CPE Charter Euro.

 
TIDMCPE 
 
Midas Investment Management Limited 
 
 Response to the announcement of Charter European Trust plc on 8 November 2011 
 
Midas Investment Management Ltd ("Midas") notes the announcement made by the 
Board of Charter European Trust plc ("CPE" or the "Company") on 8 November 2011 
with regard to the general meeting and voting system of CPE's own share savings 
scheme operated by Alliance Trust Savings Limited (the "ATS Scheme"). 
 
Midas notes the results of the general meeting of shareholders and would make 
the following points: 
 
  * The votes against the resolution were 7,571,489 ordinary shares which we 
    are led to believe included approximately 4,772,117³ ordinary shares from 
    within the ATS Scheme. If "approximately half of the shares within the 
    Alliance Trust Savings Scheme gave a voting direction", then the number of 
    votes that were actually actually cast against the resolution would have 
    been approximately 5,197,762. The vote for the resolution was 5,401,917, 
    hence without the scaling up mechanism in operation, a majority of all 
    votes actually cast by shareholders were in favour of abolishing this 
    scheme. 
 
  * It is important to note that Midas were unable to vote in respect of a 
    further 660,900 shares that we had purchased and paid for but sadly had not 
    been delivered. 
 
  * In addition to the above, 688,206 shares held within the ATS Scheme were 
    "suspended" and were not allowed to be voted within the ATS shareholders 
    enfranchisement scheme. 
 
  * Ten shareholders valiantly made the effort to vote by proxy but their votes 
    were "rejected as they had been pre-completed with a cross in favour of the 
    resolution". Whereas we believe that approximately 2,360,604 votes were 
    accepted as valid by the directors even though none of these individual 
    beneficial shareholders ever gave ATS any voting instructions whatsoever on 
    this resolution. 
 
  * With further analysis it is clear that more than a majority of shareholders 
    who actually cast a vote at the General Meeting did so to abolish the 
    scaling up provisions in the ATS Scheme, yet the board of directors of the 
    Company have still not abolished this scheme. Adding all Midas's shares 
    together (once all trades have been delivered) plus the 19,870 proxy votes 
    for the resolution rejected amounts to 6,069,563, compared to the actual 
    number of shares who actually cast votes against the resolution of 
    approximately 5,197,762. 
 
  * Midas believes that the board of directors have wasted shareholders' time 
    and more than GBP150,000 fighting pro-democratic proposals. This is an 
    investment trust that has a relatively high historic Total Expense Ratio of 
    2.1 per cent¹ versus the Europe sector average of 1.28 per cent² (which is 
    partly due to there being five members of the board). 
 
We reiterate that we will not support the Board's reconstruction proposals 
which were presented on the 28 September 2011 for the following reasons: 
 
 1. We will not support any proposals from a board that ignores an effective 
    majority of votes actually cast for a proposal if one excludes the effects 
    of the scaling up mechanism. 
 
 2. We will not support any proposals from a board that allows certain 
    shareholders to be excluded from such a scaling up mechanism because they 
    are associated with ourselves and is willing to apply or dispply this 
    mechanism when they see fit. 
 
 3. It is clear to us that if the Board has spent GBP150,000 on a seven page 
    circular then a thorough review of all costs and the potential costs of any 
    further scheme need to be reviewed in detail prior to any further 
    progression. 
 
 4. A number of shareholders have informed us that they have no interest in 
    rolling over into a unit trust. They originally bought an investment trust, 
    they know why they did this, they don't believe the Board know their needs 
    better than them and they would like the option of two rollover vehicles 
    which are investment trusts. 
 
Solutions to move forward 
 
Many shareholders have expressed to us a wish just to get their money back and 
that they no longer wish to be involved in this "ego spat" regarding rollover 
vehicles. We are unable to offer investment advice or to make recommendations 
to shareholders who should seek their own independent financial advice from 
their stockbroker, solicitor, accountant, bank manager or other appropriately 
qualified independent financial adviser if they are in any doubt as to the 
action they should take. However, we would note that shareholders are able to 
sell their shares in CPE although they may not receive the same price per share 
that they would receive should a rollover occur, nor would they benefit from 
any rollover relief that might be available on a rollover should their position 
be pregnant with capital gains above the current annual capital gains 
exemption. 
 
Some shareholders have suggested to us that the Board should seek ways to 
undertake a corporate event whereby up to 33 per cent of the Company's issued 
share capital is tendered back to the Company and repurchased at a reasonable 
discount to net asset value per share after costs of the exercise (applied only 
to those tendering their shares), following seeking any waivers if so required 
by the Panel of Takeovers and Mergers. We see a logic to this as it would be, 
in effect, one third of the original reconstruction proposals of the Board. 
 
Finally 
 
We believe that the holders of approximately 13,214³ shares in the ATS schemes 
voted FOR our proposal. We salute this honourable sacrifice you have made by 
voting for what is fair and right. 
 
For further information please contact: 
 
Midas Investment Management Limited 
 
Tel: 0161 242 2895 
 
Sources: 
 
¹ Charter European Trust plc Annual Report 2010 
 
² AIC 31 May 2011 
 
³ Email correspondence from Company dated 10 November 2011 
 
 
 
END 
 

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