TIDMSDU
RNS Number : 7948K
Schroder UK Growth Fund PLC
13 April 2018
Schroder UK Growth Fund plc
Change of investment manager
13 April 2018
The Board of Schroder UK Growth Fund plc (the "Company")
announces that it has resolved to terminate the appointment of
Schroder Unit Trusts Limited as the Company's AIFM and has entered
into heads of terms to appoint Baillie Gifford & Co Limited
("Baillie Gifford AIFM") as the Company's new AIFM, company
secretary and administrator. Baillie Gifford AIFM intends to
delegate certain portfolio and risk management to Baillie Gifford
& Co (together with Baillie Gifford AIFM, "Baillie Gifford").
The appointment of Baillie Gifford on the terms set out in the
heads of terms is conditional on the execution of a new investment
management agreement and obtaining the necessary regulatory
clearances for Baillie Gifford AIFM to be appointed as the
Company's AIFM.
The Board believes in the benefit of active management delivered
with a long-term horizon and accordingly believes investment
management performance should be measured over the long term. It is
disappointing to note that the Company's long-term investment
performance is considerably below the Board's expectation and has
lagged the benchmark since inception. Further, despite its ongoing
share buyback policy, the Company has struggled with a persistent
and wide discount to NAV. Accordingly, the Board has concluded
that, in order to provide the best investment outcome for existing
investors and to position the Company to attract new investors, it
should make the change to implement a new, 'best ideas' investment
approach managed by Baillie Gifford, an established manager of
investment trusts with a long-term track record in achieving
capital growth from UK equities.
Although the Company's investment objective and policy will not
change, Baillie Gifford will realign the portfolio to invest in a
bespoke, 'best ideas' portfolio, with approximately 40 stocks,
which will offer shareholders a UK-focussed high-growth investment
proposition.
The portfolio will be co-managed by Iain McCombie and Milena
Mileva and will be populated with their highest conviction ideas,
providing investors with exposure to some of the most exciting UK
growth companies. The managers will seek to select high quality
companies with strong competitive positions which it believes have
the prospect of delivering strong earnings growth over a number of
years. Baillie Gifford believes that the investment portfolio,
constructed on a stock-picking, growth orientated, long-term basis
will be highly differentiated relative to the benchmark and to the
peer group of all-cap UK equity investment trusts.
The Board believes that the change in manager and investment
approach will provide the following benefits to investors:
- Access to Baillie Gifford's UK equity team. The team is
experienced and well resourced, with an average investment
experience of 13 years, almost all of which has been accumulated at
Baillie Gifford. The team manages UK specialist assets of GBP5.8bn
as at 31 December 2017.
- Strong track record. Although the proposed mandate for the
Company is a customised investment proposition that is different
from the UK open-ended funds managed by Baillie Gifford, both
co-managers have strong track records of outperformance in UK
equities and there will be a degree of crossover with their
existing portfolios.
- A bespoke and unique investment portfolio. The 'best ideas'
portfolio will consist of companies that the managers believe will
outperform materially over the long term. Baillie Gifford expects
active share for the portfolio to be over 80%.
- Long-term view. Baillie Gifford adopts a long-term view with
an investment horizon of five years plus and turnover within UK
portfolios is typically 10%-20% per annum.
- Baillie Gifford is one of the largest investment trust
managers in the UK and currently manages eight investment
trusts.
It is the Board's view, after consultation with its advisers,
that these changes provide the scope for improved future long-term
performance and should enhance the appeal of the Company. With the
support of Baillie Gifford, the aim will be to attract new
investors and, over time, seek to achieve a narrowing of the
Company's discount.
Past performance cannot be relied on as a guide to future
performance.
Expected Timing
As set out above, Baillie Gifford's appointment will only become
effective upon the satisfaction of certain conditions. This will be
completed no later than the expiry of the notice of termination
served on Schroder Unit Trusts Limited.
Schroder Unit Trusts Limited has been served notice of the
Board's intention to terminate the existing investment management
agreement.
Change of name, ticker and registered office
Upon Baillie Gifford's appointment becoming effective,
applications shall be made to change the Company's name and ticker
to "Baillie Gifford UK Growth Fund plc" and "BGUK", respectively,
and its registered office address so as to take effect as soon as
reasonably practicable.
Baillie Gifford
Baillie Gifford had assets under management and advice of GBP179
billion as at 31 December 2017. Baillie Gifford was founded in 1908
and is one of the leading privately owned investment management
firms in the UK, with 43 partners and a staff of around 1,000.
Baillie Gifford will appoint Iain McCombie and Milena Mileva as
co-managers of the Company's portfolio.
Iain McCombie
Iain graduated MA in Accountancy from Aberdeen University and
qualified as a Chartered Accountant. He joined Baillie Gifford in
1994 and joined the UK Equity Team in 1999. Iain became a partner
of the firm in 2005 and Chief of Investment Staff in 2013. He is
also co-manager of the Baillie Gifford Managed Fund.
Milena Mileva
Milena completed her MPhil in Politics at Oxford University in
2009, having graduated with a BA in Social & Political Science
from the University of Cambridge in 2007. She joined Baillie
Gifford in 2009 and has been an Investment Manager in the UK Equity
Team since 2012.
Fees
As set out in the heads of terms signed by the Company and
Baillie Gifford, Baillie Gifford will be paid an annual management
fee of 0.5 per cent on the value of the Company's net asset value.
In order to offset any payment to the existing AIFM in respect of
the termination of its appointment and to contribute towards the
other costs of implementing the proposals set out in the heads of
terms (including portfolio transition costs and stamp duty),
Baillie Gifford has agreed to waive its management fee to the
extent of GBP732,000 (which is approximately equal to 6 months'
management fee payable to Baillie Gifford based on the current net
asset value of the Company). The Company shall bear all the
remaining costs associated with the proposals. The investment
management agreement shall be terminable by either party serving 6
months' notice.
Carolan Dobson, Chairman, commented:
"The Board is delighted to announce its intention to appoint
Baillie Gifford as the Company's AIFM. The Board is committed to
providing investors with exposure to a high-quality portfolio of UK
stocks that have the potential to deliver significant
outperformance over the long term and we believe that Baillie
Gifford is the right manager to take the Company forwards. With its
long-term, bottom-up approach, Baillie Gifford has a proven track
record in managing UK equities. We believe that a bespoke UK 'best
ideas' portfolio co-managed by Iain McCombie and Milena Mileva will
provide a unique investment opportunity that should, over time,
deliver strong returns to existing investors and serve to attract
new investors to the Company."
The person responsible for arranging for the release of this
announcement on behalf of the Company is Louise Richard, Schroder
Investment Management Limited, Company Secretary.
Contacts
Joe Winkley/Neil Morgan
020 3100 0000
Winterflood Securities Limited - Corporate broker and financial
adviser
This announcement contains Inside Information as defined under
the Market Abuse Regulation (EU) No. 596/2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCZMGMDNZVGRZM
(END) Dow Jones Newswires
April 13, 2018 02:00 ET (06:00 GMT)
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