CEF Times: December 2-8

A mixed week for Gartmore in closed-end funds as Gartmore European Trust's mandate remains, but another fund's merger with Artemis is approved

Jackie Beard, FCSI, 9 December, 2010 | 1:24PM
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Laxey Partners has launched the Alliance Trust Shareholder Action Group website. A significant shareholder in Alliance Trust (ATS), they are calling for action to be taken by the board to address the wide discount to NAV at which the fund has been trading for some time. The discount has been greater than 15% since mid-2009. We note a number of the trust’s directors have regularly purchased shares throughout this time.

Allianz Dresdner Endow 2010 (AZD) has had its shares suspended from trading and the company has been put into voluntary liquidation. The company had been scheduled to wind up on December 31, 2010 so this development has simply brought the process forward by one month. The vast majority of endowment policies held by the company had matured or been surrendered so this move was made in the best interests of shareholders.

The tender offer at Arc Capital Holdings (ARCH) will be closing on January 4, 2011. Under the offer the company can repurchase up to 10% of its ordinary shares and will pay NAV based on close of business November 30, 2010. The shares trade at a discount to NAV of around 6%.

BlackRock Greater Europe (BRGE) announced the results of its latest tender offer, under which it had offered to repurchase up to 20% of ordinary shares in issue. The offer was undersubscribed and only 2.9% of shares were repurchased. The shares trade on a modest discount to NAV.

Private equity firm Candover Investments (CDI) has announced proposals to return cash to shareholders and refrain from making new investments. The board intends to dispose of Candover Investment Partners, its wholly-owned private equity investment manager, to Arle Capital Partners. A further sale of 29.1% of Candover’s investments in the portfolio will also be sold. A general meeting will be held on December 22 to seek shareholder approval.

UK property company Conygar Investment (CIC) has announced its intention to start a share buyback scheme, under which it can buy back up to 2 million shares. The maximum price they are allowed to pay under the scheme is 105% of the average middle market closing price for the five days preceding the date of purchase. This has been implemented to help improve liquidity in the shares.

Aberdeen, the investment manager of Dunedin Income Growth (DIG), now has a slightly wider remit in the fund following shareholder approval to increase the permitted level of overseas investment. The fund will stay in the AIC UK Growth sector but the increased flexibility puts it on a more level playing field with open-ended peers, which can invest up to 20% outside the UK as a matter of course. Given Aberdeen’s global expertise, as recognised by our Superior rating for Aberdeen World Equity OEIC, we expect them to use this well.

The board of Eclectic Investment Company (ECIT) believes it is in shareholders’ best interests to propose a reconstruction of the fund. Shareholders can elect to receive new shares in Utilico Ltd (UTL) or take cash. A general meeting will be held on January 7, 2011 at which approval for this will be sought.

Fidelity China Special Situations (FCSS) has confirmed its C share issue at a price of 100 pence per share, with priority being given to existing shareholders. This helps protect against dilution for current investors. The announcement has helped to bring in the premium to NAV at which the shares trade—from its high of more than 12% to nearer 6%. The issue is still subject to shareholder approval and a general meeting is proposed for February 11 next year, with the C shares scheduled for conversion on February 25. The full prospectus will be available from January 7.

Separately at Fidelity, the China Special Situations trust and Fidelity Investment Managers Hong Kong have received a permit to invest in Chinese mainland A shares. This will finally enable Anthony Bolton to access the A shares market, although it’s not yet clear how much or how quickly he is likely to use this.

The special resolution to permit further share buybacks has been approved at the EGM for Gartmore European (GEO). Members of the board have been actively buying shares to help manage the discount following manager Roger Guy’s resignation. Further, the board has appointed John Bennett of Gartmore as Guy’s replacement, although they have reduced the notice period to three months from six as a cautionary step. Bennett is highly regarded by Morningstar—his Gartmore European Select Opps OEIC carries our Superior rating. That said, our concerns lie with the future of Gartmore as a firm. The board states it has consulted with major shareholders in this decision. We are watching the situation very carefully indeed.

Shareholders in Gartmore Growth Opportunities (GGOR) have voted in favour of the proposed merger with Artemis Alpha Trust (ATS). This will see up to £50 million transfer into the Artemis Trust, depending on the number of shareholders that elect to receive shares in the Artemis trust.

Greenwich Loan Income Fund (GLIF) has agreed terms with the board of Asset Management Investment Company (AMN) under which Greenwich will acquire the entire issued share capital of AMN for cash, at a price which is a discount of 8% to NAV. Approval still needs to be given by both companies’ shareholders and the deal is also subject to court approval.

New River Retail (NRR) has completed the acquisition of five UK shopping centres from the CPI Retail Active Management fund, for £53 million. This has been funded in part through financing from HSBC (£34.6 million) and approximately £19 million from the issue of convertible unsecured loan stock, as previously announced at the end of October. The initial yield on these properties is expected to exceed 8.3%.

Shareholders in Nordic Land (NLD) approved the proposal to wind up the company at the EGM this week and this action is now underway.

Taliesin Property (TPF), which invests in German property, has switched its share price quotation on AIM from euros to pound sterling. The fund is still denominated in euros and will still report in euros; this move has been made by the board in an attempt to improve liquidity.

Director Appointments
City of London (CTY) – Philip Remnant
Edinburgh Worldwide (EWI) – Donald Cameron, Helen James
RIT Capital Partners (RCP) – Rick Sopher
Standard Life Euro Private Equity (SEP) – Jonathan Taylor

Director Resignations/Retirements
Clean Energy Brazil (CEB) – Marcelo Junqueira

Jackie Beard, FCSI is Director of Closed-end Fund Research with Morningstar UK.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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