- ISS displays lack of capital markets understanding
- ISS ignores peer comparisons, governance failures and needless
value destruction
- CGT discount to NAV could widen further without effective
redemption feature
- Polar has proposed the ONLY solution to eliminate the
significant trading discount to NAV
TORONTO, April 16, 2015 /CNW/ - Polar Securities Inc.
("Polar") today commented on a report issued by Institutional
Shareholder Services Inc. ("ISS") a proxy advisor firm to
Unitholders of Central GoldTrust ("CGT" or the "Trust") (TSX:GTU-U;
NYSE MKT:GTU) in respect of Polar's proposed unit redemption
amendments and Polar's trustee nominees ("Polar Nominees") who will
shepherd the Trust through these changes and unlock value for ALL
unitholders of the Trust ("Unitholders").
Polar disagrees with ISS' analysis and recommendation to
Unitholders, finding it to be severely deficient and displaying a
lack of capital markets understanding.
"Our communications with shareholders show that the investor
sentiment is at odds with ISS' recommendation, and we expect that
institutional shareholders, acting as fiduciaries, will form their
own independent opinions about Polar's proposal and Polar's
Nominees. ISS' advice to Unitholders appears to mirror that of CGT
management – continue to suffer the destruction of value until the
price of gold improves. CGT and ISS have failed to consider that
the trading discount to NAV could widen without an effective
redemption feature," said Paul
Sabourin, CIO of Polar.
"We note that Pekin Singer Strauss Asset Management, a
United States-based investment
advisor and CGT's largest reported Unitholder, has independently
declared their support for Polar's proposal, the ONLY proposed
solution to unitholders to eliminate the significant trading
discount to net asset value ("NAV"). Unitholders who share our
views and want CGT to unlock ~$65
million of value should vote their BLUE proxy today,"
continued Mr. Sabourin.
In arriving at its conclusion, ISS appears to ignore the
following fundamental issues that have contributed to the
destruction of approximately USD $65
million of Unitholder value:
- Over the past 3 years, the trading price of the Units has
materially underperformed the returns of gold (7.8%
underperformance to March 31, 2015),
and for the past 2 years, the Units have consistently traded at a
discount to NAV. This is a problem that can be solved through
positive action.
- Without an effective redemption feature, like those adopted by
industry leaders Sprott Asset Management LP ("Sprott") and the
Royal Canadian Mint (the "Mint"), there is no mechanism to ensure
that market price of the units reflects the underlying NAV. By
adopting the redemption proposal, Polar anticipates that
Unitholders of all sizes will have the ability to sell units in the
market at a price close to NAV.
- The trading discount to NAV could actually widen further
without the adoption of an effective redemption feature.
ISS failed to acknowledge the Trustees' entrenchment tactics
and failure to engage with shareholders:
- Most troubling, Polar has never been able to speak to the
independent trustees in a constructive manner without Stefan Spicer, Chairman and CEO of CGT, present
and leading the conversation. Polar had one short meeting without
him, and no meaningful engagement with the Trustees.
- Polar offered the Board (and their legal advisors) the
opportunity to engage directly with Polar's legal advisors. This
offer was not accepted.
Confusingly, for a governance oriented organization, ISS paid
little notice to the lack of alignment and governance failures on
the CGT board:
- Management collects their fees, over $1.7 million in 2014 alone, based on the NAV and
not the market price of the Units, and have no motivation to
close the discount to trading value.
- The incumbent Trustee's interests are not aligned with
Unitholders because together, the Trustees own less than 0.01% of
the Units.
- Put another way over the last 5 years, the Trustees have earned
over USD$600,000 in fees from the
Trust and own just USD$105,950 in CGT
Units.
- The Trustees appear to work for Mr. Spicer – not Unitholders.
All but one of the Trustees sit on the boards of two other funds
managed by Mr. Spicer, Chairman, President and CEO of CGT, making
it impossible for them to be truly independent.
- "Independent" trustee Mr. Parente is a former 12 year employee
of Mr. Spicer and yet serves on the audit committee and the
corporate governance and nominating committee of the Trust.
The Trustees are using tax issues as a scare tactic to
mislead unitholders and ISS:
- The proposal will have no material tax consequences for
non-redeeming US holders.
- Tax consequences will only arise if redemptions occur. Second,
tax consequences are experienced only by U.S. persons that have
made a QEF Election in respect of their Units.
- Even a speculative $396 tax bill
per 1,000 units highlighted by the Trustees represents only 0.89%
of the NAV. This pales in comparison to the $3,102 (or 7.1%) benefit that should accrue to
Unitholders.
- Finally, the majority of any taxes paid will reduce your tax
bill when a Unitholder eventually sell their Units.
CGT REQUIRES COMPETENT TRUSTEES FOR THE FUTURE
Polar is proposing to amend CGT's existing redemption features
with proven, industry standard redemption features to benefit ALL
Unitholders, regardless of the size of their holdings. Based on
March 31, 2015 closing prices,
Unitholders should expect to gain at least USD$3,102 of additional value for each 1,000
Units held.
Polar has nominated 5 independent trustees who bring decades of
experience from Canada's largest
financial institutions and extensive public board experience. Their
combined expertise, both managing and advising public and private
companies, will enable them to unlock value at CGT for ALL
Unitholders.
BREAK OUT OF THE GOLDTRUST VALUE TRAP – VOTE BLUE FOR
CHANGE
Vote the BLUE proxy today in favour of Polar's redemption
proposal and for Polar's five highly qualified and independent
nominees.
In order to ensure that your vote is counted, your vote must be
submitted before 12:00 p.m. (noon)
(Toronto time) on Tuesday, April 28, 2015.
For additional information please visit Polar's website
www.UnitholdersForCGT.com.
If you have any
questions or need assistance in voting your BLUE proxy, please
contact Shorecrest Group Ltd. at 1-888-637-5789 (toll free within
North America) or 647-931-7454 (collect calls accepted), or by
email at contact@shorecrestgroup.com.
|
POLAR SECURITIES INC.
Established in 1991, Polar, based in Toronto, Canada, is registered as an
Investment Dealer, Investment Fund Manager and Futures Commission
Merchant with the Ontario Securities Commission and is a member of
the Investment Industry Regulatory Organization of Canada. Polar acts as the investment manager
for certain investment funds and manages over CAD$2 billion of client funds. Polar's investment
philosophy focuses on capital preservation and low volatility.
During its tenure, Polar has invested in more than 10 Canadian
precious metals funds and more than 75 Canadian closed-end products
and has extensive expertise in structuring, managing and investing
in complex investment products.
SOURCE Polar Securities Inc.