Doc re Publication of Circular
December 24 2008 - 4:32AM
UK Regulatory
24 December 2008
Gartmore Smaller Companies Trust p.l.c.
RECOMMENDED PROPOSALS FOR THE RECONSTRUCTION AND WINDING UP OF GARTMORE SMALLER
COMPANIES TRUST P.L.C.
The Board announced on 10 November 2008 that it had reached agreement with
Standard Life UK Smaller Companies Trust plc ("Standard Life Smaller") in
respect of a merger of the business and assets of Gartmore Smaller Companies
Trust p.l.c. ("Gartmore Smaller") and Standard Life Smaller to be effected
through a scheme of reconstruction and winding up of Gartmore Smaller.
Gartmore Smaller has today published a Circular to Shareholders in connection
with these Proposals.
The Proposals
Under the Proposals, Shareholders will have the option to:
* roll-over all or some of their investment into Continuation Shares in
Standard Life Smaller; and/or
* realise some or all of their investment in Gartmore Smaller for cash,
subject to scaling back.
Qualifying Shareholders holding in excess of 5 per cent. of Gartmore Smaller's
shares will be entitled to receive 100 per cent. of their interest in Gartmore
Smaller by way of an in specie distribution of investments held by Gartmore
Smaller.
Under the Proposals:
* Gartmore Smaller will be put into members' voluntary liquidation and its
business and assets (after setting aside the Liquidation Fund to cover the
estimated liabilities and contingent liabilities of Gartmore Smaller) split
into three funds in addition to the Liquidation Fund;
*
+ the Continuation Fund in respect of the interests of Shareholders
electing or being deemed to elect to roll-over their investment into
Standard Life Smaller;
+ the Realisation Fund in respect of Shareholders electing to receive
cash; and
+ the In Specie Distribution Fund in respect of Qualifying Shareholders
electing for the In Specie Distribution Option;
* Shareholders will be entitled to elect to receive Continuation Shares and/
or cash in respect of their investment in Gartmore Smaller, subject to the
cash elections not exceeding 35 per cent. of Gartmore Smaller's total
issued shares, excluding any Shares for which an Election is made for the
In Specie Distribution Option;
* Standard Life Smaller will issue Continuation Shares to Shareholders
wishing to remain invested in the enlarged company in exchange for the
transfer to it of the business and assets comprised in the Continuation
Fund. Assets in the Continuation Fund will be realigned in accordance with
Standard Life Smaller's investment policy over a period of up to 12 months
and Continuation Shares will be converted into new Ordinary Shares issued
by Standard Life Smaller as the realignment process progresses. SLI will
charge an investment management fee of 0.8 per cent. per annum on the value
of the Continuation Fund;
* Shareholders electing for cash will retain their shares in Gartmore Smaller
and will receive cash distributions as assets in the Realisation Fund are
realised over a period of up to 12 months. It is expected that quarterly
cash distributions will be made to Shareholders electing for cash. The
Realisation Fund will be managed by Standard Life Investments for a reduced
management fee of 0.4 per cent. per annum on the quarterly time weighted
gross asset value of the Realisation Fund;
* Shareholders holding in excess of 5 per cent. of Gartmore Smaller's shares
as at the In Specie Distribution Option Record Date of 31 December 2008
will be entitled to elect for an in specie distribution of investments held
by Gartmore Smaller. Such Shareholders will receive pro rata distributions
in respect of every investment owned by Gartmore Smaller as at the
Effective Date;
* Shareholders electing for the Cash Option or the In Specie Distribution
Option will suffer a 3 per cent. exit charge;
* Shareholders (other than Overseas Holders) who make no Election under the
Scheme will be deemed to have elected to receive Continuation Shares; and
* Overseas Holders (other than Qualifying Shareholders) will be deemed to
have made an Election for cash.
The 3 per cent. exit charge deducted from the Realisation Fund and from the
entitlements of any Qualifying Shareholder electing for the In Specie
Distribution Option will be credited towards the cost of the Scheme for the
benefit of continuing Shareholders.
Benefits of the Proposals
The Board believes that the Proposals will have the following benefits for
Shareholders:
* Shareholders will have the opportunity to roll-over all or part of their
investment into Standard Life Smaller, one of the best performing trusts in
the UK smaller company sector, in a tax-efficient and cost-effective
manner;
* Shareholders who were on the Register at the Record Date and who have
maintained a holding since that time will also have the opportunity to
receive cash in respect of at least a proportion of their Shares;
* Gartmore Smaller's portfolio will be subject to an orderly realisation over
a period of up to 12 months, which is intended to maximise value and avoid
forced selling of investments;
* the return of cash and the conversion will be managed with the intention of
maximising portfolio value, minimising the costs for continuing
Shareholders, and being fair to those who choose to exit;
* Shareholders electing for Continuation Shares will, on conversion of their
Continuation Shares, have an investment in the enlarged Standard Life
Smaller with:
* a larger asset base than Gartmore Smaller;
* reduced basic management fee arrangements and a lower total expense ratio;
* a discount control mechanism which seeks to maintain a discount level of
less than 10 per cent.; and
* a periodic exit route for up to 10 per cent. of the issued share capital in
any 12 month period.
Standard Life UK Smaller Companies Trust plc
Background
Standard Life Smaller is an investment trust which was launched in 1993. SLI
was appointed as investment manager to Standard Life Smaller on 1 September
2003. Harry Nimmo, Head of Smaller Companies at Standard Life Investments, has
been responsible for Standard Life Smaller's portfolio since the appointment of
SLI.
Investment policy
Standard Life Smaller's investment objective is to achieve long-term capital
growth by investment in UK quoted smaller companies.
Standard Life Smaller intends to achieve its investment objective by investing
in a diversified portfolio consisting mainly of UK quoted smaller companies.
The portfolio will normally comprise around 50 individual holdings representing
the Investment Manager's highest conviction investment ideas. In order to
reduce risk in Standard Life Smaller without compromising flexibility, no
holding within the portfolio should exceed 5 per cent. of total assets at the
time of acquisition.
The investment strategy in respect of the Continuation Fund will be to realign
the assets comprised in the Continuation Fund in accordance with the investment
policy of Standard Life Smaller in an orderly manner over a period of up to 12
months.
Performance track record
Since SLI's appointment as manager, Standard Life Smaller been one of the
top-ranking UK smaller company investment trusts and has significantly
outperformed its smaller company benchmark, the Extended Hoare Govett Smaller
Companies Index (ex Investment Companies) from one through five years on a
capital returns basis.
Management of the Continuation Fund and the Realisation Fund
The assets to be transferred from Gartmore Smaller into the Continuation Fund
will comprise a pro rata share of each investment in the Gartmore Smaller
portfolio at the time the Scheme becomes effective. Conditional on the Scheme
becoming effective, Standard Life Smaller will enter into the Co-Sale Agreement
with the Liquidators and the Investment Manager pursuant to which any selling
opportunity in respect of any asset in the Realisation Fund and also held in
the Continuation Fund will be offered pro rata to both the Liquidators (in
respect of the Realisation Fund) and Standard Life Smaller (in respect of the
Continuation Fund) with the expectation that, in general, investments in the
Realisation Fund and in the Continuation Fund will be sold down at the same
time and on the same terms. However, the board of Standard Life Smaller and the
Liquidators will retain the final discretion to determine the terms and timing
of any disposal.
Standard Life Smaller management fees
In connection with the Proposals, SLI has agreed to reduce its annual
investment management fee over the enlarged Standard Life Smaller from 0.80 per
cent. to 0.65 per cent. of its gross asset value per annum and introduce a
performance fee with effect from the day after conversion of all of the
Continuation Shares. The fee on univested cash and cash equivalents will remain
0.2 per cent. per annum. The performance fee will be payable if Standard Life
Smaller outperforms its benchmark by at least 1 per cent. per annum. The amount
of the performance fee will be 20 per cent. per annum of the enlarged Standard
Life Smaller's outperformance, capped at 0.6 per cent. per annum of the gross
assets of Standard Life Smaller. The performance fee will be subject to
protections in respect of any underperformance.
SLI clients' equity interest in Standard Life Smaller
SLI intends to maintain a significant interest on behalf of its clients in the
enlarged Standard Life Smaller of up to 15 per cent. of the issued share
capital following implementation of the Scheme.
Clients of SLI currently own 4.6 per cent. of the issued Gartmore Smaller
Shares and have indicated that they will elect to receive Continuation Shares
under the Scheme.
Discount policyof Standard Life Smaller
Regular tender offers
Conditional upon the Scheme becoming effective, the board of Standard Life
Smaller intends, on a six monthly basis, commencing in June 2010, to offer
Standard Life Smaller shareholders the opportunity to exit some or all of their
investment in Standard Life Smaller.
Subject to certain limitations set out below, the board of Standard Life
Smaller intends to invite
Standard Life Smaller shareholders to tender for purchase all or part of their
holdings of shares for cash. The price at which such shares will be purchased
will be an amount equal to the realisation value of the assets attributable to
the shares tendered as at the close of business on the relevant tender offer
calculation date, subject to a discount of two per cent. which will be used to
cover the costs of the tender offer and any surplus will be for the benefit of
continuing Standard Life Smaller shareholders.
Subject to the board of Standard Life Smaller's discretion being exercised on
any relevant occasion, the tender offers will be effected such that the tender
offer calculation dates will be
30 June and 31 December of each year (or the preceding business day) commencing
on 30 June
2010. It is intended that each six monthly tender offer will be restricted to a
maximum of 5 per cent. in aggregate of the shares in issue as at the relevant
tender offer calculation date (excluding any shares held in treasury), provided
that any amount unused at the 30 June tender date can be carried forward to the
31 December tender date and up to 5 per cent. of the 10 per cent. in any
calendar year that remains unused can be carried forward to the next calendar
year only. Accordingly, the maximum limit of shares which can be tendered in
any calendar year will be up to 15 per cent. of the shares in issue (including
a full carry forward of 5 per cent. from the previous calendar year).
Implementation of tender offers will be subject to prior shareholder approval,
by way of a special resolution, at each annual general meeting, with the first
resolution to be proposed at the annual general meeting of Standard Life
Smaller to be held in 2009.
Share buy-backs
The board of Standard Life Smaller aims to use its annual 14.99 per cent. share
buy-back authority to seek to maintain a discount level of less than 10 per
cent. on the enlarged Standard Life Smaller ordinary shares under normal market
conditions.
The board of Standard Life Smaller does not intend to seek authority to buy
back Continuation Shares.
The making and timing of any share buy-backs will be at the absolute discretion
of the board of Standard Life Smaller. Share buy-backs will only be made where
the directors of Standard Life
Smaller consider it to be in the best interests of Standard Life Smaller
shareholders.
Board of Standard Life Smaller
Upon the Scheme becoming effective, Carol Ferguson and Lynn Ruddick will join
the board of Standard Life Smaller. Donald MacDonald, chairman of Standard Life
Smaller, will remain chairman of the enlarged Standard Life Smaller. The board
of the enlarged Standard Life Smaller will comprise five directors.
Scaling back
Under the Proposals, Shareholders who wish to receive a cash exit in respect of
more than 35 per cent. of their Shares may make an Election to do so. Such
Elections will only be accepted to the extent that maximum aggregate Elections
for cash do not exceed 35 per cent. of the issued Shares, excluding Shares
electing for the In Specie Distribution Option. To the extent that Elections
for cash cannot be satisfied in full, they will be scaled back pro rata and
Shareholders will be issued Continuation Shares. Shareholders (other than
Overseas Holders) who do not make a valid Election will be deemed to have
elected for, and will receive, Continuation Shares in respect of all of their
Shares.
The Record Date for the basis of determining Shareholders' entitlements under
the Scheme was
6.00 p.m. on 13 November 2008. Only Qualifying Shareholders on the Register as
at the In Specie Distribution Option Record Date of 31 December 2008 are
entitled to elect for the In Specie Distribution Option.
Dividend
In order to comply with its approval as an investment trust under Section 842
of the Income and Corporation Taxes Act 1988, Gartmore Smaller will pay such
net revenue, if any, as is received in the period from 1 September 2008 until
the Scheme becomes effective by way of a termination dividend. The Board also
intends to distribute any amounts available under the retained revenue reserve
as part of the termination dividend. The Board will announce the level of the
termination dividend in late January 2009 and it will be paid prior to the
Scheme becoming effective.
Costs of implementing the Proposals and Costs Contribution
Gartmore Investment Limited's appointment as investment manager, secretary and
administrator will be terminated on the implementation of the Scheme. Gartmore
Smaller gave six months' notice on 14 August 2008 of the termination of
Gartmore Investment Limited's appointment as investment manager, secretary and
administrator of Gartmore Smaller. Accordingly, the fees remaining outstanding
to Gartmore Investment Limited at the time of the implementation of the Scheme
will not be material.
The aggregate costs to be incurred by both Gartmore Smaller and Standard Life
Smaller in connection with the Proposals are estimated to be approximately �1
million (including irrecoverable VAT but excluding realignment costs and stamp
duty). It is expected that the 3 per cent. exit charge to be applied to the
value of the assets of Gartmore Smaller transferred to the Realisation Fund and
the In Specie Distribution Fund will be sufficient to meet the majority of the
costs of the Proposals. To the extent that the costs of the Proposals are in
excess of this amount, they shall be borne by the Continuation Fund. SLI has
agreed to make a contribution to the costs of the Scheme for the benefit of
holders of Continuation Shares equal to 0.6 per cent. of the gross asset value
of the Continuation Fund immediately following the implementation of the
Scheme, which is broadly equivalent to its management fee on the Continuation
Fund for a period of 9 months.
Depending on the size of Realisation Fund and the In Specie Distribution Fund,
and after taking into consideration the Costs Contribution to be made to the
costs of the Scheme by Standard Life Investments, the costs of the Proposals
are not expected to have a material financial effect on holders of Continuation
Shares.
The Board has agreed a Liquidator's retention of �90,000 which will be retained
by the Liquidators to meet any unforeseen costs and liabilities.
In Specie Distribution Option approval
Under the Listing Rules, certain of the Qualifying Shareholders entitled to
elect for the In Specie
Distribution Option may be regarded as related parties of Gartmore Smaller in
the light of the size of their holdings of Gartmore Smaller Shares.
Accordingly, the inclusion of the In Specie
Distribution Option in the Scheme requires the approval of the Independent
Shareholders at the first extraordinary general meeting of Gartmore Smaller
convened for 26 January 2009.
Qualifying Shareholders who are also related parties under Listing Rule 11
electing for the
In Specie Distribution Option will be required to undertake in the In Specie
Distribution Form of Election to abstain, and to take all reasonable steps to
ensure that their associates abstain, from voting on the In Specie Distribution
Option Resolution.
Extraordinary general meetings
The implementation of the Proposals is subject to a number of conditions
including the passing of resolutions at two extraordinary general meetings of
Gartmore Smaller convened for 10.30 a.m. on 26 January 2009 and 10.30 a.m. on 3
February 2009. Both EGMs will be held at the offices of Eversheds LLP, One Wood
Street, London EC2V 7WS.
Shareholders' intentions
The Board has consulted with Gartmore Smaller's major Shareholders, holding in
aggregate approximately 68 per cent. of Gartmore Smaller's issued share
capital, who have all indicated their intention to vote in support of the
Scheme and the majority of whom will continue with a significant investment in
the enlarged Standard Life Smaller.
Expected Timetable
Record Date for the Proposals 6.00 p.m. on 13 November 2008
In Specie Distribution Option Record Date 6.00 p.m. on 31 December 2008
Date from which it is advised that dealings in 20 January 2009
Shares should only be for cash settlement and
immediate delivery of documents of title
Latest time for receipt of Forms of Election or 11.00 a.m. on 23 January 2009
TTE Instructions from Shareholders
Share register closed 6.00 p.m. on 23 January 2009
First EGM 10.30 a.m. on 26 January 2009
Calculation Date 5.00 p.m. on 27 January 2009
Amendment to the Official List, dealings in 8.00 a.m. on 2 February 2009
Reclassified Shares commence and register of
members re-opened
Dealings in Reclassified Shares suspended and 7.30 a.m. on 3 February 2009
register of
members closed
Second EGM 10.30 a.m. on 3 February 2009
Effective Date for implementation of the 3 February 2009
Proposals
CREST accounts credited with, and dealings 4 February 2009
commence in, Continuation Shares
In specie distributions to Qualifying On or as soon as practicable
Shareholders electing for the In Specie after 4 February 2009
Distribution Option
Share certificates in respect of Continuation Week commencing 9 February 2009
Shares
despatched
Cheques expected to be despatched and CREST On or around 31 March 2009, 30
payments made to Shareholders in respect of the June 2009, 30 September 2009,
Cash Option 31 December 2009 and 31 January
2010
Cancellation of listing of the Reclassified On or around 4 February 2010
Shares
This announcement does not contain all the information which is contained in
the Circular and Shareholders should read the Circular to make an informed
election under the Proposals.
Defined terms used in this announcement have the meanings given in the
Circular.
Enquiries
Liam Kane
Chairman, Gartmore Smaller Companies Trust p.l.c.
020 7782 2000
Robin Archibald/ Jane Lewis
Winterflood Investment Trusts
020 3100 0290/0295
Notes
A copy of the Circular will be submitted shortly to the UK Listing Authority
and will be available for inspection at the UK Listing Authority's Document
Viewing Facility, which is situated at:
The Financial Services Authority
25 the North Colonnade
Canary Wharf
London E14 5HS
END
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