TIDMENG
RNS Number : 4787J
Electric & General Inv Tst PLC
30 June 2011
30 June 2011
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION INTO ANY
JURISDICTION OTHER THAN THE EEA, THE CHANNEL ISLANDS OR THE ISLE OF
MAN
Electric & General Investment Trust plc (the "Company")
Proposals for the voluntary winding-up and reconstruction of the
Company
The Company announces today proposals for the voluntary
winding-up and reconstruction of the Company. The Proposals offer
the Shareholders and Savings Scheme Participants the choice of (a)
rolling over their investment without triggering a charge to
capital gains tax into a UK authorised open-ended investment
company with variable capital, the investments of which will be
managed by THS, or (b) realising all or part of their investment
for cash.
The Proposals are conditional, inter alia, on the approval of
Shareholders at general meetings to be held on Friday, 5 August
2011 and Friday, 12 August 2011. The Board of the Company (the
"Board") recommends Shareholders to vote in favour of the
resolutions required to implement the Proposals at both Meetings.
Notices of the Meetings are set out in the circular of the Company
(the "Circular") which is being published today. Capitalised terms
used in this announcement have the same meaning as set out in the
Circular.
Background to the Proposals
The Directors propose a scheme of reconstruction, comprising a
members' voluntary liquidation of the Company pursuant to Section
110 of the Insolvency Act 1986, together with options for Eligible
Shareholders to elect for a cash exit by realising their investment
in the Company for cash and/or to elect for shares in E&G Fund.
Having considered all options and consulted with the Company's
major Shareholders, the Directors have concluded that these
Proposals are in the best interests of Shareholders as a whole.
E&G Fund will continue the Company's investment strategy and
approach. Those Shareholders and Savings Scheme Participants that
wish to continue with their investment can do so in a more cost
effective form. The total expense ratio of E&G Fund is expected
to be lower than the current total expense ratio of the Company.
The risk of any share price discount will also be removed as units
in the new fund will be issued and redeemed at Net Asset Value.
E&G Fund has several aspects of the corporate structure
typical of a closed-ended investment company. For instance, E&G
Fund has voting shares, will hold annual general meetings and has
an independent board of directors whose election is approved by
shareholders and who will oversee the running of E&G Fund
including the appointment and/or dismissal of its investment
manager.
It is proposed that THS manages the assets of E&G Fund. THS
has agreed to a reduced investment management fee of 0.3 per cent.
of net assets and a performance fee on a similar basis as currently
applies to the Company. Since the appointment of THS, the Company
has returned 78.9 per cent. in NAV on a total return basis,
outperforming the Company's benchmark (MSCI World Index) which has
returned 39.1 per cent. on a total return basis.
In addition, the Directors intend that the Company should pay an
interim dividend of 6.9 pence per Share to Shareholders before the
implementation of the Proposals.
The Proposals
Options available to Eligible Shareholders
Under the Proposals, the Company will be put into members'
voluntary liquidation and Eligible Shareholders will be able to
elect:
(a) to realise all or part of their investment in the Company
for cash following realisation by the Investment Manager of the
underlying investments (the "Cash Option"); and/or
(b) to roll over all or part of their investment in the Company
into shares in E&G Fund (a UK authorised open-ended investment
company with variable capital) (the "E&G Option"). E&G
Fund's investment portfolio will be similar to the Company's
existing investment portfolio and E&G Fund's investments will
be managed by THS (the Company's current investment manager) in
substantially the same manner as it currently manages the Company's
investment portfolio.
Eligible Shareholders can make different Elections in respect of
different parts of their holdings.
Eligible Shareholders may elect for the E&G Option only in
respect of Shares held as at the Record Date. Eligible Shareholders
who do not make a valid Election under the Scheme will be deemed to
have elected for the E&G Option in respect of Shares held by
them at the Record Date.
Overseas Shareholders will be deemed to have elected for the
Cash Option in full.
Options available to Savings Scheme Participants
By taking no action, Savings Scheme Participants will be deemed
to have elected for the E&G Option. Savings Scheme Participants
will be able positively to elect for the Cash Option.
Benefits of the Proposals
The Directors believe that the Proposals will provide the
following benefits:
-- the Proposals offer all Shareholders the opportunity of
rolling their investment into a vehicle with an investment
portfolio which is similar to the Company's existing portfolio and
which will be managed by the Company's current investment manager,
in substantially the same manner as it currently manages the
Company's investment portfolio, but at what the Directors believe
will be a lower annual cost;
-- Shareholders should expect to receive at least 99.1 per cent.
of NAV (or 471 pence per Share), on the basis of a NAV per Share in
the Company of 475 pence (announced on 27 June 2011), if electing
for either cash or rolling in to E&G Fund (in the case of
Shareholders electing for cash this excludes the impact of
realisation costs). In addition, Shareholders should expect to
receive a second distribution in due course, increasing this amount
to 99.3 per cent. of NAV;
-- the Proposals offer all Shareholders the option to elect in
full for cash, which will be satisfied through a realisation of the
portfolio;
-- Eligible Shareholders and Savings Scheme Participants who
elect (or are deemed to elect) for the E&G Option will also pay
a lower management fee to THS than they are currently and
furthermore the overall total expense ratio is expected to be lower
for E&G Fund as compared with the current total expense ratio
of the Company. The 0.3 per cent. management fee will apply to
E&G Shares rolled over and to additional future subscriptions
by these shareholders;
-- the Proposals provide greater choice than if the Company were
simply to be wound up because, as an alternative to receiving cash,
they allow Eligible Shareholders and Savings Scheme Participants to
receive shares in a fund which will have the same investment
objective and policy and the same investment manager as the
Company;
-- Eligible Shareholders and Savings Scheme Participants who
elect (or who are deemed to elect) for the E&G Option will
benefit from the fact that the E&G Shares will carry no risk of
trading at a discount to E&G Fund's NAV;
-- Eligible Shareholders and Savings Scheme Participants who
elect (or who are deemed to elect) for the E&G Option will be
able to avoid the initial (sales) charge usually associated with
purchasing E&G Shares;
-- Eligible Shareholders and Savings Scheme Participants who
elect (or who are deemed to elect) for the E&G Option will not,
following approval of the Scheme at the First GM, be liable for the
portfolio realisation costs incurred in connection with the Cash
Option;
-- to the extent Eligible Shareholders and Savings Scheme
Participants elect (or are deemed to elect) for the E&G Option
a corresponding proportion of the Company's portfolio will be
transferred to the Depositary for the account of E&G Fund and
so proportionately reduce the amount of the Company's portfolio
that is to be realised overall, thereby assisting the portfolio
realisation process immediately prior to the Second GM; and
-- Eligible Shareholders and Savings Scheme Participants who may
be subject to UK capital gains tax or corporation tax on gains on
their investment in the Company should be able to roll over their
investment into E&G Shares without crystallising an immediate
charge to UK capital gains tax or corporation tax on gains.
The choice between the options available under the Proposals
will be a matter for each Shareholder and each Savings Scheme
Participant to decide and will be influenced by his or her
personal, financial and taxation circumstances and his or her
investment objectives.
Shareholders and Savings Scheme Participants who are in any
doubt as to the contents of the Circular or as to the action to be
taken should seek their own personal financial advice from their
independent professional adviser authorised under the FSMA.
Portfolio Management prior to liquidation and management of the
realisation of the Liquidation Fund and 'A' Fund portfolios in the
Liquidation Period
The Company's portfolio is predominantly invested in quoted
international equities, however, a small proportion of the
portfolio is invested in unquoted securities, the trading of which
is less liquid than that of the shares of larger quoted companies.
In anticipation of the Scheme becoming effective and in order to
provide for a timely realisation process and to maximise the first
cash distribution to Shareholders who elect (or are deemed to
elect) for the Cash Option, the Board has already instructed the
Investment Manager, in the interests of Shareholders as a whole, to
commence the realisation of the Company's investment portfolio and
to hold the proceeds in cash or near cash assets. As at 28 June
2011 (being the latest practicable date prior to the publication of
the Circular) 6 per cent. of the Company's net assets were held in
cash or near cash assets. The Company's unquoted investments were
valued at GBP4,726,163.53 on 28 June 2011 (being the latest
practicable date prior to the publication of this the Circular) in
accordance with the Directors' estimate of realisable value. The
Company is currently in negotiations to realise investments
representing the greater part of this value at, or close to,
their carrying value. It is expected that the Company's interest
in Herald Ventures LLP will be the only investment which will not
be realised by the Effective Date. It is anticipated that this
interest will be realised when the LLP is wound up in September
2011.
The Investment Management Agreement will terminate immediately
prior to the Second GM. The Investment Manager is entitled, under
the Investment Management Agreement, to receive compensation from
the Company to the extent that the agreement is terminated at less
than six months notice. The Investment Manager has agreed to waive
its entitlement to such compensation. The Investment Manager will
however, be paid accrued performance fees (which are accrued for in
the daily published NAV) in accordance with the terms of the
Investment Management Agreement.
Should the period for realisation of assets in the Liquidation
Fund exceed 12 months, as it is not possible to maintain the
Company's status as an investment trust beyond the anniversary of
the liquidation, any realisation in subsequent periods will be
subject to tax on any chargeable gains.
The services of BNP Paribas Securities Services as the
administrator of the Company will also be retained to manage out
their service obligations regarding tax compliance and other
matters. The services of BNP Paribas Securities Services as the
custodians of the Company, will also be retained until all assets
are realised and/or deemed to be of negligible value and abandoned
(where appropriate). BNP Paribas Securities Services will receive a
fee estimated at GBP80,000 in respect of such services. The
services of Computershare will be maintained throughout the
liquidation to manage the shareholder register and effect the
distributions.
In order to implement the Scheme, at the close of business on
the date of the First GM the cash and other assets of the Company
will be divided into three Funds. Following an allocation to the
Liquidation Fund, the division of the remaining cash and other
assets will be made, subject to the terms of the Scheme set out in
Part III of the Circular, on the basis that each individual
portfolio holding will be divided and allocated to the "A" Fund (in
respect of the Cash Option) and the "B" Fund (in respect of the
E&G Option) pro rata to the number of Shares elected, or deemed
to have been elected, for each Option. Any cash that is allocated
to the "B" Fund may, in the Board's absolute discretion, be used to
buy assets prior to the Second GM from the "A" Fund at bid prices.
Between the First GM and the Calculation Date it is expected that
the assets comprised in the "A" Fund will be realised by the
Investment Manager. The costs of realising the "A" Fund will be
borne by such Fund. As a result of any realisation of assets in the
"A" Fund, there may be a positive or negative effect on the NAV
return of the Shares with "cash" rights relative to the NAV return
of the Shares with E&G Fund rights.
The Company entered into a trust deed on 27 March 1934, which
was subsequently amended on 20 February 1976, 18 August 1986 and 8
January 1997, pursuant to which the Company issued a number of
series of debenture stock. The only outstanding line of debenture
stock is the GBP7,000,000 10.75 per cent. 2011 debenture stock and
the Company has agreed with the current trustee, the Law Debenture
Corporation plc to redeem this stock on 22 July 2011. The stock
will be redeemed for GBP7,376,250, being its principal level
together with all accrued interest and interest that would have
accrued if the debenture stock had been redeemed as scheduled on 30
November 2011. Following the redemption of the stock and prior to
the distribution of assets pursuant to the Scheme, the floating
charge granted by the Company as security for the stock will be
released and removed from the charges register.
Cash Option
Those Shareholders who elect (or who are deemed to elect) for
the Cash Option will receive cash in respect of their Shares
through a realisation of the underlying investments. Such
Shareholders will receive cash distributions pro rata to their
respective holdings as assets in the "A" Fund are realised. It is
expected that a first cash distribution to Shareholders who elect
(or who are deemed to elect) for the Cash Option will be made in
the week commencing 15 August 2011 and that any further cash
distribution will be made by cheque by the Liquidators immediately
prior to the closure of the liquidation. Should the period for the
realisation of the portfolio exceed 12 months, realisations beyond
this point will be subject to tax on any chargeable gains as the
Company will no longer be an investment trust. Aggregate amounts
due pursuant to the Cash Option will be rounded down to the nearest
penny, provided that, in cases where the amount so payable to any
such Shareholder is less than GBP5.00, such amounts shall be
donated to a charity nominated by the Company.
Information on E&G Fund
Eligible Shareholders who elect (or who are deemed to elect) for
the E&G Option will receive E&G Shares calculated on the
basis set out in the Circular. No initial (sales) charge will be
levied on the issue of E&G Shares pursuant to the Scheme.
E&G Fund is a newly incorporated UK authorised open-ended
investment company which will aim to maximise total return, with an
over-riding objective of capital growth. The Investment Manager
will seek to achieve this objective by investing principally in a
portfolio of quoted international equities. The portfolio is
expected to consist of between 60 and 100 holdings, which is
relatively concentrated for a global fund, but will be well spread
and not dependent on any one economy or sector. Assets other than
quoted equities may be purchased from time to time, including fixed
interest holdings, unquoted securities and derivatives.
Holders of E&G Shares will normally be able to redeem their
E&G Shares on each business day. The price at which E&G
Shares may be bought or sold is calculated by reference to the
E&G Net Asset Value (the "E&G NAV"). The E&G NAV will
be calculated at 10.00 a.m. on each dealing day (the "Valuation
Point"). E&G Fund deals on a forward pricing basis, this being
the price calculated by reference to the next Valuation Point after
the purchase or sale order is received by the ACD. Further
information on dealing in E&G Shares is set out in the
Circular.
E&G Shares are not listed on the Official List or admitted
to trading on the London Stock Exchange or any other recognised
stock exchange. E&G Shares cannot be traded, therefore, on any
market.
E&G Fund will have an independent board of individual
directors comprising John Pocock, Jonathan Ruffer and Gerry Aherne,
in addition to Carvetian Capital Management Limited, which is
E&G Fund's authorised corporate director.
Further information on E&G Fund is set out in the Circular
and the E&G Fund Simplified Prospectus. Your attention is also
drawn to the risk factors set out under the heading "Risk Factors"
in the Circular.
Further details of the scheme
Shareholders' Entitlements under the Proposals
Following approval of the Resolutions to be proposed at the
Second GM, the Company will be placed in members' voluntary
liquidation. As soon as practicable thereafter the Liquidators will
make a distribution from the "A" Fund to Shareholders who have
elected (or who are deemed to have elected) for the Cash Option.
There may be a further cash distribution which will be made by
cheque by the Liquidators immediately prior to the closure of the
liquidation. The Liquidators, pursuant to the Transfer Agreement,
will also transfer the "B" Fund to the Depositary for the account
of E&G Fund. It is expected that the E&G Shares will be
issued to Shareholders who elect (or are deemed to elect) for the
E&G Option pro rata to their respective holdings on or around
the Effective Date.
The number of E&G Shares which a Shareholder electing for
the E&G Option will receive under the Proposals will be
calculated on the Effective Date. Further details on the
calculation of Shareholders' entitlements under the Proposals are
set out in the Circular.
Liquidation Fund and Liquidators' Retention
The Company will retain an amount which the Liquidators consider
sufficient to provide for all outstanding current and future
liabilities of the Company, contingent liabilities and the costs
incurred by, or in respect of, the Company and the Liquidators in
relation to the Proposals. The Liquidation Fund will comprise cash
and other assets, such as the Company's unquoted investments (to
the extent not realised by the date of the Second GM) and any other
investments that are not capable of being transferred to the
Depositary for the account of E&G Fund. For the purposes of the
Calculation Date the Liquidators shall deem such illiquid assets to
have a nil value. It is currently anticipated that all of the
Company's holdings (except for the unquoted investments) will be
capable of being transferred to the Depositary for the account of
E&G Fund. The Contingent Tax Asset (as described in the
Circular) and the costs associated with recovering the Contingent
Tax Asset will also be allocated to the Liquidation Fund.
It is currently estimated by the Liquidators that the amount to
be set aside as a retention to provide for unknown and
unascertained liabilities over and above the Company's known
liabilities will be GBP300,000. The Liquidators shall take all
practicable steps, as and when the Liquidators shall think fit, to
realise, through the Investment Manager, the Company's investments
(if any) in the Liquidation Fund and to the extent that the
aggregate of the proceeds from sales of any investments in the
Liquidation Fund and the amount set aside for contingencies is not
required, in due course pay the remaining balance in cash by cheque
to the holders of Shares on the Register at 6.00 p.m. on 3 August
2011 pro rata to their respective holdings of Shares, provided that
no such amount of less than GBP5.00 shall be paid to any
Shareholder but the same shall instead be paid to a charity
nominated by the Company. The Liquidators shall be entitled to make
one or more interim payments to holders of Shares pro rata to their
holdings of Shares, although it is expected that there will be only
one distribution, if any, from the Liquidation Fund immediately
prior to the closure of the liquidation.
Conditions
The Scheme is conditional on a number of conditions being
fulfilled, including the passing of the requisite Resolutions at
the Meetings. If any condition to the Scheme (as specified in the
Circular) is not satisfied, the Scheme will not be implemented and
the Company will remain in existence.
Costs of the Proposals
The total costs of the Proposals (excluding (i) the Liquidators'
retention described above and (ii) the performance fee to be paid
to the Investment Manager as described below) are not expected to
exceed GBP1.79 million (excluding VAT), equivalent to approximately
0.57 per cent. of the Company's net asset value as at the close of
business on 28 June 2011 (being the latest practicable date prior
to publication the Circular).
Overseas Shareholders
In order to ensure that there is no breach of any securities
laws applicable in any overseas jurisdictions, neither the Circular
nor any of the documents accompanying the Circular will be sent to
any Shareholder whose address in the Company's register of members
is outside the UK, the Channel Islands and the Isle of Man. Any
such Shareholder may specify an address in the UK, the Channel
Islands or the Isle of Man to which such documents (excluding the
Form of Election) may be despatched. If the Scheme becomes
effective, such Overseas Shareholders will be deemed to have
elected for the Cash Option.
The implications of the Scheme, as regards Shareholders who are
citizens, residents or nationals of jurisdictions outside the UK,
the Channel Islands and the Isle of Man, may be affected by the
laws of the relevant jurisdictions. Such Overseas Shareholders
should inform themselves about and observe any applicable legal
requirements. It is the responsibility of each Overseas Shareholder
to satisfy himself as to the full observance of the laws of the
relevant jurisdiction in connection with the Scheme, including the
obtaining of any governmental or other consents which may be
required and compliance with other necessary formalities and the
payment of any issue, transfer or other taxes due in such
jurisdiction.
Proposed Interim Dividend
The Directors propose that the Company should pay an interim
dividend of 6.9 pence per Share in respect of the year ending 30
June 2011 to Shareholders on the register at 6.00 p.m. on 29 July
2011. The dividend will be paid prior to, and is not dependent on,
the implementation of the Proposals. The Shares will go ex-dividend
on 27 July 2011. The interim dividend is scheduled to be paid on 3
August 2011.
Expected timetable
2011
----------------------------------------------------- -----------------------
Ex-dividend date for the Shares 27 July
----------------------------------------------------- -----------------------
Record date for the proposed interim dividend 6.00 p.m. on 29 July
----------------------------------------------------- -----------------------
Latest time and date for receipt of Forms 9.00 a.m. on 1 August
of Direction for the GMs and Forms of Instruction
from Savings Scheme Participants
----------------------------------------------------- -----------------------
Date from which it is advised that dealings 1 August
in Shares should only be for cash settlement
and immediate delivery of documents of title
----------------------------------------------------- -----------------------
Latest time for receipt of forms of proxy 9.00 a.m. on 3 August
for the First GM
----------------------------------------------------- -----------------------
Latest time for receipt of Forms of Election 3.00 p.m. on 3 August
----------------------------------------------------- -----------------------
Latest time for receipt of TTE instructions 3.00 p.m. on 3 August
from Shareholders holding Shares in uncertificated
form
----------------------------------------------------- -----------------------
Record Date for the purposes of Elections 6.00 p.m. on 3 August
----------------------------------------------------- -----------------------
Shares disabled in CREST* 6.00 p.m. on 3 August
----------------------------------------------------- -----------------------
Payment of the proposed interim dividend 3 August
----------------------------------------------------- -----------------------
First General Meeting 9.00 a.m. on 5 August
----------------------------------------------------- -----------------------
Latest time for receipt of forms of proxy 9.00 a.m. on 10 August
for the Second GM
----------------------------------------------------- -----------------------
Calculation Date 6.00 p.m. on 10 August
----------------------------------------------------- -----------------------
Shares Reclassified, Official List amended 8.00 a.m. on 11 August
and dealing in the Reclassified Shares commence
on the London Stock Exchange**
----------------------------------------------------- -----------------------
Dealings in Reclassified Shares on the Official 7.30 a.m. on 12 August
List suspended
----------------------------------------------------- -----------------------
Second General Meeting 9.00 a.m. on 12 August
----------------------------------------------------- -----------------------
Effective Date for implementation of Proposals 12 August
----------------------------------------------------- -----------------------
Written confirmations in respect of E&G on or as soon as
Shares despatched practicable after
12 August
----------------------------------------------------- -----------------------
Cheques despatched and CREST payments made*** week commencing 15
August
----------------------------------------------------- -----------------------
Cancellation of listing of the Reclassified on or after 12 August
Shares 2012
----------------------------------------------------- -----------------------
(* For the avoidance of doubt, the Register will remain open
until the Effective Date.)
** The Reclassified Shares are a technical requirement of the
Scheme. Shares will be reclassified if the resolution to be
proposed at the First GM is passed and becomes effective. Shares
will be reclassified according to the Elections made (or deemed to
have been made) by Shareholders.
*** Shareholders who hold their Shares in CREST are expected to
receive the payments on or as soon as is practicable after 8 August
2011 through the CREST system. There may be further payments to
Shareholders who elect (or are deemed to elect) for the Cash Option
in due course. Any further payments will be made by cheque.
(All references in this announcement to times are to London
times.)
( )
A copy of the Circular has been submitted to the National
Storage Mechanism and will shortly be available for inspection at:
www.Hemscott.com/nsm.do
Enquiries
William Simmonds
J.P. Morgan Cazenove 020 7588 2828
----------------------- --------------
( )
J.P. Morgan Cazenove, which is authorised and regulated in the
United Kingdom by the Financial Services Authority, is acting for
Electric & General Investment Trust plc and for no one else,
including any recipient of the Circular, in connection with the
Proposals and will not be responsible to anyone other than Electric
& General Investment Trust plc for providing the protections
afforded to clients of J.P. Morgan Cazenove or for providing advice
in relation to the Proposals or any other matter referred to
therein.
( )
This information is provided by RNS
The company news service from the London Stock Exchange
END
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