Letter from the Chairman

Dear Unitholder,

On 3 August 2020, Magellan Asset Management (Magellan) announced a restructure proposal to simplify its global equities retail product offering. The restructure proposal, should it proceed, will have the effect of combining the Magellan Global Equities Fund (MGE) and the Magellan Global Trust (MGG) with the Magellan Global Fund.

On behalf of the Directors of Magellan, as responsible entity of MGE (Directors), I am pleased to provide you with this Explanatory Memorandum which contains details about the restructure proposal and the implications for you as an existing investor in MGE.

Overview of the Restructure

As a unitholder in MGE, your investment is managed by Magellan in accordance with our flagship global equities strategy that is managed by Hamish Douglass, the co-founder of Magellan and Chief Investment Officer (the Global Equities Strategy).

Should the proposed restructure be implemented, your money will continue to be invested in accordance with our Global Equities Strategy, however you will instead be invested in and hold units in the Magellan Global Fund.

The Magellan Global Fund will have two unit classes on issue:

To effect the restructure, Magellan Global Fund is proposing to acquire all of the units in MGE and all the units in MGG by way of two separate but inter-conditional trust schemes.

As a unitholder in MGE, you will receive Open Class Units in exchange for your existing units in MGE, with the exchange ratio based on the respective net asset values on the Effective Date. The Open Class Units will, in many respects, look and feel similar to the units in MGE you hold today. You will continue to be able trade your investment on the ASX, however you will also gain the ability to apply for or redeem your investment directly with Magellan Global Fund RE. This feature is not currently available to MGE unitholders, other than in limited circumstances.

Separately, unitholders in MGG will be offered Closed Class Units in exchange for their existing units in MGG. The terms of the Closed Class Units have been designed to substantially replicate the experience of unitholders in MGG today. That is, unitholders in MGG will continue to be able to buy and sell Closed Class Units in the ordinary course on the ASX.

The structure of the Magellan Global Fund following implementation of the restructure is detailed in the following diagram:

 Click image to view larger version

MGF Partnership Offer

Should the restructure proceed, and subject to the necessary regulatory approvals, Magellan Global Fund RE intends to offer all unitholders in the Magellan Global Fund, following implementation of the restructure, the ability to subscribe for new Closed Class Units (MGF Partnership Offer). Magellan Global Fund RE expects to launch the MGF Partnership Offer in January 2021.

The subscription price for the new Closed Class Units under the MGF Partnership Offer will be the NAV per Closed Class Unit on the Business Day immediately prior to their allotment. Successful applicants will also receive:

  • a valuable benefit in the form of additional Closed Class Units worth 7.5% of their subscription; and
  • a MGF Option for each new Closed Class Unit allotted, which will be exercisable into one Closed Class Unit with the exercise price set at a 7.5% discount to the prevailing net asset value of Closed Class Units at the time of exercise. The MGF Options will have a three year term and be exercisable in the period commencing three months following their issue. It is intended that MGF Options will be quoted on ASX.

As part of Magellan Group’s partnership approach with investors in Closed Class Units and to minimise dilution, Magellan Group will fund both the 7.5% additional Closed Class Unit partnership benefit and the 7.5% MGF Option exercise price discount.

Further details of the MGF Partnership Offer are outlined in Section 7.24.

MGE Trust Scheme and Magellan Directors' Recommendation

As noted above, the restructure will involve the acquisition of all of the units in MGE by Magellan Global Fund RE in exchange for Open Class Units by way of a trust scheme (the MGE Trust Scheme). It is the MGE Trust Scheme that is the subject of this Explanatory Memorandum and on which MGE Unitholders are being asked to vote at a virtual Meeting proposed to be held at 10.30am (Sydney time) on 25 November 2020.

The Notice of Meeting contained in Schedule 1 provides further details about how to vote and the arrangements for the virtual Meeting.

The Directors unanimously recommend that MGE Unitholders vote in favour of the MGE Trust Scheme in the absence of a Superior Proposal. Each Director intends to vote all MGE units held or controlled by them in favour of the MGE Trust Scheme.

The Directors believe that the restructure will provide a range of meaningful benefits to MGE unitholders, including:

  • greater flexibility in how you enter and exit your investment;
  • the potential for greater efficiency in ASX trading of your Open Class Units; and
  • the opportunity to participate in Magellan Group “partnership benefits” including the MGF Partnership Offer.

Section 3.4 of this Explanatory Memorandum provides a further explanation of the key benefits, disadvantages and risks for the MGE Trust Scheme.

When considering the recommendation of Directors, MGE Unitholders should note that Dr. Brett Cairns’ (CEO of the Magellan Group and director of MGE RE) annual short-term incentive payment takes into account, amongst a range of criteria, the delivery of key strategic projects, such as the restructure. The implementation of the restructure may contribute to the total annual short-term incentive payable to Dr. Cairns for the 2021 financial year. The maximum amount payable to Dr. Cairns, should he satisfactorily achieve all of the conditions governing the payment of his short term incentives, as a result of the delivery of key strategic projects including implementation of the restructure, is $193,125. This matter and other interests of the MGE RE directors in relation to the restructure are set out in Sections 12.1 and 12.2. Dr. Cairns considers that, despite these arrangements, it is appropriate for him to make a recommendation on the restructure. The MGE RE Board (excluding Dr. Cairns) also considers that it is appropriate for him to make a recommendation on the MGE Trust Scheme given his role in the operation and management of MGE and his deep industry knowledge.

The MGE Trust Scheme and restructure are subject to a number of conditions, including approvals by unitholders in MGE, Magellan Global Fund and MGG, regulatory approvals (including ASX quotation) and receipt of judicial advice from the Court.

Independent Expert’s Opinion

The Directors have appointed Lonergan Edwards & Associates Limited as the Independent Expert to provide an opinion on the MGE Trust Scheme (set out in Schedule 2).

The Independent Expert has concluded that the MGE Trust Scheme is fair and reasonable and in the best interests of MGE Unitholders in the absence of a Superior Proposal.

Conclusion

If, after reading this Explanatory Memorandum, you have any questions regarding the Restructure or the MGE Trust Scheme, please call the MGE Unitholder Information Line on +61 1800 206 847, between 7.00am and 8.00pm Monday to Friday (Sydney time), or consult your legal, investment or other professional adviser.

I look forward to your participation at the Meeting on 25 November 2020 and encourage you to vote in favour of the MGE Trust Scheme.

Yours sincerely


Robert Fraser
Chairman
MAGELLAN ASSET MANAGEMENT LIMITED
as responsible entity of Magellan Global Equities Fund

Explanatory Memorandum (MGE)

And other important documents

How to vote (MGE)

The unitholder meeting for MGE will be held at 10.30am Wednesday, 25 November 2020 (AEDT). Registered holders of MGE as at 7.00pm Monday 23 November 2020 (AEDT) are eligible to vote at the meeting.

To vote online prior to the meeting, visit: https://investorcentre.linkmarketservices.com.au and login to the Link website using your holding details. Select ‘Voting’ and follow the prompts to lodge your vote. Votes are due by 9.00am, 23 November 2020 (AEDT).

To participate and vote during the meeting, visit: https://agmlive.link/MGE20. Please ensure you have your SRN/HIN and the registered postcode of your holding as you will need to enter these details to access your Voting Card and participate at the meeting. Click here to download a Virtual Meeting Online Guide.

Relevant ASX Releases (MGE)

FAQs

Faqs

 

Contact us (MGE)

Should you have any queries regarding your holding or the upcoming MGE Meeting, please call the please call the MGE Unitholder Information Line on +61 1800 206 847, between 7.00am and 8.00pm Monday to Friday (AEDT), or consult your legal, investment or other professional adviser.

If you have questions in relation to the proposed restructure, please contact a member of the Magellan distribution team on 1800 6243 5526.