12th Feb 2009 16:00
M&G Recovery Investment Company Limited
Recommended proposals for the winding-up and reconstruction of the Company
12 February 2009
Introduction
The Board of M&G Recovery Investment Company Limited today announces recommended proposals for the winding-up and reconstruction of the Company.
Under the Proposals, Shareholders and Package Unitholders will be able to roll over some or all of their investment by electing to receive Securities in one or more of the Rollover Funds or to realise their investment for cash payable to them in the liquidation of the Company.
Background to the Proposals
The Company was launched as a closed-ended investment company in March 2002 with a planned winding-up date of 31 March 2009. Under the Articles, the Directors are obliged to convene an extraordinary general meeting on 31 March 2009, at which a resolution to place the Company into voluntary liquidation must be proposed. Liquidation without rollover options would result in all Shareholders and Package Unitholders receiving cash for their investment and, depending on their individual circumstances, incurring a potential liability to capital gains tax or realising an allowable loss.
The Proposals have been designed to provide Shareholders and Package Unitholders with a choice of realising their investment or continuing it through one or more of the Options listed below.
The Proposals
For operational reasons, under the Proposals, the Company will be wound up on 27 March 2009, rather than the planned winding-up date of 31 March 2009 as stated in the Articles. Under the Proposals, Ordinary Shareholders (including those held as part of a Package Unit) will have their entitlements calculated on the Calculation Date, but it is not anticipated that this would materially adversely affect them. Zero Dividend Shareholders will receive the amount that they would have received were the Company to be wound up on 31 March 2009 (on the assumption that there are sufficient assets in the Company). Shareholders and Package Unitholders will have a choice between continuing their investment by electing for one or more of the rollover options listed below and/or realising some or all of their investment for cash under the Cash Option.
The Options for Shareholders and Package Unitholders are as follows:
For Package Unitholders
* the Package Unit Option - to receive M&G HIT Package Units; and/or * the Income & Growth Unit Option - to receive M&G HIT Income & Growth Units; and/or * the M&G Corporate Bond Fund Option - to receive M&G Corporate Bond Fund Shares; and/or * the M&G Recovery Fund Option - to receive M&G Recovery Fund Shares; and/or * the Cash Option - to receive cash in the liquidation of the Company.
For Ordinary Shareholders
* the Package Unit Option - to receive M&G HIT Package Units; and/or * the Income & Growth Unit Option - to receive M&G HIT Income & Growth Units; and/or * the M&G Corporate Bond Fund Option - to receive M&G Corporate Bond Fund Shares; and/or * the M&G Recovery Fund Option - to receive M&G Recovery Fund Shares; and/or * the Cash Option - to receive cash in the liquidation of the Company.
For Zero Dividend Shareholders
* the Zero Dividend Option - to receive M&G HIT Zero Dividend Shares; and/or * the Package Unit Option - to receive M&G HIT Package Units; and/or * the Income & Growth Unit Option - to receive M&G HIT Income & Growth Units; and/or * the M&G Corporate Bond Fund Option - to receive M&G Corporate Bond Fund Shares; and/or * the M&G Recovery Fund Option - to receive M&G Recovery Fund Shares; and/or * the Cash Option - to receive cash in the liquidation of the Company.
The Rollover Funds
Under the Proposals, Shareholders and Package Unitholders have the choice of electing for Securities in one or more of the Rollover Funds. Information on each of these Rollover Funds is set out below and the key features of M&G High Income are set out in Part V of this document. In addition, full details of M&G High Income are set out in the enclosed Prospectus and details of the M&G Corporate Bond Fund and the M&G Recovery Fund are set out in the enclosed Key Features Document. The information contained in this document relating to M&G High Income has been provided by its directors, and the information contained in this document relating to the M&G Corporate Bond Fund and the M&G Recovery Fund has been provided by the ACD.
M&G High Income
M&G High Income, a UK investment trust managed by Nick Evans (also the fund manager with primary responsibility for the day-to-day management of the Company's portfolio), invests substantially in UK equities quoted on the London Stock Exchange, with the aim of achieving an above average and increasing income over the 20 year life of the company (with a planned winding-up date of 17 March 2017) while at the same time seeking to achieve capital growth.
M&G Corporate Bond Fund
The M&G Corporate Bond Fund, managed by Richard Woolnough, aims to achieve a higher total return (the combination of income and growth of capital) from investment than would be obtainable in UK government fixed interest securities (i.e. gilts) of similar maturities. The M&G Corporate Bond Fund invests mainly in sterling denominated corporate debt instruments. The fund's exposure to corporate debt may be gained by the use of derivatives. Any currency exposures within the M&G Corporate Bond Fund may be managed by currency hedges into sterling. The M&G Corporate Bond Fund may also invest in other assets including collective investment schemes, other transferable securities and other debt instruments (including corporate debt and government and public securities denominated in any currency), cash and near cash, deposits, warrants, money market instruments and other derivative instruments.
M&G Recovery Fund
The M&G Recovery Fund, managed by Tom Dobell, predominantly invests in a diversified range of securities issued by companies which are out of favour, in difficulty or whose future prospects are not fully recognised by the market. The sole aim of the fund is capital growth and there is no particular income yield target.
Costs and expenses
Management and administration agreement
The existing agreement for investment management and administration services between the Company and M&G Guernsey will be terminated on the Effective Date and M&G Guernsey has waived its right to receive any termination payment.
General
The Proposals have been structured such that Shareholders and Package Unitholders will bear a fixed cost in relation to the Proposals (the ``Standard Adjustment''), with further costs (the ``Rollover Adjustment'') being borne only by those Shareholders and Package Unitholders who elect (or are deemed to elect) for Securities in the Rollover Funds.
A Standard Adjustment of £350,000 shall be deducted from the Net Assets of the Company in calculating Shareholders' and Package Unitholders' entitlements under the Scheme to reflect a reasonable estimate of the costs which the Company would need to incur in any event in relation to its liquidation.
In addition, each Package Unit, Ordinary Share and Zero Dividend Share in respect of which an Election has been made (or is deemed to be made) to receive Securities in one of the Rollover Funds pursuant to the Scheme, shall bear a Rollover Adjustment when calculating their entitlement under the Scheme. The Rollover Adjustment shall be 1 per cent. of the Cash Terminal Asset Value for each Package Unit, Ordinary Share and Zero Dividend Share in respect of which an Election has been made (or is deemed to be made) to receive Securities in one of the Rollover Funds pursuant to the Scheme less the Standard Adjustment Offset.
The "Standard Adjustment Offset" is an amount by which the Standard Adjustment can be utilised to reduce the Rollover Adjustment for each Share or Package Unit in respect of which an Election has been made (or is deemed to be made) to receive Securities in the Rollover Funds pursuant to the Scheme being the remaining balance once the Standard Adjustment has been used to (i) meet the Company's costs (i) to meet the Company's costs in relation to the Proposals, including known completion costs which have not yet been incurred as at the Calculation Date; (ii) to meet M&G High Income's costs in relation to the Scheme, including known completion costs which have not yet been incurred as at the Calculation Date (other than the stamp duty to be borne by M&G High Income in respect of the transfer of assets to M&G High Income pursuant to the Scheme); and (iii) to reduce any costs incurred by M&G or M&G Securities in relation to the Scheme.
The Company will pay an amount equal to the Adjustments to M&G Securities in consideration for which M&G Securities has agreed to meet the Company's costs in relation to the Proposals. In the event that the Scheme is not implemented only the Standard Adjustment will be paid to M&G Securities and any additional costs of the Company in relation to the Proposals shall be borne by M&G Securities.
Contribution by M&G Securities
As noted above, M&G Securities has agreed to meet the Company's costs in relation to the Proposals, in consideration for which the Company will pay the Adjustments to M&G Securities. In addition M&G Securities has agreed to meet M& G High Income's costs in relation to the Scheme (other than the stamp duty to be borne by M&G High Income in respect of the transfer of assets to M&G High Income pursuant to the Scheme).
Default Provisions
Shareholders and/or Package Unitholders who do not make valid Elections for the purposes of the Proposals will be deemed to have made Elections on the following basis:
* Package Unitholders will be deemed to have elected for the Package Unit Option; * Ordinary Shareholders will be deemed to have elected for the Income & Growth Unit Option; and * Zero Dividend Shareholders will be deemed to have elected for the Zero Dividend Option, unless either (i) the Zero Dividend Option or the Income & Growth Unit Option is not available fully or partially in which case the provisions contained in the section headed ``Scaling back'' below apply or (ii) none of the M&G High Income Options are available in the event that the conditions to M&G High Income's participation in the Scheme are not satisfied (see the section headed ``M&G High Income Shareholder approval'' below), in which case Elections (including deemed Elections) for the M&G High Income Options will be deemed to be Elections for the M&G Corporate Bond Fund Option.
Scaling back
Shareholders and Package Unitholders should note that if full satisfaction of Elections (including deemed Elections) and the proposed Placing by M&G High Income would result in the capital structure of M&G High Income not being in the Standard Proportion, the Directors, M&G, as the Company's investment manager and Numis Securities reserve the right to determine in their absolute discretion that Elections for the Zero Dividend Option or the Income & Growth Unit Option will be scaled back and deemed to be Elections for the Package Unit Option.
In order to ensure that the capital structure of M&G High Income remains in the Standard Proportion, the scaling back provisions will be implemented as follows:
* If, as anticipated, there is a need to scale back Elections for M&G HIT Zero Dividend Shares, the issue of M&G HIT Zero Dividend Shares under the Scheme will be scaled back on a pro rata basis by issuing M&G HIT Package Units to those Shareholders who have elected or are deemed to have elected for M&G HIT Zero Dividend Shares. * If there is a need to scale back Elections for M&G HIT Income & Growth Units, the issue of M&G HIT Income & Growth Units will be scaled back: * first, by scaling back subscriptions for M&G HIT Income & Growth Units under the Placing, at the discretion of the board of M&G High Income, by not issuing M&G HIT Income & Growth Units to placees and returning the subscription monies; and * second, by issuing M&G HIT Package Units on a pro rata basis to those Shareholders who have elected or are deemed to have elected for M&G HIT Income & Growth Units.
M&G High Income shareholder approval
In order to satisfy Elections for the M&G High Income Options, it is necessary for M&G High Income to put an enabling resolution to its shareholders. The necessary meeting has been convened for 19 March 2009.
M&G High Income's participation in the Scheme is conditional, inter alia, on the passing of the M&G High Income Resolution. In the event that the conditions to M&G High Income's participation in the Scheme are not satisfied, all Elections (including deemed Elections) for the M&G High Income Options will be deemed to be Elections for the M&G Corporate Bond Fund Option.
Liquidation Fund
Under the Proposals, before transferring the assets of the Company to the Rollover Funds, the Liquidators will set aside sufficient assets in the Liquidation Fund (i) to cover an amount equal to the Adjustments which it shall pay to M&G Securities to be applied by them to settle or defray such costs as more particularly described in the section headed ``Costs and Expenses'' above and (ii) to meet its known actual and contingent liabilities (other than those covered by (i) above) and will also provide in the Liquidation Fund for a Retention which they consider sufficient to meet any unascertained and unknown liabilities of the Company. The Retention is currently expected to amount to approximately £150,000 or 0.06 pence per Ordinary Share (0.12 pence per Package Unit).
Any balance in the Liquidation Fund, after settlement of all creditors and after settlement of the entitlements of Zero Dividend Shareholders and Package Unitholders (to the extent their Package Units comprise Zero Dividend Shares) in accordance with the Scheme, will be paid by the Liquidators in one or more cash distributions to Ordinary Shareholders and Package Unitholders (to the extent their Package Units comprise Ordinary Shares) on the Register as at the Effective Date subject to any amounts paid to charity in respect of unclaimed distributions or unclaimed amounts as described above and provided that no payments of less than £5.00 shall be made to any Shareholder or Package Unitholder. Any such residual amounts shall be paid to M&G High Income.
Shareholder meetings
At the General Meeting of the Ordinary Shareholders, the Ordinary Shareholders and Package Unitholders will be asked to vote on an Extraordinary Resolution to approve the passing of the Resolution at the First EGM and any variation to the special rights attached to their Ordinary Shares resulting from the amendments to the Articles proposed pursuant to the Proposals. The Extraordinary Resolution will require the approval of 75 per cent. or more of the votes cast at the relevant Meeting, whether in person or by proxy.
At the First EGM, at which the Ordinary Shareholders and Package Unitholders are entitled to vote, a Special Resolution will be proposed to: (i) reclassify the Shares in accordance with the Elections (made or deemed to be made) and to amend the Articles of the Company for the purposes of implementing the Scheme; (ii) sanction the Scheme and authorise its implementation by the Liquidators; and (iii) approve the winding-up of the Company on the Effective Date, appoint the Liquidators and confer the appropriate powers on them. The Special Resolution will require the approval of 75 per cent. or more of the votes cast at the Meeting, whether in person or by proxy.
If either the Extraordinary Resolution to be proposed at the General Meeting of the Ordinary Shareholders or the Special Resolution to be proposed at the First EGM are not passed, a Special Resolution will be proposed at the Second EGM, at which all Shareholders and Package Unitholders are entitled to vote, to wind up the Company voluntarily. At the Second EGM, Shareholders entitled to vote and who vote in favour of the winding-up resolution shall collectively have such total number of votes on a poll, as is four times the aggregate number of votes cast against the Special Resolution.
The Liquidators shall seek to realise the assets of the Company as soon as reasonably possible and, after paying all creditors, will make one or more cash distributions to all shareholders on the Register on 31 March 2009.
Final Interim Dividend
Under the Proposals, the Directors will declare a Final Interim Dividend equal to their best estimate of the revenue profits of the Company (including accumulated revenue reserves) available for distribution. The Directors currently intend, based on estimates as at 12 noon on 6 February 2009 and subject to market conditions, to pay a Final Interim Dividend of at least 0.5 pence per Ordinary Share (or 1.0 pence per Package Unit), which is expected to be paid on or about 25 March 2009 to Ordinary Shareholders and Package Unitholders on the Register on 17 March 2009. If a Final Interim Dividend of 0.5 pence per Ordinary Share (or 1.0 pence per Package Unit) was paid, the total dividend paid by the Company in respect of the eleven month financial period ending 27 March 2009, including the third interim dividend of 0.5 pence per Ordinary Share (or 1.0 pence per Package Unit) declared on 10 February 2009 would be 2.95 pence per Ordinary Share (5.90 pence per Package Unit), which would compare with the total dividend of 2.95 pence per Ordinary Share (5.90 pence per Package Unit), which was paid by the Company in respect of the year ended 30 April 2008.
Any balance remaining in the Company's revenue reserve after the Final Interim Dividend has been paid will be taken into account when calculating the Final Terminal Asset Value of the Shares.
Conditions to the Proposals
The Scheme which provides for, and which will effect, the Options, is conditional inter alia upon:
* the passing by the Ordinary Shareholders of all Resolutions to be proposed at the General Meeting of Ordinary Shareholders and at the First EGM (or at any adjournments thereof); * the UK Listing Authority consenting to the amendment to the Official List to reflect the reclassification of the Shares as Reclassified Shares; and * the Directors not resolving to abandon the Scheme.
If either the Extraordinary Resolution to be proposed at the General Meeting of the Ordinary Shareholders or the Special Resolution to be proposed at the First EGM are not passed, a Special Resolution will be proposed at the Second EGM to wind up the Company voluntarily.
Restricted Persons
Restricted Persons will not receive a Form of Election, will not be entitled to submit a valid CREST Election and will (unless the Directors determine otherwise) receive cash (in the form of a cheque) directly from the Company in respect of their entire holding of Shares or Package Units unless they have satisfied the Directors that it is lawful for the Rollover Funds to issue Securities to them under any relevant overseas laws and regulations.
Expected timetable2009 12 March Date from which it is advised that dealings in Shares should only be for cash settlement and immediate delivery of documents of title; 17 March 4.30 p.m. Latest time and date for receipt of Forms of Election and CREST Elections from Shareholders and Package Unitholders; 5.00 p.m. Record Date for entitlements of Shareholders and Package Unitholders under the Proposals; 5.00 p.m. Record Date for entitlements to the Final Interim Dividend expected to be paid on or about 25 March 2009; 5.00 p.m. The Company's Register closes; 18 March 11.00 a.m. Latest time and date for receipt of Forms of Proxy for the General Meeting of the Ordinary Shareholders; 11.05 a.m. Latest time and date for receipt of Forms of Proxy for the First EGM; 20 March 11.00 a.m. General Meeting of Ordinary Shareholders; 11.05 a.m. First EGM; (1) 25 March 5.00 p.m. Payment date for Final Interim Dividend; 12.00 noon Calculation Date; 12.00 noon Calculation of the issue price of Securities in M&G High Income to be issued pursuant to the Scheme; 27 March 8.00 a.m. Opening of the Company's register of Shareholders and dealings in Reclassified Shares expected to commence; De-listing of Shares from the CISX; Effective Date for the implementation of the Proposals; 10.30 a.m. Latest time and date for receipt of Forms of Proxy for the Second EGM; Company placed into liquidation; 12.00 noon Calculation of the issue price for M&G Corporate Bond Fund Shares and the M&G Recovery Fund Shares; Issue of the M&G Extra Income Fund Shares and the M&G Recovery Fund Shares; Dealings in Reclassified Shares suspended; 30 March Confirmation letters dispatched for Securities issued in uncertified form in respect of the M&G Corporate Bond Fund Option and the M&G Recovery Fund Option; Week commencing 30 Cheques dispatched in respect of the Cash March Option; CREST accounts credited with cash in respect of the Cash Option; 31 March 10.30 a.m. Second EGM; Securities in M&G High Income issued pursuant to the Scheme; Securities issued in uncertified form credited to the stock accounts in CREST of the persons entitled thereto in respect of the M&G High Income Options; 6 April (or as soon Certificates despatched for Securities issuedas practicable in certificated form in respect of the M&G thereafter) High Income Options; By 30 March 2010 Listing of Reclassified Shares cancelled.
Note: (1) or as soon thereafter as the immediately preceding meeting shall have concluded or been adjourned.
Enquiries
For any enquiries regarding this announcement please contact:
Numis Securities LimitedNathan Brown, tel. +44 (0)20 7260 1426
Kleinwort Benson (Channel Islands) Fund Services Limited Secretary, tel. +44 (0)1481 727 111
Notes
The information in this announcement should be read in conjunction with the full text of the Circular. Capitalised terms used in this announcement shall, unless the context otherwise requires, bear the meaning given to them in the Circular issued by M&G Recovery Investment Company Limited dated 12 February 2009.
Copies of the Circular 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:
Financial Services Authority25 The North ColonnadeCanary WharfLondon E14 5HSTel. no. 020 7066 1000
This announcement and the information contained herein is not for publication, distribution or release in, or into, directly or indirectly, the United States, Canada, Australia or Japan and does not constitute, or form part of, an offer of securities for sale in or into the United States, Canada, Australia or Japan.
This announcement should not be construed as advice relating to legal, taxation or any other matters and does not constitute a recommendation to sell or the solicitation of an offer to subscribe for or buy, nor shall there be any sale of, any securities in any jurisdiction in which such offer, solicitation or sale would be unlawful or would impose any unfulfilled registration, publication or approval requirements on the Company or Numis Securities Limited.
The contents of this announcement include statements that are, or may be deemed to be "forward looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms " believes", "estimates", "anticipates", "expects", "intends", "may", "will" or " should". They include the statements regarding the target aggregate dividend. By their nature, forward looking statements involve risks and uncertainties and readers are cautioned that any such forward-looking statements are not guarantees of future performance. The Company's actual results and performance may differ materially from the impression created by the forward-looking statements. The Company undertake no obligation to publicly update or revise forward-looking statements, except as may be required by applicable law and regulation (including the Listing Rules). No statement in this announcement is intended to be a profit forecast. Investors should consult a professional adviser as to the suitability of the Proposals for the investor concerned.
M & G RECOVERY INVESTMENT COMPANY LIMITEDRelated Shares:
MGR.L