Proposed Change of Investment Objective and AIFM

RNS Number : 6419V

British Assets Trust PLC

30 October 2014

 



29 October 2014

British Assets Trust PLC

Proposed change of investment objective and policy and change of AIFM

The board of Directors (the "Board") of British Assets Trust PLC (the "Company") has undertaken a review to determine whether the Company's investment objective and policy remain appropriate and are in the best interests of shareholders.  As part of this review the Board has considered the views of its core shareholders. 

As a result of the review the Board has decided to:

i)             Seek shareholder approval to change the Company's existing investment objective and policy (the "Proposals"), and

ii)            Subject to relevant approvals under the AIFMD, appoint BlackRock Fund Managers Limited ("BFM") as the Company's AIFM to provide the Company with discretionary portfolio management and risk management services.

The Board would like to place on record its sincere appreciation for the services and commitment that F&C has provided over many years.

Proposed Investment Objective and Policy

The Company's current objective is to achieve a total return in excess of a composite index, weighted as to 80 per cent FTSE All-Share Index and 20 per cent FTSE World (ex UK) Index, by investing principally in a diversified international portfolio of equities and equity-related securities.  Within this overall objective, the Company aims to maintain a progressive dividend policy which will be dependent upon, inter alia, the rate of revenue growth within the investment portfolio and the level of dividend cover.

The new objective will be to aim to preserve capital in real terms and to grow the dividend over the medium term at least in line with inflation.  The current composite benchmark will also be removed and the Company will target a total portfolio return of UK Consumer Price Index ("CPI") plus 4 per cent per annum, over a 5 to 7 year cycle.  It is intended that dividends will be maintained at the current level, grown over time and continue to be paid quarterly.  

The new policy will be to follow a dynamic multi-asset approach.  It is BFM's current intention to invest c. 40 per cent of the portfolio into UK equity income stocks and c. 60 per cent of the portfolio on a tactical asset allocation basis.

The Board believes that BFM's proposed strategy for the Company, to reposition it  as a multi-asset portfolio (retaining the target of annual dividend growth whilst focusing on capital stability), represents an innovative way to capitalise on the very attractive opportunities presented by recent legislative changes relating to UK pensions, and, by harnessing the considerable investment track record and marketing power of the world's largest fund manager, is well designed to address the issue of relevance and relative attractiveness in the post RDR investment world.  The Board believes that, with BFM's support, the Company will attract a new investor base and that the Company will grow, as well as deliver shareholder value. 

Gearing

Under the Proposals it is the Board's intention to retain the existing 6.25 per cent Bonds which mature in 2031.

Discount Control Policy and Tender Offer

Within six months of BFM being appointed as AIFM, the Company will propose a tender offer for a minimum of 20 per cent of its ordinary shares in issue at that time (excluding any shares held in treasury) at a 2 per cent discount to the diluted, cum income NAV per share (debt at market value) less costs.  Any tender offer will be subject to the Board exercising its discretion and in making its decision the Board will be mindful of the best interests of shareholders as a whole as well as market conditions at that time.   Any tender offer will also require shareholder approval and it is proposed that the relevant authority will be sought at a general meeting in January 2015.

The Board will continue to monitor the discount to NAV at which the Company's ordinary shares trade and will look to make use of share buybacks in the short term to manage the discount.  Over time and subject to general market conditions, the Board will aim to move the Company's share rating towards a zero discount.

Appointment of BFM

The Board has resolved to appoint BFM to manage the Company's investments adopting a dynamic multi-asset approach.  BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide.  At 30 September 2014, BlackRock's  AuM were $4.525 trillion.  BFM currently manages 11 closed end investment companies with a total AuM of £2.8 billion as at 30 September 2014.

The Company's assets will be managed by Adam Ryan, head of the BlackRock Diversified Strategies Team which currently manages assets totalling £14 billion including BlackRock Dynamic Diversified Growth.  Adam has over 20 years of fund management experience and joined Merrill Lynch Investment Managers in 1999.

BFM's appointment will become effective upon termination of the Company's existing investment management arrangements with F&C Investment Business Limited who have been served notice.  The Company will notify the market at such time of the termination, expected to be January 2015, of the existing investment management arrangements and at the same time the Board will also resolve to change the registered office of the Company.

There will be no change in the management fee arrangements and therefore BFM will be paid an annual management fee of 0.4 per cent on the value of the Company's total assets less current liabilities (excluding loans).  The Company shall bear all costs associated with any portfolio transition, including stamp duty, relating to the Proposals and BlackRock shall bear all other costs and expenses of the Proposals (including any payment to the existing AIFM in respect of the termination of its appointment).

The Proposals are subject to, amongst other things, obtaining the necessary legal, tax and regulatory clearances as well as shareholder approvals. 

Letter of Intent

AXA Investment Managers UK Limited, as agent on behalf of its underlying clients has discretionary management control over approximately 15.7 per cent of the Company's ordinary shares and has given the Company a non-legally binding letter of intent to vote in favour of any shareholder resolutions in connection with the Proposals, should it remain a shareholder at the time of the relevant shareholder general meetings.

Expected Timing

It is expected that a shareholder circular and notice of general meeting setting out the proposed investment objective and policy and seeking shareholder authority for the tender offer will be sent to shareholders with the Annual Report and Accounts in early December. The Annual General Meeting and relevant general meeting will be convened in January 2015.

Lynn Ruddick, Chairman, commented:

 "The Board is truly excited by these proposals. We believe that they represent a unique opportunity to transform the Company into a strongly differentiated and relevant vehicle focused on delivering a highly attractive product offering in the rapidly changing lifetime savings and pensions market. Furthermore, we will effect this transition in partnership with BlackRock, whose track record, ambition and commitment to marketing create a compelling proposition.  The Board strongly recommend these proposals to shareholders."

For further information, please contact:

The Company

Lynn Ruddick                     [e-mail]

Cenkos Securities

Sapna Shah                         [phone]

Will Rogers                         [phone]

Alan Ray                              [phone]

Oliver Packard                  [phone]

BlackRock

Emma Phillips   [phone]

http://www.blackrock-downloads.com/latest-news/investmenttrust/

Important Information

This announcement does not constitute or form part of, and should not be considered as, any offer for sale of subscription of, or solicitation of any offer to buy or subscribe for, any shares in the Company or securities in any other entity, in any jurisdiction, including the United States, nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with, any contract or investment decision whatsoever, in any jurisdiction.  The announcement does not constitute a recommendation regarding any securities

 

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