Edinburgh
Worldwide Investment Trust plc
Legal
Entity Identifier: 213800JUA8RKIDDLH380
20
November 2024
THIS ANNOUNCEMENT CONTAINS
INSIDE INFORMATION.
Resetting Edinburgh Worldwide
on a path for growth and commitment to return up to £130 million to
Shareholders
The Board of Edinburgh Worldwide
Investment Trust has today published a circular to shareholders
setting out the following measures with a view to setting Edinburgh
Worldwide on a path to renewed growth.
· Changes to team composition and structure to increase
challenge and enhance performance
· Changes to process and approach to improve decision-making and
portfolio discipline
· A
restructuring of the portfolio to focus on a reduced number of
holdings enabling more regular and deeper engagement with those
companies
o 60-100 companies versus 75-125 at present
o Upper limit raised from $5bn to level of the market capitalisation of the largest constituent of the
Company's comparative index, the S&P Global Small Cap
Index
· A
commitment to shareholders to a capital return opportunity of up to
£130m in 2025; and
· Seeking shareholder approvals to support these
proposals.
Jonathan Simpson-Dent, Chair, said:
"Today, we are sharing the outcome and
actions from a detailed review of Edinburgh Worldwide's strategy,
execution and recent performance. Our vision, to identify and
manage a carefully selected portfolio of transformative businesses,
has the potential to deliver outsized returns for shareholders. We
have developed a comprehensive action plan to improve execution
and, in addition, are committing to return up to £130 million to
shareholders following a share buyback programme that has recently
reduced our discount and been value accretive for shareholders. We
believe that this wide-ranging package of changes will put the
Trust back on a path for growth."
Investors and media can download a video presentation by chair
Jonathan Simpson-Dent which sets out the context and background to
today's announcement. The video can be accessed using the link
below:
https://www.bailliegifford.com/insights/ic-video/2024-q4-EWIT-resetting-a-path-for-growth-10051481/
For further information please
contact:
Investors:
Deutsche Numis
David Benda
Tel: +442072601275
Media
Garfield Advisory
Andrew Garfield
Tel: 07974982337
Jason Nisse
Tel: 07769 688518
Naomi Cherry
Baillie Gifford & Co
Tel 0131 275 2000
FURTHER DETAILS ON PROPOSALS
For many years the Trust has
delivered strong returns for Shareholders by investing in
transformative businesses operating at frontiers of innovation.
However, in the last few years the Trust has underperformed against
its objectives and peer group.
The Board has therefore undertaken a
thorough review of its strategy, performance and processes in
conjunction with the Manager and independent advisers. We are
pleased to share the outcome of this review including a
reaffirmation of our strategy and our comprehensive action plan to
reset Edinburgh Worldwide on a path for growth.
We hope that Shareholders will be
excited about this plan and the future of Edinburgh Worldwide. That
said, the Board respects Shareholders' patience over recent years
and we are also committing to return up to £130 million of capital
to Shareholders.
The Board is proposing:
·
Reaffirmation of
Edinburgh Worldwide's strategy
The Board is enthusiastic about, and
committed to, the Trust's vision and strategy to identify and
access potential outsized returns from a carefully selected and
managed portfolio of game-changing businesses that aim to transform
end markets. The Trust's access to private companies such as
SpaceX, and Psi Quantum, remains an important element of this
strategy.
·
Reset action
plan: a path for growth
Having completed a rigorous
appraisal of performance, the Board has concluded that Baillie
Gifford has the right skills and expertise to deliver the strategy,
though recognises that changes are necessary to improve
performance. We have collectively agreed an action plan to return
the Trust to a path for growth: enhancing team composition and
structure with Luke Ward and Svetlana Viteva becoming co-managers
alongside Douglas Brodie; rebalancing the portfolio to increase
focus and resilience; broadening access to a larger pool of global
Small Cap businesses and tightening execution decision making and
discipline.
·
Commitment to
share buyback and capital return programme of up to £130
million
The Board is continuing to execute
an active share buy-back programme while the shares trade on a
meaningful discount and will consider other potential routes to
return capital to Shareholders in 2025. Subject to normal capital
adequacy requirements and receipt of Court and Shareholder
approvals, the Board expects to have the ability to return up to
£130 million of capital to Shareholders.
Taken together, the Board believe
that this comprehensive action plan will reset Edinburgh Worldwide
on a path for growth. We have been able to proceed immediately
towards implementation for many of these actions, including changes
in team structure and improved process around challenge and
execution.
However, in order to be able to
fully implement this action plan, two immediate Shareholder
approvals are required. The purpose of the Circular is to provide
further details relating to those specific proposals and to convene
a General Meeting on Wednesday 18 December 2024 at 3 p.m. to
approve:
(i) the New
Investment Policy which will enable increased focus in the
portfolio and provide a potentially better balance and resilience
to support improved returns; and
(ii) subject
to the Court approval, a reduction of the Trust's share premium
account and increase in distributable reserves to provide headroom
for the proposed active capital return and any future distributions
to Shareholders.
The Board believes Edinburgh
Worldwide has a unique and compelling mandate with an objective to
deliver long-term attractiveness and outsized returns for
Shareholders by investing in game-changing businesses at frontiers
of innovation. We believe the detailed action plan and proposals
can deliver this objective and reset the Trust on a path for growth
while offering an opportunity for at least a partial exit for those
Shareholders who desire it.
Accordingly, we recommend that
Shareholders vote in favour of the Resolutions, and thank you for
your continued support on this exciting journey.
MATTERS FOR SHAREHOLDER APPROVAL
1
Resolution 1 - change of investment policy
The Company proposes to amend its
existing investment policy to increase focus and access to a
broader pool of opportunities. The Company's existing
investment objective and policy and the New Investment Policy are
set out in full in Part 3 of the Circular.
The Listing Rules require any
proposed material changes to the Company's published investment
policy to be submitted to the FCA for prior approval. The FCA has
approved the New Investment Policy. The Listing Rules also require
Shareholder approval prior to any material changes being made to
the Company's published investment policy and the Board is seeking
this approval at the General Meeting.
1.1 Reduce the
number of holdings in the portfolio
The Company currently aims to spread
risk by having 75 to 125 companies in its equity portfolio. The
Review suggested that a more focused portfolio could benefit
Shareholders allowing for closer scrutiny by the Managers whilst
still providing diversity. Therefore, a new range of 60 to 100
companies is proposed.
1.2 Increase the
market capitalisation threshold for target companies
The Company currently has a market
capitalisation limit at the point of initial investment of an
investee company set as being typically in companies with a market capitalisation of
less than US$5 billion - there is no market capitalisation limit
once a company is held. This limit was set in 2014 and the size of
global small cap companies has since increased. The Board and the
Manager believe an increased threshold will increase the Company's
ability to access global small cap investment
opportunities.
It is therefore proposed to increase
the maximum market capitalisation limit to match the largest
constituent of the Company's comparative index, the S&P Global
Small Cap Index. This index rebalances annually in September and as
at 30 September 2024 the market capitalisation of the largest
constituent of the index was US$29.5 billion (source: S&P
Global). The move from an explicit fixed limit to one that is
linked to the Company's comparative index should reduce the need to
make further future changes to the investment policy.
In
order to fully introduce the changes to the investment process, the
New Investment Policy must be implemented and therefore approved by
Shareholders at the General Meeting.
If the New Investment Policy is not
approved, it would limit the team's ability to fully refine the
investment process. It would force them to hold a larger number of
companies than they now deem ideal, and they would be prevented
from looking at companies which are potentially most relevant to
the investment strategy.
2
Resolution 2 - Reduction of share premium account
In order to provide the Board with
additional headroom to continue the active capital return programme
and any future distributions to Shareholders we are seeking to
reduce the share premium account. This is a technical legal measure
required by law in Scotland and which we do not believe will impact
on the net asset value of the Company or its financial stability.
The Company has built up a substantial share premium account owing
to the high level of historic issuance of the shares with
approximately £499,723,527 currently standing to the share premium
account. The share premium account is non-distributable. Under law
any Share Premium Reduction must be approved by Shareholders and
the Court.
The Board proposes, subject to
Shareholder and Court approval, to cancel the amount standing to
credit of the Company's share premium account.
The resulting credit arising in the Company's books of
account will then be credited to a new distributable reserve to be
called the 'Distributable Capital Reserve', subject to any terms
and conditions required by the Court in granting the order
confirming the Share Premium Reduction. As
a result, this Share Premium Reduction will provide a significant
pool of reserves which can be used in future to fund distributions
including dividends, and any returns of capital in accordance with
applicable law, including any future tender offer and share
buybacks.
The Board has thoroughly reviewed
the Company's liabilities (including contingent liabilities) and is
confident that the Company will satisfy the Court that, by the time
the Court order and the statement of capital are registered with
the Registrar of Companies, the Company's creditors will either
have consented to the Share Premium
Reduction or be sufficiently protected.
The Company intends that an
application will be made to the Court to approve the Share Premium
Reduction as soon as is reasonably
practicable after the General Meeting, provided that Resolution 2
is approved by Shareholders.
The Board reserves the right to
abandon or to discontinue (in whole or in part) the application to
the Court in the event that the Board considers the terms on which
the Share Premium Reduction would be (or would likely to be)
confirmed by the Court, would not be in the best interests of the
Company and/or the Shareholders as a whole.
In
order to fully implement the proposed return of capital to
Shareholders the Company must increase its distributable reserves
and therefore the Share Premium Reduction must be approved by
Shareholders at the General Meeting.
If the Share Premium Reduction is
not approved by the Shareholders and the Court, it would limit the
amount of capital which the Company is able to return to
Shareholders.
3
Benefits to Shareholders
The Board believes that the adoption of the New Investment Policy and the
Share Premium Reduction will have the following
benefits for the Shareholders:
· More focused portfolio with
fewer holdings
Reducing the range of holdings will
allow the Managers to invest more time scrutinising and managing
existing holdings and on their portfolio construction strategy,
benefitting long-term Shareholder returns.
· Increased access and
investment flexibility
The New Investment Policy allows for
investment in business with higher market capitalisation,
reflecting an increase in small cap benchmarks over time. The Board
and the Manager believe that a higher threshold would increase the
Company's ability to access exciting global emerging investment
opportunities as well as adding resilience and balance to the
portfolio through market cycles.
· Increased distributable
reserves
The Share Premium Reduction will
increase the distributable reserves of the Company to support any
future distributions to Shareholders including dividends, buybacks
and any other forms of return of capital, such as a tender
offer.
4 The
General Meeting
Set out at the end of the Circular
is a notice convening the General Meeting at which the Shareholders
will be asked to consider and, if thought fit, approve the
Resolutions. The General Meeting is to be held at 3 p.m. on 18
December 2024 at the offices of Dentons UK and Middle East LLP, 1
Fleet Place, London EC4M 7WS.
· Resolution 1
is being proposed as an ordinary resolution and
will therefore require that more than 50 per cent. of the votes
cast in person or by proxy are voted in favour of it in order to be
passed.
· Resolution 2
is being proposed as a special resolution and will
therefore require that not less than 75 per cent. of the votes cast
in person or by proxy are voted in favour of it in order to be
passed.
All Shareholders are entitled to
attend and vote at the General Meeting. The vote shall be taken on
a poll. In accordance with the Company's
Articles, all Shareholders entitled to vote and present in person
or by proxy upon a poll shall have one vote in respect of every
Ordinary Share held or represented by them.
5 Action
to be taken by Shareholders
Shareholders will find enclosed with the Circular a Form of Proxy for use
in relation to the General Meeting.
To be valid for use at the General
Meeting, the Form of Proxy accompanying this Circular must be
completed and returned, in accordance with
the instructions printed on it, so as to be received by the
Company's Registrar, Computershare Investor Services PLC, The
Pavilions, Bridgwater Road, Bristol BS99 6ZY as soon as possible,
but in any event not later than 3 p.m. on 16 December
2024.
As an alternative to completing the
Form of Proxy, Shareholders can appoint a proxy electronically via
the Registrar's online voting portal
www.investorcentre.co.uk/eproxy.
For an electronic proxy appointment to be valid, your appointment
must be received by the Registrar no later than 3 p.m. on 16
December 2024.
5
Recommendation by the Board
The
Directors consider the adoption of the New Investment Policy and
the Share Premium Reduction to be in
the best interests of the Company and its Shareholders as a whole.
Accordingly, the Directors unanimously
recommend that Shareholders vote in favour of the
Resolutions.
The Directors intend to vote in favour of the Resolutions
in respect of their own beneficial holdings of Ordinary
Shares, amounting to 285,636 Ordinary
Shares (representing approximately 0.08 per cent. of the issued
share capital of the Company (excluding treasury shares) as at the
latest practicable date prior to publication of the
Circular).
INVESTMENT OBJECTIVE AND POLICY
The text in bold and underline
denotes the additional language in the New Investment Policy. The
strikethroughs denote parts which have been removed.
|
Current Investment Objective and Policy
|
New
Investment Objective and Policy
|
|
Investment
Objective
|
Investment
Objective
|
|
Edinburgh Worldwide's investment
objective is the achievement of long term capital growth by
investing primarily in listed companies throughout the
world.
|
Edinburgh Worldwide's investment
objective is the achievement of long term capital growth by
investing primarily in listed companies throughout the
world.
|
|
Investment
policy
|
Investment
policy
|
|
While the policy is global
investment, the approach adopted is to construct a portfolio
through the identification of individual companies which offer long
term growth potential, normally over at least a five year horizon
and which typically have a market capitalisation of less than US$5
billion at the time of initial investment.
|
While the policy is global
investment, the approach adopted is to construct a portfolio
through the identification of individual companies which offer long
term growth potential, normally over at least a five year horizon
and which typically have a market capitalisation
of less than $5 billion at the time of initial investment
at the point of initial
investment have a market capitalisation no greater than the market
capitalisation of the largest constituent of the Company's
comparative index* measured by market
capitalisation.
|
|
|
|
|
The portfolio is actively managed
and does not seek to track the comparative index hence a degree of
volatility against the index is inevitable.
|
The portfolio is actively managed
and does not seek to track the comparative index hence volatility
against the index is inevitable.
|
|
In constructing the equity portfolio
a spread of risk is achieved by diversifying the portfolio through
investment in:
• 75 to 125 companies;
• a minimum of 6 countries;
and
• a minimum of 15
industries.
|
In constructing the equity portfolio
a spread of risk is achieved by diversifying the portfolio through
investment in:
• 75 to 125
companies;
• 60 to 100 companies;
• a minimum of 6 countries;
and
• a minimum of 15
industries.
|
|
On acquisition, no holding shall
exceed 5% of total assets and no more than 15% of the Company's
total assets will be invested in other listed investment
companies.
|
On acquisition, no holding shall
exceed 5% of total assets.
and no
No more than 15% of the Company's
total assets will be invested in other listed investment
companies.
|
|
No more than 10% of the Company's
total assets will be invested in other pooled vehicles, such as
open ended funds.
Unlisted investments may be
held.
|
No more than 10% of the Company's
total assets will be invested in other pooled vehicles, such as
open ended funds.
Unlisted investments may be
held.
|
|
On acquisition of any unlisted
investment, the Company's aggregate holding in unlisted investments
shall not exceed 25% of total assets.
From time to time, fixed interest
holdings or non equity investments, may be held on an opportunistic
basis.
Derivative instruments are not
normally used but, in certain circumstances and with the prior
approval of the Board, their use may be considered either as a
hedge or to exploit an investment opportunity.
|
On acquisition of any unlisted
investment, the Company's aggregate holding in unlisted investments
shall not exceed 25% of total assets.
From time to time, fixed interest
holdings or non equity investments, may be held on an opportunistic
basis.
Derivative instruments are not
normally used but, in certain circumstances and with the prior
approval of the Board, their use may be considered either as a
hedge or to exploit an investment opportunity.
|
|
The Company recognises the long term
advantages of gearing and would seek to have a maximum gearing
level of 30% of shareholders' funds in the absence of exceptional
market conditions.
Borrowings are invested when it is
considered that investment grounds merit the Company taking a
geared position. Gearing levels, and the extent of gearing, are
discussed by the Board and Managers at every Board
Meeting.
|
The Company recognises the long term
advantages of gearing and would seek to have a maximum gearing
level of 30% of shareholders' funds in the absence of exceptional
market conditions.
Borrowings are invested when it is
considered that investment grounds merit the Company taking a
geared position. Gearing levels, and the extent of gearing, are
discussed by the Board and Managers at every Board
Meeting.
*The Company's comparative
index is the S&P Global Small Cap Index total return (in
sterling terms).
|
A copy of the Circular has
been submitted to the National Storage Mechanism and will shortly
be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
The Circular will also shortly be available on the Company's
website at www.edinburghworldwide.co.uk where further information
on the Company including a video from the Chair can also be found.
Neither the contents of the Managers' website nor the contents of
any website accessible from hyperlinks on the Managers' website (or
any other website) is incorporated into, or forms part of, this
announcement.
Capitalised terms used but not
defined in this announcement will have the same meaning as set out
in the Circular dated 20 November 2024.
Inside Information
The information contained within
this announcement is deemed by Edinburgh Worldwide Investment
Trust plc to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No.596/2014 (as it forms part of
UK domestic law by virtue of the European
Union (Withdrawal) Act 2018). On the publication of this
announcement via a Regulatory Information Service, such
information is now considered to be in the public
domain.
The person responsible for making
this announcement is Alex Blake.