To: The Stock Exchange For
immediate release:
15th October 2004
PRIVATE INVESTORS CAPITAL TRUST PLC ("PICT" or the "Company")
Recommended proposals for the reconstruction and winding up of the company
(the "Proposals")
The Board of PICT announces that it is today posting recommended Proposals for
the reconstruction and winding up of the Company to its shareholders. Under the
Proposals, shareholders in PICT can elect:
- to rollover their investment in a tax efficient manner into the CF Stewart
Ivory Managed Equity Fund, an authorised unit trust with a similar investment
objective to that of the Company, which will be managed by the same investment
team which manages the assets of the Company; and/or
- to rollover their investment in a tax efficient manner into Personal Assets
Trust plc, an existing self managed investment trust also in the AITC's Global
Growth sector; and/or
- for cash at close to NAV
Shareholders are entitled to elect for a combination of the options
Commenting on the Proposals Sir David Thomson, Chairman, said "The Board
believes the diverse demands of shareholders are best served by offering
shareholders the choice of an open ended vehicle with a similar objective to
that of the Company, an existing investment trust also in the AITC's Global
Growth sector and a cash exit at close to NAV."
Enquiries:
Isobel Hunter / Adam and Company Investment 0131 225 8484
Frances Mullan Management
Richard Ramsay Intelli Corporate Finance 020 7653 6300
Limited
SUMMARY OF THE PROPOSALS AND EXPECTED TIMETABLE
Expressions used in this announcement shall have the same meaning as the terms
defined in the circular to shareholders date 15 October 2004.
The Proposals
At the Company's annual general meeting in September 2003 the Board proposed
giving Shareholders the opportunity to vote each year for the continuation of
the Company. It was believed that this, combined with the marketing plan
initiated by the Company's investment manager, Adam & Company, would result in
narrowing PICT's discount to NAV and improving its liquidity. Despite the
considerable effort expended by the Board and Manager, liquidity has not
improved with the discount between the share price and net asset value remaining
unacceptably wide.
The Board therefore held discussions with the Company's Shareholders and
announced on 9 July 2004 that it would not be recommending that PICT continue in
its current form. After taking further soundings from Shareholders, the Board
announced on 10 August 2004 that it believed the diverse demands of Shareholders
would be best served by offering Shareholders the choice of an open-ended
vehicle with a similar investment objective to that of the Company, an existing
investment trust in the AITC's Global Growth sector and a cash exit at close to
NAV.
Under the Proposals, Shareholders may elect:
- to roll over their investment in a tax efficient manner into the CF Stewart
Ivory Managed Equity Fund ("MEF"), an authorised unit trust with a similar
investment objective to that of the Company and which will be managed by the
same investment team which currently manages the assets of the Company; and/or
- to roll over their investment in a tax efficient manner into Personal
Assets Trust plc ("PAT"), an existing self-managed investment trust also in the
AITC's Global Growth sector; and/or
- for cash at close to NAV.
Shareholders are entitled to elect for a combination of the options.
The Directors believe that the Proposals have significant attractions for
Shareholders. In particular, the
Board believes the Scheme offers the opportunity for Shareholders to:
- realise all or part of their investment for cash at close to NAV;
- roll over into more liquid investments;
- roll over all or part of their investment into an open-ended fund with a
similar investment objective to the Company and which will be managed by the
same investment team;
- roll over all or part of their investment into an existing investment trust
in the AITC's Global Growth sector; and
- defer any liability to UK capital gains tax on those Shares which are
rolled over.
The Options
CF Ivory Stewart Managed Equity Fund - the MEF Option
MEF is a UK authorised unit trust whose investment adviser is Adam & Company
Investment Management Limited. MEF will be managed by the same investment
management team as the Company and has a similar investment objective as the
Company.
Personal Assets Trust - the PAT Option
PAT is an existing self-managed investment trust also in the AITC's Global
Growth sector. PAT has a capital structure consisting only of ordinary shares
and has no investment specialisation or policy restrictions.
ILLUSTRATIVE EXAMPLE
For illustrative purposes, if the Scheme had become effective at close of
business on Friday, 8 October 2004, the following table shows the attributable
value to Shareholders electing for the various Options in respect of a holding
of 100 Shares. It should be noted that these figures are given for illustrative
purposes only, are subject to the assumptions set out in the Circular and should
not be regarded as forecasts.
NAV of Relevant Relevant Market Relevant Relevant
100 Option Option value of Option Option
Ordinary asset asset 100 aggregat aggregat
Shares value of value as Ordinary e market e market
(�) 100 a Shares value or value or
Ordinary percenta (�) cash cash
Shares ge of amount amount
(�) NAV of (�) as a
100 percenta
Ordinary ge of
Shares market
(%) value of
100
Ordinary
Shares
(%)
MEF 338.70 331.03 97.74 310.00 328.42 105.94
Option
PAT 338.70 328.24 96.91 310.00 321.62 103.75
Option
Cash 338.70 329.89 97.40 310.00 329.89 106.42
Option
Convertible Bondholders ("Bondholders")
Under the Proposals Bondholders will not be able to participate directly in the
Scheme. However, Bondholders who exercise their right to convert into Ordinary
Shares prior to 5.00 pm on Friday, 5 November 2004 will be treated pari passu
with existing Shareholders and, if they return a valid Form of Election by that
time, can elect to receive MEF Units, New PAT Shares and/or cash under the
Scheme. All Bondholders who exercise their right to convert into Ordinary Shares
prior to 48 hours before the relevant Extraordinary General Meetings will be
entitled to vote at such meeting.
A Bondholder (other than an Overseas Bondholder) who exercises his right to
convert into Ordinary Shares after that date but by the Effective Date will be
treated pari passu with existing Shareholders but, in the same way as a
Shareholder who failed to return a valid Form of Election, will be deemed to
have elected for the MEF Option.
A Bondholder who does not exercise his right to convert into Ordinary Shares may
elect during the three month period subsequent to the Second EGM to be treated
as if he had exercised his right to convert into Ordinary Shares and shall be
entitled to receive an amount equal to the cash amount which he would have
received had he been a Shareholder in the liquidation.
A Bondholder who neither exercises his right to convert into Ordinary Shares nor
elects in the three month period subsequent to the Second EGM to be treated as a
Shareholder will only be entitled to receive repayment of the nominal amount of
his Bonds plus accrued interest up to the date of the payment.
FINAL INTERIM DIVIDEND
In order to ensure that the Company continues to comply with the provisions of
section 842 of the Income and Corporation Taxes Act 1988, based on current
estimates of costs and revenues for this financial year, the Board anticipates
that the Company will pay a final interim dividend on 19 November 2004 to
Ordinary Shareholders on the register, and Bondholders who have exercised their
right to convert into Ordinary Shares, by 5 November 2004. The dividend per
share is anticipated as being in the range of 1.1p to 1.7p, the lower amount
being calculated on the basis that all outstanding Bonds convert by 5 November
2004 and the minimum dividend consistent with maintaining investment trust
status is paid, and the higher on the basis that none of the outstanding Bonds
convert and the maximum dividend consistent with maintaining investment trust
status is paid (this is not a profit forecast). A further announcement is
expected to be made on, or around, 8 November 2004 once the number of
Bondholders who have converted is known, to confirm the dividend per share. The
dividend is not conditional upon the approval or implementation of the Scheme.
EXPECTED TIMETABLE
Thursday, 4 November Date from which it is advised that
2004 dealings in Shares should only be
for cash settlement and immediate
delivery of documents of title
Friday, 5 November 5.00 pm Latest time for receipt of notices
2004 of conversion and Forms of Election
from Bondholders who wish to
exercise their right to convert
into Ordinary Shares and
participate in the Scheme as an
Ordinary Shareholder
Record date for Shareholders to
make Elections under the
Scheme
Latest time for receipt of Forms of
Election from Shareholders
6.00 pm Record date for the final interim
dividend
6.00 pm Register of members of PICT closed
Sunday, 7 November 12.30 Latest time for receipt of forms of
2004 pm proxy for the First Extraordinary
General Meeting
Monday, 8 November Announcement of final interim
2004 dividend
Tuesday, 9 November 12.30 First Extraordinary General Meeting
2004 pm
Friday, 19 November 7.30 am Dealings in Reclassified Shares
2004 commence and register of holders of
Reclassified Shares opened
5.00 pm Register of holders of Reclassified
Shares closed
Calculation of the PAT Issue Price
Payment of the final interim
dividend
11.59 Calculation Date and Allocation
pm Date
Saturday, 20 November 12.30 Latest time for receipt of forms of
2004 pm proxy for the Second Extraordinary
General
Monday, 22 November 7.30 am Suspension of listing of
2004 Reclassified Shares Meeting
12 noon Calculation of MEF Issue Price
12.30 Second Extraordinary General
pm Meeting
Effective Date
MEF Units issued
Tuesday, 23 November Issue of and dealings commence in
2004 New PAT Shares and
CREST stock accounts credited
Contract notes dispatched in
respect of MEF Units
Repayment of outstanding Bonds at
nominal amount together with
accrued interest and notice sent to
Bondholders of rights to elect to
be treated as if they had exercised
their conversion rights prior to
the commencement of the liquidation
of the Company
Week commencing Distribution of cash entitlements
22 November 2004 to Ordinary Shareholders
who elect for the Cash Option under
the Scheme
Week commencing Definitive certificates dispatched
29 November 2004 in respect of the New PAT Shares
(not admitted to CREST)
23 February 2005 Latest time for Bondholders to
elect to be treated as if they had
converted prior to the commencement
of the liquidation of the Company
CHAIRMAN'S LETTER
Set out below is the text of the letter being sent today, 15 October 2004, to
shareholders in PICT and holders of 3 per cent Subordinated Convertible Bonds
2009
"Dear Sir or Madam
PROPOSED RECONSTRUCTION OF THE COMPANY
INTRODUCTION
At the Company's annual general meeting in September 2003 the Board proposed
giving Shareholders the opportunity to vote each year for the continuation of
the Company. It was believed that this, combined with the marketing plan
initiated by the Company's investment manager, Adam & Company, would result in
narrowing PICT's discount to NAV and improving its liquidity. Despite the
considerable effort expended by the Board and Manager, liquidity has not
improved with the discount between the share price and net asset value remaining
unacceptably wide.
The Board therefore held discussions with the Company's Shareholders and
announced on 9 July 2004 that it would not be recommending that PICT continue in
its current form. After taking further soundings from Shareholders, the Board
announced on 10 August 2004 that it believed the diverse demands of Shareholders
would be best served by offering Shareholders the choice of an open-ended
vehicle with a similar investment objective to that of the Company, an existing
investment trust in the AITC's Global Growth sector and a cash exit at close to
NAV.
I am writing to provide you with details of the Proposals and to seek your
approval for the resolutions required to implement them. Your attention is drawn
to the Directors' recommendation at the end of this letter.
THE SCHEME
The Board, with its advisers, has considered a number of reconstruction
proposals and roll over vehicles and has concluded that it is in the interests
of Shareholders as a whole to propose a scheme of reconstruction comprising a
members' voluntary winding up of the Company under section 110 of the Insolvency
Act 1986 and the Company's articles of association, with options for
Shareholders to elect:
- to roll over their investment in a tax efficient manner into CF Stewart
Ivory Managed Equity Fund, an authorised unit trust with a similar investment
objective to that of the Company and which will be managed by the same
investment team which currently manages the assets of the Company; and/or
- to roll over their investment in a tax efficient manner into Personal
Assets Trust plc, an existing self-managed investment trust also in the AITC's
Global Growth sector; and/or
- for cash at close to NAV.
Shareholders shall be entitled to elect for a combination of the Options.
Shareholders who do not make a valid Election (other than Overseas Shareholders)
will (unless the Company otherwise determines) be deemed to elect for MEF Units.
Shareholders who hold their Ordinary Shares in the PICT PEP, ISA or Savings
Scheme should read the section below headed ''PICT PEP, ISA and Savings Scheme
Investors''.
ADVANTAGES OF THE PROPOSALS
Your Directors believe that the Proposals have significant attractions for
Shareholders. In particular, the Board believes the Scheme offers the
opportunity for Shareholders to:
- realise all or part of their investment for cash at close to NAV;
- roll over into more liquid investments;
- roll over all or part of their investment into an open-ended fund with a
similar investment objective to the Company and which will be managed by the
same investment team;
- roll over all or part of their investment into an existing investment trust
in the AITC's Global Growth sector; and
- defer any liability to UK capital gains tax on those Shares which are
rolled over.
Further details of the benefits relating to each of the Options are described
below.
INFORMATION ABOUT MEF AND THE MEF OPTION
MEF is a UK authorised unit trust whose investment adviser is Adam & Company.
Adam & Company's focus is on private individuals and their investment needs. MEF
will be managed by the same experienced investment team as manage the Company
and has a similar investment objective.
MEF's investment objective is to achieve capital growth and dividend growth by
investing worldwide in any economic sector. MEF will aim to achieve this
investment objective by investing in well capitalised and soundly managed
companies that consistently produce above average earnings growth at price
levels where it is believed the price to earnings growth ratio understates the
company's potential. PICT's stated investment objective is maximising total
returns by investing in companies on a worldwide basis where there are
opportunities for growth. In addition, PICT's dividend policy is to increase its
distributions by more than the rate of inflation. Like PICT, MEF's investment
focus will be on companies with recurring earnings and strong cash flows from
operations. Investments, as is the case for PICT, will be selected on their
merits rather than by virtue of their weighting within an index or because of
fashion.
Whilst geographic asset allocation tends to be driven by stock specific
opportunities, there is a preference to invest a larger proportion of MEF's
portfolio in the UK, to take account of MEF's investor base and the dividend
yield on the UK stock market. MEF's dividend yield, as at 8 October 2004, the
latest practicable date prior to the publication of the Circular, was 1.83 per
cent. For the year ended 30 June 2004 the expense ratio was 1.05 per cent.
The price of MEF Units directly reflects the value of the assets held by the
unit trust and daily dealings in the units ensures there is no discount and
adequate liquidity for unit holders.
Further information on, and the Key Features of MEF are included in Part 2 of
the Circular. Details of the
principal risk factors relating to an investment in MEF are set out on pages 24
and 25 of the Circular.
The entitlement of a Shareholder who elects for the MEF Option will be
calculated as follows. From the net asset value of a Share (after taking into
account the costs of the Scheme, the total entitlements of the holders of any
outstanding Bonds and an amount for unknown liabilities) there shall be deducted
any costs incurred by MEF and the MEF Trustee in participating in the Scheme and
this will produce a per share value that is the MEF Option Formula Asset Value
(or MEF Option FAV). This is then divided by the issue price of a MEF Unit
(which carries no initial charge and values MEF's assets at offer prices and
which also includes an amount to cover stamp duty reserve tax on the acquisition
of assets by MEF) to give the ratio at which an Ordinary Share rolls over into a
MEF Unit. There are not expected to be any realignment costs in relation to the
transfer of assets to MEF. The valuation of the MEF Pool is on the same basis as
the calculation of the MEF Issue Price. Such valuations will take place at 12
noon on the Effective Date at offer prices. An illustrative example of these
figures is given below.
AIM has agreed to rebate part of the compensation which would, under the terms
of the Management Agreement, be payable to it in respect of the assets of the
Company which are transferred to MEF pursuant to the Scheme. Such rebate shall
be equal to the management fee compensation payable to AIM in respect of the
assets of the Company which are transferred to MEF pursuant to the Scheme and
shall be solely for the benefit of Shareholders who elect for the MEF Option.
MEF will purchase assets relating to the MEF Option at offer prices on the
Calculation Date whereas on a conventional winding up these assets would be sold
at bid prices.
INFORMATION ABOUT PAT AND THE PAT OPTION
PAT is an existing self-managed investment trust also in the AITC's Global
Growth sector. As at 8 October 2004, it had a market capitalisation of �140
million and a yield of 1.48 per cent. (source: Datastream). PAT is managed
specifically for private investors. It has a capital structure consisting only
of ordinary shares and has no investment specialisation or policy restrictions.
Its investment policy is simply to protect and increase the value of
shareholders' funds over the long term and to achieve as high a total return as
possible at a risk not significantly greater than that of investing in its
benchmark index, the FTSE All-Share.
Over the 14 years since becoming self-managed in 1990, PAT has continued with
the same investment management personnel, investment process and board
relationships that have enabled it not only to achieve considerable investment
success but also to expand significantly in size through the development of its
zero-charge investment plans for shareholders.
The policy of the board of PAT is to ensure that PAT's shares always trade at
close to net asset value through the active issuing or buying in of shares. The
success of this policy has been such that the shares have not traded at a
discount of more than a percentage point or two since 1995. Over this period the
average premium of PAT's share price to net asset value has been 2.9 per cent.
compared to an average discount of 9.1 per cent. for the UK Investment Trusts
Total Market Index.
The most recent annual report and accounts of PAT for the period to 30 April
2004 have been dispatched with the Circular. Details of the principal risk
factors relating to an investment in PAT are set out on pages 24 and 25 of the
Circular.
The entitlement of a Shareholder who elects for the PAT Option will be
calculated as follows. From the net asset value of a Share (after taking into
account the costs of the Scheme, the total entitlements of the holders of any
outstanding Bonds and an amount for unknown liabilities and valuing assets at
mid prices) there shall be deducted the costs of realisation of the assets to be
transferred to PAT and this will produce a per share value that is the PAT
Option Formula Asset Value (or PAT Option FAV). This is then divided by the
price at which the New PAT Shares are to be issued under the Scheme (being the
net asset value of a PAT Share as at the Calculation Date, plus an amount
equivalent to the first interim dividend of �1.60 per share, plus a premium of
0.5 per cent.)* to give the ratio at which an Ordinary Share rolls over into a
New PAT Share. An illustrative example of these figures is given below.
The New PAT Shares to be issued under the Scheme will not be entitled to the
first interim dividend of PAT for its current financial period of �1.60 per
share which was declared on Thursday, 14 October 2004 and will be paid on
Friday, 19 November 2004. In all other respects the New PAT Shares will rank
pari passu with the existing PAT Shares.
The number of New PAT Shares to be made available in the Scheme shall be limited
to 50,000 (being approximately 7.7 per cent. of the issued share capital of PAT
as at the date of the Circular). In the unlikely event that elections for the
PAT Option exceed this amount, such elections shall be scaled back pro rata and
such excess shall be deemed to be elections for the MEF Option.
*This is expected to be approximately equivalent to the net asset value of a PAT
Share as at the Calculation Date (i.e. after the PAT Shares have become ex-
dividend) plus a premium of 1.25 per cent.
CASH OPTION
Shareholders who elect for the Cash Option (or are deemed by the Company to be
Overseas Shareholders) will receive an amount in cash equivalent to their
entitlement under the Scheme. This amount will be the net asset value of a Share
(after taking into account the costs of the Scheme, the total entitlements of
the holders of any outstanding Bonds and an amount for unknown liabilities) less
the costs required to realise the assets into cash. An illustrative example of
these figures is given below.
Cheques in respect of the cash amount due to Shareholders who elect for the Cash
Option are expected to be dispatched to them in the week commencing 22 November
2004 or as soon as practicable thereafter.
For amounts over �100,000, cash will, if the relevant account details have been
duly completed on the Form of Election, be dispatched by CHAPS, at the
recipient's expense and risk, in the week commencing 22 November 2004.
For Shareholders who elect for the Cash Option, the receipt of payment will
amount to the receipt of consideration for the disposal of their Shares and may
give rise to a liability to UK taxation of capital gains.
ILLUSTRATIVE EXAMPLE
For illustrative purposes, if the Scheme had become effective at close of
business on Friday, 8 October 2004 (being the latest practicable date prior to
the publication of the Circular) and based on the assumptions set out in the
notes below, the following table shows the attributable value to Shareholders
electing for the various Options in respect of a holding of 100 Shares. It
should be noted that these figures are given for illustrative purposes only and
should not be regarded as forecasts.
NAV of Relevant Relevant Market Relevant Relevant
100 Option Option value of Option Option
Ordinary asset asset 100 aggregat aggregat
Shares value of value as Ordinary e market e market
(�) 100 a Shares value or value or
Ordinary percenta (�) cash cash
Shares ge of amount amount
(�) NAV of (�) as a
100 percenta
Ordinary ge of
Shares market
(%) value of
100
Ordinary
Shares
(%)
MEF 338.70 331.03 97.74 310.00 328.42 105.94
Option
PAT 338.70 328.24 96.91 310.00 321.62 103.75
Option
Cash 338.70 329.89 97.40 310.00 329.89 106.42
Option
Assumptions
1. The PAT Issue Price used in the above calculation includes current net
revenue up to 8 October 2004 and specifically the first interim dividend of
�1.60 on a PAT Share declared on Thursday, 14 October 2004 and payable on
Friday, 19 November 2004 and which will not be payable to Shareholders who
elect for the PAT Option.
2. For the purposes of the PAT Option, the relevant Option asset value takes
account of the premium of 0.5 per cent. referred to above.
3. For the purposes of the calculation of the relevant Option market values,
the market value of an Ordinary Share is the bid price, the market value of a
MEF Unit is the cancellation price (which is based on bid prices) and the
market value of a New PAT Share is the bid price less �1.60 per share, being
the interim dividend declared but not yet paid and which will not be paid to
Shareholders who elect for the PAT Option.
4. The NAV and market value of an Ordinary Share and the PAT Issue Price and
market value of a PAT Share have been calculated as at close of business on
Friday, 8 October 2004 and the MEF Issue Price and cancellation price of a MEF
Unit have been calculated as at noon on Monday, 11 October 2004.
5. For the purposes of calculating the PAT Option asset value provision has
been made for the estimated realisation costs but not the reinvestment costs
of the PAT Pool.
6. Total estimated costs of the Scheme payable by the Company are �432,000
(including irrecoverable VAT), being 1.9 per cent. of the assets attributable
to Shareholders. The calculation of the relevant Option asset value takes into
account the compensation rebate from AIM in favour of the MEF Pool. In
addition, the Liquidators will retain �50,000, being 0.2 per cent. of the
Company's assets attributable to Shareholders, for unknown liabilities.
7. All of the Bonds are converted.
DEFAULT PROVISIONS
Shareholders (other than Overseas Shareholders) who do not make a valid Election
for the purposes of the Proposals will be deemed to have made an election for
MEF Units.
Further details of the Scheme are given in Part 4 of the Circular and the full
terms of the Scheme are set out in Part 5.
CONVERTIBLE BONDS
The Company has in issue �3,115,000 Subordinated Convertible Bonds 2009 of which
�2,185,000 were in registered form and �930,000 were in bearer form as at 8
October 2004. Under the terms of the Trust Deed constituting the Bonds dated 4
March 1994, Bondholders have the right to convert their bonds into Ordinary
Shares at any time. Every �1,000 nominal of Bonds can be converted into 374.53
Ordinary Shares. Under the Proposals Bondholders will not be able to
participate directly in the Scheme. However, Bondholders who exercise their
right to convert into Ordinary Shares prior to 5.00 pm on 5 November 2004 will
be treated pari passu with existing Shareholders and, if they return a valid
Form of Election by 5.00 pm on 5 November 2004, can elect to receive MEF Units,
New PAT Shares and/or cash under the Scheme. All Bondholders who exercise their
right to convert into Ordinary Shares prior to 48 hours before the relevant
Extraordinary General Meeting will be entitled to vote at such meeting.
A Bondholder other than an Overseas Bondholder who exercises his right to
convert into Ordinary Shares after that date but by the Effective Date will be
treated pari passu with existing Shareholders but, in the same way as a
Shareholder who failed to return a valid Form of Election, will be deemed to
have elected for the MEF Option.
If Shareholders pass the winding up resolution at the Second EGM, the Bondholder
Trustee, The Law Debenture Trust Corporation p.l.c., has indicated its intention
to give notice of an Event of Default under the Trust Deed. Accordingly, the
Bonds will then become repayable at their nominal value together with accrued
interest. It is noted that the Bondholder Trustee is entitled to give notice of
an Event of Default on the announcement of the Proposals by the Company.
However, it is the Bondholder Trustee's intention as at the date of the Circular
not to give such notice in order to give Bondholders the opportunity to
participate in the Scheme.
The Trust Deed provides that the Company must give notice to the Bondholders of
the passing of the winding up resolution. The giving of this notice commences a
three month period during which a Bondholder may elect to be treated as if he
had exercised his right to convert into Ordinary Shares and shall be entitled to
receive an amount equal to the cash amount which he would have received had he
been a Shareholder in the liquidation.
Bondholders should note that the Bondholder Trustee is not entitled to elect on
behalf of Bondholders. A Bondholder who neither exercises his right to convert
into Ordinary Shares nor elects in the three month period subsequent to the
Second EGM to be treated as a Shareholder will only be entitled to receive
repayment of the nominal amount of his Bonds plus accrued interest to the date
of payment.
Bondholders who exercise their right to convert into Ordinary Shares and Elect
(or are deemed to Elect) for either MEF Units and/or New PAT Shares may be able
to defer any liability to UK Capital Gains Tax on those Shares which are rolled
over. Please refer to the section headed ''Taxation'' in Part 4 of the Circular.
If the Scheme had been implemented on 8 October 2004 (the latest practicable
date prior to the publication of the Circular) the Directors estimate that a
Bondholder who did not exercise his right to convert into Ordinary Shares but
elected in the three month period subsequent to the Second EGM to be treated as
a Shareholder would have received �1,235.53 per �1,000 nominal value of Bonds
(excluding accrued interest). It should be noted that this figure is given for
illustrative purposes only and should not be regarded as a forecast.
Bondholders whose holding is in registered form and who wish to exercise their
right to convert into Ordinary Shares should complete the enclosed conversion
notice and return it to Lloyds TSB Registrars, The Causeway, Worthing, West
Sussex BN99 6DA not later than 5.00 pm on Friday, 5 November 2004.
Bondholders whose holding is in bearer form and who wish to exercise their right
to convert into Ordinary Shares should contact Adam & Company on 0131 225 8484
to obtain the necessary documentation to exercise their right to convert into
Ordinary Shares.
Bondholders will be able to exercise their right to convert into Ordinary
Shares, make an Election and vote at the Meetings by completing the conversion
notice, the Form of Election and the relevant form of proxy (all of which are
enclosed with the Circular) and returning these documents all together to be
received by Lloyds TSB Registrars, The Causeway, Worthing, West Sussex BN99 6DA
not later than 5.00 pm on Friday, 5 November 2004.
In accordance with normal practice, the Bondholder Trustee expresses no opinion
on the merits of the Proposals. The Bondholder Trustee has not verified, and
accepts no responsibility for, any of the factual statements contained in, or
the effect or effectiveness of, the Circular or any other documents referred to
herein. The Bondholder Trustee has not been involved in the commercial
negotiations relating to the Scheme and therefore cannot comment on the
commercial terms of the Scheme. Accordingly, Bondholders should seek their own
independent financial advice in relation to the matters set out in the Circular.
UNITED KINGDOM TAXATION
As explained in the section headed ''Taxation'' in Part 4 of the Circular, the
receipt by Shareholders (who are the beneficial owners of Ordinary Shares and
who hold such shares as an investment) of MEF Units and/or New PAT Shares under
this Scheme should not constitute a disposal of their Ordinary Shares for the
purposes of UK taxation of capital gains. However, an election for the Cash
Option or subsequent disposal of MEF Units or New PAT Shares will constitute a
disposal for such purposes and may, depending on a Shareholder's particular
circumstances, give rise to a liability to UK taxation of capital gains. In
assessing their tax position, individual Shareholders should have regard to the
annual exemption from capital gains tax (currently �8,200) and the availability
of taper relief on a disposal for capital gains tax purposes. Individual
Shareholders who held Ordinary Shares prior to 6 April 1998 may also benefit
from an indexation allowance in respect of the period during which they held
those Ordinary Shares up to and including 5 April 1998. Shareholders who are
companies may benefit from indexation allowance on any chargeable disposal for
the whole period of ownership up to disposal.
Exercise of the Cash Option by an individual Shareholder who is UK resident or
ordinarily resident in the UK will constitute a disposal for the purpose of
calculating liability to capital gains tax in the 2004/2005 tax year.
Any information given in the Circular concerning tax is given by way of a
general summary only and does not constitute legal or tax advice to any
Shareholder. If you are in any doubt about the taxation consequences of
acquiring, holding or disposing of MEF Units and/or New PAT Shares you should
immediately seek advice from your own professional advisers. Shareholders who
hold Shares through a PEP/ISA should note that MEF Units and New PAT Shares are
qualifying investments for the purposes of continued holdings within PEPs/ISAs.
Shareholders should consult their plan manager as to whether the rules of their
particular PEP/ISA would allow them to hold MEF Units, New PAT Shares and/or
cash.
FRACTIONAL ENTITLEMENTS
Fractions of New PAT Shares will not be issued and instead, Shareholders
electing for the PAT Option will receive a cheque for the value of any
fractional entitlement over �3.00. In the case of MEF Units issued under the
Scheme entitlements will be rounded up to the nearest one-hundredth of a unit.
OVERSEAS SHAREHOLDERS
It is the responsibility of Shareholders who are resident in or are citizens of
any jurisdiction other than the United Kingdom to inform themselves about and
observe any legal requirements in that jurisdiction and to obtain their own
advice as to the tax consequences of the Proposals in that jurisdiction. Details
of the procedure for Overseas Shareholders to receive cash for their Ordinary
Shares under the Scheme are set out in Part 4 of the Circular.
COSTS AND EXPENSES
The Board has sought to limit the expenses of the Scheme to minimise the impact
on shareholder value. However, the Board believes that the minimal additional
cost of implementing these reconstruction Proposals rather than simply
undertaking a winding up is justified given the choices it offers to
Shareholders. The Board estimates that the expenses of the Scheme (including
irrecoverable VAT), before taking account of the costs associated with the
realisation of the Company's assets and the Liquidators' contingency fund, will
be approximately �432,000, being 1.9 per cent. of the assets attributable to
Shareholders (based on the Company's net asset value per Share of 338.70p as at
8 October 2004, the latest practicable date prior to the publication of the
Circular). This estimate includes an amount of �107,000 payable by the Company
to Adam & Company in respect of the early termination of the Management
Agreement, although part of this payment will be rebated for the benefit of the
MEF Pool as described under the section headed ''Information about MEF and the
MEF Option''. The amount payable to Adam & Company as compensation is equal to
the amount of management fees that would have been payable from the Effective
Date to 18 June 2005, being 12 months following notice of termination of the
Management Agreement being served by the Company.
FINAL INTERIM DIVIDEND
In order to ensure that the Company continues to comply with the provisions of
section 842 of the Income and Corporation Taxes Act 1988, based on current
estimates of costs and revenues for this financial year, the Board anticipates
that the Company will pay a final interim dividend on 19 November 2004 to
Ordinary Shareholders on the register, and Bondholders who have exercised their
right to convert into Ordinary Shares, by 5 November 2004. The dividend per
share is anticipated at being in the range of 1.1p to 1.7p, the lower amount
being calculated on the basis that all outstanding Bonds convert by 5 November
2004, and the minimum dividend consisted with maintaining investment trust
status is paid, and the higher on the basis that none of the outstanding Bonds
convert and the maximum dividend consistent with maintaining investment trust
status is paid (this is not a profit forecast). A further announcement is
expected to be made on, or around, 8 November 2004 once the number of
Bondholders who have converted is known, to confirm the dividend per share. The
dividend is not conditional upon the approval or implementation of the Scheme.
EXTRAORDINARY GENERAL MEETINGS
The Proposals are conditional on the passing by Shareholders of the special
resolutions at the First EGM and the Second EGM or any adjournments thereof and
all conditions to such resolutions and the Scheme being fulfilled. The Scheme
is described in more detail in Part 4 of the Circular and the full terms of the
Scheme are set out in Part 5 of the Circular.
Notices convening the requisite Meetings are set out at the end of the Circular.
Both Meetings will be held at the Edinburgh offices of Adam & Company Investment
Management Limited, 22 Charlotte Square, Edinburgh EH2 4DF. Each resolution
requires the approval of at least 75 per cent. of the votes cast in respect of
it.
First Extraordinary General Meeting
The First EGM will be held at 12.30 pm on Tuesday, 9 November 2004. A special
resolution will be proposed to sanction the Scheme and to amend the Articles for
the purpose of its implementation.
Second Extraordinary General Meeting
The Second EGM will be held at 12.30 pm on Monday, 22 November 2004. A special
resolution will be proposed to approve the winding up of the Company and to
appoint the Liquidators and an extraordinary resolution will be proposed to
confer appropriate powers on them.
If these resolutions are passed, the Scheme is expected to become effective on
Monday, 22 November 2004. MEF Units and New PAT Shares will then be issued to
PICT Shareholders on the basis on which they have been elected (or are deemed to
have been elected) for under the Proposals and cheques in respect of the Cash
Option will be dispatched in the week commencing 22 November 2004. Subject to
Shareholders approving the resolutions to be proposed at the Second EGM, the
Liquidators have conditionally undertaken to procure that the Company enters
into the Transfer Agreement on the same day and transfers the appropriate assets
of the Company to MEF and PAT pursuant to that agreement. MEF and PAT have also
undertaken to enter into and implement the Transfer Agreement. The Scheme, which
will implement the Proposals, is set out in Part 5 of the Circular.
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 (as summarised in the section headed ''Dissenting Shareholders'' in
Part 4 of the Circular).
If the Proposals are not approved at the First EGM, the Board reserves the right
to proceed to propose the resolution for the winding up of the Company at the
Second EGM or, in any event, by the end of January 2005. If the Company is wound
up in this manner (that is, without the Scheme) Shareholders would receive their
cash entitlements under a liquidation after all liabilities have been satisfied
in full. Such a winding up would not, however, constitute a reconstruction for
tax purposes, and would therefore constitute a disposal by Shareholders for the
purposes of UK taxation of capital gains. Nor would Shareholders have the option
of rolling over their investment and maintaining their exposure to the stock
market.
ACTION TO BE TAKEN
Before taking any action, you are recommended to read all of the information set
out in the remainder of the Circular. If any Shareholder is unsure as to what
action he should take or how to take any action, he should consult his
independent financial adviser authorised under the Financial Services and
Markets Act 2000.
Form of Election
Shareholders, other than Overseas Shareholders, and Bondholders, other than
Overseas Bondholders, will find a Form of Election enclosed with the Circular to
be used by them for the purpose of making an Election under the Scheme.
The Form of Election enables Shareholders and Bondholders who exercise their
right to convert into Ordinary Shares by the Conversion Date to elect for MEF
Units, New PAT Shares and/or for the Cash Option in respect of the entirety, or
any proportion, of their holding. Instructions on how to complete the Form of
Election are set out in the guidance notes attached to this Form of Election.
Shareholders and Bondholders who exercise their right to convert into Ordinary
Shares by the Conversion Date who wish to receive cash or New PAT Shares must
make an election on the Form of Election. If they do not do so, they will be
deemed to have made an election for MEF Units (unless they are Overseas
Shareholders or Overseas Bondholders).
Shareholders should note that if they hold Shares in both certificated and
uncertificated form, they must complete a separate Form of Election for each
holding. Similarly, Shareholders should complete a separate Form of Election for
Shares held under different member account references within CREST and for
Shares held in certificated form but under different designations. If
Shareholders have any queries relating to the completion of the Form of Election
or if you require further copies of the Form of Election please contact the
Registrars by telephone on 0870 600 0673 or, if calling from outside the UK
(+44) 1903 702767.
Shareholders are not required to surrender their share certificates (or, in the
case of CREST participants, make a transfer to escrow) in support of their Form
of Election.
Bondholders who exercise their right to convert into Ordinary Shares will not
receive share certificates in respect of Ordinary Shares unless the Scheme does
not become effective.
Please complete the Form of Election and return it in the reply paid envelope
accompanying the Circular, so as to be received by Lloyds TSB Registrars, The
Causeway, Worthing, West Sussex BN99 6DA not later than 5.00 pm on Friday, 5
November 2004.
Forms of Proxy for Meetings
Shareholders and Bondholders will find enclosed with the Circular a white form
of proxy for the First EGM and a blue form of proxy for the Second EGM. Whether
or not Shareholders and Bondholders who exercise their right to convert into
Ordinary Shares propose to attend the relevant meetings, the appropriate forms
of proxy should be completed and returned to Lloyds TSB Registrars, The
Causeway, Worthing BN99 6ZR, as soon as possible and in any event not later than
48 hours before the time appointed for holding the relevant meeting. Completion
and return of the relevant forms of proxy will not prevent Shareholders and
Bondholders who exercise their right to convert into Ordinary Shares from
attending and voting in person at the Meetings, should they wish to do so.
PICT PEP, ISA and Savings Scheme Investors
Participants in the PICT PEP, ISA and Savings Scheme will find enclosed with the
Circular a letter from the plan manager, a Letter of Direction in respect of the
Meetings and a personalised Election Instruction Form. Participants are
requested to complete and return the relevant Letter of Direction in accordance
with the instructions printed thereon as soon as possible and, in any event, so
as to be received not later than 96 hours before the relevant meeting.
Participants should return the Election Instruction Form in the reply paid
envelope to Adam & Company, 22 Charlotte Square, Edinburgh EH2 4DF to be
received by 29 October 2004.
Overseas Shareholders and Overseas Bondholders
No person receiving a copy of the Circular and/or a Form of Election in any
territory other than the United Kingdom may treat the same as constituting an
invitation or offer to him of MEF Units or New PAT Shares, nor should he in any
event accept any invitation or offer, unless in the relevant territory such an
invitation or offer could lawfully be made to him without compliance with any
registration or other legal requirements other than those which may already have
been fulfilled.
It is the responsibility of Overseas Shareholders to inform themselves about and
to observe any legal and regulatory requirements in their jurisdiction
including, without limitation, any relevant requirement in relation to their
ability to complete and return the Form of Election and to be issued with MEF
Units or New PAT Shares. Shareholders who are subject to taxation outside the
United Kingdom should consult their tax advisers as to the affects of the
Proposals.
Overseas Shareholders will not receive a Form of Election and will (unless the
Company otherwise determines) receive a cash sum equal to the FAV attributable
to their Shares unless they have satisfied the Directors that it is lawful for
MEF to issue MEF Units or PAT to issue New PAT Shares to them under the relevant
overseas laws and regulations.
Overseas Bondholders will not receive a Form of Election. If an Overseas
Bondholder exercises his right to convert into Ordinary Shares by the Effective
Date, he will be treated as an Overseas Shareholder as described above.
Otherwise, he will be treated as a Bondholder who has not exercised his right to
convert into Ordinary Shares.
Further information in relation to Overseas Shareholders is set out in the
section headed ''Overseas Shareholders'' in Part 4 of the Circular.
RECOMMENDATION
The Board, which has been so advised by Intelli Corporate Finance, believes that
the Proposals set out in the Circular are in the best interests of the Company
and of Shareholders as a whole.
Accordingly, the Board unanimously recommends Shareholders to vote in favour of
the resolutions to be proposed at the Meetings irrespective of any Election they
may wish to make under the Proposals. The Board, who in aggregate have an
interest in 565,465 Shares being 8.57 per cent. of the current issued share
capital (assuming all of the Bonds are converted), intend to vote their entire
holdings in favour of the Scheme.
In providing its advice, Intelli Corporate Finance has taken into account the
Directors' commercial assessments of the Proposals.
The Board cannot and does not give any advice or recommendations to Shareholders
as to whether, or as to what extent, they should elect for any of the options
under the Proposals. The choice between the Options is a matter for each
Shareholder to decide and will be influenced by their individual financial and
tax circumstances and their investment objectives. Shareholders should seek
advice from their own independent financial advisers if they are in any doubt as
to the action they should take.
Yours faithfully
Sir David Thomson, Bt
Chairman"
ENDS
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