Update No. 299 – 15/07/17

As I outlined in the mail out distributed today, the Australian Tax Office has denied our application to have the shares of the company (EGP Fund No. 1 Pty Ltd) rollover into units of the trust (EGP Concentrated Value Fund).

Far be it from a Government agency to take a relatively simple idea and make it needlessly complex!

It is a very great shame as the EGM we had scheduled for next week was going to be a resounding success. Over 99.85% of stock cast was in favour of the move; with only a single dissenting vote (this shareholder redeemed their holding at June 30), and more than 80% of stock was voted. We only required 75% to pass the resolution and we are grateful for the faith our investors have placed in us to execute on our fiduciary responsibilities as the stewards of your capital.

We will now enact our contingency plan for this unfortunate eventuality. On the day the first trust price is struck, the entire portfolio of the company will be sent to the trust. EGP Fund No. 1 Pty Ltd will become the largest unitholder in EGP Concentrated Value Fund. If the transfer was made today, the EGP Fund No. 1 Pty Ltd would hold 13,367,771 units.

The company will retain a small sum of cash (a little over $1 million) for the purposes of meeting any redemptions and finalising our FY2017 tax obligations.

Over the course of the first half of FY2018, we will finalise the tax obligations and apply again to the ATO for rollover relief.

The new application we think will be much easier for the ATO to evaluate as at the time of ‘rollover’, the only asset the company will own will be units in the trust. That being the case, we think there will be a strong case for a simple in-specie distribution to the original shareholders of the equivalent value of units. Someone holding 5% of the company shares would get 5% of the units and so on.

Once we have the ruling and are confident all the companies’ financial obligations are met, EGP Fund No. 1 will pay a final dividend to extinguish any remaining Franking Credit balance. This dividend we are targeting for 30 November 2017, assuming we have the ruling; our aim is to make an in-specie distribution of units in December 2017. This will time nicely with our anticipated recommencement of monthly subscriptions in early 2018.

Any remaining cash will be used to acquire units in the trust before the in-specie distribution of the trust units to the shareholders.

I hope the above is not too complicated for everyone and naturally, we will keep you updated as we become more sure about exactly what happens and when – Tony Hansen 15/07/2017

Jun 30th 2017 Current Price Since July 1st 2017 Annualised Since Inception
EGP Fund No. 1 1.9544 1.9782*1 1.22%*1 16.19%*2
Benchmark 55758.56 56186.25 0.77% 8.05%

*1 after a 31 May 2013 dividend of 2.333 cents per share (cps) plus 1.000 cps Franking Credit, a 31 May 2014 Dividend of 7.000 cps plus 3.000 cps Franking Credit, a 31 May 2015 Dividend of 8.6667 cps plus 3.7143 cps Franking Credit, a 31 May 2016 Dividend of 6.0000 cps plus a 2.5714 cps Franking Credit and a 31 May 2017 Dividend of 7.000 cps plus 3.000 cps Franking Credit

*2 calculated based on dividends reinvested