Prospectus published for Aberforth Geared Value and Income Trust

Aberforth Geared Value and Income Trust has published its prospectus. This could be the first major new trust in years, the big questions are, how much money will roll over from Aberforth Split Level Income Trust (ASIT) and how much new money will the trust attract?

The new trust will have a fixed seven-year life. The capital structure will include both ordinary shares and zero dividend preference shares (ZDPs), issued in a ratio of 8:3 (up to 161.5m ordinary shares and 60.5m ZDPs – the manager is keen that the new fund be no larger than the fund it is replacing). There will be little to no bank debt used in the structure.

The ZDPs will be issued at 100p each and (provided that there are sufficient assets available) will hand back 160.58p on 30 June 2031. That works out as a gross redemption yield of 7.0% per annum over the life of the ZDPs.

The ordinary shares will also be issued at 100p each. Holders of both ordinary shares and ZDPs in the old trust can elect to swap their shares for ordinary shares, ZDPs, or both in the new trust. The number of shares issued will be determined on a formula asset value basis (respective NAV of each share class less costs – see below).

The company will target a dividend of 4.0–5.0p per share for the company’s first financial year ended 30 June 2025.

The mangement fee is 0.75% of total assets. Aberforth Partners will also make a cost contribution of £450,000 toward the cost of the issues.

The placing and offer for subscription opened yesterday and final applications need to be in by 21 June. The results of the issue will be announced on 28 June.

Costs associated with ASIT rollover

For illustrative purposes only, the costs of the proposals (excluding any portfolio realisation costs) which are expected to be incurred by the company would be expected to represent a reduction of 0.34p or 0.38% in the NAV of 89.6p (as at the date the document was put together) after taking into account the final capital entitlement of the ZDP shares.

[The following text is verbatim from the document, we’ve read it a couple of times and it doesn’t make complete sense to us. Our best guess is if you susbscribe you’ll pay 1.47p and if you elect you’ll pay 1.85p]

Based on the Assumptions, Ordinary Shareholders who subscribe for Ordinary Shares through the AGVIT Placing and Offer and/or elect, or are deemed to elect, to roll over into AGVIT Ordinary Shares under the Scheme will suffer costs in respect of the launch of AGVIT (net of the Aberforth Cost Contribution referred to below), which would be expected to represent a reduction of 1.47 pence or 1.47 per cent. of their investment into AGVIT Ordinary Shares. For Ordinary Shareholders who elect, or are deemed to elect, to roll over into AGVIT Ordinary Shares under the Scheme, the illustrative cumulative costs of the Proposals and launch of AGVIT, as at the Latest Practicable Date and after taking into account the final capital entitlement of the ZDP Shares, is 1.85 per cent of the NAV per Ordinary Share.

Based on the Assumptions, ZDP Shareholders who elect to roll over into AGVIT Ordinary Shares under the Scheme will suffer costs in respect of the launch of AGVIT (net of the Aberforth Cost Contribution referred to below), which would be expected to represent a reduction of 1.47 per cent. of their investment into AGVIT Ordinary Shares.

ASIT dividend

Ordinary shareholders in ASIT get a 3.25p dividend, paid on 24 June, regardless of which option they choose.

Link to the prospectus

You can access the prospectus here – ensure that you read the risk warnings and the selling restrictions. The application forms are at the back. As the size of the new trust is limited, your application could get scaled back.

ASIT : Prospectus published for Aberforth Geared Value and Income Trust