Circ re voluntary liquidation

RNS Number:6703V
Govett Asian Income & Growth Fnd Ld
20 February 2004

Govett Asian Income & Growth Fund Limited



Proposed voluntary winding-up of the Company



The Company has today posted a Circular to Shareholders seeking their approval
for the Company to be placed into a voluntary liquidation and setting out
proposals for the distribution of the Company's assets (after payment of its
liabilities) on such winding-up.



Introduction



The Board announced on 20 June 2003 that, in view of the level of the Company's
assets, it was considering all the strategic options for the future of the
Company.  This wide-ranging review to seek to enhance Shareholder value has been
ongoing since that date.



On 17 November 2003the Board announced that it had appointed Gartmore as
Manager of the Company following the announcement by AIB of the intended sale of
certain of the management contracts of Govett (who, at that time, was the
Company's investment manager) to Gartmore Investment Management Plc.  Prior to
that announcement by AIB, the Board had been close to finalising its review of
the strategic options available to the Company.  However, with the change of
Manager, the Board considered it necessary to give Gartmore time to gain a
deeper understanding of the Company and to allow it also to consider the future
viability of the Company.



As announced on 29 January 2004, the Board has held discussions as to the
strategic options available for the future of the Company with its advisers, its
major Shareholders and Gartmore and has concluded that in view of the current
size of the Company, its total expense ratio and the level  of discount at which
the Shares have traded historically, it would be in the best interests of
Shareholders as a whole if proposals were put to Shareholders to wind-up the
Company voluntarily and for the Company's assets (after payment of its
liabilities) to be distributed to Shareholders on such a winding-up.



Background to and reasons for the Proposals



The Company was launched in April 2001 through a placing and the issue of Shares
to shareholders of Govett Emerging Markets Investment Trust PLC in connection
with the scheme of reconstruction of that company.  The Company has an
indefinite life but, under the Articles of Association, Shareholders would have
been given the opportunity at the annual general meeting in 2009 to decide
whether the Company should continue as an investment company for a further five
year period.  The substantial decline in the assets of the Company (see further
below) led to the Board undertaking its review of the future of the Company
which, together with the wishes of the Company's largest Shareholder to realise
itsinvestment, has resulted in the Board's decision that the question of
whether to continue should be considered by Shareholders now.



Total assets of the Company at the time of launch in April 2001 were
approximately #63.3 million, comprising Shareholders' funds of #37.4 million and
bank debt of #25.9 million.



The investment objective of the Company has been to provide a high level of
income on the Shares as well as the potential for capital growth.  The
investment policy at launch was that the Company's portfolio be divided into two
parts.  Initially, approximately one half of the Company's portfolio was
invested in the Asian Portfolio and the other half in the Income Portfolio.  In
line with the Company's prospectus, dated 28 February 2001, approximately 80 per
cent. of the Income Portfolio was initially invested in income shares and geared
ordinary shares of split capital investment trusts and other closed-end funds,
with the balance in corporate and sovereign bonds.



Since launch the Company has experienced poor global equity markets which
combined with the structural gearing of the Company has contributed to a
substantial decline in the assets of the Company.  In the face of such market
conditions the Company was forced to reduce its structural gearing in the
financial year to 31 March 2003 and repaid #16.4 million of its Bank Facility
(together with associated Swap Arrangements termination costs of approximately
#0.7m), thereby cutting the level of theCompany's debt from #25.9 million to
#9.5 million.



The total assets of the Company as at the close of business on 17 February 2004
(which excludes current year revenue reserves) were approximately #19.9 million
as compared to #63.3 million atlaunch.  This represents a reduction of 69 per
cent., inclusive of the repayments of the Bank Facility during the period.  The
NAV per Share fell 72 per cent. over the same period, from 96.25p to 26.74p.



Within the Income Portfolio, bond returns have provided a regular source of
income.  However, the difficulties faced by investment companies and the partial
repayment of the Bank Facility referred to above has adversely affected the
income stream received by the Company.  Consequently, the Company was required
to reduce the dividend payments from 8.0p paid in respect of the year ended 31
March 2002 to the current level of 2.0p per Share.



The Board also considers that, with the reduction in the Company's net income
and assets, the annual running costs now represent an excessive proportion of
the annual income and total assets of the Company.  Indeed, in the current
financial year, as was the case in the previous financial year, the Board
expects that the total expenses of the Company (including loan interest,
management fees and other administration expenses) will exceed the total net
income of the Company.  Total expenses for the six months to 30 September 2003
were #558,000.  On an annualised basis, this level of expense ratio equates to
5.6 per cent. of the total assets of the Company as at the close of business on
17 February 2004.



Since January 2002, the Shares have usually traded at a significant discount to
net asset value.  The discount for over the last twelve months to 28 January
2004 (the day prior to the announcement of the Board's intention to propose a
voluntary winding-up of the Company) averaged 32 per cent., with a high and low
of 49 per cent. and 17 per cent. respectively.  The discount as at 28 January
2004 was 17 per cent. (Source: Thomson Financial Datastream).



As part of its review, the Board, with its financial advisers Hoare Govett, has
considered a wide range of possible options including seeking a merger with
another closed-ended fund, becoming open-ended, buying back shares and/or
changing the Company's investment mandate, but does not believe that any such
proposals would have gained the necessary support of Shareholders.  In the
absence of an acceptable proposal to deliver long term value to Shareholders in
a capital structure which the Board believes would be acceptable to
Shareholders, the Board has concluded that it would be in the best interests of
Shareholders for proposals to be put to Shareholders now for a voluntary
winding-up of the Company.



In the event that the Proposals are not passed by the required majority of
Shareholders at the Meeting, the Board intends to continue to manage the Company
with the same investment objective and investment policy as currently adopted.



The Proposals

Under the Proposals, it is proposed that the Company will be wound-up
voluntarily and that Stephen Le Page and John Dunford of PricewaterhouseCoopers
be appointed Liquidators of the Company.  The Liquidators will set aside
sufficient assets in a Liquidation Fund to meet the Company's liabilities
including the costs of the Proposals (see "Costs of the Proposals" below).  The
Liquidators will also provide in the Liquidation Fund fora Retention which they
consider sufficient to meet any contingent and unknown liabilities of the
Company.  This Retention is currently expected not to exceed #100,000.

On the basis of the published NAV of the Company as at the close of business on
17 February 2004, the net assets of the Company available for distribution on a
liquidation would be approximately #9.58 million (equivalent to approximately
24.7p per Share).  This assumes the successful realisation of all the
investments in splitcapital investment trusts at bid prices and the other
investments in the Income Portfolio and the investments in the Asian Portfolio
at carrying values, the Retention not being utilised and deducts the estimated
costs of the Proposals (see "Costs ofthe Proposals" below).

Depending on prevailing market conditions and the Directors being satisfied that
the Proposals will be approved by the Shareholders, the Company may dispose of
some of its portfolio prior to the Meeting.  If the Resolution is approved by
Shareholders, the Company will repay the Bank Facility before filing the
Resolution with H.M. Greffier.  It is expected that the Resolution will be filed
on 19 March 2004.  Upon filing, the winding-up will take effect. The size and
timing of the liquidation distributions will depend on the timing and amount
actually realised on the sale of the Income Portfolio and Asian Portfolio.  The
Liquidators expect to make an initial capital distribution in the week
commencing 29 March 2004 to Shareholders on the Register at the close of
business on 19 March 2004.  It is currently expected that the initial capital
distribution will be of a sum equivalent to at least 98 per cent. of the
Company's realised resources (less the Liquidation Fund) which are available at
the time of making the distribution.  Based on the assumptions stated in the
previous paragraph and assuming that the entire portfolio has been realised
prior to such distribution being made, the initial capital distribution would be
approximately 23.9p per Share.

The assumed balance of the Company's assets including the Retention, would
potentially be available for future distributions to Shareholders.  The size and
timing of any future distributions will again depend on the timing and amount
actually realised on the sale of the Company's assets and also the ongoing costs
payable during the liquidation and settlement of any currently unknown or
contingent liabilities.

In order to facilitate payment of theinitial capital distribution, the Register
will be closed at the close of business on 19 March 2004 and, to be valid, all
transfers must be lodged and transactions of CREST settled before that time.
Transfers received by the Registrars after the close of business on 19 March
2004 will be returned to the person lodging them.  Shareholders should be aware
that dealings in the Shares after close of business on 16 March 2004 will be for
cash settlement only.

If any distribution otherwise payableto a Shareholder is, in aggregate, of an
amount of #3.00 or less, such distribution will not be made to such Shareholder
but instead carried forward and if not ultimately distributed together with a
subsequent distribution, paid by the Liquidators to Macmillan Cancer Relief.

If the Proposals become effective, dealings in Shares on the London Stock
Exchange and the Channel Islands Stock Exchange will be suspended at the close
of business on 11 March 2004 and on the same date the listing on theOfficial
List will be suspended.

Shareholders should note that the amount finally distributed may be different
from the current carrying value of the underlying investments due to a variety
of factors including movement in the value of the underlying assets, the level
at which assets can be realised, the exact amount payable due to the early
termination of Swap Arrangement (as detailed below), settlement of any currently
unknown or contingent liabilities and ongoing costs associated with running the
Company and the realisation process.

Shareholders should also note that it cannot be guaranteed that the Company will
be able to dispose of its entire portfolio prior to the Liquidators making the
initial capital distribution.

Dividends

As part of the Proposals, the Directors today announced a Fourth Interim
Dividend for the year ended 31 March 2004 of 0.5p per Share.  The Fourth Interim
Dividend will be paid on 12 March 2004 to those Shareholders on the Register as
at 5 March 2004.

Repayment of the Company's Bank Facility

As described above, the Company repaid approximately #16.4 million of its #25.9
million Bank Facility and terminated a similar proportion of the Swap
Arrangements during the financial year ended 31 March 2003.

In connection with the Proposals, the remaining #9.5 million of the Bank
Facility (which is due for repayment in 2009) will be repaid following the
Resolution being passed and prior to the Effective Date.  In addition, it is
proposed that the Company's Swap Arrangements with Bank of Scotland will be
terminated, which will trigger the requirement to pay breakage costs.

On the assumption that there are no changes to the relevant circumstances, it is
estimated that the costs associated with the early repayment of the Bank
Facility and the early termination of the Swap Arrangements will be
approximately #370,000.  This amount has been deducted for the purposes of
calculating the estimated initial capital distribution referred to above.  The
actual breakage costs associated with the early termination of the Swap
Arrangements payable by the Company will be dependent on the prevailing interest
rates at the time of termination.  Any change from the current estimate referred
to above will affect the amount available for distribution to Shareholders.

Costs of the Proposals

The expenses incurred in relation to the Proposals (including all financial
advice, other professional advice, the current estimate of the breakage costs
associated with the early termination of the Company's Swap Arrangements
referred to above, the compensation payable to Gartmore referred to below and
the Liquidators' charges) are currently estimated to amount to approximately
#615,000.

The payment of fees to the Directors will cease when the Liquidators are
appointed, and no payments for loss of office will be made.

As noted in the last Report & Accounts for the year ended 31 March 2003, the
Board served protective notice on 13 June 2003 on Govett in respect of its
management agreement and the terms of that management agreement, which was
novated to Gartmore, required twelve months' notice to be given to the manager.
The protective notice served on Govett is binding on Gartmore and accordingly
Gartmore will only be entitled to compensation for early termination in respect
of the period from the Effective Date up to and including 12 June 2004.  It is
currently estimated that the cost to the Company of the early terminationof the
management agreement will be approximately #46,000.

Extraordinary General Meeting

The implementation of the Proposals will require Shareholders to vote in favour
of the Resolution at the EGM, which has been convened for 11.00 a.m. on
Wednesday, 10 March 2004.  The Proposals are conditional on the passing of the
Resolution at the EGM.  If the Resolution is passed, the Proposals will take
effect upon the filing of the Resolution with H.M. Greffier which is expected to
be on 19 March 2004.



Commitments to support the Proposals

The Company has received irrevocable undertakings to vote in favour of the
Proposals in respect of 11,463,657 Shares (representing 29.5 per cent of the
issued share capital of the Company).

Recommendation

The Board, which has been advised by Hoare Govett Limited, considers the
Proposals set out in this document to be in the best interests of Shareholders
as a whole.  In providing its advice, Hoare Govett Limited has placed reliance
on theDirectors' commercial assessment of the Proposals.

                                      Ends



Enquiries:



Hugh Field                    Hoare Govett               020 7678 8000



The definitions used in this announcement are as setout in the Circular.



Hoare Govett Limited is acting for Govett Asian Income & Growth Fund Limited and
no one else in connection with the Proposals and will not be responsible to any
person other than Govett Asian Income & Growth Fund Limited for providing
protections afforded to clients of Hoare Govett Limited or for providing advice
in relation to the Proposals.



A copy of the Circular to Shareholders is available for inspection at the UKLA's
Document Viewing facility at 25 The North Colonnade, Canary Wharf, London E14
5HS.


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

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