires no action; or
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realise their investment in the Company, by making a Realisation Election. Realisation Elections are intended to be satisfied in cash at the Realisation Price, which will represent a 1.6 per cent. discount to NAV per Ordinary Share as at the Election NAV Determination Date. The discount proposed has been set at a level intended to ensure that the variable costs of the 2018 Realisation Opportunity (including commissions and stamp duty) are borne by the Realisation Shares. However, if all Realisation Elections cannot be satisfied in cash, then no cash distribution will be made and instead all Elected Shares will be converted into Realisation Shares.
Realisation Elections are intended to initially be satisfied by one or more placings in the market by Numis, the Company’s broker at the Realisation Price. Numis has agreed, in relation to the 2018 Realisation Opportunity, to use its reasonable endeavours to place as many of the Elected Shares as it is able. To the extent that the Realisation Elections cannot be satisfied through one or more placings in the market, Numis will, acting as principal, purchase Elected Shares which shall then be repurchased into treasury by the Company from Numis (or repurchased and immediately cancelled) at the Realisation Price; the number of Elected Shares up to but not exceeding 5 per cent. of the issued share capital of the Company as at the Record Date, or such greater number of Elected Shares as may be determined by the Board from time to time.
If Realisation Elections cannot be satisfied in their entirety through the placing and/or repurchase and/or purchase mechanism, all Elected Shares shall be converted into Realisation Shares with effect from the Reorganisation Date which will be 5 Business Days’ after the 2018 AGM. The Portfolio will then be split into two separate and distinct pools pro rata as between the Continuing Ordinary Shares and the Realisation Shares and the assets comprising the Continuation Pool will be managed in accordance with the Company’s investment objective and policy while the assets comprising the Realisation Pool will be managed in accordance with an orderly realisation programme aiming to make progressive returns of cash to the holders of Realisation Shares. The Realisation Pool will bear the incremental costs associated with converting the Elected Shares to Realisation Shares and the admission to trading of the Realisation Shares on the London Stock Exchange. It is expected that it will take the Company up to 60 days to produce a prospectus, required in order for the Realisation Shares to be admitted to trading on the London Stock Exchange. The Realisation Shares will not be transferable during this period, as they will not have been admitted to trading on the London Stock Exchange.
Shareholders should consider fully the risk factors associated with the Proposals set out in Part V of the Circular. Before making any investment decision, Shareholders are recommended to seek advice from an authorised independent financial adviser.
The Directors (and their connected persons) hold an aggregate of 217,058 Ordinary Shares (representing approximately 0.78 per cent. of the Ordinary Shares as at 7 September 2018, being the latest practicable date prior to the publication of the Circular. The Directors intend to retain their holdings of Ordinary Shares and will not participate in the 2018 Realisation Opportunity.
Further information relating to the 2018 Realisation Opportunity is given in Part III of the Circular.
Amendment to the Investment Objective and Management Agreement
LIBOR and the Sterling Overnight Index Average (known as “SONIAâ€) are both Sterling Risk-Free Reference Rates (RFR). Whilst LIBOR was previously widely recognised as the preferred RepoFundsRate (“RFRâ€) benchmark, SONIA is increasingly being used as an alternative. In April 2017, the Bank of England announced that SONIA was preferred to LIBOR as an RFR for use in Sterling derivatives and relevant financial contracts.
The Company’s current investment objective is outperforming Sterling 3 month LIBOR plus 2 per cent. over the longer term, principally through exploiting inefficiencies in the pricing of closed-end funds.
Based on the change in the Bank of England’s preference and the fact that SONIA is more cost efficient to the Company, it is proposed that going forward the Company’s investment objective should be to outperform the 3 month SONIA plus 2 per cent. over the longer term, principally through exploiting inefficiencies in the pricing of closed-end funds. As a consequence of the proposed change to the Company’s investment objective, it is proposed that the Management Agreement be amended so that the performance fees payable in respect of the realisation of assets in any Realisation Pool (or the realisation of assets where the Company as a whole moves to a realisation basis) will be calculated by reference to a hurdle of 3 month SONIA plus 5 per cent., rather than the existing hurdle of Sterling 3 month LIBOR plus 5 per cent. (the “Related Party Transactionâ€).
These changes to the Management Agreement are classified as a related party transaction under the Listing Rules and therefore the Board is required to seek Shareholders’ approval for the amendments by way of an ordinary resolution at the General Meeting. This resolution will be proposed as the second resolution at the General Meeting.
Costs and Illustrative Financial Effects of the 2018 Realisation Opportunity
Shareholders as a whole will bear the fixed costs of preparing and implementing the Proposals, estimated to be £188,398 which is equivalent to 0.25 per cent. of NAV per Share. Such costs have been accrued into the Net Asset Value.
Shareholders who elect to realise their Shares are expected to receive the Realisation Price, which will be calculated at a 1.6 per cent. discount to NAV (adjusted for the costs of the Proposals) per Ordinary Share.
Assuming NAV per Ordinary Share of 280 pence (being the NAV per Ordinary Share as at 5 September 2018, the latest practicable date prior to the publication of the Circular), the Realisation Price would be 274.9 pence. Shareholders considering making a Realisation Election should note as a comparative that as at 5 September 2018 the Ordinary Shares were quoted at a bid price of 286.5 pence per Share and have traded at an average premium to their Net Asset Value per Ordinary Share of 0.4 per cent. during the 30 days ended 7 September 2018.
In the event that the 2018 Realisation Opportunity is implemented by way of an issue of Realisation Shares:
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the fixed costs borne by Shareholders as a whole will increase to an estimated £483,500 which is equivalent to 0.6 per cent. of NAV per Share; and
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the Shares elected for the 2018 Realisation Opportunity will, through the calculation of the initial NAV per Realisation Share, bear the costs directly associated with converting the Elected Shares to Realisation Shares and the admission to trading of the Realisation Shares on the London Stock Exchange. These costs would be dependent on the value of the Realisation Pool. Additionally the Realisation Shares will bear the costs of realising assets within this pool.
General Meeting
Resolution 1 will be proposed as a special resolution to amend the Articles and to authorise the Company to repurchase Elected Shares on the terms and conditions set out in the Circular.
Resolution 2 will be proposed as an ordinary resolution to approve the proposed amendment to the investment objective of the Company and consequential amendment of the Management Agreement described above.
All Shareholders are entitled to attend and vote at the General Meeting. In accordance with the Articles, all Shareholders present in person or by proxy shall upon a show of hands have one vote and upon a poll shall have one vote in respect of each Ordinary Share held. In order to ensure that a quorum is present at the General Meeting, it is necessary for two Shareholders entitled to attend and vote to be present, whether in person or by proxy (or, if a corporation, by a representative). The formal notice convening the General Meeting is set out in the Circular.
All Shareholders are entitled to vote on the Resolutions. However, the Investment Manager has undertaken to abstain from voting on Resolution number 2 and to take all reasonable steps to ensure that its associates and funds managed by it and its associates abstain from voting on that Resolution.
Risk Factors
Please refer to Part V of the Circular for an overview of the relevant Risk Factors.
Action to be taken
The only action that Shareholders need to take is:
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all Shareholders to complete the accompanying Form of Proxy for use at the General Meeting;
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only in the event that you wish to make a Realisation Election, complete the Election Form.
Shareholders are asked to complete and return the Form of Proxy in accordance with the instructions printed thereon to Link Asset Services, PXS 1, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4ZF, or deliver it by hand (during office hours only) to the same address so as to be received as soon as possible and in any event by not later than 11.45 a.m on Wednesday, 3rd October 2018.
Shareholders are requested to complete and return a Form of Proxy whether or not they wish to attend the General Meeting.
ONLY IF Shareholders wish to make a Realisation Election are Shareholders asked to complete and return the Election Form in accordance with the instructions printed thereon to Link Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, or deliver it by hand (during office hours only) to the same address so as to be received as soon as possible and in any event by not later than 1.00 p.m. on Monday, 1 October 2018.
ENDS
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