Aberforth Geared Income Trust to float

15th Apr 2010 13:06

New split capital investment trust Aberforth Geared Income Trust hopes to raise up to £100m via a placing and offer for subscription. The offer for subscription opens today and is due to close on 23 April. Dealings in the ordinary and zero dividend preference (ZDP) shares commence on the Main Market on 30 April. If the issue is fully subscribed there will be 60m ordinary shares and 40m ZDP shares. Each class of shares will be sold for 100p a share. The trust will invest in a portfolio of small UK quoted companies. The definition is based on the RBS Hoare Govett Smaller Companies Index (Excluding Investment Companies), which includes the bottom 10% of the Main Market's market capitalisation. This still includes companies that are worth up to £1.2bn. There are 448 companies in the index. The trust's portfolio will include between 50 and 100 companies and the focus will be value investing. Lowly-rated companies with relatively high yields will be preferred. The portfolio could include AIM-quoted companies if they have given a commitment to move to the Main Market or if they have moved the other way. There are no plans to gear up the trust. Any borrowings will be for short-term purposes. There is a gearing limit of 5% of total assets. The planned life of the trust lasts until 30 June 2017. Shareholders can vote to wind up the trust or keep it going. The ZDP Shares will have a fixed capital entitlement of 159.7p a share on 30 June 2017 representing a redemption yield of 6.75% a year.The trust's manager Aberforth Partners has £1.5bn of funds under management. It already manages the Aberforth Smaller Companies Trust, which has a similar remit to Aberforth Geared Income Trust but has ordinary shares and no other class of shares. Aberforth Smaller Companies Trust's NAV (with dividends reinvested) grew by 145% over the 10 years to the end of 2009. That is double the growth in the RBS Hoare Govett Smaller Companies Index (Excluding Investment Companies).