8th Jul 2005 13:10
Insight Foundation Property Tst Ltd08 July 2005 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES,CANADA, AUSTRALIA OR JAPAN. 8 July 2005 Insight Foundation Property Trust Ltd Placing and Offer for Subscription for up to 100 million C Shares at 100p Further to the announcement made on 9 June 2005, the Board has today published aProspectus and Circular announcing proposals to raise up to £100 million bymeans of a placing and offer for subscription of C Shares. Terms used in thisannouncement shall have the same meaning as defined in the Prospectus andCircular. Background Over the period from the Company's launch in July 2004, the net asset totalreturn of the Company's Ordinary Shares has been almost 11 per cent. (measuredfrom 16 July 2004 to 31 March 2005). In addition, the Ordinary Shares havetraded consistently at a premium to Net Asset Value during this period. After due consideration of the Company's strategy, the Board has concluded thatit is now an appropriate time to seek to raise additional capital for theCompany in order to expand and diversify the Company's asset base. The proceeds of the Issue will be used to acquire properties designed tore-weight the Company's investment portfolio towards areas of the propertymarket which the Investment Manager believes will improve the anticipatedreturns for Shareholders. As announced on 8 June 2005, the company exchangedunconditional contracts to acquire Minerva House at a price of approximately£42.13 million. It also has a number of other properties under activeconsideration. These properties comprise Central London buildings where theInvestment Manager believes that there are continued attractive marketopportunities. In the event that, for whatever reason, the Issue does notproceed, the acquisition of Minerva House will nevertheless be completed by theCompany utilising its existing cash resources and additional committed externalborrowings. Rationale for the Issue The primary rationale for the fundraising is to grow the Company and to improveanticipated long term returns for Shareholders. • The current portfolio has performed well. The Investment Managerwishes both to retain the large majority of the current portfolio and expand theportion of it that is allocated to Central London and South East of Englandoffice markets. • The Investment Manager believes that increasing the exposure of theCompany's investment portfolio towards Central London and South East of Englandoffice markets will improve anticipated returns with rental growth and potentialnet asset value growth for Shareholders. • Broadening the spread of assets and tenants will further add diversityto the portfolio. • The enlargement of the Company's investment portfolio will also bepartially financed through the additional tranche of the securitisation facilityat an attractive rate of borrowing. • It is expected that the acquisition of these properties will initiallyhave a neutral impact on earnings but subsequently lead to further growth. • By Ordinary Shareholders sharing the acquisition costs of theseproperties with the C Share pool, both Ordinary Shareholders and C Shareholderswill benefit from economies of scale. • The C Shares will convert into Ordinary Shares once the C Share poolis at least 50 per cent. invested. The C Shares will be issued at 100 pence perC Share and will convert on a net asset value to net asset value basis. Thesee-through yield to new C Shareholders is estimated to be 6.3 per cent. postIssue. This is not a profit forecast. • Enlarging the Company will mean the fixed costs of operating thebusiness are spread across a greater number of assets. • Broadening the spread of investors within the Company should addfurther diversification to the shareholder list and create a larger free float. • The Issue will be structured so as to avoid dilution for existingOrdinary Shareholders and existing Ordinary Shareholders will not bedisadvantaged by the costs of the fundraising. Rights attaching to the C Shares The C Shares will form a separate class of shares within the share capital ofthe Company and application has been made for the C Shares to be admitted to theOfficial Lists and to trading on the London Stock Exchange and Channel IslandsStock Exchange. Once the proceeds of the Issue have been at least 50 per cent. invested the CShares will convert into Ordinary Shares on the basis of a Conversion Ratio,which will reflect the proportion which the Company's net assets attributable toeach C Share bear to the net assets attributable to each existing Ordinary Shareat the Calculation Time. The net proceeds of the Issue will be accounted for as a separate pool untilthey have been at least 50 per cent. invested in accordance with the Company'sinvestment policy (or, if earlier, until 6 months after Admission at which pointthe C Shares will convert into Ordinary Shares on the basis referred to above).Pending investment in accordance with the Company's investment policy, the netproceeds of the Issue will be held in cash, cash-equivalents, gilts or othershort term money market instruments. Fractions of Ordinary Shares arising onConversion will not be allocated to holders of C Shares but will be aggregatedand sold for the benefit of the Company. The C Shares will not carry any rights to dividends. Nor will they carry votingrights, but the consent of C Shareholders as a class will be required inconnection with certain matters specified in the Articles. C Shareholders willbe entitled to participate in a winding-up of the Company or on a return ofcapital as specified in the amended Articles. The Issue is designed to overcome the potential disadvantages for both existingand new investors which would arise out of a conventional fixed price issue offurther shares for cash. In particular: • the assets from time to time representing the proceeds of the Issuewill be accounted for as a distinct pool of assets until the Calculation Time(as defined in the amended Articles), by which time it is expected they willhave been at least 50 per cent. invested in accordance with the Company'sinvestment policy. As a result, existing Ordinary Shareholders will not beexposed to a portfolio containing substantial uninvested cash; • the Net Asset Value of the existing Ordinary Shares will not bediluted by the expenses associated with the Issue, which will be borne by theassets attributable to the C Shares; and • the basis upon which the C Shares will convert into Ordinary Shares issuch that the number of Ordinary Shares to which C Shareholders will becomeentitled will reflect the value of the pool of additional capital raised by theIssue as compared to the value of the remainder of the Company's assets. As aresult, neither the Net Asset Value attributable to the existing Ordinary Sharesnor the Net Asset Value attributable to the C Shares will be adversely affectedby Conversion. Clerical Medical Investment Group Limited, which holds 42.31 per cent. of theissued Ordinary Shares of the Company, has informed the Board that it does notintend to acquire any C Shares under the Placing and Offer. Irrevocable Undertaking An irrevocable undertaking to vote in favour of the Resolution to be proposed atan EGM of the Company convened for 10.30 a.m. on 26 July 2005, has been providedby Clerical Medical Investment Group Limited, representing 42.31 per cent. ofthe issued Ordinary Shares in the Company. Example of Conversion The following example is provided for the purpose of illustrating the basis onwhich the number of new Ordinary Shares arising on Conversion will becalculated. The example is not, and is not intended to be, a profit forecast ora forecast of the number of Ordinary Shares which will arise on Conversion. The costs of the Issue payable by the C Shareholders are expected to beapproximately £1.7 million (including VAT). These costs will be deducted fromthe assets of the C Shares when calculating the Conversion Ratio. TheAcquisition Costs will be shared among C Shareholders and Ordinary Shareholderson a pro-rata basis according to net asset value of each class at the time ofconversion. By way of illustration only, had the Proposals become effective on 6 July 2005,based on the Company's estimated net asset value per Ordinary Share of 106.3pence* as at 30 June 2005 and the methodology set out in the Prospectus, the netasset value of a C Share and an Ordinary Share for the purposes of Conversionwould have been 97.8 pence and 104.2 pence respectively. A holder of 1,000 CShares would therefore have received 938 Ordinary Shares. This calculation isillustrated below: ExampleValue of assets attributable to each C Share 100pLess: Issue costs per C Share (1.7p)Less: Share of Acquisition Costs and other attributable liabilities per C Share (0.5p) Net assets attributable to a C Share for Conversion Ratio 97.8p Estimated Net Asset Value of investments attributable to an existing Ordinary Share* 106.3pLess: quarterly dividend per Ordinary Share** (1.6875p)Less: other adjustments including share of Acquisition Costs and other attributable (0.4)pliabilities per Ordinary Share Net assets attributable to an Ordinary Share for Conversion Ratio 104.2p Conversion Ratio 0.938Number of Ordinary Shares for a holder of 1,000 C Shares arising on Conversion 938Estimated see through yield of C Shares based on issue price of C Shares*** 6.3% * This NAV is an estimate for the purposes of illustration in the Prospectus. This NAVvalues the swap breakage costs on a mark to market basis at £6.7 million. The Companyexpects to confirm the 30 June 2005 NAV during the week ending 22 July 2005. ** Assuming a declared but unpaid dividend of 1.6875 pence per share. *** This is not a profit forecast. On the assumption that all of the C Shares are fully subscribed under thePlacing and Offer and on the basis of the Assumptions set out in the Prospectus,it is expected that on conversion of the C Shares, the new Ordinary Sharesissued on conversion will represent 27 per cent. of the Ordinary Sharesfollowing Conversion. It is estimated that the rental value and capital value of the New PropertyPortfolio will need to increase by an average rate of approximately 1 per cent.per annum (on the basis of the Assumptions set out in the Prospectus) for theNet Asset Value of an Ordinary Share at 15 July 2014 to equal the share price ofan Ordinary Share of 115.25 pence as at 6 July 2005. Expected Timetable Offer for Subscription opens 8 July 2005Latest time and date for applications under the Offer* 11.00 a.m. on 21 July 2005Latest time and date for receipt of Forms of Proxy for the 10.30 a.m. on 24 July 2005Extraordinary General Meeting of the CompanyLatest time and date for commitments under the Placing* 11.00 a.m. on 25 July 2005Annual General Meeting of the Company 10.00 a.m. on 26 July 2005Extraordinary General Meeting of the Company 10.30 a.m. on 26 July 2005Admission of the C Shares to the Official List 27 July 2005Dealings in C Shares commence 8.00 a.m. on 27 July 2005Crediting of CREST stock accounts in respect of the C Shares 8.00 a.m. on 27 July 2005Share certificates in respect of the C Shares despatched Week commencing 8 August 2005 * The Directors may, with the prior approval of the Sponsor, bring forward suchdate and thereby shorten the offer period, to a date no earlier than 14 July2005. In the event that the offer period is shortened, the Company will notifyinvestors of such change through the publication of a notice through aregulatory information service provider to the London Stock Exchange and theChannel Islands Stock Exchange. Enquiries Duncan Owen 020 7321 1677Insight Investment Management Richard Cotton / Angus Gordon Lennox 020 7588 2828JPMorgan Cazenove Limited Stephanie Highett / Dido Laurimore 020 7831 3113Financial Dynamics This announcement is not for distribution directly or indirectly in or into theUnited States, Canada, Australia or Japan. This announcement does not constitutean offer to sell or issue or the solicitation of an offer to buy or acquire Cshares in the capital of Insight Foundation Property Trust in the United States,Canada, Australia or Japan or any jurisdiction in which such an offer orsolicitation is unlawful. The C shares in Insight Foundation Property Trustreferred to in this announcement have not been and will not be registered underthe Securities Act and may not be offered or sold within the United Statesabsent registration or an exemption from registration. No public offering ofsecurities will be made in the United States, Canada, Australia, or Japan. This announcement has been communicated by JPMorgan Cazenove Limited which isauthorised and regulated in the United Kingdom by the Financial ServicesAuthority and does not constitute an offer to sell or a solicitation of an offerto purchase any securities. The price of shares and the income from them may godown as well as up and investors may not get back the full amount invested ondisposal of the shares. Investments in property are relatively illiquid andmore difficult to realise than equities or bonds. Yields may vary, and are notguaranteed. There is no guarantee that the market price of shares in the fundwill fully reflect their underlying NAV. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Schroder Real