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29 July
2020
Perpetual Income
and Growth Investment Trust plc
Results of Manager
Search
The Board of Perpetual Income and Growth Investment Trust plc
(the “Company” or “PLI”) has concluded its
comprehensive search for a new manager with the credentials and
capacity to deliver capital growth and real growth in dividends
over the medium to longer term mainly from UK equities.
Having considered a large number of proposals, the Board has
agreed the heads of terms for a combination of the assets of the
Company with Murray Income Trust PLC (“MUT”) by means of a
section 110 scheme of reconstruction under the Insolvency Act 1986
(the “Transaction”). MUT is managed by the UK Equities
team at Aberdeen Standard Investments (“ASI”). The
Board, which had been focused on finding the best manager for the
Company, was very impressed by the investment strategy and approach
put forward by ASI, as well as the strength of the team and its top
quartile performance over the last 1, 3 and 5 years[1].
Moreover, the existing scale of MUT and the initiative demonstrated
by the MUT board added to the attractions of the proposal.
Although consolidation rarely results from manager beauty parades,
the Board was of the view that a combination of the two companies
would bring additional benefits to PLI shareholders, by offering
exposure to ASI’s UK Equity strategy in a well-managed, and
enlarged, investment trust with a highly competitive management
fee.
MUT, which has a similar investment objective to PLI, aims to
provide a high and growing income combined with capital growth
through investment in a portfolio principally of UK equities.
MUT is an AIC Dividend Hero, and intends to seek to retain this
status, having grown its dividend for 46 consecutive years and
currently has a yield of 4.5%[2]. The proposed
Transaction will result in MUT being one of the largest investment
trusts in the UK Equity Income sector, with gross assets in excess
of £1 billion[2].
The Transaction will provide the Company’s shareholders with an
investment in a significantly larger investment trust with one of
the lowest management fees in the sector (0.38% per
annum[3]), with greater liquidity, and with a stronger
investment track record and in recent years a better share price
rating than PLI (4.5% 12-month average discount for MUT, compared
with 13.1% discount for PLI[1]).
The Company’s shareholders will benefit from the extensive
resource and experience within the UK Equities team at ASI, with
Charles Luke as lead portfolio
manager supported by the UK Equities team. ASI manages MUT with a
differentiated investment process that has a quality focus coupled
with an emphasis on environmental, social and governance factors
based on fundamental analysis enabled by an extensive in-house
research resource. MUT has a total return approach aiming to
deliver an appealing and sustainable dividend yield allied to
attractive capital and dividend growth potential. Over the 5
years ending 30 June 2020, the NAV
total return of MUT, which has a 5-star Morningstar rating, has
been 5.6% p.a., representing outperformance of 2.6% p.a. against
the FTSE All-Share index[1]. The ASI UK Equity Income
Fund is the top performing fund in the IA UK Equity Income sector
since Charles Luke started to manage
the fund in 2016[1].
The Company has consulted with a number of its major
shareholders who have indicated their support for the
Transaction.
The Transaction will be effected by way of a scheme of
reconstruction of the Company under section 110 of the Insolvency
Act 1986 resulting in the voluntary liquidation of the Company. In
accordance with customary practice for such transactions involving
investment trusts, the City Code on Takeovers and Mergers is not
expected to apply to the Transaction. However, the Transaction will
be subject to other regulatory and tax approvals. The Transaction
will be subject to, inter alia, approval by the shareholders and
noteholders of each of the Company and MUT. As part of the
Transaction, in order to manage the realisation/realignment of the
Company’s portfolio ahead of liquidation, it is proposed that
Aberdeen Standard Fund Managers Limited (“ASFML”) will be
appointed as the alternative investment fund manager of the
Company. ASFML will not charge a management fee to PLI.
The formal termination of Invesco Fund Managers Limited and
the appointment of ASFML is expected to become effective by no
later than the end of September
2020.
New MUT shares that are issued to PLI shareholders will be
issued on a formula asset value (“FAV”)-to-FAV basis. FAVs will be
calculated using the respective net asset values of each company,
adjusted for the costs of the Transaction, any dividends and
distributions declared by each party which have a record date prior
to the effective date of the Transaction, an allowance for the
costs of liquidation (for PLI) and the cash exit option (for PLI,
as defined below). ASFML has agreed to make a contribution to
the costs of the Transaction by means of a reduction in the
management fee payable by MUT to ASFML for the first six months
following the completion of the Scheme. The value of such
reduction will be based on the value of the assets transferred by
PLI to MUT as part of the Transaction and the reduction will be for
the benefit of the shareholders of the enlarged MUT.
It is expected that PLI shareholders will see a reduction in
their overall share price yield given MUT has a lower, but still
attractive, current yield than PLI, but it is believed that MUT has
a more resilient portfolio income profile than the market.
MUT also has strong revenue reserves and an extensive record of
dividend growth, which it intends to maintain. Partly in
recognition of the reduction in absolute dividends that a PLI
shareholder would be expected to receive, the Board of PLI intends
to pay a pre-liquidation interim dividend to its shareholders to
reflect a distribution of its revenue reserve in full, such amount
is anticipated to be approximately 13.6
pence per share[4]. PLI shareholders
receiving MUT shares will rank fully for all dividends declared by
MUT on or after the date of the issue of MUT shares to them.
As part of the Transaction, the Company expects to offer its
shareholders the ability to elect to receive cash in respect of
some or all of their holdings in the Company at a price equal to
98% of FAV (the “Cash Option”). The Cash Option will
be limited to 20% of the Company’s shares in issue and aggregate
elections for the Cash Option in excess of this number will be
scaled back on a pro rata basis in favour of the rollover into MUT,
which will also be the default option for the Transaction.
The Board of MUT have invited Richard
Laing, Alan Giles and
Georgina Field to join the Board of
MUT from the date of completion of the Transaction. Bob
Yerbury and Victoria Cochrane did
not wish to be considered for a position on the MUT board and
Mike Balfour stood aside as he would
not be considered independent given he is on the board of another
ASFML-managed investment company.
A circular convening a general meeting to approve the
Transaction will be sent to the Company’s shareholders in due
course, together with a prospectus published by MUT containing
details of the MUT shares to be issued in connection with the
Transaction. It is expected that the Transaction will
conclude in early Q4 2020.
Richard Laing, the Company’s
chairman said “After a thorough tender process, when a number of
excellent proposals were received, the Board of PLI is delighted to
recommend to shareholders the combination of Perpetual Income &
Growth and Murray Income Trust. We believe this decision will
provide shareholders with strong potential for future capital
growth and income generation. With very similar investment
objectives to deliver growing income and capital growth from mainly
UK equities, Murray Income Trust has demonstrated a consistent
performance track record in doing both, with its NAV total return
outperforming its benchmark FTSE All-Share index on an annualised
basis by 8.8%, 3.6%, 2.6% and 1.6% over 1, 3, 5 and 10 years
respectively[1]. We are confident that the depth and
breadth of experience in Charles
Luke, the lead portfolio manager of MUT, as well as the
wider UK equity team at Aberdeen Standard Investments will continue
to deliver for shareholders over the long run.
“There are few mergers of investment trusts, but we believe
that this Transaction will have great appeal to shareholders of
PLI. They will transition their interests at net asset value
(after deduction of costs and adjusting for dividends), and with
Murray Income shares typically trading at a narrower discount to
PLI, should bring an immediate uplift. Our shareholders will become
part of a trust that has an excellent track record and share price
rating, one of the lowest ongoing charges ratio in the sector at an
estimated 0.50% per annum[3] (a significant reduction
from PLI’s present 0.73% per annum[5]), and an
attractive yield of 4.5%[2] with the accolade of being
an AIC Dividend Hero. It will also be one of the largest investment
trusts in the UK equity income sector, with the liquidity and
positioning that a trust with gross assets well over £1 billion
brings.”
Notes
1 As at 30 June 2020. Sources
Morningstar, FTSE or Datastream.
2 As at 28 July 2020, being the
latest date prior to the publication of this announcement. Source:
Datastream or Bloomberg.
3 ASI is paid a variable management fee by MUT of 0.55% p.a. of
the first £350m of net assets, 0.45% p.a. on the assets between
£350 – 450m, and 0.25% p.a. on assets
in excess of £450m. The weighted average annual management fee
would be 0.38% p.a. and the estimated pro forma ongoing charges
ratio would be 0.50% p.a., based on the net assets of MUT and PLI,
assuming the cash option is fully taken-up, as at 24 July 2020. Source: ASI.
4 Based on revenue reserves at the latest date prior to the
publication of this announcement. Source: Invesco.
5 Source: PLI annual report and accounts for the year ended
31 March 2020.
Important Information
This announcement contains information that is inside
information for the purposes of the Market Abuse Regulation (EU)
No. 596/2014. The person responsible for arranging for the
release of this announcement on behalf of the Company is
Paul Griggs of Invesco Asset
Management Limited.
LEI: 549300UIWJ7E60WUQZ16
Contact Details
Richard Laing, Chairman
Contact through Winterflood or Montfort
Winterflood Investment Trusts (Corporate Broker)
Joe Winkley / Neil Morgan
Telephone 020 3100 0000
Montfort Communications
Gay Collins – 07798 626282
Miles McKechnie – 07788 546279
Claire Lewis – 07825 588626
pli@montfort.london