Australian Listed Investment Company Report May 2022

Weekly Reports | May 03 2022

A Listed Investment Company (LIC) is a listed investment vehicle that offers investors access to a diversified portfolio of shares in other companies also listed on the stock market. Also known as Listed Investment Trusts or Listed Managed Investments.

For comprehensive comparative data tables for LICs please see attached.

LMI Market News

WCM Global Long Short Fund Limited ((WLS)) Proposes Restructure to Unlisted Trust

On 29 April 2022, WLS announced it has executed an implementation deed with Contango Funds Management Limited ((CFML)) and Associate Global Partners Limited for the WCM Global Long Short Fund (Managed Fund) (the "Fund") in relation to the proposed restructure of WLS.

If implemented, the restructure will result in WLS shareholders exchanging their WLS shares for units in the Fund, a newly created unlisted trust. The Fund will invest in the same underlying portfolio as WLS.

The proposed restructure is the result of a review by an independent board committee to address the persistent discount to NTA [net tangible asset value].

If the proposed restructure is approved and implemented the following will occur:

-WLS shares will be exchanged for units in the Fund on a one-for-one basis;

-WLS will become wholly owned by the Fund and will be delisted from the ASX;

-The portfolio will be transferred to the Fund;

-The investment management agreement between WLS and CFML will be terminated without any termination fees payable to CFML;

-The Fund will continue to engage WCM Investment Management LLC to manage the portfolio as Investment Advisor on materially the same terms as WLS; and

-Unitholders in the Fund will be able to request the withdrawal of some or all of their units in the Fund.

WLS shareholders will vote on the Scheme at a general meeting expected to be held in August 2022. Details of the proposed scheme will be provided in a Scheme Booklet which is expected to be distributed to shareholders in June 2022.

WLS has traded at an average discount to pre-tax NTA of 15.2% over the 12-months to 31 March 2022. The proposed restructure will provide WLS shareholders the ability to exit their investment closer to NAV [net asset value].

BTI Announces Instaclustr to be Acquired by NetApp

On 8 April 2022, Bailador Technology Investments Limited ((BTI)) announced one of the investments in the portfolio, Instaclustr, has entered into an agreement to be acquired by NetApp. NetApp is a global cloud-led, data-centric software company that is listed on the Nasdaq.

BTI increased its carrying value in Instaclustr to A$118m, a valuation uplift of $54m, an increase of $0.38 pre-tax NTA per share. The sale is subject to normal final adjustments and closing proceeds are subject to payment transaction costs and to exchange rate movements. Further to this, the agreement in subject to certain regulatory approval and conditions to closing.

On completion of the transaction, BTI will realise its full position with proceeds expected to be received in FY22.

The investment has been a successful one. BTI made its initial investment in Instaclustr in November 2016 with a $4m investment and completed a $0.5m follow-on investment in March 2017. In 2021, BTI made a further $3.8m investment when the opportunity presented itself. The $8.3m investment is now valued at $118m.

BTI's pre-tax NTA has increased 32.3% over the 12-months to 31 March 2022. This compares to the ASX All Ordinaries Accumulation Index increase of 15.5%. While the pre-tax NTA has increased the share price has lagged behind, falling 9.9% over the 12-month period, resulting in the Company trading at a discount of 36.9% to pre-tax NTA and 25.6% to post-tax NTA at 31 March 2022.

ECP Completes Convertible Note Issue

On 12 April 2022, ECP Emerging Growth Limited ((ECP)) announced the completion of a Convertible Notes issue. ECP issued 7,569,534 listed unsecured redeemable convertible notes, raising $10.8m. 86.6% of the maximum number of Notes on offer was subscribed to. The Notes were issued at a price of $1.43 and pay a fixed interest rate of 5.50%p.a., paid quarterly until the Step Up Date of 11 April 2025.

The Step Up Date is 3 years after the issue at which time the interest rate will increase to 6.50%p.a. in the event the 2 year Bank Bill Swap Rate (BBSW) is above 2.5859%. In the event the BBSW is not above this rate the interest rate will remain at 5.50%. The Notes will have a Maturity Date of 11 April 2027, at which point all outstanding Notes will be redeemed at face value.

The Notes are convertible into ECP ordinary shares on a one-for-one basis (subject to adjustment for certain dilutionary and other capital transactions) during the conversion period, which will commence two years after the issue and finish ten business days prior to the Maturity Date.

The Notes may be redeemed prior to maturity if a change of control event or tax event occurs. ECP may also redeem the Notes prior to maturity on the first Step Up Date or any subsequent interest payment date, or if a Clean-Up Event occurs at face value.

The proceeds of the Offer will be invested in the existing portfolio and used to pay the costs associated with the Offer. The Notes provide the opportunity to grow the assets of the Company without diluting shareholder positions.

The Notes are listed on the ASX with the ticker ((ECPGA)). The Notes will be the only debt on the balance sheet of ECP with the Company committing to not taking on any further debt.

WAM Completes Acquisition of WIC and OZG

During the month, WAM Capital Limited's ((WAM)) acquisition of the shares of Westoz Investment Company Limited ((WIC)) and Ozgrowth Limited ((OZG)) that it did not own was approved by both shareholders and the court.

OZG shareholders were issued with 0.177 WAM shares for every one OZG share held on the record date (being 13 April 2022). Based on the share price at the close of the completion announcement date, this equated to $0.40 per OZG share. WIC shareholders were issued with 0.686 WAM shares for every one WIC share held at the record date.

This equated to a value $1.57 per WIC share at the close of the completion announcement date. In total, 153.7m new WAM shares were issued.

VGI Partners Releases Explanatory Memorandum Regarding Merger with Regal Funds Management

On 27 April 2022, VGI Partners Limited ((VGI)) released the Explanatory Memorandum for the merger with Regal. Shareholders will vote on the merger at the AGM scheduled for 27 May 2022.

Under the terms of the proposed merger it is expected that:

-VGI will acquire all the shares in Regal in consideration for the issue of new VGI shares to Regal shareholders. Consideration to be paid comprises approximately 140m shares;

-VGI will be renamed Regal Partners Limited. The merged entity will remain listed on the ASX with the ticker changed to RPL.

-Approximately 33.3% of the issued share capital of the merged entity will be held by VGI shareholders and the remaining 66.7% will be held by Regal shareholders.

On completion of the merger, Phillip King (CIO and Co-Founder of Regal) and his family trusts will have an aggregate voting power of 42.53% of the merged entity.

The consideration to be paid comprises approximately 140m shares. VGI intends to declare a fully franked special dividend of up to $0.40 per share prior to the Completion Date of the merger, conditional on the merger being completed.

VG1 & VG8 to Resume Share Buy-Backs

On 30 March 2022, VGI Partners Global Investments ((VG1)) and VGI Partners Asian Investments ((VG8)) announced that they plan to recommence the on-market share buy-back program of up to 10% of shares over 12-months in May.

The buy-back program is targeted at addressing the discount to NTA that the two companies continue to trade at. At 31 March 2022, both VG1 and VG8 were trading at a discount to pre-tax NTA of 13.7%.

PE1 Raises $57.7m Through Rights Issue

In early April, Pengana Private Equity Trust ((PE1)) completed a pro-rata non-renounceable rights issue. Under the offer, eligible unitholders had the opportunity to subscribe for 1 new unit in PE1 for every five units held with unitholders able to apply for additional units under a shortfall facility.

Further to this, the Responsible Entity also decided to make up part of the shortfall through the issue of new units to wholesale and sophisticated investors.

PE1 raised a total of $57.7m through the issue of 37.5m units at $1.54 per unit. The issue represented a take-up rate of 77.9% of the total units on offer.

Both the NAV and unit price of PE1 have performed strongly over the 12-months to 31 March 2022. NAV (including distributions) increased 38.1% over the 12-month period and the unit price increased 43.0%.

Independent Investment Research, "IIR", is an independent investment research house based in Australia and the United States. IIR specialises in the analysis of high quality commissioned research for Brokers, Family Offices and Fund Managers. IIR distributes its research in Asia, United States and the Americas. IIR does not participate in any corporate or capital raising activity and therefore it does not have any inherent bias that may result from research that is linked to any corporate/ capital raising activity.

IIR was established in 2004 under Aegis Equities Research Group of companies to provide investment research to a select group of retail and wholesale clients. Since March 2010, IIR (the Aegis Equities business was sold to Morningstar) has operated independently from Aegis by former Aegis senior executives/shareholders to provide clients with unparalleled research that covers listed and unlisted managed investments, listed companies, structured products, and IPOs. IIR takes great pride in the quality and independence of our analysis, underpinned by high caliber staff and a transparent, proven and rigorous research methodology.

INDEPENDENCE OF RESEARCH ANALYSTS

Research analysts are not directly supervised by personnel from other areas of the Firm whose interests or functions may conflict with those of the research analysts. The evaluation and appraisal of research analysts for purposes of career advancement, remuneration and promotion is structured so that non-research personnel do not exert inappropriate influence over analysts.

Supervision and reporting lines: Analysts who publish research reports are supervised by, and report to, Research Management. Research analysts do not report to, and are not supervised by, any sales personnel nor do they have dealings with Sales personnel

Evaluation and remuneration: The remuneration of research analysts is determined on the basis of a number of factors, including quality, accuracy and value of research, productivity, experience, individual reputation, and evaluations by investor clients.

INDEPENDENCE ACTIVITIES OF ANALYSTS

IIR restricts research analysts from performing roles that could prejudice, or appear to prejudice, the independence of their research.

Pitches: Research analysts are not permitted to participate in sales pitches for corporate mandates on behalf of a Broker and are not permitted to prepare or review materials for those pitches. Pitch materials by investor clients may not contain the promise of research coverage by IIR.

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Widely-attended conferences: Analysts are permitted to attend and speak at widely-attended conferences at which our firm has been invited to present our views. These widely-attended conferences may include investor presentations by corporate clients of the Firm.

Other permitted activities: Analysts may be consulted by Firm sales personnel on matters such as market and industry trends, conditions and developments and the structuring, pricing and expected market reception of securities offerings or other market operations. Analysts may also carry out preliminary due diligence and vetting of issuers that may be prospective research clients of ours.

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DISCLAIMER

This publication has been prepared by Independent Investment Research (Aust) Pty Limited trading as Independent Investment Research ("IIR") (ABN 11 152 172 079), an corporate authorised representative of Australian Financial Services Licensee (AFSL no. 410381. IIR has been commissioned to prepare this independent research report (the "Report") and will receive fees for its preparation. Each company specified in the Report (the "Participants") has provided IIR with information about its current activities. While the information contained in this publication has been prepared with all reasonable care from sources that IIR believes are reliable, no responsibility or liability is accepted by IIR for any errors, omissions or misstatements however caused. In the event that updated or additional information is issued by the "Participants", subsequent to this publication, IIR is under no obligation to provide further research unless commissioned to do so. Any opinions, forecasts or recommendations reflects the judgment and assumptions of IIR as at the date of publication and may change without notice. IIR and each Participant in the Report, their officers, agents and employees exclude all liability whatsoever, in negligence or otherwise, for any loss or damage relating to this document to the full extent permitted by law. This publication is not and should not be construed as, an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Any opinion contained in the Report is unsolicited general information only. Neither IIR nor the Participants are aware that any recipient intends to rely on this Report or of the manner in which a recipient intends to use it. In preparing our information, it is not possible to take into consideration the investment objectives, financial situation or particular needs of any individual recipient. Investors should obtain individual financial advice from their investment advisor to determine whether opinions or recommendations (if any) contained in this publication are appropriate to their investment objectives, financial situation or particular needs before acting on such opinions or recommendations. This report is intended for the residents of Australia. It is not intended for any person(s) who is resident of any other country. This document does not constitute an offer of services in jurisdictions where IIR or its affiliates do not have the necessary licenses. IIR and/or the Participant, their officers, employees or its related bodies corporate may, from time to time hold positions in any securities included in this Report and may buy or sell such securities or engage in other transactions involving such securities. IIR and the Participant, their directors and associates declare that from time to time they may hold interests in and/or earn brokerage, fees or other benefits from the securities mentioned in this publication.

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