Media Release - 2 July 2018.
• Entitlement Offer for PGF shareholders, General Offer for new investors
• Highly innovative way to invest in global markets with a leading investment manager
• PTrackERS offers the choice to redeem based on NTA in June 2025
• More choice, flexibility and control for LIC holders
• PM Capital to pay for all costs of the Offer. Non-dilutive to PGF Shareholders
PM Capital Global Opportunities Fund (ASX: PGF) and its subsidiary, PM Capital GO 2025 Limited (GO 2025), today jointly issued a Prospectus for the Offer of a next-generation Listed Investment Company (‘LIC’) security: ‘PTrackERS’, which stands for Portfolio Tracking Exchangeable Redeemable Securities (Converting Security).
A first of its kind innovation in the LIC space, PTrackERS have been developed to improve LIC investor outcomes and choice.
The Offer is made via a 1:1 Entitlement to PGF shareholders, plus a General and Broker Firm Offer. The Issue Price is $1.40 per PTrackERS, to raise a minimum of $105 million and a maximum of $491 million.
The Chairman of PGF and GO 2025, Andrew McGill, said: “GO 2025 is unique in the Australian market, combining the skills of an exceptional global equities investment manager, PM Capital, with a highly innovative offer structure that gives investors more control, choice and flexibility.
“PM Capital is in its 20th year of applying its global investing philosophy and process, and has one of the most deeply experienced global equities teams in Australia. In 2017, PM Capital’s global equities strategy applied to funds ranked first for performance in their peer group from 1 year all the way out to 9 years.
“PTrackERS provide access to the management experience of PM Capital, along with a significant benefit – the choice for sellers to redeem in the future based on NTA, thereby providing a redemption safety net if the securities are trading on market at a discount to NTA.
“This is a first of its kind benefit for investors in listed investment companies."
The Chief Investment Officer and Chairman of PM Capital, Paul Moore, said: “Australians are citizens of the world. Given our outward focus and desire to experience the best the world can offer, it still surprises me that Australians keep such a large proportion of their assets in Australian equities rather than global equities.
“PM Capital GO 2025 provides an efficient and flexible way to take advantage of what we see as the best global opportunities to build wealth - with a long-term perspective.
“We believe our benchmark-unaware philosophy and process suits GO 2025’s aims and structure, allowing us to seek market anomalies that can provide attractive long-term returns.”
GO 2025’s Investment Strategy, and that of its parent PGF, is consistent with that of PM Capital’s unlisted managed investment scheme, the PM Capital Global Companies Fund and other associated global mandates. Across these funds and mandates PM Capital was ranked first in its peer group over 5, 6, 7, 8 and 9 years returns to 31 December 20171.
Since inception the PM Capital Global Companies Fund has doubled the annual returns of the MSCI World Net Total Return Index (AUD)2. PGF’s portfolio, also managed using a consistent global investment strategy, has generated a total return3 of 75% since inception. PM Capital was awarded the Money Management/Lonsec – 2018 Fund Manager of the Year – Equities (Long/ Short category).
GO 2025 is a step forward for LICs
‘GO 2025’ stands for ‘Global Opportunities’, reflecting its focus on global securities, and the year 2025, which is when its ASX-listed securities, the PTrackERS, provide holders the choice to either convert into PGF shares or redeem based on NTA.
The 7 year conversion/ redemption right reflects PM Capital’s recommended investment time frame of seven years plus across its global equities strategies.
It is the first time this type of security has been offer by an LIC.
Major factors which can negatively affect LIC investor returns:
- significant establishment costs resulting in day 1 investable assets being materially below the IPO price;
- even strongly performing LICs can trade away from their underlying net tangible asset (NTA) value, creating uncertainty for investors as to whether they can obtain the underlying value of their securities;
- growth in a LIC’s capital can lead to a dilution of NTA per share for existing holders making NTA performance vary from the investment manager’s performance;
- Locked-up capital creating low alignment between shareholders and the LIC investment manager, and
- Uncertain dividend policy.
PTrackERS by GO 2025 have been designed to address the above concerns. With PTrackERS:
- PM Capital is paying all Offer costs. On day 1, PTrackERS investable assets will equal the Issue Price (NTA will not include any soft intangible receivables from the investment manager. This is extremely rare with LICs);
- a selling holder has the choice of selling on market or redeeming based on NTA on 30 June 2025. This feature should also act as a catalyst for PTrackERS to trade closer to NTA;
- PTrackERS are non-dilutive to NTA before tax plus franking credits for both PGF and GO2025;
- other LICs lock-up capital, whereas PTrackERS gives investors the choice in 7-years’ time to redeem or stay. This makes the investment manager truly aligned and accountable for investment performance and communication, and
- a clear dividend policy that intends to target a distribution yield of between 3% and 4% per annum.
With PTrackERS the benefits of traditional LICs outlined below remain:
- PTrackERS will be traded on the ASX (Code: P25PA) consistent with shares of LICs;
- the Investment Manager can, due to the seven year time frame, genuinely invest for the long term without the distraction of daily capital flows, and
- dividends can be franked where franking credits are available.
Higher levels of alignment between investors and the Investment Manager
PM Capital is strongly aligned to the GO 2025 and PGF investment strategy:
- The Investment Manager, PM Capital, and its staff are, in aggregate, the largest holders in GO 2025’s parent, PGF, with a co-investment representing approximately 8.9% of PGF’s issued capital (amounting to an investment of over $40 million);
- If the Offer is fully subscribed, PM Capital will be required to pay approximately $15 million in fees and costs on behalf of the Issuers; and
If investors do not believe they have had a good investment experience, they can redeem PTrackERS on 30 June 2025, and in doing so remove a source of PM Capital’s management fees revenue.
Morgans Financial Limited is the Lead Arranger and Joint Lead Manager to the Offer. Morgan Stanley Australia Securities Limited and Ord Minnett Limited are the other Joint Lead Managers.
The Co-Managers to the Offer include Baillieu Holst Limited, Bell Potter Securities Limited, Kimber Capital Pty Ltd, Patersons Securities Limited, and Shaw and Partners Limited.
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1. As at 31 December 2017, CFS FC-PM Capital Wholesale Global Companies Fund ranked #1 in its Morningstar Australian Open-Ended Equity World Large Blend peer group out of 154, 150, 146, 135 and 144 peer fund products, for 6, 7, 8 and 9 year returns respectively. As at 31 December 2017, CFS FC-PM Capital Global Companies Fund ranked #1 in its Morningstar Australian Open-Ended Equity World Large Blend peer group out of 154 peer fund products for 5 year returns. As at 30 June 2017, the PM Capital Global Companies Fund ranked #1 in its Morningstar Open-Ended Equity World Large Blend peer group of 214 for 1 years returns.
All Morningstar reference: © 2018 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. Any general advice or ‘class service’ have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf . You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser.
2. Since inception (at 28 October 1998) returns have been 9.0% pa vs the MSCI World Net Total Return Index (AUD) of 4.5% pa as at 31 May 2018.
3. Return refers to the growth in net tangible assets of PGF before the accruals for net current and deferred tax liabilities/assets, and has been adjusted for capital flows associated with the payment of dividends, tax, and share issuance as a result of the dividend reinvestment plan and option exercise. Inception date was 12 December 2013.
This media release is issued by PM Capital Limited (ABN 69 083 644 731, AFSL No. 230222).
It contains general information only and does not constitute financial product or investment advice, an offer, invitation, solicitation or recommendation with respect to the purchase or sale of any securities. The information and website are not intended for any person outside, or non-resident, of Australia or New Zealand, and does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in the United States.
The information herein seeks to provide an insight into how and why we make our investment decisions and is subject to change without notice. It does not, take into account any investors’ investment objectives, financial situation, tax position or particular investment needs. Investors should seek their own financial advice and must make their own assessment of the PTrackERS and consider the Prospectus* (dated 2 July 2017) prior to making a decision to invest. Past performance is not a reliable indicator of future performance and no guarantee of future returns, trading prices, or ASX liquidity is implied or given. These are not indications of actual, nor forecasts of future, performance of either PGF or PTrackERS.
The Prospectus (dated 2 July 2018) is jointly issued by PM Capital Global Opportunities Fund Limited (ACN 166 064 875, ‘PGF’), and PM Capital GO 2025 Limited (ACN 623 887 285, ‘GO 2025’) and is an invitation to Australian and New Zealand resident investors to acquire up to 350,909,977 PTrackERS each having an Issue Price of $1.40 to raise up to $491,273,967.80 (Offer). PTrackERS will be exchanged for fully-paid ordinary shares of PGF at 30 June 2025, unless a redemption election at the option of the Securityholder has been made on terms described in the Prospectus. PTrackERS are not bank deposits. Capital and income of an investment in PTrackERS may go down as well as up due to various market forces. Accordingly, there is risk that investors may lose all or a substantial portion of their investment. PTrackERS will not be registered under the U.S. Securities Act of 1933, as amended (“US Securities Act) or the securities laws of any state or other jurisdiction of the United States. See the ASX company announcements platform at www.asx.com.au for further information on PGF, GO2025, and PTrackERS.