Proposals for the Future
Aberdeen Latin American Inv Tst PLC
03 June 2003
3 June 2003
ABERDEEN LATIN AMERICAN INVESTMENT TRUST PLC
PROPOSALS FOR THE FUTURE OF THE COMPANY
INTRODUCTION
On 4 April 2003, an ordinary resolution was passed by a majority of Shareholders
at an extraordinary general meeting of the Company directing the Directors to
put forward proposals to liquidate, open-end or otherwise reconstruct the
Company in such a manner that would allow Shareholders to realise their
investment in the Company for cash at a minimum of 95 per cent. of net asset
value per Share.
Since the extraordinary general meeting of the Company on 4 April 2003, Midas
Capital Partners Limited has approached the Board regarding proposals to
continue the Company as an investment trust with a revised investment objective
and Midas as its new investment manager. Notwithstanding written support for the
Continuation Proposal from holders representing the majority of the issued
Shares, the Board has been advised that it must still put forward proposals as
directed by the resolution referred to above as an alternative to the
Continuation Proposal.
The Board was, and remains, of the view that no form of reconstruction of the
Company would offer all Shareholders the opportunity, with certainty, to realise
their investment for cash at a minimum of 95 per cent. of net asset value per
Share and has concluded that the proposals that the Directors have been directed
to bring forward in accordance with the resolution referred to above should be
in the form of a simple winding-up of the Company.
The Board has today posted a circular to Shareholders convening an extraordinary
general meeting of the Company for Thursday, 26 June 2003 for the purposes of
considering resolutions relating to the Continuation Proposal and the
Liquidation Proposal. The Board is unanimously recommending Shareholders to vote
in favour of the resolutions relating to the Continuation Proposal, and against
the resolutions relating to the Liquidation Proposal to be proposed at that
meeting.
SUMMARY OF THE ALTERNATIVE PROPOSALS
The Continuation Proposal
Set out below is a summary of the principal features that will affect the future
of the Company if the Continuation Proposal becomes effective.
Investment Objective
The investment objective of the Company will be to provide Shareholders with
capital growth and income from a portfolio of mining and resource equities and
of mining, resource and industrial fixed interest securities. Midas expects to
have completed the transition from the Company's current portfolio to a
portfolio consistent with the Company's new investment objective by the end of
July 2003.
Borrowings
It is intended that the Company will use its existing borrowing powers to borrow
up to a maximum of 25 per cent. of Shareholders' funds. The Company will not
have any fixed or long-term borrowings.
Investment Manager
Midas, an independent investment management company formed in March 2002, will
be appointed as investment manager of the Company in place of the Company's
existing investment manager, with Richard Lockwood, who has specialised in the
mining industry since 1969 and will join Midas on the Continuation Proposal
becoming effective, being responsible for the day-to-day management of the
Company's portfolio.
Richard Lockwood was responsible for the day-to-day management of City Merchants
High Yield Trust plc between May 1991 (when it was launched) and April 2003
(when he ceased to be its sole investment manager). A significant portion of the
portfolio of City Merchants High Yield Trust plc, the objective of which is to
obtain both high income and capital growth from high yielding fixed interest
securities, has been invested in resource and industrial fixed interest
securities. City Merchants High Yield Trust plc has a strong total return
performance record and its shares have traded at an average premium of 3 per
cent. over the period from its launch to 30 May 2003 (source: Datastream).
With effect from 1 October 2003, Midas will receive a monthly investment
management fee from the Company of 0.1 per cent. of the Company's net assets
(this is the same fee as currently payable to the Company's existing investment
manager). Midas has agreed not to charge a management fee in respect of any
period prior to 1 October 2003. Midas' appointment will be for an initial period
of 12 months and will continue thereafter until terminated by either party
giving to the other not less than three months' notice.
Directors
Upon the Continuation Proposal becoming effective, Radhika Ajmera, Christopher
Edge and Christopher Little have agreed that they will stand down as directors
of the Company and Adam Cooke and Michael Coulson will be appointed as
non-executive directors in their place. Bryan Lenygon, the chairman, and Adrian
Collins will continue as directors of the Company.
Adam Cooke is a global partner of AMVESCAP PLC and has over 20 years experience
in the UK institutional business, including in the investment trust sector.
Michael Coulson, a senior research analyst with more than 30 years experience of
covering mining and gold shares, is currently chairman of the Association of
Mining Analysts.
Change of Name
The Company will change its name to 'City Natural Resources High Yield Trust
plc'.
Dividend Policy
It is intended that the Company will adopt a dividend policy of paying dividends
quarterly, commencing in February 2004. The Company will aim to pay dividends
providing an initial annual net yield of 5.0 per cent. (based on the net asset
value per Share). This dividend yield is an estimate only and should not be
taken as a forecast of profits.
Warrant Subscription Price
Recognising the potential adverse impact on the capital-only returns on the
Warrants of the proposed change in the Company's dividend policy, the Board,
after consulting some of the largest Shareholders, is recommending that the
Warrant Subscription Price should be reduced from 100p to 85p. The terms of the
Warrants will remain unchanged in all other respects.
Annual Continuation Resolutions
Commencing in 2004, Shareholders will be given the opportunity to vote on an
ordinary resolution to continue the Company as an investment trust at each
annual general meeting of the Company. If any such resolution is not passed, the
Board will put forward proposals to liquidate, open-end or otherwise reconstruct
the Company.
Introduction of New Investors
Midas will be pro-active in promoting the Company to potential new investors,
with the aim of significantly improving the price at which the Shares trade
relative to their net asset value and, over time, increasing the size of the
Company through further issues of Shares. If the Company fails to increase its
net assets to £20 million through further issues of Shares prior to 31 March
2004, the Board will consult Shareholders regarding the future of the Company
and may put forward alternative proposals to liquidate, open-end or otherwise
reconstruct the Company in place of the annual continuation resolution referred
to above.
The Liquidation Proposal
If the Liquidation Proposal becomes effective, the Company will be placed in
members' voluntary liquidation and the Liquidators will be appointed to realise
the Company's assets and distribute the cash proceeds to Shareholders and
Warrantholders. For illustrative purposes only, the Directors estimate that, had
the Liquidation Proposal become effective on 30 May 2003, the aggregate cash
distributions per Share would have been 48.9p, representing 92.5 per cent. of
the net asset value of 52.9p per Share on 30 May 2003.
INVESTMENT RATIONALE FOR THE CONTINUATION PROPOSAL
Mining and resource equities provide financial exposure to the production of
base and precious metals, soft commodities (such as rubber, vegetable oils and
sugar) and resources (such as natural gas, oil and coal). The prices of many
such products have been depressed but are now increasing, fuelled by growing
demand, particularly from emerging market economies (such as China, which with
an increasingly affluent population of 1.2 billion, will become the largest
consumer in the world for most goods and services). As a consequence, mining and
resource equities represent an attractive asset class with many offering growing
dividend yields. Besides a requirement for equity capital, mining and resource
companies often have an appetite for other finance and may have in issue fixed
income or convertible securities that offer favourable terms. Likewise, many
industrial corporates have in issue fixed interest securities that offer yields
that are often significantly higher than the yields on G7 Government bonds. The
Company will offer diversified exposure to these asset classes, which, when
combined, offer good capital growth prospects as well as an attractive yield.
BENEFITS OF THE CONTINUATION PROPOSAL
The Directors believe that the Continuation Proposal:
•provides exposure to a sector offering significant growth prospects
through a fund managed by a manager with excellent investment credentials
and strong institutional support;
•offers the prospect of new demand for, improved liquidity in and enhanced
rating of the Shares;
•is a constructive and cost-effective alternative to liquidation; and
•avoids the dilutive effect of the Warrants on the net asset value per
Share which would occur if the Liquidation Proposal becomes effective (the
Directors estimate that, had the Liquidation Proposal become effective on 30
May 2003, the impact of the Warrantholders' entitlement on liquidation would
have been to reduce the net asset value per Share by 1.0p, representing 2.0
per cent. of the net asset value of 52.9p per Share on 30 May 2003).
EGM AND WARRANTHOLDERS' MEETING
The Liquidation Proposal requires the approval of Shareholders in general
meeting. Whilst the Continuation Proposal (other than the proposals to reduce
the Warrant Subscription Price and to change the Company's name) does not
require such approval, the Directors believe that it is appropriate to invite
Shareholders to vote on the Continuation Proposal. Accordingly, an extraordinary
general meeting of the Company is being convened on Thursday, 26 June 2003 at
which resolutions relating to the Liquidation Proposal and the Continuation
Proposal will be proposed. The resolutions relating to the Continuation Proposal
will be conditional on the resolutions relating to the Liquidation Proposal not
being passed.
A general meeting of Warrantholders is also being convened on Thursday, 26 June
2003 at which a resolution approving the proposed reduction in the Warrant
Subscription Price will be proposed. That resolution will be conditional on the
resolutions relating to the Continuation Proposal being passed and becoming
unconditional. Save in relation to the reduction in the Warrant Subscription
Price, the Continuation Proposal does not require the approval of Warrantholders
PRINCIPAL TIMETABLE
2003
Circular containing details of the Alternative Tuesday, 3 June
Proposals dispatched to Shareholders and
Warrantholders
Latest time for receipt of forms of proxy for use at 11.15 a.m. on
the extraordinary general meeting of the Company Tuesday, 24
June
Latest time for receipt of forms of proxy for use at 11.25 a.m. on
the general meeting of Warrantholders Tuesday, 24
June
Extraordinary general meeting of the Company 11.15 a.m. on
Thursday, 26
June
General meeting of Warrantholders 11.25 a.m. on
Thursday, 26
June
DEFINITIONS
'Alternative the Continuation Proposal and the Liquidation
Proposals' Proposal
''Board'' or the board of directors of the Company from time to
''Directors'' time
''Company'' Aberdeen Latin American Investment Trust PLC
''Continuation the proposals for the continuation of the Company
Proposal'' as an investment trust with the objective of
providing Shareholders with capital growth and
income from a portfolio of mining and resource
equities and of mining, resource and industrial
fixed interest securities described in this
announcement
''Liquidation the proposal to place the Company in members'
Proposal'' voluntary liquidation referred to in this
announcement
'Midas' Midas Capital Partners Limited
''Proposals'' or the Continuation Proposal and the Liquidation
''Alternative Proposal
Proposals''
''Shareholders'' holders of Shares
'Shares' ordinary shares of 25p each in the capital of the
Company
''Warrantholders'' the holders of Warrants
''Warrants'' the outstanding warrants issued by the Company to
subscribe for Shares at 100p per Share on 31
October in any of the years up to and including
2009
'Warrant the price per Share payable in the exercise of the
Subscription subscription rights conferred by the Warrants
Price'
ENQUIRIES
Gordon Neilly Intelli Corporate Finance Limited T: 020 7653
6300
Intelli Corporate Finance Limited, which is authorised and regulated in the
United Kingdom by the Financial Services Authority, is acting for Aberdeen Latin
American Investment Trust PLC and for no one else in connection with the
Alternative Proposals or any other matter referred to herein and will not be
responsible to anyone other than Aberdeen Latin American Investment Trust PLC
for providing the protections afforded to customers of Intelli Corporate Finance
Limited or for affording advice in relation to the Alternative Proposals.
This information is provided by RNS
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