Proposed changes at Artemis Alpha – In the run-up to the continuation resolution due to be proposed at the company’s AGM to be held in October 2018, the board of Artemis Alpha Trust (ATS) had undertaken a strategic review. From the review, a number of proposals have been made, some of which will be voted upon at the AGM.
The proposals are as follows:
- the company should adopt a new investment objective and policy
- the continuation resolution to be proposed at this year’s AGM (and, if passed, at every fifth subsequent AGM) should be replaced by “triennial liquidity events” (see below), commencing in 2021
In addition, other changes that do not require shareholder approval are proposed or have been made as a consequence of the strategic review :
- subject to shareholders approving the adoption of the new investment objective and policy, in future the company’s dividend policy will be linked to inflation rather than target a specific annual growth rate
- a tiered basis has been introduced to the rate of the annual management fee payable to the investment manager (as yet undisclosed) and the performance fees have been removed
The board is also proposing that, subject to shareholder approval, the outstanding subscription shares, the subscription rights of which lapsed earlier this year, should be cancelled
New investment objective and policy
The company’s current investment objective is to achieve above average rates of total return over the longer term and to achieve a growing dividend stream.
It is proposed that it should change so that the company will aim to provide long-term capital and income growth by investing predominantly in listed companies and to achieve a NAV total return greater than the total return of the FTSE All-Share Index.
The investment manager currently has an unconstrained and opportunistic investment approach with a bias to smaller UK companies.
- The new investment objective and policy will focus on a more concentrated portfolio of listed equities. Therefore, the number of holdings in the portfolio will reduce to about 30 to 60 names.
- The top 10 holdings as a proportion of the portfolio is currently in the region of 36%. This will rise to between 40 to 50%
- The holdings in larger companies will rise from approximately 10% to between 25% and 50%
- Currently, higher overseas weighting are in the region of 12%, The manager will be permitted to hold between zero and 30%.
- The fund’s exposure to companies not quoted on stock exchanges will be targeted to fall to below 10% (The fund’s exposure to unlisted companies has been the reason for the recent underperformance)
Continuation resolutions and triennial liquidity events
Currently, shareholders are asked by the board to approve / vote for the continuation of the company. This is called the continuation resolution.
Now, the board are proposing that this should be replaced a new arrangement. Every three years (triennially), a tender offers will be made to shareholders with each tender offer being for up to 25% of the ordinary shares in issue at the time (excluding Treasury Shares). A tender offer is a type of public takeover bid, in this case by the board of ATS. The offer will be to buy the shares from the existing shareholders.
Unless the board elects to use its tender realisation pool that they have in the company’s accounts, the tender price will be the prevailing NAV (cum-income) per ordinary share less the costs of the relevant tender offer and less a discount of 3%. (Cum = With (Latin))
The company will call this the “triennial liquidity event” and the first one will be in 2021.
ATS : Proposed changes at Artemis Alpha Trust