Trian Investors 1 Limited

NOTICE OF REQUISITIONED EXTRAORDINARY GENERAL MEETING

11 July 2022

The information communicated in this announcement is deemed to constitute inside information as stipulated under the UK version of the Market Abuse Regulations (EU) No. 596/2014 as it forms part of the law of England and Wales by virtue of the European Union (Withdrawal) Act 2018, as amended ("EUWA"), as further amended by UK legislation from time to time. Upon the publication of this announcement, this information is considered to be in the public domain.

Trian Investors 1 Limited (the Company) will today post a circular convening an extraordinary general meeting (the Requisitioned EGM) to be held at 2:30 p.m. on Friday, 5 August 2022 (the Circular).

1.       Introduction

As announced on 20 June 2022, the Board of the Company has received a request to requisition an extraordinary general meeting of the Company to consider reconstituting the Board by removing three of the four current directors, being Chris Sherwell, Simon Holden and Anita Rival and nominating two new directors, Robert Legget and Miles Staude to replace the outgoing three directors (the Requisition).

The Requisition was signed by The Bank of New York (Nominees) Limited UKREITs, Harewood Nominees Limited, Securities Services Nominees Limited, Pelham Capital Limited and Global Value Funds, being holders of registered legal title to, in aggregate, more than 10 per cent. of such of the capital of the Company as carries the right of voting (excluding any capital held as treasury shares). The Board understands that these registered shareholders represent Global Value Fund, Invesco, Janus Henderson Investors UK Limited and Pelham Capital (the Requisitioning Shareholders).

The notice convening the Requisitioned EGM and setting out the resolutions to be proposed at the Requisitioned EGM (the Requisitioned Resolutions) is set out on pages 14 to 16 of the Circular.

For the reasons set out in the Circular, the Board recommends that Shareholders VOTE AGAINST all the Requisitioned Resolutions.

2.         Background to the Requisition

The Company was launched in September 2018 with the investment objective of generating significant capital appreciation through the investment activity of the Investment Manager, whose investment strategy is to act as a highly engaged shareowner at the companies in which it invests, combining concentrated public equity ownership with operational expertise. The IPO Prospectus explained that the Company expected to make a substantial minority investment, through its investment in the Investment Partnership, in a high quality, but undervalued and underperforming company, publicly listed in the United Kingdom or United States.  The IPO Prospectus further noted that the holding period for any investment to be made by the Company was not fixed - the average holding period of the ten comparable investments referenced in the IPO Prospectus that were previously realised by Trian Management was 3.9 years (and in some cases, investments were held for significantly longer).   Importantly, the IPO Prospectus also explained that the Special Limited Partner (an affiliate of the Investment Manager) would not receive any Incentive Allocation until an investment position is realised for a profit - a compensation structure designed to align the interests of the Investment Manager with those of other Shareholders.[1]

In June 2019 the Company announced that funds managed by Trian, including the Investment Partnership in which the Company is the principal investor, had acquired a 5.98 per cent. interest in the shares of Ferguson. After announcing its Ferguson investment, Trian constructively engaged with Ferguson's board of directors and management team, and Ferguson later pursued a number of operational and strategic initiatives supported by Trian, including selling its Wolseley UK business in March 2021 and completing a relisting to the New York Stock Exchange in May 2022. As a result of strong performance in the Ferguson share price, from the date of the Company's IPO through 30 June 2022, the Company's NAV has increased by 56.4 per cent., significantly outperforming the total shareholder return of 9.5 per cent. generated by the FTSE 100 during the same period.  The Investment Manager has informed the Board that it continues to believe that Ferguson is undervalued and should benefit from continued market share gains, capital return to shareholders, and technical factors resulting from the US relisting (including potential inclusion in key US stock market indices that could lead to significant purchasing activity by passive funds) during the next 12 months.

Source: FactSet and Company filings. (1) Does not include 0.52 pence per Share dividend paid by the Company in February 2022

In May 2021, the Board put forward a series of initiatives, including proposals to be considered at the annual general meeting held in June 2021. In addition to helping to address the illiquidity and discount to NAV associated with the Company's Shares, these initiatives sought to promote further alignment of interests between Shareholders and the Investment Manager, to better enable the Company to capitalise on new investment opportunities, and to position the Company to become a larger, more widely followed and actively-traded public company over time. These initiatives included:

•      Proposed Amendments to Investment Policy - The Board proposed amendments to the Company's investment policy and related policies and guidelines intended to permit the Company, through the Investment Partnership, to invest in more than one UK or U.S. Target Company at the same time, acquire majority or controlling interests in listed or unlisted Target Companies, and reinvest investment proceeds following the disposition of a Target Company. The proposed amendments provided that all net proceeds generated from the sale of an investment in a Target Company (whether or not board representation were obtained at the Target Company) would be available for reinvestment by the Investment Partnership.

•      Further Share Repurchases - The Company announced that it intended to use the Sterling equivalent of US$20m to repurchase Shares in the open market (in addition to the £7m of Shares which it had already repurchased previously) to help address the then-current Share price discount to NAV.

•      Further Alignment of Interests - Subject to Shareholders approving the proposed amendments to the Company's investment policy, the Special Limited Partner (an affiliate of the Investment Manager) agreed with the Company that it would receive future Incentive Allocations in the form of Shares (net of amounts required to cover certain tax liabilities), to be valued at NAV at the time of issuance, unless the issue of Shares would trigger a mandatory offer for the Company under the UK Takeover Code. The Special Limited Partner also agreed, for the Company's benefit, that should the Company realise losses on any future investment, the Special Limited Partner would not receive any Incentive Allocation on investment returns until the Company recovers such realised losses. Finally, the Board authorised Trian Subscriber to acquire additional Shares in the open market (in addition to the US$50m of Shares previously acquired by Trian Subscriber in the IPO).

At the 2021 AGM the proposed amendments to the investment policy were approved through an ordinary resolution with 52.25 per cent. of those voting in favour, 47.75 per cent. voting against and 19.5m Shares withheld, representing an overall voting turnout of 98.2 per cent. Prior to the 2021 AGM, the Board was advised by the Company's independent legal counsel that all Shareholders were entitled to vote on the proposed amendments to the investment policy and that, as a Guernsey incorporated company whose shares are traded on the Specialist Fund Segment, there were no legal or regulatory requirements restricting Trian Subscriber from voting on the proposed amendments to the investment policy. The Board notes that the majority of Shares voted in favour of the revised investment policy were held by Shareholders unaffiliated with Trian. 

Notwithstanding the successful adoption of the revised investment policy, the Board was (and is) aware that a significant number of Shareholders, both in number and by voting rights, did not support the relevant resolution. The Board is also aware that, while the Company has generated a total shareholder return of 28.0 per cent. from the date of its IPO through 30 June 2022 (again significantly outperforming the total shareholder return of the FTSE 100 during the same time period), the Company's share price has failed to match the high growth in the Company's NAV.  The Board notes that the IPO Prospectus advised Shareholders that (1) "the Shares may trade at a discount to the NAV per Share for a variety of reasons, including market conditions…", (2) there may be limited liquidity in Shares, "which may affect…an investor's ability to realise some or all of its investment…" and (3) "the holding period for Company and Investment Partnership investments is not fixed" (and, in fact, the Company's Ferguson holdings have been held for a shorter duration than the 3.9 year average investment holding period referenced in the IPO Prospectus).  Still, the trading activity of the Company's Shares has frustrated the Board and certain Shareholders (particularly those Shareholders who invested on behalf of open-ended vehicles and have been required to satisfy investor redemptions at their vehicles).  

Since the 2021 AGM, the Board has sought to engage with all Shareholders directly and through its advisers to identify potential initiatives that would be supported by a significant majority of the Shareholders (including Shareholders who voted both for and against the revised investment policy). The Board has also returned significant capital to Shareholders to help improve trading activity of the Shares - since 2020, the Company has used approximately £24.3m to purchase 19.6m Shares in aggregate (representing over 7 per cent. of the Shares in issue at the time of the Company IPO). 

Most recently, in March 2022, the Board, taking advantage of the additional flexibility afforded by the Company's revised investment policy, approved an investment in Unilever as a second Target Company.  Shortly thereafter, the Company, through the Investment Partnership, acquired approximately US$50 million of shares of Unilever and on 31 May 2022 Unilever announced the appointment of Nelson Peltz, CEO and a Founding Partner of the parent of the Investment Manager, as a Non-Executive Director.  Since the investment was made by the Company through 30 June 2022, Unilever has generated total shareholder returns for its shareholders of 6.0 per cent.--again outperforming the FTSE 100, which generated shareholder returns of -4.5 per cent. during the same time period.

3.         Reasons for rejecting the Requisitioned Resolutions

The Requisitioning Shareholders have stated that they have submitted the Requisition because the Board has failed to discharge its fiduciary duty to exercise its independent judgement thereby failing to act in the interests of all Shareholders. At the same time they seek to represent themselves as the "independent" Shareholders, apparently distinguishing their position as different from other Shareholders. As set out in the IPO Prospectus, the Company is admitted to trading on the Specialist Fund Segment and is therefore not subject to any of the Listing Rules typically applicable to listed funds. In particular, the Listing Rules relating to related parties do not apply to the Company. As noted above, the Board has been advised by the Company's independent legal counsel that there is no basis on which it can prefer, or otherwise favour, any particular Shareholder (or group of Shareholders) and that in putting the proposed amendments to the investment policy to a vote of all Shareholders it was in fact discharging its fiduciary duty to act in the interests of the Company and all Shareholders.

It should also be noted that due to the structure of the Company and the manner in which it pursues its investment policy through its investment in the Investment Partnership, the Board has limited powers with respect to the management of any underlying investment in any Target Company or the management and operation of the Investment Partnership, and in particular with regards to the divestment and return of capital from any investment in a Target Company. In summary the two main powers available to the Board are:

•      When the Investment Manager decides to recommend an appropriate Target Company, the Investment Manager is required to propose the investment to the Investment Partnership for approval by the limited partners in the Investment Partnership. The choice of Target Company will be subject to a vote in the affirmative of the majority in interest of the limited partners of the Investment Partnership, in effect giving the Board a veto on such a decision since the Company indirectly owns, and is currently expected to continue to own, more than 50 per cent. of the interests in the Investment Partnership; and

·      The Company (for so long as it directly or indirectly holds the majority interest in the Investment Partnership) has the right to remove the Managing General Partner on 90 Business Days' notice for any reason (provided that the Investment Manager is entitled to receive 12 months' worth of management fees upon termination, and the Special Limited Partner retains its entitlement to receive the Incentive Allocation). However, as disclosed in the IPO Prospectus, "if after Admission …  (ii) the Directors as at the date of this Prospectus, or directors appointed by them, at any time, cease to represent a majority of the board of the Company, the notice period for removing the Managing General Partner will be increased to two years". If the Requisitioned Resolutions were passed the newly constituted board would not represent such a majority which would have a direct and negative economic impact on the Company should the Requisitioning Shareholders ultimately be seeking to effect an exit from underlying investments and a return of capital through the removal of the Managing General Partner.

The Requisitioning Shareholders have also stated that through the Requisition they are seeking to restore trust in the Board. The Board as currently constituted is wholly independent of all other Shareholders and also of Trian. As part of its regular review of Board composition, the Board appointed Anita Rival (who is independent of all Shareholders and Trian) in April 2022 after conducting a process which included discussions with the Company's brokers and other advisers about potential candidates and speaking with references about Ms. Rival's qualifications.  It is particularly disappointing that the Requisitioning Shareholders are seeking to remove Ms. Rival from the Board as she brings to it relevant US experience and extensive experience in the asset management industry, as well as contributing to the skills and gender diversity of the Board (the latter point being at the forefront of most corporate governance agendas). In addition, the Requisitioning Shareholders concede that one of their proposed directors, Miles Staude, cannot be considered independent and therefore in the event that the Requisitioned Resolutions were to be passed the Board would become one third non-independent.  The Board believes the passing of the Requisitioned Resolutions  would significantly reduce its overall independence  and diminish gender diversity and the Board's collective skills and  and abilities, which would  be detrimental to the long term interests of all Shareholders.

Neither the Requisitioning Shareholders, nor either of their two director nominees, have publicly described what actions they may pursue if the Requisition is successful.  However, given previous conversations that the Board and Investment Manager have had with the Requisitioning Shareholders (which in some cases, date back even prior to the 2021 AGM) and Mr. Legget's background at Progressive Value Management (a firm which specialises in monetising illiquid positions for institutional investors), the Board believes that the reconstituted Board may seek to wind up the Company and return capital to Shareholders as soon as practicable.  While such a course of action may create some short-term Share price appreciation, it would prevent the Company from compounding capital and generating attractive returns for Shareholders over a longer period of time, in contrast to the revised investment policy approved at the 2021 AGM.  The Board also notes that the Company's NAV has declined by approximately 29 per cent. since it reached an all-time high at the end of 2021, due largely to challenging macroeconomic conditions (as well as short-term technical factors associated with the Ferguson relisting), which would suggest that now may be a particularly inopportune time for the Investment Manager to monetise the Ferguson investment.  The Board believes that taking steps now to wind up the Company would not be consistent with the interests of its longer-term Shareholders, and instead it has sought and will continue to seek solutions that balance the objectives of different segments of the Shareholder base.

A proposal that the Board is currently discussing with the Investment Manager could involve the Investment Manager committing to commence an orderly realisation and winding up of the Investment Partnership (thereby enabling the return of capital to Shareholders) if, within 18 months, the Investment Manager is unable to identify one or more underlying businesses that have been approved as a Target Company by the Investment Partnership which it would seek to acquire (or seek to acquire control of) in order to transform the Company into an operating company - an objective that was set out in the notice of 2021 AGM.  Such a transformation, if it were achieved, could significantly improve the liquidity of the Shares - by increasing the size of the Company and enlarging the potential investor universe and scope of research analyst coverage.  In connection with the potential acquisition of an operating company, the Board would also consider the merits of a change in market listing if a relisting could further enhance the Company's standing and increase governance standards and index exposure. If it were not possible to achieve such a transformation within this 18 month timeframe, Shareholders would benefit from the alternative of a realisation of the Company's assets that the Board believes would likely occur sooner than any exit that the Requisitioning Shareholders could seek following the Requisitioned EGM. The Board remains committed to ongoing Shareholder engagement to consider this proposal, as well as any other initiatives that might satisfy Shareholders with both short-term and longer-term orientations.

The proposal described above would require agreement from the Investment Manager.  The Investment Manager has indicated to the Board that, for a limited period of time, it will agree to support this proposal if Shareholders also agree to support the proposal and withdraw support for the Requistioned Resolutions.  The Investment Manager has informed the Board that it is seeking an amicable resolution with other Shareholders in an effort to avoid a contested Requisitioned EGM - however, the Investment Manager may no longer continue to support this proposal if agreement cannot be reached with other Shareholders well in advance of the Requisitioned EGM. The Investment Manager has made clear to the Board that, in its view, a contested Requisitioned EGM would not serve the interests of any Shareholders and could result in continuing conflict - even if the Requisitioned Resolutions were approved, the notice period for removing the Managing General Partner would be increased to two years and during this period, the Investment Manager would continue to manage the Investment Partnership's holdings and further extraordinary general meetings of the Company could be called (which could result in the removal of the directors nominated by the Requisitioning Shareholders).   

The Board believes that it has conducted itself with integrity at all times and has positioned itself at the centre of challenge and debate between all Shareholders throughout the Company's successful and profitable strategy to date. Further, the Board is resolute that it remains best placed to continue to mediate between the differing objectives of Shareholders and to oversee the process of achieving a unifying resolution to satisfy the objectives of each Shareholder group; both those that wish to remain invested in the Company as well as those who may wish to exit their holding.

4.         The Requisitioned EGM

The Requisitioned Resolutions will be put to Shareholders at the Requisitioned EGM in accordance with the requirements of sections 203 (1) and (2) of the Law. Notice convening the Requisitioned EGM which is to be held at the Company's registered office, Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1 4LY, on Friday, 5 August 2022 is set out at the end of the Circular.

All resolutions to be proposed at the Requisitioned EGM will be proposed as ordinary resolutions requiring a simple majority of members entitled to vote and present in person or by proxy to vote in favour in order for the relevant resolution to be passed. 

The quorum for the Requisitioned EGM shall be two persons holding 5 per cent. of the total voting rights of the Company between them entitled to attend and to vote, each being a Shareholder or a proxy of a Shareholder or a duly authorised representative of a corporation which is a Shareholder.

All Shareholders are entitled to attend and vote at the Requisitioned EGM. However, Shareholders may and are strongly encouraged to participate in the business of the Requisitioned EGM by exercising their votes in advance of the Requisitioned EGM by completing and submitting a Form of Proxy as set out below and as detailed in the notes to the notice of the Requisitioned EGM. 

As all the Requisitioned Resolutions will be taken on a poll, all proxy votes will be included in the voting at the Requisitioned EGM.

5.         Action to be taken

Shareholders will find enclosed with the Circular a BLUE Form of Proxy for use at the Requisitioned EGM. The Form of Proxy should be completed and returned to the Company's UK Transfer Agent, FREEPOST PXS, Link Group, Central Square, Wellington Street, Leeds, LS1 4DL, so as to be received by no later than  2.30 p.m. on Wednesday, 3 August 2022 or, in the event of any adjournment of the Requisitioned EGM, not later than 48 hours (excluding days which are not business days) before the time appointed for the adjourned meeting.

Shareholders may appoint more than one proxy provided that each proxy is appointed to exercise rights attaching to different Shares. Completing and returning the BLUE Form of Proxy will not prevent them from attending the Requisitioned EGM and voting in person, should they wish to do so.

A proxy need not be a member of the Company. A Shareholder may also submit their proxy electronically using the share portal service at www.signalshares.com.

Shareholders who hold their Shares through CREST and who wish to appoint a proxy for the Requisitioned EGM or any adjournment thereof may do so by using the CREST proxy voting service in accordance with the procedures set out in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider, should refer to that CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.  Proxies for the Requisitioned EGM submitted via CREST must be received by the Registrar by no later than  2.30 p.m. on 3 August 2022.

6          Recommendation

For the reasons set out above, the Directors are unanimously of the opinion that the Requisitioned Resolutions to be proposed at the Requisitioned EGM are not in the best interests of the Company and Shareholders as a whole. Accordingly, the Board unanimously recommends that Shareholders VOTE AGAINST all of the Requisitioned Resolutions to be proposed at the Requisitioned EGM, as the Directors intend to do so in respect of their own beneficial holdings amounting to 152,775 Shares in aggregate representing approximately 0.06 per cent. of the current voting share capital of the Company.

EXPECTED TIMETABLE

Unless otherwise defined, capitalised words and phrases in this announcement shall have the meaning given to them in the Circular dated 11 July 2022.

The Circular, together with the Form of Proxy, have been submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism  and will also shortly be available to download from the Company's website at www.trianinvestors1.com. 

LEI number: 213800UQPHIQI5SPNG39

For further information, please contact:

Ocorian Administration (Guernsey) Limited
(Administrator and Company Secretary)
+44 (0)1481 742 742
Chezi Hanford

Numis Securities Limited

(Joint Broker)

+44 (0)20 7260 1000

David Benda

Jefferies International Limited

(Joint Broker)

+44 (0)20 708000

Stuart Klein