Ocean Dial Asset Management India Capital Growth Fund May 2020 Source: Ocean Dial Asset Management, Bloomberg
The Proposals 01
REASONS FOR THE CONTINUATION VOTE + The Board carries out a formal assessment of the company’s performance every three years and a vote on the company’s continued existence is put to shareholders only in the event that either of the following criteria are met: + the company’s monthly average market capitalisation over the past year is below £30 million; or + the company’s published diluted NAV per ordinary share has underperformed its benchmark, the BSE Mid Cap Total Return Index, by more than a cumulative 5 per cent. over the previous three years. 3
REASONS FOR THE CONTINUATION VOTE + With less than three months to go until 6 August 2020 (the date for the next three-yearly assessment), the Board regards it as unlikely that performance could improve sufficiently to exceed the second part of the test by then. + the diluted NAV per ordinary share fell 45.8 per cent from 7 August 2017 to 15 May 2020, giving a cumulative underperformance against the benchmark of 14.1 per cent. + Given the strong likelihood of there needing to be a continuation vote this year and coinciding with changes made by the investment manager, the Board has decided to bring forward the date for proposing the continuation resolution and the proposals. + The Board recognises that for ICGF to have a future: + Performance will need to improve significantly; + The level of the discount must be brought in; + A route to liquidity must be provided; and + Costs must be competitive. 4
THE PROPOSALS + Despite the company’s underperformance and taking account of the investment manager’s outlook for the company’s investments, the Board considers that there is good potential for the company’s performance to improve markedly. The Board is therefore proposing that the company should continue on the basis of the following proposals: + the introduction of the redemption facility, giving shareholders the right to request the redemption of part or all of their shareholding on 31 December 2021 and every second year thereafter at an exit discount equal to a maximum of a six per cent. discount to NAV per redemption share; and + a change to the investment manager’s fee from 1.25 per cent. of total assets per annum, to the lower of 1.25 per cent. of average market capitalisation (calculated on a daily basis) per annum or 1.25 per cent. of total assets per annum with effect from 1 July 2020, with a further review of the investment manager’s fee in 2022. + Given the existence of the redemption facility, the requirement for a three-yearly continuation vote would terminate and accordingly the continuation resolution is conditional on the passing of the special resolution to amend the company's articles to include the redemption facility. + If at any redemption point, the directors believe that implementing the redemption requests received will materially impair the future viability of the remainder of the fund, they will cancel the redemption point and instead move to the realisation of the company. At the present, the Board views below £40 million as materially impaired. 5
BENEFITS OF THE PROPOSALS + The Directors believe that the proposals will provide the following benefits to shareholders: + being able to redeem some or all of their shareholding, without being reliant on the market liquidity of the ordinary shares; + progressively reducing the discount at which the ordinary shares trade compared to NAV per ordinary share; + addressing, through the redemption facility and the issue of ordinary shares from treasury, market imbalances in the supply of, and demand for, the ordinary shares; + an uplift in NAV per ordinary share for the company and continuing shareholders as a result of the exit discount applied to the ordinary shares that are redeemed; + a greater likelihood that the value of the ordinary shares will reflect the prospects of the company’s investment strategy; and + a reduction in the operating costs of the company and a more effective alignment between the investment manager and shareholders by switching the investment manager’s fee calculation from total assets to market capitalisation.
IF THE PROPOSALS ARE NOT APPROVED… + ...your Board would put forward proposals to enable shareholders to realise their investment. + If the special resolution to approve the redemption facility is not passed, the continuation resolution will not become unconditional and the Board will be obliged to put forward to shareholders proposals to wind-up, reorganise or reconstruct the company. + Given the extremely volatile market environment and the as yet unknown impact of Covid-19 on India, the Board considers that the realisation of the company’s portfolio of investments at the present time is likely to result in sub-optimal returns for shareholders and is not in the interests of the company or of shareholders as a whole. 7
Process & Performance 02
PERFORMANCE Rebased ICGF Performance vs Benchmark June 14-June 17 Rebased ICGF Performance vs Benchmark June 17-April 20 220 220 200 200 180 180 160 160 140 140 120 120 100 100 80 80 60 60 40 40 Rebased NAV BSE MidCap Index Rebased NAV BSE MidCap Index June 2014 – June 2017 June 2017 – April 2020 December 2019 – May 15 2020 ICGF Rebased NAV Absolute Performance 113.8% -41.7% -29.4% -21.8% BSE MidCap Absolute Performance 97.1% -23.9% ICGF Relative Performance 16.7% -17.8% -7.6% ICGF CAGR 28.8% -17.3% N/A Source: Ocean Dial Asset Management, Bloomberg 9
FOCUS ON IMPROVING PERFORMANCE RENEWED INPUTS EVIDENCED OUTPUTS SUPERIOR RETURNS IDENTIFICATION OF BEST House of Ocean Dial Expansion of investment team Investment committee approved OPPORTUNITIES from four to seven members focused universe of 143 companies; each analyst covers IMPROVED SELL DISCIPLINE own portfolio of ~30 names 3 day, full-team intense offsite analysing strengths, ESG integration FORMALISED RISK weaknesses, hits, and misses Additional analyst to take MANAGEMENT (Nov 2019) ownership across portfolios SMALL AND MIDCAP MEAN Enhanced toolkit REVERSION Full time analyst covering data Ranking tool : integrated across and AI software models; reinforced sell discipline INDIAN ECONOMIC RECOVERY AI tool: Efficient aggregation of unstructured data DISCOUNT MEAN REVERSION Closure of open-ended Bandwidth and focus alternate strategy Portfolio Adviser’s stocks under ownership from 63 to 35* *13 May 2020 10
INVESTMENT & RESEARCH TEAM CHANGES Gaurav Narain Tridib Pathak Co-Head of Co-Head of Job title Job title Equities Equities Joined Joined 2011 2019 Ocean Dial Ocean Dial Experience 26 years Experience 30 years Shahil Shah Saurabh Chugh Ankush Kedia Assistant Fund Job title Job title Analyst Job title Analyst Manager Joined Joined Joined 2006 2018 2005 Ocean Dial Ocean Dial Ocean Dial Experience 17 years Experience 14 years Experience 15 years Ashutosh Garud Saurabh Rathore Job title Analyst Job title Analyst Joined Joined 2019 2020 Ocean Dial Ocean Dial Experience 3 years Experience 15 years Since 2017, the Investment & Research Team has expanded from four to seven, with the expectation of an additional hire soon 11
RANKING TOOL Behavioural guidance framework utilising multiple valuation methodologies Source: Ocean Dial Asset Management 12
ENHANCED ANALYTICS TOOL Increased analyst productivity in assessing new ideas, monitoring universe companies, and aggregating due diligence from a broader range of sources Source: Ocean Dial Asset Management, Egregore Labs 13
NEW INVESTMENTS – FUTURE WINNERS Aegis Leading LPG 5 year historic EPS CAGR at 29%. High visibility, £622m Logistics terminal operator Small Cap expect 20% EPS growth over next 3 years World’s largest CCL 3 year expected EPS CAGR > 15%, embedded £294m MARKET private label instant Products Small Cap optionality from domestic brand launch coffee manufacturer LEADERS India’s largest city 3 year volume CAGR at 20%. Attractively valued £1.9bn Gujarat Gas gas distribution Mid Cap with structural volume growth in place. company WIDE ENTRY BARRIERS ICICI Largest private Compounding machine. Expect 15% annual Lombard £6.5bn sector general growth in net earned premium in line with General Large Cap insurance company historical 5 year average of 17% Insurance STRONG UNDERLYING ~100% market Multi Regulatory tailwinds to drive steady state 10- FUNDAMENTALS share in energy, £662m Commodity 12% increase in trading volumes. Operating bullion, base metal Small Cap Exchange leverage to drive superior earnings growth trading contracts Source: Ocean Dial Asset Management, 13 May 2020, Small cap less than £1.6bn, Mid Cap £1.6bn – 5.7bn, Large Cap greater than £5.7bn 14
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