Proposed Placing and Open Off
04 Agosto 2000 - 11:59AM
UK Regulatory
RNS Number:0431P
Gartmore British Inc & Gwth Tst PLC
4 August 2000
GARTMORE BRITISH INCOME & GROWTH TRUST PLC
PROPOSED PLACING AND OPEN OFFER
The Board of Gartmore British Income & Growth Trust PLC (the
"Company") has today announced recommended proposals which
include a placing and open offer, a new debt facility, an
adjustment to the investment policy and a change of name as
follows:
. A Placing and Open Offer of 14,682,470 New Income
Shares and 10,945,114 New Ordinary Shares to raise
approximately #19 million before expenses.
. The New Shares are being issued in Package Units, each
Package Unit comprising 55 New Income Shares and 41 New
Ordinary Shares. The Issue Price, which will be
calculated as at the Calculation Date, will be 107.5
per cent. of Package Formula Asset Value. For
illustration purposes, based on asset values at the
close of business on 1 August 2000, the Issue Price
would be approximately #71.17.
. 200,288 Package Units have been conditionally placed
firm whilst 66,666 Package Units have been
conditionally placed subject to clawback to satisfy
valid applications from Qualifying Shareholders under
the Open Offer. The Placing and Open Offer has been
underwritten by Old Mutual Securities.
. The Company has also conditionally entered into a fixed
term loan facility agreement with Robert Fleming for a
committed sterling loan facility of up to #15 million,
repayable in March 2006.
. The Company's objective continues to be the achievement
of long term capital and income growth from investments
primarily in higher-yielding UK securities.
. The Company's policy has been to invest primarily in an
equity portfolio with a dividend yield significantly
exceeding that of the FTSE All-Share Index. The
Directors and the Manager believe that a reduction in
the average yield on the equity portfolio from its
current level of approximately 170 per cent. of the
prevailing yield on the FTSE All-Share Index to around
120 per cent. of the prevailing yield will increase the
range of equity securities available for inclusion
within the portfolio and improve the prospects for
capital growth.
. An adjustment of the Company's investment policy is
proposed, to take effect upon completion of the
Proposals, whereby up to 30 per cent. of the Company's
portfolio may be invested in fixed interest securities
(including convertible preference shares), with the
balance invested predominantly in UK quoted companies.
. A change of name of the Company is proposed to The
Income & Growth Trust PLC and a change of name of its
subsidiary, GBIGT Securities PLC, is proposed to
Income & Growth Securities PLC.
. The Proposals are expected to have the following
benefits:
- an increase in dividends forecast for the financial
year to 31 December 2001 to 7.5p (net) per Income Share and
4.8p (net) per Ordinary Share as compared with a forecast
for the current year of 7.065p (net) and 4.41p (net)
respectively (1999: 6.8p (net) and 4.2p (net) respectively).
This forecast relates to dividends only and does not
constitute a profit forecast. The forecast is based on the
Assumptions set out below;
- an increase in Cover for the ZDP Shares 2002 from 1.9
times to 2.0 times and a reduction in the hurdle rate from -
19.6 per cent. to -24.5 per cent.;
- an increase in Cover for the ZDP Shares 2006 from 1.1
times to 1.3 times and a reduction in the hurdle rate from
-13.2 per cent. to -15.3 per cent.;
- an increase in the Net Asset Value of each Ordinary
Share (after taking into account the expected expenses of
the Proposals) of 2.2p per share; and
- improved marketability for the Income Shares and the
Ordinary Shares.
Enquiries:
Aberdeen Asset Management
Piers Currie/Charlie Macrae 020 7463 6000
Old Mutual Securities
Jonathan Becher/Gary Gould 020 7489 4600
The following are extracts from the circular to be posted to
the Company's shareholders today. Words and expressions
defined in the circular have the same meanings in this
announcement, when the context otherwise requires.
Introduction
Your Board has today announced a proposed issue of
14,682,470 New Income Shares and 10,945,114 New Ordinary
Shares in Package Units, of which up to 3,666,630 New Income
Shares and 2,733,306 New Ordinary Shares are being made
available to Qualifying Shareholders by way of the Open
Offer.
The proposed Placing and Open Offer will, on the basis of
the Illustrative Issue Price, raise approximately #19
million before expenses. In addition, it is intended that
bank borrowings of up to #15 million will be drawn down
under the Robert Fleming Facility. The net proceeds of the
Placing and Open Offer and monies drawn down under the
Robert Fleming Facility will be used in accordance with the
Company's investment objective which will remain unchanged.
The investment policy of the Company will, however, be
adjusted as described below. It is also intended that the
name of the Company is changed to "The Income & Growth Trust
PLC" and the name of the Subsidiary is changed to "Income &
Growth Securities PLC". Your Directors believe that the
Proposals will be of benefit to all Shareholders.
The Issue Price, which will be determined as at the
Calculation Date, will be 107.5 per cent. of Package FAV.
Package FAV represents the net asset value of a Package
Unit, calculated in accordance with the Company's accounting
policies. The issue of Package Units at 107.5 per cent. of
this value at the Calculation Date will, therefore, ensure
that, after allowing for the expenses of the Proposals,
there will be an enhancement to the Cover of the ZDP Shares
2002 and the ZDP Shares 2006 and to the Net Asset Value of
the Ordinary Shares.
Dividend Policy and Forecasts
The dividend policy of the Company has been to distribute
most of its net revenue by way of four interim dividends.
For the financial year to 31 December 2000, first and second
interim dividends of 1.73p (net) and 1.73p (net) per Income
Share and 1.07p (net) and 1.07p (net) per Ordinary Share
have been declared. In the absence of unforeseen
circumstances, and subject to completion of the Proposals,
the Directors expect to be able to recommend the payment of
third and fourth interim dividends of 1.73p (net) and 1.875p
(net) per Income Share and 1.07p (net) and 1.2p (net) per
Ordinary Share bringing the total for the year to 7.065p
(net) per Income Share and 4.41p (net) per Ordinary Share.
This compares with 6.80p (net) per Income Share and 4.20p
(net) per Ordinary Share for the financial year ended 31
December 1999.
On the basis of the Assumptions, the Directors expect to be
able to pay dividends of 7.5p (net) per Income Share and
4.8p (net) per Ordinary Share for the financial year ending
31 December 2001. These dividends, and their expected
timetable, are summarised below:
Financial year to 31 Expected ex- Per Per
December 2000 dividend Income Ordinary
date/month Share Share
Paid in May 2000 8 May 2000 1.73p 1.07p
Payable in August 2000 7 August 2000 1.73p 1.07p
Payable in November 2000* November 2000 1.73p 1.07p
Payable in February 2001 February 2001 1.875p 1.20p
_____________
Total 7.065p 4.41p
_____________
* New shares will be entitled to receive the interim dividend
in respect of the three month period ending 30 September 2000
only pro rata to the proportion of such period during which they
shall have been in issue.
Financial year to 31 Expected ex- Per Per
December 2001 dividend Income Ordinary
month Share Share
Payable in May 2001 May 2001 1.875p 1.20p
Payable in August 2001 August 2001 1.875p 1.20p
Payable in November 2001 November 2001 1.875p 1.20p
Payable in February 2002 February 2002 1.875p 1.20p
________________
Total 7.50p 4.80p
_______________
The forecasts above relate to dividends only and do not
constitute profit forecasts. These forecasts are based on
the Assumptions set out below.
Investment Objective and Policy
The Company's objective is to achieve long term capital and
income growth from investments primarily in higher-yielding
UK securities.
The Company's policy has been to invest primarily in an
equity portfolio with a dividend yield significantly
exceeding that of the FTSE All-Share Index. The sharp
divergence in performance during the second half of 1999 and
the first quarter of 2000 between technology stocks, with
little or no dividend yield, and higher yielding stocks,
which while providing an attractive yield generally
underperformed the FTSE All-Share Index, highlighted the
inflexibility of the current investment policy.
The Directors and the Manager believe that a reduction in
the average yield on the equity portfolio from its current
level of approximately 170 per cent. of the prevailing yield
on the FTSE All-Share Index to around 120 per cent. of the
prevailing yield will increase the range of equity
securities available for inclusion within the portfolio and
improve the prospects for capital growth.
At the same time, the Manager has identified opportunities
in the fixed interest market where attractive yields are
available with the prospect of some capital growth. The
Directors and the Manager believe that investment in fixed
interest securities (including convertible preference
shares) will generate the yield required to provide for the
reduction in yield from the equity portfolio whilst
improving the risk profile of the portfolio as a whole.
Accordingly, the Board has conditionally approved an
adjustment of the Company's investment policy, to take
effect on completion of the Proposals, whereby up to 30 per
cent. of the Company's portfolio may be invested in fixed
interest securities (including convertible preference
shares) and the balance invested predominantly in UK quoted
companies.
Currently, management fees and all other expenses of the
Group are allocated 55 per cent. to revenue account and 45
per cent. to capital account. In view of the proposed
changes to the composition of the investment portfolio, the
Directors have decided, with effect from completion of the
Proposals, to allocate management fees and finance costs 65
per cent. to capital account and 35 per cent. to revenue
account and to charge all other running expenses to revenue
account. This proposed allocation reflects the Directors'
revised expectation of the long term split of returns as
between capital growth and income.
The Placing and Open Offer
The Company is proposing to issue the New Shares in
proportion to the existing issued Income Shares and Ordinary
Shares. Under the terms of the Placing, 200,288 Package
Units have been conditionally placed firm with institutional
investors, whilst 66,666 Package Units have been
conditionally placed with institutional investors, subject
to clawback in favour of Qualifying Shareholders who make
valid applications under the Open Offer. The Placing and
Open Offer has been underwritten by Old Mutual
Securities.
66,666 Package Units are being offered to Qualifying
Shareholders who are invited to apply for Package Units at
the Issue Price payable in full on application up to or in
excess of their pro rata minimum entitlement which is:
1 Package Unit for every 720 Income Shares or 720 Ordinary
Shares held on the Record Date
Applications may be made for any number of Package Units by
Qualifying Shareholders, including those who do not hold
sufficient Income Shares or Ordinary Shares to qualify for a
minimum entitlement. Applications may also be made by
Qualifying Shareholders for numbers of Package Units in
excess of their minimum entitlements. Such applications will
be satisfied to the extent that other Qualifying
Shareholders do not take up their entitlements. Each Package
Unit comprises 55 New Income Shares and 41 New Ordinary
Shares. Fractional entitlements to Package Units pursuant to
applications under the Open Offer will be disregarded, with
entitlements being rounded down to the nearest whole number
of Package Units.
Insofar as the New Shares which are the subject of the Open
Offer are not taken up by Qualifying Shareholders they will
be taken up by placees procured by Old Mutual Securities
and/or Old Mutual Securities itself under the Placing.
The Issue Price will not be determined until the Calculation
Date. For illustrative purposes, as at 1 August 2000, the
latest practicable date prior to the publication of the
Circular to shareholders, the Illustrative Issue Price was
#71.17 per Package Unit. Qualifying Shareholders should
follow the instructions regarding payment in the Application
Form. On announcement of the Issue Price, the Receiving
Agent will calculate the number of Package Units for which a
Qualifying Shareholder has subscribed, based on the sum of
money he or she has tendered with his or her Application
Form. As the Issue Price will not be determined until the
Calculation Date, Qualifying Shareholders who apply under
the Open Offer may receive more Package Units or less
Package Units than would be calculated on the basis of the
Illustrative Issue Price. Any excess application monies, and
monies representing fractional entitlements to Package
Units, will be returned to Qualifying Shareholders without
interest as soon as practicable following the announcement
of the Issue Price.
The New Shares will, when issued and fully paid, rank pari
passu in all respects with the existing Shares of the same
class save that the New Shares will be entitled to receive
the interim dividend in respect of the three month period
ended 30 September 2000 only pro rata to the proportion of
such period during which they shall have been in issue. This
dividend is expected to be paid on 30 November 2000.
Although the New Shares will be issued in Package Units,
dealings in the Package Units will not take place separately
on the London Stock Exchange.
The issue of New Shares comprised in Package Units is
subject to satisfaction of the following conditions:
(i) the passing of the Resolutions;
(ii) the Placing and Offer Agreement becoming unconditional
in all respects and not being terminated in accordance with
its terms; and
(iii) Admission becoming effective by no later than 8.00
a.m. on 1 September 2000 (or such later time and/or date as
Old Mutual Securities and the Company may agree being not
later than 20 September 2000).
Robert Fleming Facility
Robert Fleming has agreed to make available a committed
sterling term loan facility, with interest at a margin to
LIBOR, repayable in March 2006, in an aggregate amount of up
to #15 million. It is proposed that the facility will be
drawn down in full following completion of the Placing and
Open Offer. The Company's borrowings under the Robert
Fleming Facility will be guaranteed by the Subsidiary.
The Directors intend to fix the rate of interest payable by
the Company by entering into an interest rate swap. Based on
recent indicative sterling interest rate swaps offered in
the London Inter Bank Market and the interest rate margin,
the interest rate payable if draw down had been effected on
3 August 2000 would have been 7.43 per cent. per annum.
The availability of the Robert Fleming Facility is subject
to the passing of the Resolutions.
Benefits of the Proposals for Shareholders
On the basis of the Illustrative Issue Price, the Proposals
are expected to have the following benefits:
. an increase in dividends forecast for the financial
year to 31 December 2001 dividends to 7.5p (net) per
Income Share and 4.8p (net) per Ordinary Share as
compared with a forecast for the current year of 7.065p
(net) and 4.41p (net) respectively (1999 - 6.8p (net)
and 4.2p (net) respectively. This forecast relates to
dividends only and does not constitute a profit
forecast. The forecast is based on the Assumptions set
out below;
. an increase in Cover for the ZDP Shares 2002 from 1.9
times to 2.0 times and a reduction in the hurdle rate
from -19.6 per cent. to -24.5 per cent.;
. an increase in Cover for the ZDP Shares 2006 from 1.1
times to 1.3 times, and a reduction in the hurdle rate
from -13.2 per cent. to -15.3 per cent.;
. an increase in the Net Asset Value of each Ordinary
Share (after taking into account the expected expenses
of the Proposals) of 2.2p per share; and
. improved marketability for the Income Shares and the
Ordinary Shares.
Illustrative Return Statistics
The New Shares are being issued in Package Units in the same
proportions as the existing issued Income and Ordinary Share
capital.
Following the implementation of the Proposals, it is
intended to invest the proceeds of the Placing and Open
Offer and the Robert Fleming Facility so as to improve the
average yield on the Company's investment portfolio whilst
ensuring that the equity exposure to the market is kept at
levels at which reasonable capital growth rates might be
attainable.
Income Shares
The table below illustrates the NRYs and PAVs of an Income
Share based on different assumed rates of growth in the
Company's portfolio over the period to 31 March 2006.
Illustrative Return Statistics for an Income Share to 31 March 2006
Portfolio asset and revenue growth per annum (%)
0.0 2.5 5.0 7.5 10.0
NRY (%) 0 8.3 10.4 11.0 11.7
PAV (p) 24.7 63 70 70 70
Notes:
(i)NRYs are calculated on the basis on an imputed price of
75.25p per Income Share, based on the Illustrative Issue
Price less the imputed value for the New Ordinary Shares
in each Package Unit of 72.65p.
(ii) The table above assumes different rates of growth
in the Company's portfolio other than bonds; in relation
to the portfolio of bonds, it is assumed that capital
growth will not exceed 1 per cent. per annum and revenue
growth will be nil.
Based on an imputed price of 75.25p and the dividends
forecast to be paid for the financial year to 31 December
2001, the net dividend yield on an Income Share over that
period will be 9.97 per cent. per annum. Total assets would
have to grow overall by 2.96 per cent. per annum to enable
the PAV of an Income Share to equal the capital entitlement
of 70p on 31 March 2006.
Ordinary Shares
The table below illustrates the NRYs and PAVs of an Ordinary
Share based on different assumed rates of growth in the
Company's portfolio over the period to 31 March 2006.
Illustrative Return Statistics for an Ordinary Share to 31 March 2006
Portfolio asset and revenue growth per annum (%)
0.0 2.5 5.0 7.5 10.0
NRY (%) 0 0 0.1 13.5 22.8
PAV (p) 0 0 43.9 104.0 170.8
Notes:
(i)NRYs are calculated on the basis on an imputed price of
72.65p per Ordinary Share, based on the Illustrative
Issue Price less the imputed value for the New Income
Shares in each Package Unit of 75.25p.
(ii) The table above assumes different rates of growth
in the Company's total portfolio other than bonds; in
relation to the portfolio of bonds, it is assumed that
capital growth will not exceed 1 per cent. per annum and
revenue growth will be nil.
Based on an imputed price of 72.65p and the dividends
forecast to be paid for the financial year to 31 December
2001, the net dividend yield on an Ordinary Share over that
period will be 6.61 per cent. per annum. Total assets would
have to grow overall by 5.52 per cent. per annum to enable
the PAV of an Ordinary Share to equal the imputed price of
72.65p on 31 March 2006.
Redemption Yields and Projected Asset Values have been
calculated to 31 March 2006, being the date on which the ZDP
Shares 2006 are repaid.
The figures in the tables above and the statements of
expected yields and dividend forecasts contained above do
not constitute profit forecasts and are based on the
Assumptions set out below.
Recommendation
Your Directors, who have been advised by Old Mutual
Securities, consider that the Proposals are in the best
interests of all classes of the Company's Shareholders and
of the Company's Shareholders as a whole. In giving its
advice, Old Mutual Securities has placed reliance on the
Director's commercial assessment of the Proposals.
Accordingly, your Directors recommend the Company's
Shareholders to vote in favour of the Resolutions to be
proposed at the relevant meetings as they intend to do in
respect of their own beneficial shareholdings, amounting in
aggregate to 54,574 Income Shares (representing 0.2 per
cent. of the issued Income Share capital), 54,574 Ordinary
Shares (representing 0.3 per cent. of the issued Ordinary
Share capital) and 13,450 ZDP Shares 2002 (representing 0.1
per cent. of the issued ZDP 2002 Share Capital).
Principal Bases and Assumptions
Save as otherwise stated, the dividend forecast by the
Directors for the financial years ending 31 December 2000
and 31 December 2001, the return statistics (including NRYs
and PAVs) which are included for illustrative purposes only,
and other relevant financial information and statistics
contained in the Circular have been based or calculated on
the following principal bases and assumptions, namely that:
1. 266,954 Package Units are issued pursuant to the
Placing and Open Offer at the Illustrative Issue Price and
the net proceeds of the Placing and Open Offer are received
on 1 September 2000;
2. bank borrowings of #15 million are drawn down in
sterling on 1 September 2000 bearing interest at the rate of
7.5 per cent. per annum. No further monies are borrowed and
interest on bank borrowings is charged 65 per cent. to
capital account and 35 per cent. to revenue account;
3. the Group's total assets as at 1 September 2000 are
#125.12 million, being equal to the net assets of the Group
as at 1 August (the latest practicable date prior to the
publication of this document) as enlarged by the net
proceeds of the Placing and Open Offer and the Robert
Fleming Facility and adjusted for the accrued entitlement of
the ZDP Shares 2002 and the ZDP Shares 2006;
4. for the financial year ending 31 December 2001, the net
dividend payable on an Income Share is 7.5p and on an
Ordinary Share is 4.8p and dividends are declared thereafter
in the same ratio. This should not be construed as a profit
forecast;
5. substantially all of the income received by the Company
(net of tax and expenses) is distributed by way of dividend;
6. the expenses of the Proposals of #495,000 (including
irrecoverable VAT) are deducted from the net assets
attributable to the Ordinary Shareholders;
7. excluding management expenses and interest payable on
bank borrowings, the annual running expenses of the Group
are #250,000, which increase at an inflation rate of 2 per
cent. per annum and are charged to revenue account;
8. management fees are payable equal to 0.6 percent. per
annum (plus irrecoverable VAT) of the value of the Group's
total assets less liabilities (excluding from such
liabilities the amount of the Robert Fleming Facility). 65
per cent. of the management fees payable by the Company and
interest payable on bank borrowings are charged to the
Company's capital account and 35 per cent. to the revenue
account;
9. the ZDP Shares 2002 are repaid on 18 December 2002 at
233p per share and further zero dividend shares are issued
on that date raising net proceeds equal to the total
redemption amount of the ZDP Shares 2002 and having a
capital entitlement which ranks behind the ZDP Shares 2006
and which increases at the same rate as the ZDP Shares 2002
until 31 March 2006;
10. the Subsidiary is wound up on 31 March 2006, without
significant costs or expenditure, and ZDP 2006 Shareholders
receive their final capital entitlement of 306.03p per share
on that date;
11. the standard rate of corporation tax payable by the
Group remains at 30 per cent.; no corporation tax on capital
gains is payable by the Group and no liability to taxation
or duty arises on any loan agreement entered into by the Group;
and the allocation of certain expenses to capital account
does not result in a notional transfer of tax relief from
the revenue account to the capital account:
12. The Group's assets are divided into portfolios with the
following characteristics:
Equities Convertibles Bonds
Percentage of total assets 70 15 15
Initial yield (% per annum) 2.85 7.5 9.5
Income growth rate (% per Variable Variable Nil
annum)
Capital growth rate (% per Variable Variable 1.0
annum)
Expected Timetable
2000
Record Date close of business on 26 July
Latest time and date for splitting Application
Forms (to satisfy bona fide market claims only)3.00 p.m. on 23 August
Calculation Date* close of business on 24 August
Latest time and date for receipt of completed
Application Forms and payment in full for the
New Shares 3.00 p.m. on 25 August
Latest time and date for receipt of Forms of Proxy for the
- Separate Class Meeting of ZDP 2006
Shareholders 11.00 a.m. on 27 August
- Separate Class Meeting of Income
Shareholders 11.10 a.m. on 27 August
- Separate Class Meeting of Ordinary
Shareholders 11.15 a.m. on 27 August
- Separate Class Meeting of ZDP 2002
Shareholders 11.20 a.m. on 27 August
- Extraordinary General Meeting 11.25 a.m. on 27 August
Separate Class Meeting of ZDP 2006
Shareholders 11.00 a.m. on 29 August
Extraordinary General Meeting of the
Subsidiary 11.05 a.m. on 29 August
Separate Class Meeting of Income
Shareholders 11.10 a.m. on 29 August
Separate Class Meeting of Ordinary
Shareholders 11.15 a.m. on 29 August
Separate Class Meeting of ZDP 2002
Shareholders 11.20 a.m. on 29 August
Extraordinary General Meeting of the
Company 11.25 a.m. on 29 August
Announcement of Issue Price* 29 August
Admission, commencement of dealings* 8.00 a.m. on 1 September
CREST accounts credited against payment* 1 September
Definitive certificates despatched in respect
of the New Shares* 8 September
Application forms are personal to the shareholder named thereon
and may not be transferred except to satisfy bona fide market claims.
* Note: In the event that any of the Separate Class Meetings
or the Extraordinary General Meeting of the Company is
inquorate, it will be adjourned to a date 7 days later and
the subsequent dates in this timetable will change
accordingly.
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