Establishment Inv. Trust PLC (The) Publication of Circular (7053B)

TIDMET.

RNS Number : 7053B

Establishment Inv. Trust PLC (The)

10 June 2019

10 June 2019

The Establishment Investment Trust plc (the "Company")

LEI: 213800I9IT25LOQ1UW49

Publication of Circular

Further to the announcement on 12 April 2019 in connection with the proposals for the reconstruction and voluntary winding-up of the Company (the 'Proposals'), the Board is today publishing a Circular (the "Circular") in connection with the Proposals, which includes notices convening the required general meetings.

Introduction

The continuation of the Company is subject to a resolution to be put to Shareholders at the Annual General Meeting to be held on 10 July 2019.

While the Company has returned 7.4 per cent. per annum in Net Asset Value total returns from listing in 2002 to 31 March 2019, the small size of the Company, perennial and persistent discount, besides the increasing regulatory and governance obligations and increased costs, all present mounting and significant challenges. The Board therefore considers that the Company continuing in its current form is not an attractive option for Shareholders.

Therefore, the Board strongly recommends that shareholders vote against the continuation resolution. The Proposals described in this announcement are conditional on the continuation resolution not being passed.

The Proposals

Under the Proposals, the Company will be wound up on the Winding-up Date by means of a members' voluntary liquidation pursuant to a scheme of reconstruction under section 110 of the Insolvency Act 1986 and Shareholders may elect:

   --      to receive ordinary shares in Henderson International Income Trust plc ('HINT') 

-- and/or class R sterling net income shares in Garraway Asian Centric Global Growth Fund ('Garraway Asian Centric')

   --      and/or cash in respect of all or part of their holding of Ordinary Shares in the Company. 

Shareholders who elect to roll over their investment into one or both of the Rollover Funds will receive HINT Ordinary Shares and/or Garraway Net Income Shares (as applicable) and, in consideration of such issue, the Company will transfer a portion of its net assets to each of HINT and Garraway ICVC (for the benefit of Garraway Asian Centric). In this way, it is envisaged that UK resident Shareholders will be given a tax-efficient rollover of their entitlements.

The number of HINT Ordinary Shares to be issued will be calculated by reference to the net asset value of the HINT Ordinary Shares (including current year income) as at the Calculation Date taking into account the HINT Manager Contribution.

The Garraway Net Income Shares will be issued at GBP1.00 per share (which shall be the net asset value per share immediately following the issue of such shares).

Shareholders' approval is required to implement parts of the Proposals which will involve the reclassification of the Company's existing Ordinary Shares to give effect to the respective options that each Shareholder has elected for, the voluntary winding-up of the Company and the appointment of the Liquidators. The Proposals are also subject to the approval of shareholders of HINT and to the Continuation Vote being rejected at the Company's forthcoming Annual General Meeting.

In order to consider and approve the Proposals, general meetings have been convened for 10 July 2019 (the "First General Meeting") and 18 July 2019 (the "Second General Meeting").

Benefits of the Proposals

The Directors consider that the Proposals make available to all Shareholders some or all of the following benefits, depending on Shareholders' choices, as compared to their current position, or under a liquidation:

(i) they enable Shareholders to roll over some or all of their investments into HINT, a global income investment trust, with a consistent track record of delivering dividend growth which may be attractive to Shareholders in the current market environment as well as seeking to provide capital appreciation and which is managed by an experienced team of investment professionals;

(ii) they enable Shareholders to roll over some or all of their investments into Garraway Asian Centric, a sub-fund of Garraway ICVC, which aims to provide shareholders with capital growth and income over the longer term and which is managed by an experienced team with a consistent track record (and which will include Henry Thornton, one of the current members of the Company's management team);

(iii) Shareholders will not suffer the full dealing costs that would be incurred on the realisation of the Company's portfolio in the event of a simple winding-up;

(iv) Shareholders who may be subject to UK capital gains tax or corporation tax on chargeable gains should be able to roll over their investment into HINT and/or Garraway Asian Centric and thereby continue to receive investment returns without triggering an immediate liability to UK capital gains tax or corporation tax on chargeable gains;

(v) the use of HINT as a rollover vehicle will enable Shareholders to avoid dealing and other costs associated with a purchase of HINT Ordinary Shares in the secondary market;

(vi) Shareholders who elect for the HINT Option may benefit from the HINT Manager Contribution, of which any amount in excess of HINT's costs in connection with the Proposals will be allocated to the HINT Rollover Pool;

(vii) Garraway ICVC is an open-ended investment vehicle and Garraway Net Income Shares can be redeemed on any business day in England and Wales on which the London Stock Exchange is open for trading. Shareholders who elect for the Garraway Option will therefore be able to redeem their investment on request (subject to the terms of the Garraway Prospectus) and without the price potentially being subject to a discount to net asset value;

(viii) Shareholders who elect for the Garraway Option will not be required to cover Garraway Asian Centric's costs in connection with the Proposals as these will be met by the Garraway Investment Adviser; and

(ix) Shareholders who elect for the Cash Option in respect of some or all of their investments will be able to receive cash in the liquidation of the Company. Shareholders should note that, depending on their particular circumstances, this may trigger a chargeable gains tax liability.

Conditions to the Scheme

The Scheme is conditional, among other things, upon:

   (i)               the Continuation Vote not being passed at the Annual General Meeting; 

(ii) the passing of all Resolutions to be proposed at (a) the First General Meeting and (b) the Second General Meeting (or at any adjournments thereof) and upon any conditions of such Resolutions being fulfilled;

   (iii)             the passing of the HINT Resolution; 

(iv) the FCA agreeing to amend the listing of the Ordinary Shares to reflect their reclassification as Reclassified Shares for the purpose of implementing the Scheme;

(v) the FCA having agreed to admit the HINT Ordinary Shares to be issued to Shareholders pursuant to the Scheme to listing on the premium segment of the Official List and the London Stock Exchange having agreed to admit such shares to trading on the premium segment of the London Stock Exchange's main market; and

    (vi)            the Directors resolving to proceed with the Scheme. 

In the event that condition (i) fails, both General Meetings will be adjourned indefinitely and the Scheme will not become effective. In the event that any of conditions (ii)(a), (iii), (iv), or (v) fails, the Second GM will be adjourned indefinitely and the Scheme will lapse.

Henderson International Income Trust plc

HINT is a closed-ended investment company incorporated in England and Wales on 2 March 2011 with an investment objective of providing a growing total annual dividend, as well as capital appreciation, from a focused and internationally diversified portfolio of securities outside the UK. Ben Lofthouse is the fund manager responsible for the management of the Company's portfolio and he is supported by the wider Janus Henderson Global Equity Income team. HINT carries on business as an investment trust within the meaning of Chapter 4 of Part 24 of the Corporation Tax Act 2010.

As at the Latest Practicable Date, HINT had unaudited net assets of GBP287.4 million, the net asset value (cum income) per HINT Ordinary Share (unaudited) was 160.3 pence and its market capitalisation was GBP286.0 million.

The following table sets out HINT's cumulative performance (including income) from launch to 30 April 2019:

 
                           Since launch(*)   5y     3y     1y 
 Performance over           (%)               (%)    (%)    (%) 
------------------------  ----------------  -----  -----  ----- 
 Share price (total 
  return)                  112.5             73.1   52.0   6.6 
 Net Asset Value (total 
  return)                  119.0             67.7   43.3   5.2 
 

* The Company launched on 28 April 2011

Source: Morningstar

The HINT Ordinary Shares traded at an average premium to the prevailing cum income net asset value of 0.6 per cent. over the 12 months to the Latest Practicable Date compared to an average discount for the AIC Global Equity Income sector of 0.4 per cent.

VT Garraway Asian Centric Global Growth Fund

Garraway Asian Centric is a new open-ended investment fund which aims to provide shareholders with capital growth and income over the longer term by investing in a diversified global portfolio of equities, combining both developed and emerging markets exposure, and the flexibility to invest in government bonds and precious metal ETFs. The fund management team will comprise Malcolm Schembri, Tim Hall, Darran Goodwin and Henry Thornton. Henry is presently at Blackfriars Asset Management Limited, the Company's outgoing investment manager and will be joining Garraway Capital Management LLP as a fund manager, responsible for Asian equities.

Garraway Asian Centric is a sub-fund of VT Garraway Investment Funds ICVC. VT Garraway Investment Funds ICVC is an open-ended investment company with variable capital incorporated in England and authorised by the Financial Conduct Authority as an undertaking for collective investment in transferable securities (UCITS) with effect from 26 March 2012. Garraway Asian Centric was itself authorised as a sub-fund of VT Garraway Investment Funds ICVC on 31 May 2019.

The Garraway Net Income Shares will not be admitted to listing and/or to trading by any authority or stock exchange.

Interim Dividends

The Directors have declared a second interim dividend of 1.75 pence per Ordinary Share in respect of the financial year ended 31 March 2019. In relation to the period from 1 April 2019 to 31 May 2019, the Directors have also declared an interim dividend of 1.25 pence per Ordinary Share, in order to ensure the Company meets the distribution requirements to maintain investment trust status during the period from 1 April 2019 to the Winding-up Date. Both dividends will be paid on 4 July 2019 to Shareholders who are on the Register as at close of business on 14 June 2019. The ex-dividend date for both dividends is 13 June 2019.

It is not anticipated that there will be further dividends paid in relation to the year ending 31 March 2019 or for the period up to the liquidation of the Company.

Costs of proposals

The costs payable by the Company in connection with the implementation of the Proposals are expected to be approximately GBP400,000 (including VAT, where applicable). These costs have not been accrued in the Company's net assets as at close of business on the Latest Practicable Date, but will be accrued in the Company NAV on the Calculation Date.

Expected Timetable

 
                                                                                                                  2019 
Ex dividend date for the Interim Dividends                                                                     13 June 
Record date for the Interim Dividends                                                     close of business on 14 June 
Payment of the Interim Dividends                                                                                4 July 
Latest time and date for receipt of Forms of Proxy from                                           12.05 p.m. on 8 July 
Shareholders for First General Meeting 
Latest time and date for receipt of the Forms of Election                                          1.00 p.m. on 8 July 
and/or TTE Instructions from Shareholders 
 
Record Date for entitlement to the Scheme                                                  close of business on 8 July 
Annual General Meeting                                                                           12.00 noon on 10 July 
First General Meeting                                                                         12.05 p.m.(1) on 10 July 
Calculation Date                                                                                 11.59 p.m. on 12 July 
Latest time for receipt of Forms of Proxy from                                                   10.00 a.m. on 16 July 
Shareholders for Second General Meeting 
Ordinary Shares disabled in CREST                                                         close of business on 16 July 
Reclassification of the Ordinary Shares                                                           8.00 a.m. on 17 July 
Publication of Residual Net Asset Value per Share and HINT                                                     17 July 
FAV per Share 
Suspension of dealings in Reclassified Shares                                                     7.00 a.m. on 18 July 
Second General Meeting                                                                           10.00 a.m. on 18 July 
Effective Date and Transfer Agreements executed and                                                            18 July 
implemented 
CREST accounts credited with new HINT Ordinary Shares                                                          19 July 
Admission of HINT Ordinary Shares issued under the Scheme                                         8.00 a.m. on 19 July 
and dealings in HINT Ordinary Shares 
commence 
Garraway Net Income Shares issued pursuant to the Scheme                                          9.00 a.m. on 19 July 
and first day of dealings in Garraway 
Net Income Shares 
Cheques expected to be despatched and CREST payments made                                      week commencing 22 July 
to Shareholders in respect of the 
Cash Option 
Contract notes expected to be despatched in respect of                                         week commencing 22 July 
Garraway Net Income Shares issued pursuant 
to the Scheme 
Certificates expected to be despatched in respect of HINT                                      week commencing 22 July 
Ordinary Shares issued pursuant 
to the Scheme 
Cancellation of listing of Reclassified Shares                         as soon as practicable after the Effective Date 
 

[1] Or as soon thereafter as the immediately preceding Annual General Meeting shall have been concluded or adjourned

The times and dates set out in the expected timetable of events above and mentioned may be adjusted by the Company, in which event details of the new times and dates will be notified, as requested, to the Financial Conduct Authority, the London Stock Exchange and, where appropriate, Shareholders.

All references to time are to UK time.

Defined terms used in this announcement have the meanings given in the Circular unless the context otherwise requires.

Enquiries:

   Henry Willcocks / Robert Finlay                                                020 7601 6100 

Shore Capital

Broker

Anthony Lee

   PraxisIFM Fund Services (UK) Limited                                      020 7653 9690 

Company Secretary

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June 10, 2019 09:00 ET (13:00 GMT)