TIDMIIT
RNS Number : 0479C
Independent Investment Trust PLC
06 October 2022
PuPTHIS ANNOUNCEMENT AND THE INFORMATION CONTAINED IN IT ARE NOT
FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY,
IN WHOLE OR IN PART, IN OR INTO, THE UNITED STATES, AUSTRALIA,
CANADA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR ANY JURISDICTION
FOR WHICH THE SAME COULD BE UNLAWFUL.
This announcement is not an offer to sell, or a solicitation of
an offer to acquire, securities in the United States or in any
other jurisdiction in which the same would be unlawful. Neither
this announcement nor any part of it shall form the basis of or be
relied on in connection with or act as an inducement to enter into
any contract or commitment whatsoever.
The Independent Investment Trust plc (the "Company")
Publication of a circular in relation to the recommended
proposals for the members' voluntary winding up of the Company and
combination with The Monks Investment Trust PLC
Introduction
The Board announced on 9 August 2022 that it has agreed the
heads of terms for a combination of the assets of the Company with
The Monks Investment Trust PLC ("Monks" or "MNKS") by means of a
scheme of reconstruction and members' voluntary winding up of the
Company under section 110 of the Insolvency Act (the "Scheme") and
the issue of New MNKS Shares to Shareholders who elect, or are
deemed to have elected, to roll over their investment into Monks
(the "Proposals").
The Company has today published a circular to Shareholders in
connection with the Proposals (the "Circular").
Defined terms used in this announcement have the meanings given
to them in the Circular.
The Proposals, which are conditional upon, amongst other things,
the approval of Shareholders at the General Meetings and the
approval of MNKS Shareholders to the issue of the New MNKS Shares,
comprise a members' voluntary liquidation and a scheme of
reconstruction of the Company under which Shareholders will be
entitled to elect to receive in respect of some or all of their
Shares:
(a) New MNKS Shares (the "Rollover Option"); and/or
(b) cash (subject to the application of a discount of 2 per
cent. to the Residual Net Asset Value per Share) (the "Cash
Option").
The default option under the Scheme is for Shareholders to
receive New MNKS Shares meaning that Shareholders who, in respect
of all or part of their holding of Shares, do not make a valid
election or who do not make an election at all under the Scheme
will be deemed to have elected for New MNKS Shares in respect of
such holding.
Shareholders can make different Elections in respect of
different parts of their holdings. There is no limit on the amount
of Shares which may be elected for the Cash Option. However,
Overseas Shareholders should ensure they have read paragraph 15 of
Part 4 of the Circular.
The Board considers the Proposals to be in the best interests of
Shareholders as a whole and recommends that Shareholders vote in
favour of the Resolutions required to implement the Proposals at
the General Meetings.
Background to and rationale for the Proposals
As announced in August 2022, Max Ward, the Company's Managing
Director and full-time portfolio manager, has informed the Board of
his intention to retire. Given the impact which Mr Ward's
retirement will have on the Company, the Board has carefully
considered the various options available to the Company and has
decided that a combination with Monks offers the greatest benefits
to Shareholders.
The Board agreed, in principle, the heads of terms for a
combination of the assets of the Company with Monks by means of the
Scheme. Monks is managed by the Global Alpha team at Baillie
Gifford & Co ("Baillie Gifford").
The Global Alpha team within Baillie Gifford, which took over
the management of Monks in 2015, has a strong long-term track
record, and the wide diversification of the Monk's portfolio, which
is beyond the resources of the Company, is a feature which the
Board considers attractive against an uncertain geopolitical
background which may prove persistent. The scale of Monks, with a
market capitalisation of GBP 2.08 billion at 29 September 2022 and
no dominant shareholders, allows for a liquid market in MNKS
Shares.
The MNKS Board currently comprises five directors, all of whom
are non-executive. It has been agreed that none of the Directors
will be joining the MNKS Board as part of the Scheme. Accordingly,
the MNKS Board will continue to consist of the five incumbent MNKS
Directors upon completion of the Scheme.
Benefits of the Proposals
The Board believes that the Proposals will have the following
benefits for Shareholders:
-- Ability to stay invested in a tax efficient manner : As part
of the Scheme, Shareholders will have the option of a rollover into
Monks which should not (depending on a Shareholder's personal
circumstances) trigger a capital gains tax liability.
-- Opportunity for full cash realisation : An unlimited cash
exit option will give Shareholders the option to realise all or
part of their holding at a level near to liquidation value, should
they so wish.
-- Continuity of investment proposition : Shareholders will be
able to maintain exposure to similar investment objectives but with
a more diversified portfolio.
-- Baillie Gifford cost contribution : Baillie Gifford has
agreed to make a cost contribution by way of a six month fee
reduction based on the quantum of assets acquired by Monks. This
will be for the benefit of all shareholders of the enlarged
Monks.
-- Increase in scale : An enlarged Monks will allow fixed costs
to be spread over a larger cost base, alongside potentially
improving liquidity and aiding marketing.
The Proposals are also expected to result in an uplift in the
valuation of Shareholders' investments due to the narrower discount
to net asset value at which the MNKS Shares have historically
traded compared with the Shares prior to the announcement of the
Proposals. Over the 12 months ended 3 October 2022, the Company's
Shares and MNKS Shares traded at average discounts to cum-income
net asset value of 12.92 per cent. and 5.39 per cent. respectively.
The Board believes this provides an attractive look-through value
for Shareholders
Summary information on Monks
Monks is a UK based investment trust whose investment objective
is to invest across the globe to achieve capital growth, which
takes priority over income and dividends.
Monks' investment objective is pursued through applying a
patient approach to investment, principally from a differentiated,
actively managed global equity portfolio containing a diversified
range of growth stocks - companies with above average earnings
growth potential - which Monks expects to hold for around five
years on average. Monks is not bound to make investments in
circumscribed locations or markets and should not be viewed as a
proxy for an index. The Monks portfolio, which includes stocks with
a range of different growth profiles, will typically contain in
excess of 100 stocks from around the world. As at 29 September
2022, Monks had total assets of GBP2.53 billion.
The Proposals, if implemented, are anticipated to result in
gross assets of Monks of approximately GBP2.64 billion (based on
the respective gross asset values of each of the Company and Monks
as at 29 September 2022 and assuming 50 per cent. of the Company's
current issued Share capital is elected for the Cash Option).
Monks' alternative investment fund manager for the purposes of
the UK AIFMD Laws is Baillie Gifford & Co Limited ("BGL"),
which has delegated the day-to-day management of the portfolio to
Baillie Gifford. Baillie Gifford is an independent fund management
group which has, in aggregate, approximately GBP231 billion of
funds under management or advice (as at 30 June 2022). Following
completion of the Scheme, it is intended that the Monks portfolio
will continue to be managed on the same basis as it is currently.
In particular, the Monks investment objective and investment policy
will not be amended in connection with the Scheme and the Monks
portfolio will continue to be managed by Spencer Adair, supported
by Malcolm MacColl and Baillie Gifford's Global Alpha team.
Further details on Monks, including details of its performance
track record, are set out in Part 2 of the Circular and in the
accompanying MNKS Prospectus.
Summary of the Scheme mechanics
Entitlements under the Scheme
Under the Scheme, each Shareholder on the Register on the Record
Date (other than a Sanctions Restricted Person and certain Overseas
Shareholders) may elect to receive:
-- such number of New MNKS Shares as have a value (at the MNKS
FAV per Share) equal to the proportion of the Rollover Pool
attributable to the number of Shares so elected, being the Rollover
Option; and/or
-- an amount of cash equal to the Cash NAV per Share
attributable to the number of Shares so elected, being the Cash
Option.
The default option under the Scheme is for Shareholders to
receive New MNKS Shares meaning that Shareholders who, in respect
of all or part of their holding of Shares, do not make a valid
election or who do not make an election at all under the Scheme
will be deemed to have elected for New MNKS Shares in respect of
such holding.
Shareholders can make different Elections in respect of
different parts of their holdings.
Overseas Shareholders should ensure they have read paragraph 15
of Part 4 of the Circular.
After allocating cash and other assets to the Liquidation Pool
to meet all known and unknown liabilities of the Company and other
contingencies there shall be appropriated to the Cash Pool and the
Rollover Pool the remaining assets of the Company in the manner
described in detail in paragraph 3.2 of Part 4 of the Circular.
Such appropriation includes the application of a discount of 2 per
cent. to the Residual Net Asset Value attributable to Shares which
are elected to receive cash (the "Cash Option Discount"). The value
arising from the application of the Cash Option Discount shall be
allocated to the Rollover Pool for the benefit of Shareholders
electing, or who are deemed to have elected, for the Rollover
Option.
The issue of New MNKS Shares under the Scheme will be effected
on a formula asset value ("FAV") for formula asset value basis as
at the Calculation Date as described in detail in Part 4 of the
Circular. The Calculation Date for determining the value of the
Rollover Pool under the Scheme is expected to be market close on 2
November 2022. The Record Date for the basis of determining
Shareholders' entitlements under the Scheme is 6.00 p.m. on 31
October 2022.
Illustrative entitlements
For illustrative purposes only, had the Calculation Date been
market close on 29 September 2022 and assuming that no Shareholders
exercise their right to dissent from participation in the Scheme,
after deduction of the pre-liquidation interim dividend of 9.0
pence per Share and assuming 50 per cent. of the Company's current
issued Share capital is elected for the Cash Option, the Cash NAV
per Share would have been 423.838260 pence and the IIT FAV per
Share would have been 441.137783 pence. The Cash NAV per Share and
the IIT FAV per Share may be compared with the Company's share
price and cum-income NAV per Share as at 29 September 2022 which,
when adjusted on a pro forma basis for the deduction of the
pre-liquidation interim dividend of 9.0 pence per Share, were
418.50 pence and 434.34 pence respectively.
The MNKS FAV per Share would have been 1,077.983705 pence which,
for the Rollover Option, would have produced a conversion ratio of
0.409225 and, in aggregate, 10,620,790 New MNKS Shares would have
been issued to Rollover Shareholders under the Scheme, representing
approximately 4.62 per cent. of the issued ordinary share capital
of the enlarged Monks immediately following completion of the
Scheme. Monks, as enlarged, would also then have paid listing fees
in relation to the listing of the New MNKS Shares and SDRT on the
acquisition of the Rollover Pool equal to 0.19 pence per MNKS
Share, which would have resulted in a cum-income NAV per MNKS Share
of 1,077.80 pence.
Elections for the Cash Option
There is no limit on the amount of Shares which may be elected
for the Cash Option. Shareholders are entitled to elect for the
Cash Option in respect of their entire holdings of Shares. The Cash
Option Discount of 2 per cent. to the Residual Net Asset Value
attributable to Shares which are elected to receive cash will be
applied.
It is expected that the Liquidators shall distribute Cash
Entitlements (rounded down to the nearest penny) by 12 November
2022.
Costs of implementing the Scheme
The Company and Monks have each agreed to bear their own costs
in relation to the Scheme. The costs of the Scheme payable by the
Company are expected to be approximately GBP850,000 inclusive of
VAT which, for the purposes of this calculation, is assumed to be
irrecoverable, where applicable. This estimate of costs excludes
the Liquidators' retention to cover unknown liabilities (estimated
at GBP100,000), and does not take account of any dealing costs
which will be incurred by the Company in disposing of assets in
order to meet Elections made and in realigning the portfolio in
respect of the Rollover Pool to be established pursuant to the
Scheme, prior to the Effective Date.
The fixed costs of the Proposals payable by Monks are expected
to be approximately GBP600,000 inclusive of VAT which, for the
purposes of this calculation, is assumed to be irrecoverable, where
applicable. In addition, Monks will also incur listing fees in
respect of the listing of the New Shares and SDRT based on the
value and constitution of the Rollover Pool.
In the event that either Shareholders or MNKS Shareholders
resolve not to proceed to implement the Scheme on the terms
described in the Circular (including if either Shareholders or MNKS
Shareholders do not approve any resolution required to implement
the Scheme) then either the Company or Monks (whichever company
resolves not to proceed to implement the Scheme) will bear the
reasonable costs of both parties in connection with the Proposals,
save to the extent that the other party's reasonable costs exceed
GBP125,000 (exclusive of VAT).
In the event that both of the parties resolve not to proceed to
implement the Scheme on the terms described in the Circular
(including if both Shareholders and MNKS Shareholders do not
approve any resolutions required to implement the Scheme) then each
party will bear its own costs.
BGL has agreed to reduce the management fee payable by Monks in
respect of the net assets transferred to Monks under the Scheme for
the first 182 days following the completion of the Scheme. The
financial value of this amount (which is estimated at approximately
GBP171,000 based on the Company's NAV as at 3 October 2022 and
assuming that no Shareholders exercise their right to dissent from
participation in the Scheme and 50 per cent. of the Company's
current issued Share capital is elected for the Cash Option) shall
be for the benefit of the shareholders of the enlarged Monks,
including those Shareholders who elect, or are deemed to have
elected, for the Rollover Option. For the avoidance of doubt, this
amount shall not be taken into account in the calculation of either
the IIT FAV per Share or the MNKS FAV per Share.
Conditions of the Proposals
Implementation of the Proposals is subject to a number of
conditions, including:
-- the passing of the Resolutions to be proposed at the First
General Meeting and the Resolution to be proposed at the Second
General Meeting (or any adjournment of those General Meetings), and
any conditions of such Resolutions being fulfilled;
-- the MNKS Resolutions being passed and becoming unconditional in all respects;
-- the approval of the Financial Conduct Authority and the
London Stock Exchange of the Admission of the New MNKS Shares to
the Official List and to trading on the Main Market, respectively;
and
-- the Directors and MNKS Directors resolving to proceed with the Scheme.
If any condition is not satisfied, the Proposals will not become
effective, the Company will not proceed with the members' voluntary
winding up and instead will continue in existence and will continue
to be managed under the current investment policy. In such
circumstances the Directors would reassess the options available to
the Company at that time.
Dividend
The Board has announced a pre-liquidation interim dividend of
9.0 pence per Share which, subject to the Resolution to be proposed
at the First General Meeting being passed, will be paid to
Shareholders prior to the Effective Date. The ex-dividend date for
the pre-liquidation interim dividend is 13 October 2022, with the
record date being 14 October 2022.
Shareholders receiving New MNKS Shares under the Scheme will
rank fully for all dividends declared by Monks with a record date
falling after the date of the issue of those New MNKS Shares to
them.
General Meetings
The Proposals are conditional, inter alia, upon Shareholders'
approval of the Resolutions to be proposed at the First General
Meeting and the Second General Meeting. The First General Meeting
will be held on 31 October 2022 at 9.30 a.m. and the Second General
Meeting will be held on 8 November 2022 at 9.30 a.m. Both General
Meetings will be held at the offices of Baillie Gifford & Co,
Calton Square, 1 Greenside Row, Edinburgh EH1 3AN.
Further details of the Resolutions to be proposed at the General
Meetings are set out in the Circular.
Recommendation
The Board, which has received financial advice from JPMC,
considers the Proposals and the Resolutions to be proposed at the
General Meetings to be in the best interests of Shareholders as a
whole. In providing advice to the Board, JPMC has relied on the
Board's commercial assessment of the Proposals.
Accordingly, the Board unanimously recommends that Shareholders
vote in favour of the Resolutions to be proposed at the General
Meetings, as the Directors intend to do in respect of their own
beneficial holdings, which in aggregate amount to 12,626,500
Shares, representing approximately 24.3 per cent. of the Company's
issued share capital (excluding Shares held in treasury) as at 3
October 2022. The Directors intend to roll over their entire
beneficial holdings of Shares into New MNKS Shares.
Expected timetable
2022
Ex-dividend date for the pre-liquidation 13 October
interim dividend to Shareholders
Record date for the pre-liquidation interim 14 October
dividend to Shareholders
Latest time and date for receipt of Forms 9.30 a.m. on 27 October
of Proxy for the First General Meeting
Latest time and date for receipt of the Forms 1.00 p.m. on 27 October
of Election and/or TTE Instructions
Record Date for Cash Entitlements under the 6.00 p.m. on 31 October
Scheme
Shares disabled in CREST 6.00 p.m. on 31 October
First General Meeting 9.30 a.m. on 31 October
Calculation Date market close on 2
November
Payment date for pre-liquidation interim 4 November
dividend
Latest time and date for receipt of Forms 9.30 a.m. on 4 November
of Proxy for Second General Meeting
Reclassification of the Shares (and commencement 8.00 a.m. on 7 November
of dealings in Reclassified Shares)
Suspension of listing of Reclassified Shares 7.30 a.m. on 8 November
and Company's Register closes
Second General Meeting 9.30 a.m. on 8 November
Effective Date for implementation of the 8 November
Scheme
Announcement of the results of Elections, 8 November
the IIT FAV per Share, the Cash NAV per Share
and the MNKS FAV per Share
CREST accounts credited with, and dealings 8.00 a.m. on 9 November
commence in, New MNKS Shares
Share certificates in respect of New MNKS by 12 November
Shares despatched (or as soon as practicable
thereafter)
Cheques despatched to Shareholders who elect by 12 November
for the Cash Option in accordance with their
Cash Entitlements and CREST accounts credited
with cash
Cancellation of listing of Reclassified Shares as soon as practicable
after the Effective
Date
Note : All references to time in this document are to UK time.
Each of the times and dates in the above expected timetable
(other than in relation to the General Meetings) may be extended
or brought forward. If any of the above times and/or dates change,
the revised time(s) and/or date(s) will be notified to Shareholders
by an announcement through a Regulatory Information Service.
This announcement does not contain all the information which is
contained in the Circular and Shareholders should read the Circular
in conjunction with the MNKS Prospectus and the MNKS KID before
deciding what action to take in respect of the Proposals.
A copy of the Circular has been submitted to the Financial
Conduct Authority and will be available for inspection at the
National Storage Mechanism which is located at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism and on the
Company's website at www.independentinvestmenttrust.co.uk .
Enquiries:
Independent Investment Trust +44 (0) 131 558
plc 9434
Douglas McDougall
+44 (0) 207 742
J.P. Morgan Cazenove 4000
William Simmonds
Rupert Budge
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