AGE August Equity

RNS Number:1531X
Rutland Trust PLC
24 May 2007

Not for release, publication or distribution, in whole or in part, in or into
the United States, Canada, Australia or Japan.



24 May 2007



Rutland Trust PLC (the "Company")





Proposed reconstruction and winding up of the Company



Introduction

The boards of August Equity Trust PLC ("August") and the Company announced on 22
March 2007 proposals for a merger of the two companies (the "Proposals"). The
merger is to involve August adopting a new investment policy, appointing New
Star Asset Management Limited ("New Star") as its manager, changing its name to
'New Star Private Equity Investment Trust PLC' ("NSPEIT") and acting as the
successor vehicle to the Company. NSPEIT will have an investment policy to
invest in a diversified portfolio of private equity funds, with a focus on
mid-market buyout funds in the UK and Europe. NSPEIT's initial portfolio will
comprise existing investments from both August and the Company and investments
in listed private equity vehicles. In addition, NSPEIT will have commitments to
existing, and seek to make commitments to new, private equity limited
partnerships. The merger will also give the Company's shareholders ("
Shareholders") the opportunity to realise their holdings for cash at the
Company's prevailing net asset value per share (after taking account of any
costs associated with implementing the Proposals).



The Proposals require the approval of the Shareholders and a circular (the "
Circular") has now been published and sent to shareholders setting out the
detailed terms of the Proposals and seeking Shareholders' authority to implement
them. Terms used in this announcement shall have the same meaning as set out in
the Circular.



Background to the Proposals

The respective boards of August and the Company have for some time been
reviewing the strategic options available. Each board is aware that a number of
shareholders of each company wish to continue with exposure to private equity
whilst others wish to realise their interests at a price at or near to net asset
value.



The Board of the Company (the "Board") announced in September 2006 that it was
considering broadening the scope of the investment policy in a way which would
deploy the financial resources of the Company more quickly than through a
commitment to a single private equity fund. The board of August announced in
November 2006 that it was committed to exploring a number of options available
to it. The Company, August and New Star conducted productive negotiations which
resulted in the formulation of the Proposals which are being put before both the
Shareholders and the shareholders of August. The Board has received letters of
intent from Shareholders representing in excess of 50 per cent. of the issued
share capital of the Company to support the Proposals.



The Company and August have entered into an implementation agreement, which
provides that each party must take appropriate steps to facilitate the
implementation of the Proposals in accordance with the agreed terms (the "
Implementation Agreement"). The Implementation Agreement also identifies the
conditions to which the Proposals are subject and governs the process by which
the Proposals are (subject to the satisfaction or, as the case may be, waiver of
the conditions) to be carried into effect.



The Proposals require the approval of Shareholders and the shareholders of
August at their respective extraordinary general meetings, and the Proposals
will be implemented either in their totality or not at all. Therefore, if either
Shareholders or the shareholders of August do not pass by the requisite
majorities the relevant resolutions to effect the Proposals, no part of the
Proposals will become effective, irrespective of the outcome of the
extraordinary general meeting(s) of the other company.



The Proposals

Introduction

The Proposals seek to create a vehicle with a diversified fund of private equity
funds benefiting from the combined management expertise of New Star, August
Equity LLP and Rutland Partners LLP. It is expected that such a vehicle should
be attractive to a wide audience of potential investors who wish to access
private equity returns. The Board believes that the rating of the NSPEIT Shares
in the market should be enhanced with a more fully invested portfolio and the
ongoing support of New Star.



The Proposals will comprise a Scheme of Reconstruction under section 110 of the
Insolvency Act 1986, which will be administered by liquidators to be appointed
by the Company (the "Liquidators"). Under the Scheme, the Liquidators will set
aside, in a liquidation fund (the "Liquidation Fund"), cash and other assets in
an amount which they consider sufficient to provide for the costs and
liabilities of the Company. Further information on the Liquidation Fund is set
out below. The remaining assets will be divided into two pools depending on
elections made or deemed to be made by the Shareholders. Shareholders may elect:



*           to receive shares in NSPEIT which will act as a successor vehicle to
            the Company; or

*           to realise some or all of their investment in the Company for cash.



Shareholders who make no election under the Scheme will receive NSPEIT shares
unless they are Restricted Persons (as defined in the Circular) in which case
they will receive cash.



The Liquidators will distribute cash to those Shareholders who elect or who are
deemed to have elected to receive cash under the Scheme. All other Shareholders
will receive NSPEIT Shares according to an exchange ratio based on the relative
formula asset value per share of each of the Company and August. The primary
consideration for the issue of such NSPEIT Shares will be the transfer of the
Company's limited partnership interest in the Rutland Partnership ("Partnership
Interest") to NSPEIT. If the number of Shares rolling over into NSPEIT Shares is
insufficient to require the entire Partnership Interest to transfer to NSPEIT
then NSPEIT will, in addition to issuing such NSPEIT Shares, pay additional cash
consideration to the Company for the Partnership Interest. If the number of
Shares rolling over into NSPEIT Shares is such that transfer of the entire
Partnership Interest would not be sufficient consideration for the issue of such
NSPEIT Shares then the Liquidators will also transfer cash or near cash
instruments to NSPEIT.



In February 2007, the Company announced that it had exchanged contracts for the
sale of its investment property, Rutland House. It is intended that the merger
will complete following completion of the sale of Rutland House (which is not
expected to occur until the end of June 2007) and that the proceeds of the sale
will therefore be reflected within the Rutland Net Asset Value per Share. If the
sale of Rutland House has not been completed prior to the close of business on
the Calculation Date, Rutland House shall remain an asset of the Company but its
value will not be reflected within the Rutland Net Asset Value per Share. Any
proceeds subsequently realised on the sale of Rutland House will be distributed
in cash to all Shareholders pro rata to their entitlements, regardless of
whether they receive cash or roll over their holdings of Shares into NSPEIT
Shares under the Scheme.



The choice between electing for NSPEIT Shares, a cash distribution or a
combination of the two will be a matter for each Shareholder to decide and will
be influenced by his or her personal, financial and tax circumstances and his or
her investment objectives. Accordingly, Shareholders should, before making any
Election, read carefully the information contained in the Circular. Shareholders
who are in any doubt as to the contents of this document or as to the action to
be taken should immediately seek their own personal financial advice from their
independent professional adviser authorised under the Financial Services and
Markets Act 2000.



New Star Private Equity Investment Trust PLC

Introduction

The merger will involve August adopting a new investment policy, appointing New
Star as its manager, changing its name to 'New Star Private Equity Investment
Trust PLC' and acting as the successor vehicle to the Company.



Investment management

Upon completion of the Proposals, the investment manager will be New Star, a
subsidiary of New Star Asset Management Group PLC. The New Star group of
companies provides asset management products and services to retail and
institutional investors worldwide and had total assets under management of
approximately #22.9 billion as at 31 March 2007.



New Star is authorised and regulated by the Financial Services Authority and as
such is subject to its rules in the conduct of its investment business.



New Star will appoint Paul Craig and Nick Brind to manage the Company's assets.
Mr Craig joined New Star from Exeter Asset Management in September 2003 and is a
director of New Star. He has 19 years of investment management experience,
including 10 years gained at Exeter Asset Management. He is responsible for the
management of four unit trusts with combined assets of #390 million as at 31
March 2007. Mr Craig is currently rated ''AA'' by Citywire. Mr Brind joined New
Star from Exeter Asset Management in April 2005. He has 12 years of investment
experience, including eight years at Exeter Asset Management and two years at
Capel-Cure Myers. He is responsible for the management of two closed-end funds
with combined assets of #208 million as at 31 March 2007. Mr Brind holds a BSc
in chemistry from the University of Southampton and the Securities Institute
Diploma.



An advisory committee will provide support to New Star through sourcing and
assessing proposed investments in private equity limited partnerships. The
advisory committee will be chaired by Michael Langdon, Chairman of Rutland
Partners.



Management arrangements

The Company has given notice, conditional on the Proposals becoming effective,
to the Investment Manager, Rutland Fund Management Limited, to terminate the
Management Agreement with effect from 13 September 2007. Assuming the Company is
placed into liquidation on 2 July 2007, fees totalling #26,000 (exclusive of any
amounts in respect of value added tax) will be payable to the Investment Manager
after the date of liquidation. The Company has also agreed to pay to the
Investment Manager an additional investment management fee of #75,000 (exclusive
of any amounts in respect of value added tax) in respect of services relating to
the implementation of the Proposals which the Investment Manager has provided
and which fall outside the scope of the Management Agreement.



The Company entered into service contracts with each of the Directors (or
persons associated with them) at or around the time they became directors of the
Company and intends to give written notice to terminate such service contracts
in accordance with their terms upon, and subject to, the passing of the special
resolutions to be proposed at the First Extraordinary General Meeting. The
Directors (or persons associated with them) will consequently be entitled to 12
months' fees from the date of such written notice. Such fees amount in aggregate
to #114,411 (exclusive of any amounts in respect of value added tax).



New Star will be entitled to a basic management fee (exclusive of any amounts in
respect of value added tax) of 1.25 per cent. per annum of the assets invested
in limited partnerships and direct private equity interests and 0.75 per cent.
per annum on all other assets.



New Star will also be entitled to a performance fee (exclusive of any amounts in
respect of value added tax) of 10 per cent. of any return in excess of 8 per
cent per annum. The performance fee will be subject to a high watermark
provision such that only growth in the total return on net asset value per share
from a previous high point will attract a performance fee. The management
agreement will be for an initial period of 2 years with a rolling 12 month
notice period thereafter.



Initial portfolio

Immediately following the merger, assuming no new investments, divestments or
commitments to private equity vehicles, it is expected that NSPEIT's unlisted
portfolio will comprise the investments listed below:



                                                    Estimated Value (# million)*

August Equity managed funds                                  28.9
The Rutland Fund                                             23.9
Other limited partnerships and direct investments            13.6
Total                                                        66.4

*Based on estimated valuations as at close of business on 21 May 2007



In addition it is expected that NSPEIT will have commitments totalling #73
million comprising remaining commitments in existing funds of #33 million, new
commitments of #30 million to August Equity Partners II, managed by August
Equity Investments Limited, and #10 million to Rutland Fund II, managed by
Rutland Partners. NSPEIT expects to arrange borrowing facilities to allow for an
over-commitment policy.



Board

The existing directors of August, being John Mackie (Chairman), Terry Connor,
Barry Dean and Ian Orrock will remain in place and John Duffield, Chairman of
New Star, will be appointed on completion of the Proposals as a non-independent
director.



Costs

The Company's costs under the Proposals, which are estimated at #0.99 million
(inclusive of amounts in respect of value added tax), will be shared across the
Shareholders. August's costs under the Proposals are estimated at #0.86 million
(inclusive of any amounts in respect of value added tax) of which #0.48 million
will be applied pro rata against the net assets of August attributable to all
those shareholders of August on the register of members of August prior to its
merger with the Company and the remaining #0.38 million will be applied pro rata
against the net assets of NSPEIT attributable to all those shareholders on the
register of members of NSPEIT following implementation of the Proposals
(including the Shareholders who roll over into NSPEIT).



Financial effects of the Proposals

The net asset value of both August and the Company will be calculated at the
latest practicable date prior to the implementation of the Proposals. The net
asset values of each of August and the Company will be reviewed by their
respective auditors.



By way of illustration only, based on the relevant assumptions set out below, a
Shareholder would be entitled to 0.21 NSPEIT Shares (not taking into account any
retention as described below and in the Circular) or 68.3 pence for each Share
held. Based on the assumptions below, the effect of the proposals on the
Shareholders either electing to roll their entire holding into NSPEIT or
electing entirely for cash would have been as follows:



Successful Election of entire holding              Effect on net asset value (%)
NSPEIT                                              -1.4%
Cash                                                -1.0%



Underlying assumptions:

1.        The fixed costs and expenses incurred by August in respect of the
NSPEIT Tender Offer are #0.48 million (inclusive of amounts in respect of value
added tax) and the further costs and expenses incurred by August and charged to
it following implementation of the Proposals are #0.38 million (inclusive of
VAT).

2.        Stamp duty of 0.5 per cent. is charged to August on the consideration
of the NSPEIT Shares bought back.

3.        Holders of 40 per cent. of NSPEIT Shares elect to tender under the
NSPEIT Tender Offer at a price per share equal to 97 per cent. of the net asset
value of NSPEIT as calculated for the purposes of and in accordance with the
NSPEIT Tender Offer.

4.        The New Star Funds purchase NSPEIT Shares under the NSPEIT Matching
Facility or the NSPEIT Placing such that 28 per cent. of the NSPEIT Shares are
bought back by NSPEIT under the NSPEIT Tender Offer.

5.        August's NAV is 330.4 pence per share, per its published net asset
value at 31 December 2006.

6.        The Company's net asset value is 69 pence per Share as referred to in
the preliminary announcement of its results for the year ended 31 December 2006
which was made on 22 March 2007.

7.        Shareholders roll over holdings of Shares with a value of #30 million
into NSPEIT.

8.        The fixed costs and expenses incurred by the Company in respect of the
Scheme are #0.99 million (inclusive of amounts in respect of value added tax).



Liquidation Fund and the Liquidators' Retention

As explained above, the Liquidators will set aside cash and other assets in an
amount which they consider sufficient to provide for the costs and liabilities
of the Company. As well as providing for all known liabilities of the Company,
the Liquidators will therefore also retain in the Liquidation Fund an amount
considered by them to be appropriate to provide for any unknown, unrecorded or
contingent liabilities, including tax. This amount is estimated to be #2.7
million. Substantially all of this amount of #2.7million relates to a liability
which could arise in connection with the disposal of an asset by the Company.
The Directors have been advised that such a liability should not arise and, in
accordance with the Company's normal accounting policies and procedures, no
provision has been made in respect of it. However, as there is a possibility
that the liability could arise, the Liquidators have, in accordance with their
usual practices, required a retention in an amount equal to the maximum possible
exposure of the Company. It is expected that this matter will be resolved within
12 months of the date of the liquidation.



It is the Liquidators' intention to invest all funds retained in the Liquidation
Fund in the best and most appropriate manner. If there is a need for the Company
to retain its status as an investment trust for tax purposes during the first
year of the liquidation the funds will be invested in Government securities. If
there is no such need they will be placed in the Insolvency Services Account at
the Bank of England where the rate is currently 6.5 per cent. per annum.



It should also be noted that the Company entered into a share purchase agreement
when it sold a business in March 2002. The share purchase agreement contains
customary warranties and indemnities which were given by the Company to the
purchaser of the business. The Company has not made any provision in its audited
accounts for the year ended 31 December 2006 for any contingent liabilities in
respect of these warranties and indemnities and has no reason to believe that
any claims will be made by the purchaser in respect of them. The Company is
currently engaged in discussions with third parties which it expects will result
in the Liquidators not being required to make any additional retention in
respect of these warranties and indemnities. However, dependent on the outcome
of these discussions, the Liquidators may determine that an additional amount of
up to #9million (which is the maximum liability of the Company in respect of
these warranties and indemnities) should be added to the Liquidation Fund and
retained until December 2008, when the claims period under the share purchase
agreement expires.



To the extent that any part of the Liquidation Fund is not required to meet the
Company's liabilities, the Liquidators will pay to each Shareholder the
proportion of such excess as the number of Reclassified Shares held by that
Shareholder bears to the total number of Reclassified Shares immediately before
the Effective Date, unless the amount otherwise payable to any such Shareholder
would be less than #3, in which case such amount will not be paid by the
Liquidators to the Shareholder concerned but will, instead, be aggregated with
any other like amounts and then paid by the Liquidators to a charity selected by
the Directors of the Company.



In certain circumstances, depending on the amount of any cash distribution
received by a Shareholder, an apportionment of the acquisition cost of such
Shareholder's Shares may be required for the purposes of UK taxation of
chargeable gains. Further information on the possible consequences of any such
apportionment is set out in the Circular.



Benefits of the Proposals

The Board considers the Proposals to have a number of advantages including:



*           providing Shareholders who elect for shares in NSPEIT with the
opportunity to invest in a listed vehicle with a more diversified portfolio of
private equity funds in the UK and Europe, managed by New Star (an established
UK fund manager) and, to the extent that such Shareholders are subject to UK tax
on chargeable gains, allowing them to do so without incurring an immediate
liability to UK tax on chargeable gains; and

*          offering Shareholders an opportunity to realise their investment for
cash at its prevailing net asset
value per share (after taking account of any costs associated with implementing
the Proposals).



Overseas Shareholders and Restricted Persons

Overseas Shareholders and Restricted Persons (as defined in the Circular) will
not receive Forms of Election. If the Scheme becomes effective, Overseas
Shareholders will be deemed to have made an Election for a cash distribution,
unless the Company receives satisfactory evidence before the First Extraordinary
General Meeting that an Overseas Shareholder is not a Restricted Person and may
receive a Form of Election and hold NSPEIT Shares without infringing any
relevant laws or regulations or other requirements in their relevant
jurisdiction, in which case that Overseas Shareholder will be entitled to make
an Election for NSPEIT Shares in respect of their Shares.



Restricted Persons will (unless the Company otherwise determines) be given (and
deemed to have elected for) cash directly from the Company in respect of their
entire holding unless they have satisfied the Directors that it is lawful for
NSPEIT to issue securities to them under the relevant overseas laws and
regulations.



UK taxation

A summary of the United Kingdom taxation consequences of the Proposals is set
out in Part IV of the Circular.



Approval and implementation of the Proposals

The Proposals are conditional on the passing by the Shareholders of the
Resolutions to be proposed at the First Extraordinary General Meeting convened
for 9.00 a.m. on 15 June 2007 and at the Second Extraordinary General Meeting
convened for 9.00 a.m. on 2 July 2007. Notices of these meetings are set out in
the Circular and a summary is provided below.



At the First Extraordinary General Meeting two special resolutions will be
proposed to:

*    sanction the Scheme; and

*    amend the Articles for the purposes of its implementation by:

     o   providing that upon the Second Extraordinary General Meeting being
         convened, the resolutions proposed thereat will be deemed to have been 
         passed notwithstanding the number of votes cast for those resolutions; 
         and

     o   setting out the rights of the A Shareholders and the B Shareholders in
         a winding up of the Company.


Each of these Resolutions will require the approval of at least 75 per cent. of
the votes cast at the meeting in person or by proxy.



Following the passing of these Resolutions, the listing of the Reclassified
Shares and the segregation of the assets of the Company, further special and
extraordinary resolutions will be proposed at the Second Extraordinary General
Meeting. These further resolutions (which will be deemed to have been passed
under the amended Articles approved by Shareholders at the First Extraordinary
General Meeting) will:

*         approve the winding up of the Company;

*         appoint the Liquidators; and

*         confer appropriate powers on the Liquidators.



If the Proposals are approved they will bind all Shareholders whether or not
they have voted in favour of the Proposals at the Meetings save for those
Shareholders who validly dissent as provided in section 111(2) of the Insolvency
Act 1986.



Action to be taken

The Circular contains full instructions for the actions to be taken by
shareholders in relation to elections and proxies.



Enquiries


Michael Langdon                                                 020 7556 2600
Chairman, Rutland Partners LLP

Ravi Anand                                                      020 7225 9200
New Star Asset Management Limited

Howard Myles                                                    020 7951 2000
Ernst & Young LLP



JPMorgan Cazenove Limited, which is regulated in the United Kingdom by the
Financial Services Authority, is acting for August and no-one else in connection
with the proposals  and will not be responsible to anyone other than August for
providing the protections afforded to clients of JPMorgan Cazenove Limited or
for providing advice in relation to the proposals.



Ernst & Young LLP, which is regulated in the United Kingdom by the Financial
Services Authority, is acting for Rutland and no-one else in connection with the
proposals and will not be responsible to anyone other than Rutland for providing
the protections afforded to clients of Ernst & Young LLP or for providing advice
in relation to the proposals.



This announcement does not constitute, or form any part of, any offer for, or
solicitation of any offer for, securities.  Any acceptance or other response to
the Proposals should be made on the basis of the information contained in the
Circular.








                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

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