Proposals re winding up / Reconstruction of the Company
11 Setembro 2008 - 12:06PM
UK Regulatory
M&G Income Investment Company Limited
Recommended proposals for the winding-up and reconstruction of the Company
11 September 2008
Introduction
The Board of M&G Income Investment Company Limited (the ``Company'') has today
announced recommended proposals for the reconstruction and voluntary
liquidation of the Company. Under the Proposals, Shareholders and Package
Unitholders will be able to roll over some or all of their investment in a tax
neutral manner by electing to receive Securities in one or more of the Rollover
Funds or to realise their investment for cash payable to them in the
liquidation of the Company.
Background to the Proposals
The Company was launched as a closed-ended investment company in October 2001
with a planned winding-up date of 31 October 2008. Under the Articles, the
Directors are obliged to convene an extraordinary general meeting on 31 October
2008, at which a resolution to place the Company into voluntary liquidation
must be proposed, unless on or before that date the Directors have been
released from such obligation by proposing a special resolution of the Company.
Liquidation without rollover options would result in all Shareholders and
Package Unitholders receiving cash for their investment and, depending on their
individual circumstances, incurring a potential liability to capital gains tax
or realising an allowable loss.
The Proposals
Under the Proposals, the Company will be wound up on 31 October 2008.
Shareholders and Package Unitholders will have a choice between continuing
their investment by electing for one or more of the rollover options listed
below and/or realising some or all of their investment for cash under the Cash
Option. The Options are as follows:
For Package Unitholders: the Package Unit Option - to receive M&G HIT Package
Units; and/or the Income & Growth Unit Option - to receive M&G HIT Income &
Growth Units; and/or the M&G Extra Income Fund Option - to receive M&G Extra
Income Fund Shares; and/or the M&G Recovery Fund Option - to receive M&G
Recovery Fund Shares; and/or the Cash Option - to receive cash in the
liquidation of the Company.
For Ordinary Shareholders: the Package Unit Option - to receive M&G HIT Package
Units; and/or the Income & Growth Unit Option - to receive M&G HIT Income &
Growth Units; and/or the M&G Extra Income Fund Option - to receive M&G Extra
Income Fund Shares; and/or the M&G Recovery Fund Option - to receive M&G
Recovery Fund Shares; and/or the Cash Option - to receive cash in the
liquidation of the Company.
For Zero Dividend Shareholders: the Zero Dividend Option - to receive M&G HIT
Zero Dividend Shares; and/or the Package Unit Option - to receive M&G HIT
Package Units; and/or the Income & Growth Unit Option - to receive M&G HIT
Income & Growth Units; and/or the M&G Extra Income Fund Option - to receive M&G
Extra Income Fund Shares; and/or the M&G Recovery Fund Option - to receive M&G
Recovery Fund Shares; and/or the Cash Option - to receive cash in the
liquidation of the Company.
In calculating Shareholders' and Package Unitholders' entitlements under the
Options each Ordinary Share will be valued at its Terminal Asset Value. For
illustrative purposes only, if the Company had been wound up at 12 noon on 5
September 2008 it is estimated that the Terminal Asset Value per Share would
have been 14.60 pence (excluding the costs incurred in realising some of the
portfolio of the Company but taking account of the Retention and an estimated
accrual for the Final Interim Dividend described below). Ordinary Shareholders
should be aware that the actual Terminal Asset Value per Ordinary Share will
differ from the current net asset value per Ordinary Share and the estimate
given above, because the value of the Company's assets will be subject to
market movements until the Calculation Date and because it may be necessary for
the Company to incur further costs in relation to the Proposals, including the
cost of realising some of its assets. Subject to there being sufficient assets
in the Company, each Zero Dividend Share will be valued at 56.60 pence. This
represents an amount equal to the final entitlement per Zero Dividend Share
provided for under the Articles. Each Package Unit will be valued as the sum of
56.60 pence (in respect of the Zero Dividend Share contained within it, subject
to there being sufficient assets in the Company) and the Terminal Asset Value
of two Ordinary Shares (in respect of the two Ordinary Shares contained within
it). For illustrative purposes only, if the Company had been wound up at 12
noon on 5 September 2008 it is estimated that the Terminal Asset Value per
Package Unit would have been 85.80 pence (excluding the costs incurred in
realising some of the portfolio of the Company but taking account of the
Retention and an estimated accrual for the Final Interim Dividend described
below). Package Unitholders should be aware that the actual Terminal Asset
Value per Package Unit will be different from the current net asset value per
Package Unit and the estimate given above, because the value of the Company's
assets will be subject to market movements until the Calculation Date and
because it may be necessary for the Company to incur further costs in relation
to the Proposals, including the cost of realising some of its assets.
Advantages of the Proposals
The Directors believe that the Proposals are in the best interests of
Shareholders and Package Unitholders taken as a whole because they offer
greater choice and flexibility than if the Company were simply wound up since
the Proposals enable Shareholders and Package Unitholders to continue their
investment, in a tax neutral manner, in the Rollover Funds in addition to being
able to realise their investment for cash under the Cash Option; the
opportunity to elect for shares in M&G High Income, enabling Shareholders and
Package Unitholders to maintain their exposure to UK equities within a listed
closed-ended investment company under the management of M&G following a similar
investment strategy to that of the Company; and the potential to avoid certain
dealing and other costs associated with a share purchase in the secondary
market.
The choice between the various Options available under the Proposals will be a
matter for each Shareholder and Package Unitholder to decide and will be
influenced by their individual financial and tax circumstances and investment
objectives.
The Rollover Funds
Under the Proposals, Shareholders and Package Unitholders have the choice of
electing for Securities in one or more of the Rollover Funds. Information on
each of these Rollover Funds is set out below.
M&G High Income
M&G High Income, a UK investment trust managed by Nick Evans (also the fund
manager with primary responsibility for the day-to-day management of the
Company's portfolio), invests substantially in UK equities quoted on the London
Stock Exchange, with the aim of achieving an above average and increasing
income over the 20 year life of the company while at the same time seeking to
achieve capital growth.
M&G Extra Income Fund
The M&G Extra Income Fund, managed by Richard Hughes (M&G's Director of
Investment Trusts and a Director of the Company), is managed to provide
investors with a high income through a portfolio of UK equities and high
quality corporate bonds (in order to aid income generation). The M&G Extra
Income Fund targets a yield that is 50% higher than that of the FTSE All-Share
Index. Although this gives the M&G Extra Income Fund a bias towards the higher
yielding sectors of the market, it aims to have a broadly diversified portfolio
within these yield constraints.
M&G Recovery Fund
The M&G Recovery Fund, managed by Tom Dobell, focuses on troubled companies
where a good management team is making concerted efforts to turn the business
around. The fund manager seeks opportunities from across the UK stockmarket and
the portfolio will contain a wide and interesting mix of companies. The sole
aim of the M&G Recovery Fund is capital growth and there is no particular
income yield target.
Default Provisions
Shareholders and Package Unitholders who do not make a valid Election for the
purposes of the Proposals will be deemed to have made Elections on the
following basis:
* Package Unitholders will be deemed to have elected for the Package Unit
Option;
* Ordinary Shareholders will be deemed to have elected for the Income & Growth
Unit Option; and
* Zero Dividend Shareholders will be deemed to have elected for the Zero
Dividend Option,
unless either (i) the Zero Dividend Option or the Income & Growth Unit Option
is not available fully or partially in which case the provisions contained in
the section headed ``Scaling back'' below apply or (ii) none of the M&G High
Income Options are available in the event that the M&G High Income Resolution
is not passed in which case Shareholders and Package Unitholders will be deemed
to have elected for the M&G Extra Income Fund.
Scaling back
Shareholders and Package Unitholders should note that if full satisfaction of
Elections (including deemed Elections) and the proposed Placing by M&G High
Income would result in the capital structure of M&G High Income not being in
the Standard Proportion, the Directors, M&G and Numis Securities reserve the
right to determine in their absolute discretion that Elections for the Zero
Dividend Option or the Income & Growth Unit Option will be deemed to be
Elections for the Package Unit Option.
In order to ensure that the capital structure of M&G High Income remains in the
Standard Proportion, the scaling back provisions will be implemented as
follows:
* If there is a need to scale back applications for M&G HIT Zero Dividend
Shares, the issue of M&G HIT Zero Dividend Shares under the Scheme will be
scaled back on a pro rata basis by issuing M&G HIT Package Units to those
Shareholders who have elected or are deemed to have elected for M&G HIT Zero
Dividend Shares.
* If there is a need to scale back applications for M&G HIT Income & Growth
Units, the issue of M&G HIT Income & Growth Units will be scaled back: first,
by issuing M&G HIT Package Units on a pro rata basis to those Shareholders who
have elected or are deemed to have elected for M&G HIT Income & Growth Units;
and second, by scaling back subscriptions for M&G HIT Income & Growth Units
under the Placing, at the discretion of the board of M&G High Income, by not
issuing M&G HIT Income & Growth Units to placees and returning the subscription
monies.
M&G High Income shareholder approval
In order to satisfy Elections for the M&G High Income Options, it is necessary
for M&G High Income to put an enabling resolution to its shareholders. The
necessary meeting has been convened for 21 October 2008.
If the M&G High Income Resolution is not passed, all Elections (including
deemed Elections) for the M&G High Income Options, will be deemed to be
Elections for the M&G Extra Income Fund.
Liquidation Fund
Under the Proposals, the Company will be wound up by means of a voluntary
liquidation. The Liquidators will set aside sufficient assets in the
Liquidation Fund to meet its known actual and contingent liabilities and will
also provide in the Liquidation Fund for a Retention which they consider
sufficient to meet any unascertained and unknown liabilities of the Company.
The Retention is currently expected to amount to approximately �150,000 or 0.05
pence per Ordinary Share (0.1 pence per Package Unit). In order to avoid the
Liquidation Fund needing to be a higher amount to take into account the
dividends in underlying investments which have been declared but which the
Company has not received as at the Effective Date, M&G has agreed to provide an
indemnity to the Liquidators to cover such amount.
Shareholder meetings
Shareholders are being asked to vote on the Proposals because the Directors are
required to obtain the consent of the Shareholders to the Proposals pursuant to
the Articles.
At the General Meeting of the Ordinary Shareholders, the Ordinary Shareholders
and Package Unitholders will be asked to vote on an Extraordinary Resolution to
approve the passing of the Resolutions at the First EGM and any variation to
the special rights attached to their Ordinary Shares resulting from the
amendments to the Articles proposed pursuant to the Proposals. The
Extraordinary Resolution will require the approval of 75 per cent. or more of
the votes cast at the relevant Meeting, whether in person or by proxy.
At the First EGM, at which all Shareholders and Package Unitholders are
entitled to vote, the first Special Resolution will be proposed to reclassify
the Shares in accordance with the Elections (made or deemed to be made) and to
amend the Articles of the Company for the purposes of implementing the Scheme.
The second Special Resolution will be proposed to sanction the Scheme and
authorise its implementation by the Liquidators. The third Special Resolution
will be proposed to approve the winding-up of the Company on the Effective
Date, appoint the Liquidators and confer the appropriate powers on them. The
Special Resolutions will require the approval of 75 per cent. or more of the
votes cast at the Meeting, whether in person or by proxy. If the third Special
Resolution to be proposed at the First EGM is not passed, a Special Resolution
will be proposed at the Second EGM, at which all Shareholders and Package
Unitholders are entitled to vote, to wind up the Company voluntarily. At the
Second EGM, Shareholders entitled to vote and who vote in favour of the
winding-up resolution shall collectively have such total number of votes on a
poll, as is four times the aggregate number of votes cast against the Special
Resolution.
Final Interim Dividend
Under the Proposals, the Directors will declare a Final Interim Dividend equal
to their best estimate of the revenue profits of the Company (including
accumulated revenue reserves) available for distribution. The Directors
currently intend, based on estimates as at 12 noon on 5 September 2008 and
subject to market conditions, to pay a Final Interim Dividend of not less than
0.2 pence per Ordinary Share (or 0.4 pence per Package Unit), which is expected
to be paid on or about 29 October 2008 to Ordinary Shareholders and Package
Unitholders on the Register on 24 October 2008. If this amount of the Final
Interim Dividend was paid, the total dividend paid by the Company in respect of
the year ending 31 October 2008 would be 3.48 pence per Ordinary Share (6.96
pence per Package Unit), which would compare with the total dividend of 2.94
pence per Ordinary Share (5.88 pence per Package Unit), which was paid by the
Company in respect of the year ended 31 October 2007.
Any balance remaining in the Company's revenue reserve after the Final Interim
Dividend has been paid will be taken into account when calculating the Terminal
Asset Value of the Ordinary Shares.
Costs and expenses
Management and administration agreement
The existing agreement for investment management and administration services
between the Company and M&G Guernsey will be terminated on the Effective Date
and M&G Guernsey has waived its right to receive any termination payment.
General
The Company's total costs in connection with the Proposals are estimated to be
approximately �725,000 (before taking account of any contribution from M&G
Securities Limited set out below and excluding the costs incurred in realising
some of the portfolio of the Company) and the Retention is estimated to be �
150,000.
For the avoidance of doubt, each Rollover Fund shall bear any stamp duty and
stamp duty reserve tax payable in respect of the transfer of assets from the
relevant Fund to the Rollover Fund.
Contribution by M&G Securities Limited
The Company has negotiated that M&G Securities Limited will make a cash
contribution, based on the value of the assets rolled over into M&G High
Income, to offset the costs borne by the Company in connection with the
Proposals. To the extent the M&G High Income Options are available M&G
Securities Limited will make a cash contribution to the Company equal to the
lesser of 0.5 per cent. of the M&G High Income Asset Transfer Value and the
Company's total costs in connection with the Proposals. On the basis of the
Assumptions, the net costs borne by the Company, taking account of the
contribution from M&G Securities Limited, are estimated to be approximately �
295,000 (excluding portfolio realisation costs). If the M&G High Income Options
are not available, M&G Securities Limited will meet the Company's costs (up to
a maximum of �350,000) which have been included as a result of the Company's
participation in the Scheme, excluding the costs which would have been incurred
by the Company in preparing for and implementing its liquidation.
Conditions to the Proposals
The Scheme which provides for, and which will effect, the Options, is
conditional inter alia upon the passing by Shareholders of all Resolutions to
be proposed at the General Meeting of Ordinary Shareholders and at the First
EGM (or at any adjournments thereof); the UK Listing Authority consenting to
the amendment to the Official List to reflect the reclassification of the
Shares as Reclassified Shares; and the Directors of the Company not resolving
to abandon the Scheme.
The winding-up of the Company is conditional on the passing of the third
Special Resolution, being the winding-up resolution, by Shareholders at the
First EGM. If the third Special Resolution to be proposed at the First EGM is
not passed at the First EGM, a Special Resolution will be proposed at the
Second EGM to wind up the Company voluntarily.
Restricted Persons
Restricted Persons will not receive a Form of Election, will not be entitled to
submit a valid CREST Election and will (unless the Directors determine
otherwise) receive cash directly from the Company in respect of their entire
holding of Shares unless they have satisfied the Directors that it is lawful
for the Rollover Funds to issue Securities to them under any relevant overseas
laws and regulations.
Expected timetable
Tuesday 14 October Date from which it is advised that dealings
2008 in Shares should only be for cash settlement
and immediate delivery of documents of title
Friday 17 October 2008 4.30 p.m. Latest time and date for receipt of Forms of
Election and CREST Elections from
Shareholders and Package Unitholders;
5.00 p.m. Record Date for entitlements of Shareholders
and Package Unitholders under the Proposals;
5.00 p.m. The Company's Register closes;
Monday 20 October 2008 11.00 a.m. Latest time and date for receipt of Forms of
Proxy for the General Meeting of the Ordinary
Shareholders;
11.05 a.m. Latest time and date for receipt of Forms of
Proxy for the First EGM;
Wednesday 22 October 11.00 a.m General Meeting of Ordinary Shareholders;
2008
11.05 a.m. First EGM;
(1)
Friday 24 October 2008 5.00 p.m. Record date for entitlements to the Final
Interim Dividend expected to be paid on or
about 29 October 2008;
Wednesday 29 October Payment date for Final Interim Dividend;
2008
10.30 a.m. Latest time and date for receipt of Forms of
Proxy for the Second EGM;
12.00 noon Calculation Date;
12.00 noon Calculation of the issue price of Securities
in M&G High Income to be issued pursuant to
the Scheme;
Friday 31 October 2008 8.00 a.m. Opening of the Company's Register of
Shareholders and dealings in Reclassified
Shares expected to commence;
Effective Date for the implementation of the
Proposals;
10.30 a.m. Second EGM;
Company placed into liquidation;
12.00 noon Calculation of the issue price for M&G Extra
Income Fund Shares and the M&G Recovery Fund
Shares;
Issue of the M&G Extra Income Fund Shares and
the M&G Recovery Fund Shares;
Dealings in Reclassified Shares suspended;
Monday 3 November 2008 Confirmation letters dispatched for
Securities issued in uncertified form in
respect of the M&G Extra Income Fund Option
and the M&G Recovery Fund Option;
Week commencing Monday Cheques dispatched in respect of the Cash
3 November 2008 Option;
CREST accounts credited with cash in respect
of the Cash Option;
Securities issued in uncertified form
credited to the stock accounts in CREST of
the persons entitled thereto in respect of
the M&G High Income Options;
Certificates despatched for Securities issued
in certificated form in respect of the M&G
High Income Options;
By Friday 30 October Listing of Reclassified Shares cancelled.
2009
Note: (1) or as soon thereafter as the immediately preceding meeting shall have
concluded or been adjourned.
The information in this announcement should be read in conjunction with the
full text of the Circular. Capitalised terms used in this announcement shall,
unless the context otherwise requires, bear the meaning given to them in the
Circular issued by M&G Income Investment Company Limited dated 11 September
2008.
Copies of the Circular have been submitted to the UK Listing Authority and will
shortly be available for inspection at the UK Listing Authority's Document
Viewing Facility which is situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS
Tel. no. 020 7066 1000
This announcement and the information contained herein is not for publication,
distribution or release in, or into, directly or indirectly, the United States,
Canada, Australia or Japan and does not constitute, or form part of, an offer
of securities for sale in or into the United States, Canada, Australia or
Japan.
This announcement should not be construed as advice relating to legal, taxation
or any other matters and does not constitute a recommendation to sell or the
solicitation of an offer to subscribe for or buy, nor shall there be any sale
of, any securities in any jurisdiction in which such offer, solicitation or
sale would be unlawful or would impose any unfulfilled registration,
publication or approval requirements on the Company or Numis Securities
Limited.
The contents of this announcement include statements that are, or may be deemed
to be "forward looking statements". These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms "
believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "
should". They include the statements regarding the target aggregate dividend.
By their nature, forward looking statements involve risks and uncertainties and
readers are cautioned that any such forward-looking statements are not
guarantees of future performance. The Company's actual results and performance
may differ materially from the impression created by the forward-looking
statements. The Company undertake no obligation to publicly update or revise
forward-looking statements, except as may be required by applicable law and
regulation (including the Listing Rules). No statement in this announcement is
intended to be a profit forecast. Investors should consult a professional
adviser as to the suitability of the Proposals for the investor concerned.
For any enquiries regarding this announcement please contact:
Numis Securities Limited
David Benda +44 (0)20 7260 1275
Kleinwort Benson (Channel Islands) Fund Services Limited
Secretary +44 (0)1481 727 111
END
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