MCC Global’s investment management appointment with Equus Total Return, a New York Stock Exchange listed closed-end fund, will not be renewed and will expire by its terms on 30 June 200
MCC Global’s investment management appointment with Equus Total Return, a New York Stock Exchange listed closed-end fund, will not be renewed and will expire by its terms on 30 June 2009.
Moore Clayton Capital Advisors, a group company of MCC, has been the sole investment adviser to Equus since June 2005.
The expiration of this appointment is expected to have a materially negative effect upon the company’s financial condition and anticipated results of operations.
In connection with its appointment as the investment adviser for Equus, MCC made a substantial investment to acquire the fund’s former investment adviser, as well as take a significant ownership stake in the fund.
The Equus board’s decision means that MCC will not have the opportunity to recover its investment in the fund’s adviser and will not be able to effect, through MCCA, its investment made in the fund’s shares.
During each of the years in which MCCA was the fund’s investment adviser, the fund’s shares outperformed the private equity share index as well as outgained the S&P 500. In addition, in a comparison of Equus with 23 other business development companies, overall expense and compensation ratios for Equus in 2008 were lower than the average for this group.
The only expense components of the fund that were higher than average were independent director fees (approximately three times the average) and professional fees paid principally to external counsel and auditors (approximately twice the average).
Anthony Moore, chairman of the MCC supervisory board, says: ‘We are proud of the outstanding track record we have established as fund managers amidst a terribly difficult economic climate over the past several years. Notwithstanding the challenges we’ve seen all across the industry, Equus has continued to perform relatively well, preserved its liquidity and, through our careful stewardship, now has an exciting array of solid portfolio companies with significant upside potential. We have no reasonable explanation for the non-renewal of our appointment and have not been provided such by the Equus board. As the largest shareholder of Equus, we remain concerned about stockholders not having seen a transition plan, including specifically how the fund expects to achieve a lower operational cost structure as a percentage of net assets under management, or how the board expects to achieve access to deal flow commensurate with the quality and variety that had been brought by MCCA.’
