17 November 2015
Aurora Investment Trust
plc
Publication of Shareholder
Circular
On 24 September 2015, the Board
announced that the Company's existing manager would be acquired by
Phoenix Asset Management Partners Limited. Today, the Company has
published a shareholder circular containing further details of the
Proposals and notice of General Meeting to be held on 11 December
2015.
Information on Phoenix Asset
Management
Phoenix Asset Management was set up
in 1998 by Gary Channon and now has approximately £570 million of
assets under management. The core investment team of Phoenix has
been together for over 14 years.
In the years since it was founded in
1998, Phoenix has experienced only three negative return years,
1999, 2002 and 2008, whereas the FTSE All-Share Index, which is the
most appropriate benchmark, has had seven negative years in the
same period. The annualised return achieved by Phoenix since it was
founded is 10.1 per cent. (after fees) against a benchmark return
(including dividends) of 4.4 per cent. Cumulatively this resulted
in a return from May 1998 to September 2015 of 435.1 per cent.
(after fees) versus a total return for the benchmark of 110.6 per
cent.
Further information on Phoenix can be
found in the Appendix to this announcement.
The proposed new investment
policy
The Company currently invests in a
diversified portfolio, the majority of which is made up of
investments in securities listed on the London Stock Exchange with
some exposure to fixed interest and equity related securities. The
Company's current objective is to achieve capital growth for its
Shareholders.
The new objective of the Company will
be to provide Shareholders with long term returns through capital
and income growth. The Company will seek to achieve this objective
by investing in a concentrated portfolio of UK listed equities,
typically consisting of 15 to 20 holdings. The Company's benchmark
will change to the FTSE All-Share Total Return.
The Company has not set maximum or
minimum exposures for each individual holding or sector, but the
Board will monitor exposure levels closely to ensure that there is
adequate diversification in the portfolio. The amount of capital
deployed will be restricted at cost prices with a maximum of 15 per
cent. to any one investment.
The Company does not currently intend
to use gearing. If the Board decided to utilise gearing the
aggregate borrowings of the Company would have to comply with the
limits set out in the Articles of Association which restrict
borrowing to 30 per cent. of the aggregate of the paid up nominal
capital plus the capital and revenue reserves.
The full text of the proposed
investment policy is set out in the circular.
Following approval of the new
investment policy, it is intended that the investment portfolio
will be realigned in line with the investment style of Phoenix. In
the event that the resolution to approve the new investment policy
is not passed the Board will consult with Shareholders regarding
the future of the Company.
Dividend policy
In the light of the proposed new
investment policy, there will be no fixed dividend policy. However,
the Board will distribute substantially all of the net revenue
arising from the investment portfolio. Accordingly the Company is
expected to continue to pay an annual final dividend, but this
could be lower than the level of recent dividends and may vary each
year.
Benefits of the Proposals
The Board believes that by adopting
the successful investment style adopted by Phoenix since its
establishment in 1998 the Company will be a more attractive
investment opportunity for many new investors. This will allow the
Company to grow over time through the issue of new Shares at a
premium to NAV.
The Board further believes that the
long term view adopted by Phoenix will better prepare the Company
to deal with fluctuations in the financial markets. By focusing on
a smaller portfolio of assets the Board believes that the Company
will be better placed to provide Shareholders with long term
returns.
Proposed changes to the investment
management arrangements
Subject to the approval of the new
investment policy at the General Meeting, the appointment of
Phoenix as the Company's Alternative Investment Fund Manager will
become effective upon termination of the Company's existing
investment management arrangements with Mars Asset Management
Limited and the appointment of a depositary as described in the
circular.
Under the terms of the proposed new
AIFM Agreement Phoenix will not earn an ongoing annual management
fee but will be paid an annual performance fee. The performance fee
will be equal to one third of the outperformance of the Company's
net asset value total return (including dividends and adjusted for
the impact of share buy backs and the issue of Shares) over the
FTSE All-Share Total Return for each financial year. The Company's
net asset value return will be based on the weighted number, and
NAV, of Shares in issue over the relevant period.
The total annual performance fee will
be capped at 4 per cent. per annum of the Net Asset Value of the
Company at the end of the relevant financial year, in the event
that the NAV per Share has increased in absolute terms over the
period, and 2 per cent., in the event that the NAV per Share has
decreased in absolute terms over the period. Any outperformance
that exceeds these caps will be carried forward and only paid if
the Company outperforms, and the annual cap is not exceeded, in
subsequent years.
The performance fee will be subject
to a high water mark so that no performance fee will be payable in
any year until all underperformance of the Company's Net Asset
Value since the last performance fee was payable has been made up.
The performance fee will also be subject to a clawback if over a
rolling three year period the Company underperforms.
The performance fee will be paid to
Phoenix in Shares (issued at the NAV per Share on the date of
issue) and such Shares must be retained by Phoenix for a minimum
period of three years from the date of issue. It is intended that
the performance fee will be charged to the capital reserves of the
Company.
Tender Offer
The Board has announced that, as part
of the Proposals, it intends to offer Shareholders a cash exit
following the appointment of Phoenix as investment manager of the
Company and realignment of the investment portfolio.
Any cash exit by means of a Tender
Offer would be at a price equal to a two per cent. discount to the
diluted, cum income NAV per Share less the direct costs and
expenses of effecting the Tender Offer, which is expected to result
in a Tender Offer Price of approximately a 3.5 per cent. discount
to the NAV per Share. Since the date of the announcement on
24 September 2015, the Shares are currently trading at an average
discount of approximately 1.62 per cent. to the NAV per
Share.
The Board will continue to monitor
the price of the Shares and the level of discount (or premium) to
the NAV per Share at which they trade. The Board only intends
to propose the Tender Offer if it gives Shareholders the
opportunity to exit the Company at a price materially better than
can be achieved through the market in normal market
conditions.
The implementation of the Tender
Offer remains subject to the discretion of the Board
Related party transaction
As clients of Phoenix hold more than
10 per cent of the voting rights in the Company, Phoenix are
considered to be a "related party" for the purposes of the Listing
Rules. Phoenix has agreed to meet the Company's costs in preparing
the circular, convening the General Meeting and drafting and
negotiating the AIFM Agreement and Depositary Agreement. This
constitutes a smaller related party transaction under Listing Rule
11.1.10R. The estimated costs are approximately £50,000.
Expected Timetable
|
2015
|
Latest time and date for receipt of
Forms of Proxy from Shareholders
|
11.30 a.m. on 9 December
|
General Meeting
|
11.30 a.m. on 11 December
|
Enquiries:
Lord Flight
Chairman
Tel: 020 7222
7559
John Luetchford/Anthony Lee
Cavendish Administration
Limited
Company Secretary to Aurora Investment Trust plc
Tel: 020 7490 4355
James Barstow
Mars Asset Management
Limited
Tel: 020 7490 4440
Gary Channon
Phoenix Asset Management Partners
Limited
Tel: 020 8600 0100
Appendix
Phoenix have developed a distinctive
investment approach that has consistently delivered excellent long
term results. The key elements of the investment approach are as
follows.
§ Phoenix identifies
a particular type of business and management team using a highly
detailed due
diligence system that has been developed by the investment team,
called DREAM.
§ Once a suitable
business has been identified Phoenix waits and only invests at a
price that offers minimal chance of permanent capital loss and a
strong chance of excellent long term returns.
§ The investment team
operate detailed monitoring programmes on all holdings. These
programmes include mystery shopping and talking to competitors,
suppliers, employees and other stakeholders.
§ Phoenix weights the
portfolio to reflect the risk, opportunity and transparency of an
investment.
§ Phoenix uses the findings of behavioural psychology to improve
the judgement and decision making process.
§ The investment team
have an ongoing commitment to continuous improvement that uses past
mistakes to improve future results.
This investment approach results in a
low turnover, concentrated portfolio which although volatile in the
short term has in the past delivered outstanding long term
returns.