CAS.L Regulatory News (CAS)

27 May 2005 14:44

Collective Assets Trust PLC27 May 2005 To: RNS From: Collective Assets Trust plc Date: 27 May 2005 Collective Assets Trust plc ("CAT" or the "Company") Recommended proposals for the amalgamation of CATwith Personal Assets Trust plc The Board of CAT today announces that it has issued a circular to Shareholders(the Circular) in which it notes that, despite CAT's success, the Board hasconcluded that the Company should no longer continue in being, for the reasonslisted below. Therefore, the Board has decided to give Shareholders theopportunity to roll their investment into Personal Assets Trust plc, aninvestment trust with which many Shareholders will already be familiar, or torealise their investment in the Company for cash (the Proposals). At 25 May 2005(the latest practicable date prior to the publication of this document), £4.2million (or 30.0 per cent.) of CAT's assets were represented by its investmentin PAT. These Proposals are being brought forward for the following principal reasons: • the Listing Rules have, from 1 April 2005, prohibited a listed investment company from having a board in which the majority of directors are also directors of another investment company which is managed by the same manager. PAT has, in Ian Rushbrook, the same managing director as CAT and each of the directors of CAT (with the exception of CAT's chairman) is also a director of PAT. The amended Listing Rules would therefore necessitate a significant change in the composition of CAT's Board of Directors and/or in the Board of Directors of PAT if Ian Rushbrook were to remain as managing director of both PAT and CAT; • those directors of CAT who are also directors of PAT receive only a small incremental directors' fee for their services to CAT and therefore any change in the composition of CAT's Board would be likely to lead to a substantial increase in directors' fees payable by CAT; • when CAT was launched, the Board envisaged that it would seek to increase its assets in part by participating in reconstructions of other investment companies and investment trusts. As CAT Shares have usually traded at a premium to net assets, CAT would have been well placed to participate in such reconstructions without the problem faced by many investment trusts of having to offer, at net asset value, shares which could be purchased in the market at a discount. However, as a result of CAT's relatively small size, its participation in reconstructions would inevitably have involved the publication of listing particulars or even re-applying for its listing in the event that CAT was considered to have effected a reverse takeover. In part owing to the costs which that would entail, but also owing to a lack of suitable reconstruction opportunities, CAT has not been able to achieve significant growth by acquisition. THE PROPOSALS The Board has concluded that it is in the interests of Shareholders as a wholeto propose a scheme of reconstruction comprising a members' voluntary winding upof the Company under section 110 of the Insolvency Act 1986 and the Company'sarticles of association, with options for Shareholders to elect: • to roll over their investment in a tax efficient manner into PAT on a NAV for NAV basis (the PAT Option); or • to realise their investment in the Company for cash at NAV (the Cash Option). The Board considers that it is important to offer an unrestricted Cash Option atNAV as part of the Proposals as this is consistent with its policy of ensuringthat CAT's shares always trade at close to net asset value. Shareholders (other than Overseas Shareholders and Shareholders who would beentitled to less than one PAT Share) who do not make a valid election for thepurposes of the Proposals will be deemed to have made an election for the PATOption. Overseas Shareholders and Shareholders who would be entitled to lessthan one PAT Share will be deemed to have made an election for the Cash Option. INFORMATION ABOUT PAT AND THE PAT OPTION PAT is an existing self-managed investment trust in the AITC's Global Growthsector. PAT's managing director is Ian Rushbrook. As at 30 April 2005, PAT had amarket capitalisation of £152 million and a yield, based on the current rate ofdividend payment, of 1.6 per cent. PAT is managed specifically for privateinvestors. It has a capital structure consisting only of ordinary shares and hasno investment specialisation or policy restrictions. Its investment policy issimply to protect and increase the value of shareholders' funds over the longterm and to achieve as high a total return as possible at a risk notsignificantly greater than that of investing in its benchmark index, the FTSEAll-Share. Since PAT became self-managed in July 1990, it has continued with the sameinvestment management personnel, investment process and board relationships thathave enabled it not only to achieve considerable investment success but also toexpand significantly in size through the development of its zero chargeinvestment plans for shareholders. The policy of the Board of PAT is to ensure that PAT's shares always trade atclose to net asset value through the active issuing or buying in of shares. Thesuccess of this policy has been such that, from 1995 to 30 April 2005, thewidest discount on which PAT Shares traded was 3.3 per cent. and over the periodas a whole the average premium of PAT's share price to net asset value was 3.1per cent. compared to an average discount of 9.0 per cent. for the UK InvestmentTrusts Total Market Index. The entitlement of a Shareholder who elects for the PAT Option shall becalculated as follows. The NAV of a CAT Share will be divided by the price atwhich the New PAT Shares are to be issued under the Scheme (being the net assetvalue of a PAT Share as at the Calculation Date) to give the ratio at which a CAT Share rollsover into a New PAT Share. In determining this ratio, no account shall be takenof the costs of the Proposals as all these costs will ultimately be borne by IanRushbrook. The New PAT Shares will rank pari passu with the existing PAT Shares. ADVANTAGES OF THE PROPOSALS The Directors believe that the Proposals have no disadvantages and offerShareholders some benefits: • the total expense ratio (TER) of PAT for its last completed financial year was 1.13 per cent., which is significantly lower than the TER of CAT for its last completed financial year of 1.47 per cent. The Directors expect that the TER of CAT would increase following a change to the composition of its Board as this would result in significantly higher directors' fees; • the bid-to-offer spread on a PAT Share has generally been narrower than the bid-to-offer spread on a CAT Share; and • the amalgamation of CAT with PAT will eliminate investor confusion between the two companies. COSTS AND EXPENSES PAT has agreed to assume the liability for all of the costs and expenses of theProposals, subject to the Scheme becoming effective. The Proposals willtherefore not result in any reduction in shareholder value. PAT has agreed withIan Rushbrook, its managing director, that, in the event that the Scheme becomeseffective, the salary which he receives from PAT will be reduced by an amountequal to the costs and expenses of the Proposals (including irrecoverable VAT)such that the costs and expenses of the Proposals will ultimately be borneentirely by Ian Rushbrook. Ian Rushbrook has agreed with CAT that in the event that the Scheme does notbecome effective then the salary which he receives from CAT will be reduced suchthat Ian Rushbrook will ultimately bear the entire costs and expenses of theProposals. CASH OPTION Shareholders who elect for the Cash Option or who are Overseas Shareholders orwho would be entitled to less than one PAT Share will receive an amount in cashequivalent to their entitlement under the Scheme. This amount will be the netasset value of a CAT Share (without taking account of the costs of theProposals, as the costs and expenses of the Proposals will not ultimately beborne by CAT) multiplied by the number of CAT Shares held. Cheques in respect of the cash amount due to Shareholders who elect for the CashOption are expected to be dispatched to them in the week beginning 4 July 2005or as soon as practicable thereafter. DEFAULT PROVISIONS Shareholders (other than Overseas Shareholders and Shareholders who would beentitled to less than one PAT Share) who do not make a valid election for thepurposes of the Proposals will be deemed to have made an election for the PATOption. Overseas Shareholders and Shareholders who would be entitled to lessthan one PAT Share will be deemed to have made an election for the Cash Option. FINAL INTERIM DIVIDEND In order to ensure that the Company continues to comply with the provisions ofsection 842 of the Income and Corporation Taxes Act 1988, the Board intends thatthe Company shall pay a final interim dividend on 27 June 2005 to Shareholderson the register on 17 June 2005. Based on current estimates of costs andrevenues for this financial year, the interim dividend is expected to be 1.75pper share. This is not a profit forecast. This interim dividend will not be paidif the resolution to be proposed at the First EGM is not passed by the requisitemajority. CAT'S SHAREHOLDING IN PAT As at the date of this document, CAT holds 18,100 PAT Shares. Since these shareswould be unable to be transferred to PAT under the Scheme, the Board ofDirectors of PAT has agreed that PAT will buy back these shares prior to theCalculation Date. EXTRAORDINARY GENERAL MEETINGS The Proposals are conditional on the passing by Shareholders of the specialresolutions at the first and second extraordinary general meetings or anyadjournments thereof (the First EGM and the Second EGM respectively) and allconditions to such resolutions and the Scheme being fulfilled. The First EGM will be held at 12 noon on Wednesday, 22 June 2005. At the FirstEGM, a special resolution will be proposed to sanction the Scheme and to amendthe Articles for the purpose of implementing the Scheme. The Second EGM will be held at 12 noon on Wednesday, 29 June 2005. At the SecondEGM, a special resolution will be proposed to approve the winding up of theCompany and to appoint the liquidators and an extraordinary resolution will beproposed to confer appropriate powers on them. Both EGMs will be held at the Edinburgh offices of F&C Asset Management plc, 80George Street, Edinburgh EH2 3BU. DEFINITIONS "Board" the board of directors of CAT"Calculation Date" the date (to be determined by the directors of CAT but expected to be Tuesday, 28 June 2005) on which the value of the assets of the Company will be determined for the purpose of the Scheme "CAT Share" an ordinary share of £0.02 in the capital of CAT or a Reclassified Share (as the context may require) "Listing Rules" the listing rules of the UK Listing Authority "NAV" net asset value of a share "New PAT Shares" PAT Shares to be issued pursuant to the Scheme "Overseas Shareholders" Shareholders with a registered address outside the United Kingdom, the Channel Islands or the Isle of Man "PAT Shares" ordinary shares of £12.50 each in the capital of PAT "Reclassified Shares" shares with A rights and shares with B rights to be created for the purpose of the Scheme, subject to shareholder approval at the First EGM "Scheme" the proposed scheme implementing the Proposals, details of which are set out in the Circular "Shareholders" holders of shares in CAT The Circular is available to the public for inspection only during normalbusiness hours at the Document Viewing Facility, The Financial ServicesAuthority, 25 The North Colonnade, London E14 5HS. For further information please contact: Ian Rushbrook, Collective Assets Trust plc: 0131 225 2049Robin Angus, Collective Assets Trust plc: 0131 465 1179 This announcement, which has been issued by the Company, has been approved by F&C Asset Management plc for the purposes of section 21 of the Financial Servicesand Markets Act 2000. F&C Asset Management plc is Authorised and regulated inthe United Kingdom by the Financial Services Authority. This information is provided by RNS The company news service from the London Stock Exchange