RNS No 0830a
THE SCOTTISH NATIONAL TRUST PLC
9th July 1998
PART 2
BACKGROUND TO THE OFFERS
Abpref was established in 1997 to be the successor
investment trust to Abpref Securities, which was itself
launched as a split capital investment trust in 1991.
Following an offer made in February 1997, Abpref acquired
all the ordinary income shares in Abpref Securities, leaving
its ZDP Shares outstanding pending the winding-up of Abpref
Securities which was due in May 1998. In March 1998,
proposals were made to the holders of the ZDP Shares to
extend their life and vary their terms, following which
Abpref Securities' life is now due to expire in March 2003.
While Abpref itself has only one class of shares and does
not have a fixed life, as a consequence of the presence of
the ZDP Shares in the capital structure of the Abpref Group,
it may be regarded as equivalent to a split capital trust.
SNT is a split capital investment trust company whose shares
are listed on the London Stock Exchange. Under its articles
of association, SNT has a fixed life to, and is due to be
wound up on, 30 September 1998. On 13 October 1997 offers
were made on behalf of SNT II for the SNT Shares which were
accepted in respect of 13.4 per cent. of the SNT Stepped
Preference Shares, 30.2 per cent. of the SNT Zeros, 42.7 per
cent. of the SNT Income Shares and 15.9 per cent. of the SNT
Capital Shares (although SNT II's holding of SNT Zeros and
SNT Income Shares has since been reduced by sales to 17.3
per cent. and 39.6 per cent. respectively). On 29 April
1998 at the time of its announcement of its unaudited
results for the six months to 31 March 1998, the directors
of SNT announced their intention to put forward a roll-over
scheme giving an efficient shelter from the crystallisation
of capital gains tax.
Abpref is making the Offers so as to give SNT Shareholders
the opportunity to exchange their holdings in SNT, in a tax
efficient manner, for new Abpref Group Securities on a basis
which Abpref believes will prove attractive to many SNT
Shareholders.
ADVANTAGES OF THE OFFERS FOR SNT SHAREHOLDERS
Unlike SNT, Abpref has a simple share capital structure,
comprising ordinary shares alone. Its subsidiary, Abpref
Securities, has ZDP Shares which contribute to the Group's
gearing. Abpref pioneered the concept of having ZDP Shares
in a U.K. subsidiary, so allowing the parent company,
Abpref, to offer a high-yielding, geared ordinary share with
an indefinite life. Since its inception in 1997, Abpref's
performance has been outstanding: measured by share price
total return over the last year it has been the best-
performing high income investment trust by a comfortable
margin.
Abpref's Offers present SNT Shareholders with the following
opportunities:
* capital gains tax liabilities which would otherwise
crystallise on SNT's winding-up can be deferred by
electing to receive new Abpref Group Securities.
* an immediate capital uplift for all classes of SNT
Shareholders.
* all holders of income-producing SNT Shares can elect for
high-yielding Abpref Ordinary Shares whose gearing should
be beneficial for continued capital and income growth and
which have historically stood at a significant premium to
net asset value.
* holders of SNT Shares other than SNT Income Shares can
also elect for a well-covered ZDP Share with a highly
competitive, pre-determined, capital return.
* a long-dated loan stock is also being made available to
the holders of SNT Capital Shares.
The specific benefits for SNT Shareholders accepting the
individual Offers are:
The Stepped Preference Offer (SNT liquidation value 171.03p
per share)
- Abpref Ordinary Shares which (based on 171.03p) give an
immediate capital uplift of 1.97 per cent. and an
indefinite stream of high income representing initially a
gross dividend yield of 12.75 per cent; or
- Abpref ZDP Shares with a very high cover and redemption
yield (based on 171.03p) of 8.6 per cent. per annum; the
immediate capital uplift (on the same basis) is 2.16 per
cent.; or
- any combination of Ordinary Shares and ZDP Shares.
The Zero Offer (SNT liquidation value 324.67p per share)
- Abpref ZDP Shares with a very high cover and a redemption
yield (based on 324.67p) of 8.6 per cent. per annum; the
immediate capital uplift (on the same basis) is 2.11 per
cent.
The Income Share Offer (SNT liquidation value 100p per
share)
- Abpref Ordinary Shares which (based on 100p) give an
immediate capital uplift of 7.2 per cent. and an
indefinite stream of high income representing initially a
gross yield of 13.4 per cent.
The Capital Share Offer (Estimated SNT TAV 218p per share)
- Subordinated Loan Stock which (based on 218p) affords a
running yield of 8.66 per cent. per annum, a redemption
yield of 8.7 per cent. per annum and an immediate capital
uplift of 5 per cent.; or
- Abpref ZDP Shares with a very high cover and a redemption
yield (based on 218p) of 8.1 per cent. per annum; or
- any combination of Subordinated Loan Stock and ZDP
Shares.
INVESTMENT PERFORMANCE OF ABPREF
In March 1997 the Abpref Ordinary Shares were issued at a
placing price of 85p with a net asset value of approximately
81p. As at 3 July 1998 (the date of the last published
unaudited net asset value of the Abpref Ordinary Shares
prior to this announcement) the middle-market price of the
Abpref Ordinary Shares was 166.5p, representing a premium of
almost 20 per cent. above the net asset value of 138.88p as
at that date.
In its AITC peer group of investment trust high income
shares Abpref ranks first by a considerable margin in terms
of share price total return over the year to 29 May 1998,
the most recent date to which such statistics are available:
Share Price
Ranking Total
Return on
#100
Abpref 1 #202.7
Aberdeen High Income Investment Trust 2 #180.8
PLC
Shires Income PLC 3 #164.6
Dartmoor Investment Trust PLC 4 #158.1
Aberdeen Convertible Income Trust PLC 5 #145.4
FTSE All-Share Index - #129.52
(Source: AITC. Principal bases: #100 invested on 29 May
1997; net dividends reinvested)
DIVIDENDS AND DIVIDEND FORECAST
The dividend policy of Abpref is to distribute substantially
all of its net revenue by way of four interim dividends.
The dividends paid in respect of the financial year ended 28
February 1998 totalled 14p net. In February 1998, the
Directors forecast total dividends for the current financial
year totalling 14.5p net, payable in four equal quarterly
instalments of 3.625p.
If the Offers and the Placing become unconditional in all
respects, in the absence of unforeseen circumstances, it is
the intention of the Directors to pay quarterly dividends of
4p each in the calendar year 1999, totalling 16p and
representing an increase on an annualised basis of 10.3 per
cent.
The expected timetable for Abpref's announced and forecast
dividend payments is as follows:
Dividend In respect of Month of Amount
the financial Payment (net)
year ending 28
February
First interim 1999 August 1998 3.625p
Second interim 1999 November 3.625p
1998
Third interim 1999 January 1999 4p
Fourth interim 1999 April 1999 4p
First interim 2000 August 1999 4p
Second interim 2000 November 4p
1999
The first dividend for which the new Abpref Ordinary Shares
will rank will be the dividend expected to be paid on 15
January 1999.
These forecasts relate to dividends only and are based on
the Assumptions.
THE OFFERS
On behalf of Abpref and Abpref Securities, Brewin Dolphin
Bell Lawrie Limited ('BDBL') has agreed to offer to acquire,
on the principal terms and subject to the conditions set out
in this announcement, all of the SNT Shares not already
owned by Abpref on the following bases:
(a) The Stepped Preference Offers
FOR EVERY 100 SNT STEPPED PREFERENCE SHARES: either 109 NEW
ABPREF ORDINARY SHARES* or 78 NEW ABPREF ZDP SHARES * or ANY
COMBINATION (AT THE ACCEPTOR'S CHOICE) OF NEW ABPREF
ORDINARY SHARES AND NEW ABPREF ZDP SHARES * as described
below
and so in proportion for any other number of SNT Stepped
Preference Shares. Holders of SNT Stepped Preference Shares
may elect to receive their consideration in the form of new
Abpref Ordinary Shares or new Abpref ZDP Shares and may
elect to receive new Abpref Ordinary Shares in respect of
some of their SNT Stepped Preference Shares and new Abpref
ZDP Shares in respect of others. Accepting holders of SNT
Stepped Preference Shares will also be entitled to receive
or retain the dividend of 4.072237p per SNT Stepped
Preference Share payable in accordance with the articles of
association of SNT on 30 September 1998.
* on the basis described in "Structure of the Offers"
below
The SNT Stepped Preference Shares will be acquired free from
all liens, charges, encumbrances, rights of pre-emption and
any other third party rights of any nature and together with
all rights attaching to them, including, save as aforesaid,
the right to receive in full all dividends and other
distributions, if any, declared, made or paid hereafter.
The Stepped Preference Offers are conditional upon
satisfaction or waiver of the relevant conditions set out in
Part C of PART 5 below.
(b) The Zero Offer
FOR EVERY 100 SNT ZEROS: 148 NEW ABPREF ZDP SHARES *
and so in proportion for any other number of SNT Zeros
* on the basis described in "Structure of the Offers" below.
The SNT Zeros will be acquired free from all liens, charges,
encumbrances, rights of pre-emption and any other third
party rights of any nature and together with all rights
attaching to them.
The Zero Offer is conditional upon satisfaction or waiver of
the relevant conditions set out in Part D of Part 5 below.
(c) The Income Share Offer
FOR EVERY 100 SNT INCOME SHARES: 67 NEW ABPREF ORDINARY
SHARES*
and so in proportion for any other number of SNT Income
Shares. Accepting holders of SNT Income Shares will also be
entitled to receive or retain all dividends paid on the SNT
Income Shares in respect of the year ending 30 September
1998 and any amount representing accumulated and
undistributed revenue reserves to which holders of such
shares are entitled.
* on the basis described in "Structure of the Offers"
below
The SNT Income Shares will be acquired free from all liens,
charges, encumbrances, rights of pre-emption and any other
third party rights of any nature and together with all
rights attaching to them, including, save as aforesaid, the
right to receive in full all dividends and other
distributions, if any, declared, made or paid hereafter.
The Income Share Offers are conditional upon satisfaction or
waiver of the relevant conditions set out in Part B of Part
5 below.
(d) The Capital Share Offers
FOR EVERY 100 SNT CAPITAL SHARES: either SUCH AN AMOUNT OF
SUBORDINATED LOAN STOCK AS WOULD HAVE A VALUE AT THE ISSUE
PRICE THEREOF EQUAL TO 105 PER CENT. OF THE FORMULA ASSET
VALUE OF SUCH SNT CAPITAL SHARES* or SUCH NUMBER OF NEW
ABPREF ZDP SHARES AS WOULD HAVE A VALUE AT THE PLACING PRICE
EQUAL TO 100 PER CENT. OF THE FORMULA ASSET VALUE OF SUCH
SNT CAPITAL SHARES* or ANY COMBINATION (AT THE ACCEPTOR'S
CHOICE) OF SUBORDINATED LOAN STOCK AND NEW ABPREF ZDP
SHARES*
and so in proportion for any other number of SNT Capital
Shares. Holders of SNT Capital Shares may elect to receive
their consideration in the form of new Abpref ZDP Shares or
Subordinated Loan Stock and may elect to receive new Abpref
ZDP Shares in respect of some of their SNT Capital Shares
and Subordinated Loan Stock in respect of others.
* on the basis described in "Structure of the Offers"
below
The SNT Capital Shares will be acquired free from all liens,
charges, encumbrances, rights of pre-emption and any other
third party rights of any nature and together with all
rights attaching to them, including the right to receive in
full all dividends and other distributions, if any,
declared, made or paid hereafter.
The Capital Share Offers are conditional upon satisfaction
or waiver of the relevant conditions set out in Part A of
Part 5 below.
(e) Formula Asset Value of the SNT Capital Shares ("FAV")
Under the Code, the FAV would normally be calculated on the
date on which the Offers are declared unconditional as to
acceptances. However, the SNT Capital Shares are
exceptionally highly geared and consequently have an
extremely volatile net asset value. For this reason Abpref
and its financial advisers consider that calculating the FAV
at the Unconditional Date would not be appropriate, since
any significant movement in net asset value between that
date and the date of allotment of the consideration under
the Capital Share Offer would be likely to create unfairness
either to accepting holders of SNT Capital Shares or to
accepting holders of the other classes of SNT Shares.
Abpref has therefore determined, with the agreement of the
Panel, that the FAV will be calculated as at the Closing
Date. Abpref will give at least seven days' public notice
of its intention to close the Offers and during this period
holders of SNT Capital Shares who have accepted the Capital
Offer will be able to withdraw their acceptance. Holders of
SNT Capital Shares will not be able to accept the Capital
Share Offer after the FAV has crystallised on the Closing
Date.
The FAV when calculated will be used to ascertain the amount
of Subordinated Loan Stock and the number of ZDP Shares to
be issued to accepting holders of SNT Capital Shares: for
this purpose the FAV will be compared, with the Issue Price
of the Subordinated Loan Stock or the Placing Price of the
ZDP Shares as the case may be.
It will only be possible to calculate the FAV after the
Closing Date. However, based on the Estimated SNT TAV,
Abpref has set out the financial effects of acceptance of
the Capital Share Offer below. While these examples are
illustrative only, they show that the consideration for each
SNT Capital Share would, at the Placing Prices of the
Subordinated Loan Stock and the ZDP Shares, have a value of
228.9p and 218p respectively at the Closing Date of the
Offers.
(f) Conditions
The Panel has agreed to waive the requirements of Rule 10 of
the Code, thus enabling Abpref and/or Abpref Securities to
declare the Offers unconditional as to acceptance without
Abpref or Abpref Securities (as the case may be) holding or
having agreed to acquire SNT Shares carrying 50 per cent. of
the voting rights normally exercisable at general meetings
of SNT and accordingly the Offers may become wholly
unconditional without any particular level of acceptances
being attained.
The conditions of the offers include conditions relating to
the level of the FTSE All-Share Index, the total assets of
SNT, the Cover of the ZDP Shares and certain provisions of
the Debenture Stock trust deed. These conditions have been
included for prudential reasons, to protect shareholders
against contingencies which the Directors consider to be
remote.
(g) General
The new Abpref Ordinary Shares will be issued credited as
fully paid and will rank pari passu in all respects with the
existing issued Abpref Ordinary Shares, save that they will
not rank for the first and second interim dividends in
respect of the current financial year ending 28 February
1999. The first dividend for which the new Abpref Ordinary
Shares will rank will be third interim dividend forecast to
be 4p net expected to be paid on 15 January 1999. The new
Abpref ZDP Shares will be issued credited as fully paid and
will rank pari passu in all respects with the existing
Abpref ZDP Shares. The Subordinated Loan Stock will be
issued credited as fully paid.
Fractions of new Abpref Group Securities will not be
allotted and entitlements of SNT Shareholders under the
Offers will be rounded down to the nearest whole number of
shares or the nearest unit of 1p nominal of Subordinated
Loan Stock.
STRUCTURE OF THE OFFERS
BDBL will make the Offers on behalf of both Abpref and
Abpref Securities to enable SNT Shareholders to have the
opportunity to elect to receive new Abpref Ordinary Shares,
Subordinated Loan Stock or new Abpref ZDP Shares.
Accordingly the Offers of new Abpref Ordinary Shares for SNT
Stepped Preference Shares and SNT Income Shares and of
Subordinated Loan Stock for SNT Capital Shares will be made
on behalf of Abpref and the Offers of new Abpref ZDP Shares
for SNT Stepped Preference Shares, SNT Zeros and SNT Capital
Shares will be made on behalf of Abpref Securities.
FINANCIAL EFFECTS OF ACCEPTANCE OF THE OFFERS
The following tables and statistics illustrate the financial
effects, in terms of capital and income, for SNT
Shareholders exchanging their SNT Shares for new Abpref
Group Securities pursuant to the Offers, as opposed to
receiving a cash distribution in SNT's winding-up.
In detailing the financial effects of acceptance, no account
has been taken of taxation on any capital gain which might
be incurred by a SNT Shareholder electing to receive cash in
the winding-up of SNT. Acceptors of the Offers should have
the benefit of rolling-over (or, in the case of election for
Subordinated Loan Stock, holding-over) any capital gain into
the new Abpref Group Securities and thus deferring any tax
liability.
Receiving a cash distribution in SNT's winding-up
On SNT's winding-up on 30 September 1998 the holders of SNT
Shares would have the following cash entitlements:
SNT Stepped Preference Shares 171.03p per share
SNT Zeros 324.67p per share
SNT Income Shares 100p per share (see Note 1)
SNT Capital Shares 218p per share (see Note 2)
Notes:
1.Holders of SNT Income Shares will be entitled to
receive or retain all dividends and distributions of
accumulated revenue reserves on such shares
irrespective of acceptance of the Income Share
Offer. The figure of 100p does not include these
dividends/distributions.
2.Estimated SNT TAV
The Stepped Preference Offer
Holders of SNT Stepped Preference Shares will be offered the
alternatives of Abpref ZDP Shares, Abpref Ordinary Shares or
any combination of the two.
A. The ZDP Share alternative is 78 ZDP Shares for every
100 SNT Stepped Preference Shares. On the basis of the
Placing Price of the ZDP Shares (224p per share), this
alternative values each SNT Stepped Preference Share at
174.72p and the SNT Stepped Preference Shares as a
class at #55.8 million.
For an acceptor of the ZDP Share alternative the
effects on capital value and income will be as follows:-
Capital value
TAV of 100 SNT Stepped Preference Shares#171.03
Placing price of 78 ZDP Shares #174.72
______
Increase in capital value #3.69
======
Percentage increase 2.16%
=====
Income
By their nature ZDP Shares do not have any
entitlement to income.
B. The Ordinary Share alternative is 109 Ordinary Shares
for every 100 SNT Stepped Preference Shares. On the
basis of the Placing Price of the Ordinary Shares (160p
per share) this alternative values each SNT Stepped
Preference Share at 174.4p and the SNT Stepped
Preference Shares as a class at #55.7 million.
For an acceptor of the Ordinary Share alternative the
effects on capital value and income will be as follows:-
Capital value
TAV of 100 SNT Stepped Preference Shares#171.03
Placing price of 109 Ordinary Shares #174.40
________
Increase in capital value #3.37
========
Percentage increase 1.97%
======
Income
Gross income on #171.03 (TAV of 100 SNT Stepped
Preference Shares) * #14.71
Gross dividend on 109 Ordinary Shares ** #21.80
______
Increase in income #7.09
=====
Percentage increase 48.2%
=====
* based on a gross yield of 8.6 per cent.,
being the interest yield on British
Government Treasury 10% Stock 2003, as
derived from the Financial Times on 7 July
1998 (the latest practicable date prior to
this announcement)
** based on Abpref's forecast dividends of 16p
(equivalent to 20p gross under the current
tax regime) per Ordinary Share in respect of
the calendar year 1999
Abpref's forecast 1999 dividend is the equivalent of a
gross dividend yield on 171.03p (the TAV of a SNT
Stepped Preference Share) of 12.75 per cent.
Accepting holders of SNT Stepped Preference Shares will also
be entitled to receive or retain the dividend of 4.072237p
per SNT Stepped Preference Share payable in accordance with
the articles of association of SNT on 30 September 1998.
The Zero Offer
Holders of SNT Zeros will be offered 148 ZDP Shares for
every 100 SNT Zeros. On the basis of the Placing Price of
the ZDP Shares (224p per share), this offer values each SNT
Zero at 331.52p and the SNT Zeros as a class at #211.7
million.
For an acceptor of the Zero Offer the effect on capital
value will be as follows:
Capital value
TAV of 100 SNT Zeros #324.67
Placing price of 148 ZDP Shares #331.52
_______
Increase in capital value #6.85
======
Percentage increase 2.11%
======
Neither the SNT Zeros nor the Abpref ZDP Shares have any
entitlement to income.
The Income Share Offer
Holders of SNT Income Shares will be offered 67 Abpref
Ordinary Shares for every 100 SNT Income Shares. On the
basis of the Placing Price of the Ordinary Shares (160p per
share), this offer values each SNT Income Share at 107.2p
and the SNT Income Shares as a class at #171.1 million.
For an acceptor of the Income Share Offer the effects on
capital value and income will be as follows:-
Capital value
TAV of 100 SNT Income Shares #100.00
Placing price of 67 Abpref Ordinary Shares#107.20
_______
Increase in value #7.20
======
Percentage increase 7.2%
======
Income
Gross income on #100 (TAV of 100 SNT Income
Shares) * #8.60
Gross dividend on 67 Abpref Ordinary Shares **#1
3.40
______
Increase in income #4.80
======
Percentage increase 55.81%
======
* based on a gross yield of 8.6 per cent.,
being the interest yield on British
Government Treasury 10% Stock 2003, as
derived from the Financial Times on 7 July
1998 (the latest practicable date prior to
this announcement)
** based on Abpref's forecast dividends of 16p
(equivalent to 20p gross under the current
tax regime) per Ordinary Share in respect of
the calendar year 1999
Abpref's forecast 1999 dividend is the equivalent
of a gross dividend yield on 100p (the TAV of a
SNT Income Share) of 13.4 per cent.
Accepting holders of SNT Income Shares will also be entitled
to receive or retain all dividends paid on the SNT Income
Shares in respect of the year ending 30 September 1998 and
any amount representing accumulated and undistributed
revenue reserves to which holders of such shares are
entitled.
The Capital Share Offer
Holders of SNT Capital Shares will be offered the
alternatives of Subordinated Loan Stock, Abpref ZDP Shares
or any combination of the two. The Capital Share Offer is
made on the basis of a formula, which compares the FAV of
the SNT Capital Shares with the Placing Price of,
respectively, the Subordinated Loan Stock and the ZDP
Shares. As at 7 July 1998 (the latest practicable date prior
to this announcement) the terms of the Capital Share Offer,
on the basis not of FAV but of the Estimated SNT TAV, would
have been as follows:
A. The Subordinated Loan Stock alternative would have
resulted in terms of 228.9 1p units of Subordinated
Loan Stock for every 100 SNT Capital Shares. On the
basis of the Issue Price of the Subordinated Loan Stock
(100p per 1p unit) this would have valued each SNT
Capital Share at 228.9p and the SNT Capital Shares as a
class at #146.2 million.
For an acceptor of the Subordinated Loan Stock
alternative the effect on capital value would have been
as follows:-
Capital value
Estimated TAV of 100 SNT Capital Shares #218.0
Issue Price of 228.9 units of Subordinated Loan
Stock #228.9
______
Increase in value #10.9
======
Percentage increase 5%
======
On the basis of the market price of a SNT Capital Share
of 204p on 7 July 1998, the latest practicable date
prior to this announcement, the percentage increase in
capital value for an acceptor would be 12.2%.
The SNT Capital Shares do not have any entitlement to
income.
B. The ZDP Share alternative would have resulted in terms
of 97.32 ZDP Shares for every 100 SNT Capital Shares.
On the basis of the Placing Price of the ZDP Shares
(224p per share), this would have valued each SNT
Capital Share at 218p and the SNT Capital Shares as a
class at #139.2 million.
For an acceptor of the ZDP Share alternative the effect
on capital value would have been neutral on the basis
of the Estimated SNT TAV. On the basis of the market
price of a SNT Capital Share of 204p on 7 July 1998,
the latest practicable date prior to this announcement,
the percentage increase in capital value for an
acceptor would be 6.9%.
Neither the SNT Capital Shares nor the Abpref ZDP Shares
have any entitlement to income.
RIGHTS AND CHARACTERISTICS OF THE NEW ABPREF GROUP
SECURITIES
Abpref has an unlimited life and a simple share capital
structure consisting of Ordinary Shares alone, the gearing
for which following completion of the Offers and the Placing
will be provided by the existing RPI-linked Debenture Stock,
bank borrowings, the ZDP Shares and the Subordinated Loan
Stock. The Directors consider that the use of this
combination of different types of gearing, is preferable to
reliance on a single form of gearing, in order to provide
flexibility for the future.
The Offers and the Placing will result in a significant
increase in the size of the Abpref Group's capital, the
composition of which will depend on the acceptances received
and elections made under the Offers and the amount of new
Abpref Group Securities issued pursuant to the Placing. The
Placing has been structured in such a way that the amount of
each class of Abpref Group Securities in issue following the
Offers and the Placing should be such as to balance the
interests of the holders of each class in the context of the
characteristics of each class as described in this
announcement.
Abpref ZDP Shares
The new ZDP Shares will rank pari passu in all respects with
the existing ZDP Shares, which had a capital entitlement of
218p as at 30 June 1998 increasing at a daily compound rate
up to their final capital entitlement of 318p on 31 March
2003 when Abpref Securities is due to be wound up in
accordance with its articles of association. Based on the
Placing Price of 224p, assumed to be payable on 30 September
1998, the return on the new ZDP Shares will be equivalent to
a Redemption Yield of 8.1 per cent. per annum over the
duration of their remaining life. On the basis of the
Assumptions the ZDP Shares are expected to have Cover of
approximately 2.5 times immediately following completion of
the Placing and Offers.
The ZDP Shares rank for repayment ahead of the Subordinated
Loan Stock by virtue of the subordination provision
described below under "Subordinated Loan Stock".
The ZDP Shares will not normally entitle their holders to
vote at general meetings of Abpref Securities. Their holders
will, however, have a right to vote in certain limited
circumstances, and their separate approval as a class will
normally also be required for certain proposals which would
be likely to affect their position. Further ZDP Shares (or
other prior or pari passu ranking shares or securities) may
be issued without the approval of the holders of such shares
provided that the Cover for the existing ZDP Shares will be
at least two times immediately thereafter, on the basis set
out in the articles of association of Abpref Securities.
Abpref Ordinary Shares
General
The new Ordinary Shares will be issued credited as fully
paid and will rank pari passu in all respects with the
existing Ordinary Shares, except that they will not rank for
the first or second interim dividends expected to be paid in
August and November 1998 respectively in respect of Abpref's
current financial year. Subject thereto, the Ordinary
Shares are entitled to all the distributable profits of
Abpref which are resolved to be distributed and, on a
winding-up, to all the Company's assets remaining after
satisfaction of its liabilities.
Revenue
Abpref's investment policy is designed to provide holders of
the Ordinary Shares with a high income yield without unduly
prejudicing the capital value of their investment. Dividends
on the Ordinary Shares are paid quarterly. As stated under
the heading "Dividends and dividend forecast" above, the
Directors expect to pay dividends in aggregate of 16p net
per Ordinary Share in the calendar year 1999. At the Placing
Price of 160p per new Ordinary Share, this represents a
dividend yield of 12.5 per cent. gross under the current tax
regime, and 10 per cent. net.
Capital
The current Net Asset Value of an Ordinary Share is 138.88p.
On the basis of the Assumptions and immediately following
completion of the Offers and the Placing, the Net Asset
Value of an Ordinary Share will be approximately 144.18p and
Abpref will have borrowings and securities effectively
ranking ahead of the Ordinary Shares as follows:
Debenture Stock (at current repayment value) #19.3 million
Bank loans #72.0 million
ZDP Shares (at current entitlement) #80.2 million
Subordinated Loan Stock (at the Issue Price) #18.9 million
#190.4 million
On the basis of the Assumptions, the net assets attributable
to the Ordinary Shares will amount to #191.8 million. The
charges ranking ahead of these shares (at their respective
current entitlements) will on the same basis amount to
#189.6 million. This equates to capital gearing on the
Ordinary Shares of 50 per cent.
Investment prospects
Abpref's investment portfolio is divided between fixed
interest stocks and the Income Share Portfolio (comprising
principally geared ordinary income shares of split capital
trusts). Yields in the fixed interest market have fallen
markedly in this time, influenced by a firm gilt market,
especially the market for longer dated gilts which usually
reflects perceived inflation prospects. At the same time,
equity market prices have been buoyant for much of the past
twelve months. The market price rises in the income share
sector were particularly striking as the favourable longer
term outlook for interest rates and the geared nature of
such shares helped to increase their market prices faster
than the rise in the general equity market. Shareholders
have benefited markedly from all these factors.
For the enlarged Group, with an unchanged investment policy,
the same market factors are expected to continue to apply
and the Manager remains optimistic about the demand for high
yielding income shares. The Manager believes the new issue
market for these shares is strong and that this will provide
many opportunities to invest the assets arising from the
Offers and the Placing. Although the monetary policy
committee of the Bank of England has recently raised short
term interest rates, in the view of the Manager this should
be regarded as transitional in an era in which the Manager
believes that rates in the long term will fall.
Following completion of the Placing and the Offers and on
the basis of the Assumptions, the Redemption Yield on the
Ordinary Shares, assuming a purely notional redemption on
the Zero Termination Date in 2003, will be 11 per cent.
Portfolio growth of some 4.2 per cent. per annum would be
necessary to produce a net asset value on the Zero
Termination Date of 160p, the Placing Price of the new
Ordinary Shares. If the value of the fixed interest
portfolio grew at a fixed 2 per cent. per annum over the
period to the Zero Termination Date, the Income Share
Portfolio would need to grow at some 6.2 per cent. per annum
to ensure that a net asset value of 160p per Ordinary Share
was attained on that date.
Subordinated Loan Stock
The Subordinated Loan Stock, bears interest at a fixed rate
of 8.25 per cent. per annum on the Issue Price in two equal
instalments on 28 February and 31 August in each year and is
repayable at par plus a premium of up to 99p per unit of 1p
nominal on 28 February 2023. The interest is payable only if
and to the extent that immediately after payment thereof
Abpref would have profits available for distribution. The
Subordinated Loan Stock has been created to satisfy the
demand perceived by the Directors for a security offering
this level of unfranked yield to certain classes of
professional investor.
The Subordinated Loan Stock is an unsecured obligation of
the Company. It ranks behind all other indebtedness of the
Company and the ZDP Shares and any further zero dividend
preference shares that may be issued by the Company or any
subsidiary. If the Company has insufficient assets to repay
the capital entitlements of the ZDP Shares or any further
zero dividend preference shares that may be issued by the
Company or any subsidiary on the date on which they are due
to be repaid, a proportion of each holding of Subordinated
Loan Stock equal in aggregate (at the Issue Price) to the
insufficiency will automatically convert into Abpref
Ordinary Shares. In addition, a premium will only be paid on
the repayment of the Subordinated Loan Stock on 28 February
2023 to the extent that there would be assets of the Company
available after making such repayment to meet the claims of
creditors and holders of ZDP Shares (if any) and further
zero dividend preference shares that may be issued by the
Company or any subsidiary.
At the expected premium of the Subordinated Loan Stock of
99p, the Redemption Yield at the Issue Price of the
Subordinated Loan Stock will be 8.25 per cent. per annum.
However, even if the Subordinated Loan Stock is only
redeemed at the nominal value of 1p, the Redemption Yield
will only be reduced to 6.6 per cent. per annum.
Because of its subordinated status the rights of holders of
the Subordinated Loan Stock are limited. In particular, it
is only if default is made by the Company in the payment of
any principal due or, for a period of 14 days or more, of
any interest due that the trustee of the Subordinated Loan
Stock can enforce repayment of it by way of instituting
proceedings for the winding up of the Company. Otherwise,
there are no rights of enforcement conferred on the trustee
or the holders of the Subordinated Loan Stock.
A summary of the particulars of the Subordinated Loan Stock
is contained in PART 3.
THE PLACING
Brewin Dolphin Bell Lawrie as agent of Abpref and Abpref
Securities has conditionally placed 31,842,250 Ordinary
Shares at 160p per share, 9,284,816 ZDP Shares at 224p per
share and 18 million 1p units of Subordinated Loan Stock at
100p per unit. 9,671,125 Ordinary Shares and 2,916,667 ZDP
shares have been placed firm but the remainder of these
shares, and the 18 million units of Subordinated Loan Stock,
may not be issued if in the view of Brewin Dolphin Bell
Lawrie this would be advisable in order to balance the
interests of the holders of the various classes of Abpref
Group Securities.
In addition, up to 10 million Ordinary Shares, up to 10
million units of Subordinated Loan Stock and up to 20
million ZDP Shares (together the "Available Securities") may
be placed within eight weeks of the Closing Date (in each
case out of the amount of such securities made available and
not taken up under the Offers).
Abpref and Abpref Securities reserve the right to issue the
Available Securities once the level of acceptances under the
Offers is known. Their aim in doing so will be so far as
possible to balance the interests of the holders of the
Abpref Group Securities of each class in the context of the
characteristics of such Abpref Group Securities as described
in this announcement and to raise additional capital for
investment by the Abpref Group. The proceeds of any issue
of any Available Securities will be applied in accordance
with the investment policies and objectives of Abpref.
At the Placing Price, the maximum amount which could be
raised for the Abpref Group through the Placing would be
approximately #161 million before expenses; on the basis of
the Assumptions the amount raised would be #32.24 million
before expenses.
The Placing is conditional upon, inter alia, the passing of
appropriate resolutions at an extraordinary general meeting
of Abpref and the London Stock Exchange admitting the new
Abpref Group Securities to the Official List. The Placing is
not conditional on the Offers or any of them becoming
unconditional.
LISTING AND DEALINGS
Application will be made to the London Stock Exchange for
the new Abpref Group Securities to be admitted to the
Official List.
BENEFITS OF THE OFFERS AND THE PLACING FOR ABPREF SHAREHOLDERS
The Offer Document and the Listing Particulars will contain
key assumptions (set out in Part 4 of this announcement)
concerning, among other things, the levels of acceptances
which will be received under the Offers and the amount of
new Abpref Group Securities which will be issued pursuant to
the Placing. On the basis of the Assumptions, and further
assuming no change in market conditions, the net asset value
of the Ordinary Shares will increase by approximately 5.3p
as a result of the Offers and the Placing, notwithstanding
the considerable expense involved in implementing these
transactions. On the same basis the number of Ordinary
Shares in issue will increase from approximately 60 million
to approximately 135 million, which the Directors consider
should lead to an improvement in their marketability.
The Abpref board is forecasting, in the absence of
unforeseen circumstances, an increase in the dividends on
the Ordinary Shares for the calendar year 1999. The
forecast is set out above under "Dividends and dividend
forecast" and involves an increase on an annualised basis of
10.3 per cent. over the existing forecast for the current
financial year. The new forecast depends on the Offers and
the Placing becoming unconditional, and accordingly on the
appropriate resolutions being passed at an extraordinary
general meeting of Abpref.
INTERESTS IN SNT SHARES
Abpref, and persons acting or deemed to be acting in concert
with Abpref and Abpref Securities for the purpose of the
offers, own or control the following SNT Shares:
SNT Stepped SNT
Preference Income Shares
Shares
Abpref - 1,000,000
Discretionary clients
of Aberdeen Asset
Managers Limited 2,231,417 450,000
--------- ---------
2,231,417 1,450,000
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