TIDMCPE
RNS Number : 2203Q
Charter European Trust plc
14 October 2011
CHARTER EUROPEAN TRUST PLC
Publication of Circular and Notice of General Meeting
14 October 2011
The Board of Directors of Charter European Trust plc (the
"Company") announces that is has today posted a circular to
Shareholders (the "Circular") containing a notice of general
meeting to be held at 10.30a.m. on 8 November 2011 at the offices
of RCM (UK) Limited, 155 Bishopsgate, London EC2M 3AD ("GM" or
"General Meeting").
Introduction
The Board announced on 26 September 2011 that Midas Investment
Management Limited ("Midas") (acting through Manchester &
Metropolitan Investment Limited ("M&M"), whose shareholding in
the Company is under the management of Midas) had requisitioned the
General Meeting to consider a special resolution (the "Midas
Resolution") to vary certain voting arrangements under the share
scheme for retail investors investing in the Company's shares
operated by Alliance Trust Savings Limited ("Alliance Trust", and
such share scheme being the "AT Savings Scheme").
The Board is required, in accordance with the relevant
provisions of the Companies Act 2006, to convene the GM and write
to Shareholders regarding the Resolution. However, it is with
reluctance that the Board has done so, thereby incurring costs for
the Company, when the Board believes that the majority of
Shareholders would rather the Board focus its attention on the
future of the Company, proposals for which the Board announced on
28 September 2011 (the "Reconstruction Proposals").
Midas has left the Board with no choice but to convene the GM
and the Board strongly believes that Midas has built up a stake in
the Company and called this GM for the specific purpose of
influencing the Company's future direction for its own benefit
without regard to the interests of all Shareholders.
Indeed, Midas has indicated that it would, in the future, wish
to remove independent directors from the Board and appoint its own
representative, and include Manchester and London Investment Trust
plc ("M&L"), a fund that it manages, as a default rollover
option in any reconstruction of the Company. As a result, the Board
is unanimously of the opinion that the Midas Resolution is not in
the best interests of Shareholders as a whole and accordingly has
recommended that Shareholders vote AGAINST the Midas Resolution to
be proposed at the General Meeting.
Background
As the Board has previously announced, Midas has been
aggressively acquiring Shares over the course of the last few
months and, so far as the Company is aware, funds under the
management of Midas hold 25.01 per cent. of the Company's total
voting rights as at the date of the Circular.
On 22 August 2011, the Board announced that, notwithstanding the
Company's good long-term net asset value performance compared to
its benchmark, the Company had failed to attract sufficient new
long-term investors and that it remains small in size, particularly
in comparison to its peer group. Accordingly, the Board announced
that it would examine and evaluate the options available to the
Company and its Shareholders going forward, either as a continuing
vehicle or in the context of a reconstruction. Thereafter, the
Board contacted the Company's major Shareholders to ascertain their
views on, and their objectives towards, the Company. As part of
this process, the Board understood from Midas that it would only
support reconstruction proposals if these included M&L as a
rollover option. Given that Midas holds just over 25 per cent. of
the Company's total voting rights, it is effectively in a position
to block any reconstruction proposals put forward by the Board.
After much deliberation, the Board announced on 28 September
2011 that it had formulated Reconstruction Proposals that it would
wish to put to Shareholders. However, in order not to incur costs
unnecessarily, the Board would only do so once Midas has confirmed
that it would not seek to block such proposals. In the event that
the Board's Reconstruction Proposals are put to Shareholders, a
further circular will be sent to Shareholders giving full details
of such proposals and convening a general meeting at which
Shareholders will be afforded opportunity to vote on the Board's
Reconstruction Proposals.
The Reconstruction Proposals which the Board wishes to put to
Shareholders include the option of a full cash exit at realisable
net asset value for those Shareholders who wish to realise their
investment as well as a rollover into the award winning and
strongly performing Jupiter European Fund, managed by Alexander
Darwall. In addition, with reluctance but in the interests of
pragmatism and in order to maximise the likelihood of Midas
supporting the scheme of reconstruction, the Board has stated that
it is prepared to offer M&L (a fund ultimately controlled by Mr
B.S. Sheppard and his immediate family, and managed by Midas (which
is itself controlled by Mr B.S. Sheppard and his immediate family))
as an additional rollover option.
Midas has repeatedly refused to engage with the Board further in
relation to potential reconstruction proposals for the Company. On
23 September 2011, M&M requisitioned a GM to consider the Midas
Resolution to vary the AT Savings Scheme voting arrangements. The
AT Savings Scheme (with approximately 1400 private individual
members, many of whom have been longstanding investors in the
Company) holds 4,795,773 Shares representing approximately 22 per
cent. of the Company's total voting rights. Despite the Board
announcing the Reconstruction Proposals, and including M&L as a
rollover option, Midas has not withdrawn its requisition. Given
this conduct, the Board can only conclude that Midas has its own
agenda for the future of the Company and, in requisitioning the GM,
is seeking to alter the voting methodology of the AT Savings Scheme
in order to enhance the influence of Midas' own vote on the future
of the Company.
As the Board has noted, the Reconstruction Proposals, if
implemented, will result in the Company undergoing a reconstruction
and subsequent Members' Voluntary Liquidation. In this context, the
AT Savings Scheme voting arrangements will be of no relevance.
In order to address any concerns which Midas might claim to have
with regard to the possible effect of the current AT Savings Scheme
voting arrangements on the outcome of a vote on the Board's
Reconstruction Proposals, the Board has made it clear to Midas'
advisers that it is prepared to amend the existing arrangements
with Alliance Trust so as to disapply the scaling-up provisions
under the AT Savings Scheme (as further described below)in good
time prior to the publication of any circular relating to the
Board's Reconstruction Proposals. Despite this, Midas has remained
insistent on the removal of the scaling up provisions under the AT
Savings Scheme and, in its recent announcement on 4 October 2011,
it is clear that Midas see this GM as the first step in a process
which would involve the removal of the independent Board,
appointment of a Midas representative as a director to the Board,
and securing M&L as one of the default rollover options under
any scheme of reconstruction. In order to achieve those objectives,
Midas would have to requisition a further general meeting at which
Shareholders would consider such resolutions. The Board would make
the following observations in relation to Midas' announcement:
-- Midas claims that it will not support any reconstruction
proposals whilst the voting method used under the AT Savings Scheme
involves scaling up. However, as stated above, the Board has made
it clear that it is willing to disapply scaling up under the AT
Savings Scheme in respect of the Reconstruction Proposals.
-- Midas is critical of the way in which the Company has been
managed and yet it has been recommending the Company to its
clients.
-- The Board has always been cost conscious and very much
resents the additional costs of some GBP150,000, ultimately paid
for by all Shareholders, which Midas is foisting on the Company as
a result of its requisition of the GM and related matters.
-- Midas raises concerns about the presentation of M&L as a
rollover option in any document that may be sent to Shareholders
outlining the Reconstruction Proposals. In its announcement of 28
September 2011, the Board raised six points of concern (detailed
below) regarding M&L that it felt would need to be brought to
Shareholders' attention were M&L to be included as a rollover
option under any scheme of reconstruction. The Board is yet to hear
from Midas which of these points should not have been brought to
Shareholders attention:
- M&L's shares stood at a 12.5 per cent. discount on 11
October 2011 (being the date of the last published NAV) to their
net asset value and over the past 12 months the average discount
has been 9.2 per cent. (source: Morningstar). It is difficult to
see why the Company's shareholders would want to suffer such an
immediate loss of value by rolling over their interest into M&L
at net asset value. Only shareholders with very significant capital
gains tax liabilities would, if they wish to be invested in
M&L, do better to roll over into M&L rather than take cash
and buy M&L in the secondary market;
- M&L's investment policy is significantly different to the
Company's. M&L is not a European focussed fund and therefore
would not provide a continuing, similar investment exposure for
shareholders. The Board sees no particular merit in M&L when
compared to a large number of other investment funds outside the
European subsector which have better performance records, share
ratings and trading liquidity in their shares. The Board believes
that to the extent that there may be Shareholders who wish to
change their asset allocation to another subsector, they are best
placed to make that judgment themselves and should do so by
electing for cash and reinvesting in a fund of their choice;
- M&L's portfolio is relatively concentrated, with one
investment accounting for approximately 14 per cent. of asset value
and the top 10 holdings accounting for approximately 63 per cent.
(source: M&L's latest factsheet dated 31 August 2011). Such a
fund should be considered higher risk and, as such, not one that
the Board considers suitable to be put forward as an additional
rollover option. This is borne out by M&L's recent performance
where, during the recent market turmoil, its NAV has, over the two
months to end of September 2011, fallen approximately 22 per cent.
compared to a 12.2 per cent. fall in the FTSE All Share Index
(source: Thomson Datastream). Over one year to 30 September 2011,
M&L's NAV total return ranks 55th out of 57 investment
companies whose policy is to invest predominantly in UK equities
(source: Morningstar/AIC);
- Manchester & Metropolitan Investment Limited, ultimately
controlled by Mr B.S. Sheppard and his immediate family, owns over
50 per cent. of M&L. As a result, M&M has effective control
of M&L and is able, amongst other things, to decide the future
of M&L and change the investment policy. Any other shareholders
in such a fund will have limited influence;
- The Board is not aware of demand from among the Company's
shareholders, other than from Midas, for M&L as a rollover
option; and
- Inclusion of M&L as a rollover option will increase the
costs of implementing a scheme as well as making it more complex
and extending the timetable for its implementation.
The Board is independent and takes its independence very
seriously indeed, particularly when it comes to safeguarding the
interests of all Shareholders. As a result, it would be
irresponsible of the Board to include M&L as a rollover option
in the Reconstruction Proposals other than in the context of the
particular set of circumstances arising as a result of Midas' large
shareholding in the Company and only on the proviso that
Shareholders are made aware of the pitfalls of rolling over their
investment into M&L. It would be entirely inappropriate for the
Board to recommend a scheme in which M&L was a default rollover
option.
-- Midas seems to agree with the Reconstruction Proposals as
proposed by the Board with one key exception: it wants M&L as a
50:50 default option with Jupiter European Fund. By way of
explanation, Shareholders would receive the default option if they
fail to make an election be it through omission, being away or
through returning an incorrect election form. In the interests of
pragmatism, the Board is prepared to include M&L as a rollover
option but not as the default given its unsuitability for the
reasons stated above. Furthermore, a large number of the Company's
Shareholders are private individuals with relatively small
holdings; accordingly, a default that is split across two different
investments would create disproportionate administrative complexity
for such Shareholders.
Until M&M and Midas give their support for the Board's
Reconstruction Proposals (and the Board sees no reason why this
should not be the case given the pragmatic approach which the Board
has adopted), THE BOARD WOULD URGE YOU TO VOTE AGAINST THE MIDAS
RESOLUTION.
The Company's arrangements with Alliance Trust
The Company has an arrangement with Alliance Trust in relation
to the provision of the AT Savings Scheme. The AT Savings Scheme is
a share scheme which consists of approximately 1400 private
individuals, many of whom have been long-standing investors in the
Company. As the Company has previously made clear, neither the
Directors nor the manager hold Shares in the Company through the AT
Savings Scheme and therefore they have no influence on the outcome
of the AT Savings Scheme vote. As far as the Board is aware,
neither Midas, nor any funds managed or controlled by Midas, nor
any directors, officers or employees of Midas hold Shares through
the AT Savings Scheme.
The AT Savings Scheme uses a democratic process to determine how
to cast the votes in respect of the Shares held by it. The Company
has agreed with Alliance Trust that Share Scheme Participants in
the AT Savings Scheme will be provided with all of the information
and notifications from the Company necessary for those Share Scheme
Participants to make an informed direction as to how they wish to
vote in relation to a relevant corporate action by the Company.
Each Share Scheme Participant is then able to indicate how it
wishes Alliance Trust Savings Nominee Limited ("ATSN") to vote
his/her Shares. However, in the event that not all Share Scheme
Participants indicate a vote, ATSN will vote its entire holding in
proportion to the votes actually cast by those Share Scheme
Participants who did vote.
The Midas Resolution
The Midas Resolution which Shareholders are being asked to
consider, and which is set out in full in the Circular, directs and
requires the Board, inter alia, to ensure that:
(a) the arrangements in place between the Company and Alliance
Trust relating to share plans, savings schemes and/or related
matters (the "Share Schemes") in respect of the Company's Shares be
amended as a matter of urgency with the result that these
arrangements no longer provide for or entitle the registered
shareholder under the Share Schemes to exercise votes on behalf of
participants in the Share Schemes unless those share scheme
participants have given specific instructions to Alliance Trust as
to how the votes attached to their relevant Shares should be cast
on a particular resolution; and
(b) to the extent not already provided for by (a) above, to
ensure that the provisions of the AT Savings Scheme be amended so
that the terms of the AT Savings Scheme provide for the exercise of
voting rights only in accordance with the specific instructions of
the relevant Share Scheme Participants and any "scaling-up"
provisions therein are abolished and have no further effect.
Document Viewing Facility
A copy of the Circular, including the notice of General Meeting,
will shortly be available on the National Storage Mechanism at
www.hemscott.com/nsm.do and is also available on the Company's
website, www.chartereuropean.co.uk Capitalised terms not otherwise
defined in this announcement have the meanings given to them in the
Circular.
Contacts:
Giles Weaver (Chairman) 020 7523 8000
Collins Stewart Europe Limited 020 7523 8000
Robbie Robertson
Andrew Zychowski
Lucy Lewis
Lansons Communications 020 7294 3687
David Masters
Collins Stewart Europe Limited, which is authorised and
regulated in the United Kingdom by the Financial Services
Authority, is acting as adviser to Charter European Trust plc and
is acting for no-one else in connection with the contents of this
announcement, and will not be responsible to anyone other than the
Company for providing the protections afforded to clients of
Collins Stewart Europe Limited nor for providing advice in
connection with the contents of this announcement or any other
matter referred to herein. Collins Stewart Europe Limited is not
responsible for the contents of this announcement. This does not
exclude or limit any responsibilities which Collins Stewart Europe
Limited may have under the Financial Services and Markets Act 2000
or the regulatory regime established thereunder.
Chairman
This information is provided by RNS
The company news service from the London Stock Exchange
END
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