11 Sep 2008 16:00
M&G High Income Investment Trust P.L.C
11 September 2008
RECOMMENDED PROPOSALS FOR AN ISSUE OF NEW SHARES AND NEW UNITS IN CONNECTION WITH THE SCHEME OF RECONSTRUCTION OF M&G INCOME INVESTMENT COMPANY LIMITED
The Company has today published a Circular and Prospectus with details of recommended proposals for an issue of new shares and new units in connection with the scheme of reconstruction of M&G Income Investment Company Limited. Capitalised terms in this announcement have the same meaning as that set out the Circular and or Prospectus both dated 11 September 2008
Introduction
The Board has announced Proposals today, set out in outline on 24 June 2008, for an issue of New Shares and New Units in connection with the reconstruction of M&G Income Investment Company Limited. Under the Proposals, IIC Shareholders will be able to exchange their holdings of IIC Shares and IIC Package Units for New Shares and New Units in the Company.
The Proposals represent a significant opportunity for the Company to grow its assets in a transaction recommended by both the Board and the board of IIC. The Board believes that the Proposals will benefit the Company through greater liquidity in its Shares and Units and, in the case of its Capital Shares, lower proportionate fixed operating costs. There will be no change in the Company's investment style to accommodate the transaction.
The Proposals
The Proposals involve an issue of New Shares and New Units in consideration for the transfer of assets from IIC. In addition, it is proposed that the Directors' general authority to allot Shares and disapply Shareholders' pre-emption rights be increased proportionately to reflect the increase in the issued share capital of the Company under the Proposals.
Details of the Proposals
The Scheme
The Scheme involves a reconstruction of IIC under which it will be placed into members' voluntary liquidation. IIC Shareholders will be able to choose between maintaining an investment exposure to equities and some bonds through the New Shares and the New Units as set out in the options described below, and/or through shares in one or more open-ended investment companies managed by the Manager, or receiving a cash payment.
Issue of New Shares and New Units to IIC Shareholders
The Company is making available new Zero Dividend Shares, new Package Units and new Income & Growth Units to IIC Shareholders as part of the Scheme. Both the Company and IIC are split capital investment companies.
IIC Shareholders are being offered a number of rollover choices for further investment, including a rollover into the Company. They may choose to receive the following Shares or Units in the Company:
For IIC Ordinary Shares Income & Growth Units and/or Package Units For IIC Zero Dividend Shares Zero Dividend Shares and/or Package Units and/or Income & Growth Units For IIC Package Units Package Units and/or Income & Growth Units
Winterflood Securities has agreed to use its reasonable endeavours to procure subscribers for new Income & Growth Units to match the demand in the rollover for new Zero Dividend Shares and therefore to limit any scaling back that may be required in respect of new Zero Dividend Shares as the Company may only issue equal numbers of each class of New Shares. Any new Income & Growth Units placed will be subscribed for at the same price as the new Income & Growth Units to be issued under the Scheme.
The New Shares and New Units in each class will rank pari passu with the existing Shares of that class in issue except as mentioned in this paragraph. The new Income Shares, issued as part of new Income & Growth Units and new Package Units, will not receive the Company's first interim, second interim and special dividend to be paid in respect of its financial year ending 31 May 2009. These dividends will be paid to existing holders of Income Shares on the Register at the close of business on 24 October 2008 in respect of the Company's first interim dividend, payable on 25 November 2008, and the existing holders of Income Shares on the Register at the close of business on 31 October 2008 in respect of the Company's second interim and special dividends, payable on 25 February 2009.
Calculation of the Issue Prices of New Shares and New Units
The prices at which the New Shares and New Units will be issued by the Company to IIC Shareholders and new subscribers will be calculated on the Calculation Date. The assets to be transferred in consideration for the issue of New Shares and the New Units to the IIC Shareholders will be valued on the Calculation Date in line with the current valuation policies of IIC. The IIC valuation policies are the same as the valuation policies of the Company.
New Zero Dividend Shares (other than when issued as part of new Package Units) will only be offered to holders of IIC Zero Dividend Shares. The Zero Dividend Issue Price will be the higher of (i) 57.71 pence representing the 57.42 pence accrued entitlement of an existing Zero Dividend Share as at 31 October 2008 plus a premium of 0.5 per cent. in respect of the Company's costs in connection with the Scheme and (ii) a five per cent. discount to the average closing price of an existing Zero Dividend Share over the 10 dealing days immediately preceding the Calculation Date.
New Zero Dividend Shares issued under the Scheme will rank pari passu in all respects with the existing Zero Dividend Shares and therefore will be entitled to the Zero Dividend Final Entitlement of 122.83224 pence at 17 March 2017 (subject to there being sufficient assets then available).
New Package Units will be offered to holders of IIC Package Units, IIC Ordinary Shares and IIC Zero Dividend Shares. New Package Units comprise one Zero Dividend Share and one Income & Growth Unit. The Package Unit Issue Price will be the net asset value of a Package Unit calculated as at 12 noon on the Calculation Date (deducting the dividends with record dates of 24 October 2008 and 31 October 2008) as increased by a premium of 0.5 per cent. in respect of the Company's costs in connection with the Scheme.
New Income & Growth Units will be offered to holders of IIC Package Units, IIC Ordinary Shares and IIC Zero Dividend Shares as well as to subscribers which Winterflood Securities has procured. Income & Growth Units comprise one Capital Share and one Income Share. The Income & Growth Unit Issue Price will be an amount equal to the Package Unit Issue Price less the Zero Dividend Issue Price.
Costs
The costs of the Proposals (including all advisers' fees, printing and other ancillary costs but excluding any stamp duty payable on the transfer of the assets from IIC to the Company) are expected to be approximately ‚£790,000 (excluding VAT) which includes a variable element based on the value of the rollover. M&G Securities Limited, an affiliate of the Manager, has agreed to pay all of the costs incurred by the Company in connection with the Proposals in consideration of which the Company will pay M&G Securities Limited an amount equal to the premium to net asset value of 0.5 per cent. at which the New Shares and the New Units are to be issued. Furthermore the Company will pay stamp duty of 0.5 per cent. of the value of substantially all of the assets transferred from IIC, in the same way as it would have paid stamp duty if it had purchased those assets for cash.
Dividends
The Company will continue to make quarterly dividend payments on the Income Shares (including those comprised in the Package Units and in the Income & Growth Units) in February, May, August and November each year. All dividends will be paid as interim dividends.
In the absence of unforeseen circumstances, the Board expects that the four ordinary quarterly dividends payable by the Company following completion of the Scheme in respect of the financial year to 31 May 2010 will total 5.80 pence (net) per Income Share.
The Board also intends to declare a special dividend to Income Shareholders on the Register as at 31 October 2008 which will represent substantially all of the revenue reserves of the Company before the Scheme completes, thereby protecting the revenue interests of Income Shareholders which would otherwise be diluted by the Proposals. However, this will mean that the Company will have substantially reduced revenue reserves following the implementation of the Proposals. It is expected that this revenue reserves dividend, which will be paid on 25 February 2009 to Income Shareholders on the Register at the close of business on 31 October 2008, will be 0.90 pence per Income Share (including those comprised in Package Units and in Income & Growth Units).
The dividends set out above for the years ending 31 May 2009 and 31 May 2010 are estimates only, and are not to be taken as a forecast of profits.
Revised Management Fee
The Board has negotiated with the Manager an amendment to its annual management fee. As set out in the Company's annual report and accounts for the year ended 31 May 2008, with effect from 1 August 2008, the flat rate of 1 per cent. charged on the Company's total assets less current liabilities was replaced with the following tiered rate structure:
* one per cent. on the first ‚£75 million of total assets less current liabilities; * 0.9 per cent. on the next ‚£125 million; and * 0.8 per cent. on the balance in excess of ‚£200 million.
The annual management fee will continue to be calculated and paid monthly in advance.
A copy of the Circular and Prospectus will be submitted shortly to the UK Listing Authority and will be available for inspection at the UK Listing Authority's Document Viewing Facility, which is situated at:
The Financial Services Authority
25, the North ColonnadeCanary WharfLondon E14 5HSEnquiries:
Robin Archibald, Winterflood Securities 020 3100 0290
Jane Lewis, Winterflood Securities 020 3100 0295
Jonathan McClelland, Company Secretary 0207 548 3027
M & G HIGH INCOME INVESTMENT TRUST PLC