Recommended Proposals

RNS Number : 2891N

UK Commercial Property Trust Ltd

09 June 2010

 



NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION IN PARTICULAR THE UNITED STATES, CANADA, AUSTRALIA AND JAPAN

9 June 2010

RECOMMENDED MERGER OF THE INTERESTS OF F&C COMMERCIAL PROPERTY TRUST LIMITED ("FCPT") AND UK COMMERCIAL PROPERTY TRUST LIMITED ("UKCPT")

KEY HIGHLIGHTS

§    Recommended merger of FCPT and UKCPT by means of a scheme of reconstruction.

§    Under the Scheme, FCPT Shareholders will receive New UKCPT Shares with an aggregate NAV equal to the aggregate NAV of their FCPT Shares, or may elect to receive 91p in cash per FCPT Share.

§    The combination of two high quality and complementary property portfolios providing diversification benefits and future income and capital growth and asset management opportunities.

§    Significant reduction in Total Expense Ratio to 0.7 per cent. per annum largely through a reduction in the level of management fees payable to Ignis.

§    The Enlarged UKCPT is expected to become the sixth largest UK listed property company with a market capitalisation of approximately £1.6 billion. This should significantly enhance the liquidity of the Enlarged UKCPT's shares and thereby increase its attractiveness to new and existing investors.

1.         Introduction

The FCPT Board and the UKCPT Board announce that they have reached agreement on the terms of a recommended acquisition of the assets of FCPT by UKCPT. The acquisition will be effected through a voluntary solvent liquidation of FCPT, the issue of new ordinary shares by UKCPT and the provision of a cash alternative (the "Scheme").

Under the Scheme, FCPT Shareholders will receive New UKCPT Shares or will be able to elect to receive 91p per share in cash for their FCPT Shares.

Friends Provident and Phoenix Group, each through subsidiary companies, together hold 50.3 per cent. of the issued FCPT Shares and have irrevocably undertaken to FCPT and UKCPT to vote in favour of the Scheme and to receive New UKCPT Shares. The Scheme will be conditional on both FCPT's and UKCPT's Independent Shareholders approving the Proposals.

2.         Background to the Scheme

In the FCPT prospectus published in June 2009 the FCPT Board noted that FP intended to reduce its shareholding in FCPT. 

As announced by the FCPT Board on 23 April 2010, it had been informed that FP was selling 16.15 per cent. of the issued FCPT Shares to Phoenix for 91p per share in cash.  In connection with this sale, Ignis, the investment manager of UKCPT, made a proposal to FCPT and UKCPT for a merger of the two companies. FP and Phoenix have irrevocably undertaken to support the Scheme for the merger of FCPT and UKCPT. 

Since the announcement, the FCPT Board and the UKCPT Board, together with their respective advisers, have been separately discussing the proposed terms of a merger and each has carefully considered whether the proposal from Ignis is in the best interests of their respective shareholders. The FCPT Board has also considered carefully other alternatives for the future of FCPT.  After such consideration and following discussion on the detailed terms of the Scheme, including amendments to UKCPT's management arrangements, gearing policy and articles following the implementation of the Scheme, the FCPT Board and the UKCPT Board each now recommend the Scheme to their respective shareholders.  The FCPT Board has been advised by Winterflood Investment Trusts and Dickson Minto. The UKCPT Board has been separately advised by Execution Noble.

3.         Benefits of the Scheme

The FCPT and UKCPT Boards each believe that the Scheme offers significant benefits for all FCPT and UKCPT Shareholders as noted below.

§    The Scheme will result in a substantial increase in the size of the Enlarged UKCPT's property portfolio to approximately £1.6 billion, which will:

§    diversify further the property and tenant exposure;

§    provide complementary geographic and sector exposures without incurring material acquisition costs;

§    improve the profile of lease expiries by spreading them over a more diversified tenant base and, through slightly shorter average lease length in the FCPT Property Portfolio, provide attractive asset management initiatives in the medium term;

§    enable the Enlarged UKCPT to obtain exposure to assets with a larger lot size; and

§    enhance the Enlarged UKCPT's ability to undertake asset management opportunities in the Combined Portfolio without having a material adverse effect on the Combined Portfolio's income returns.

§    There will be a significant reduction in the Total Expense Ratio of the Enlarged UKCPT, largely as a result of a reduction in the Enlarged UKCPT's management fees.

§    The structure of the Scheme offers low transaction costs, a capital gains tax roll-over for FCPT Shareholders and, by using NAV for NAV, calculated as at 30 June 2010, a fair means of effecting a merger resulting in the Enlarged UKCPT.

§    The Enlarged UKCPT is expected to have a market capitalisation (based on FCPT and UKCPT share prices as at 8 June 2010) of approximately £1.6 billion which should significantly enhance the liquidity in UKCPT Shares thereby increasing the attractiveness of the Enlarged UKCPT to new and existing investors.

§    Ignis has committed to provide strong management and administrative support for the Enlarged UKCPT.

For FCPT Shareholders, the Scheme offers the following additional benefits.

§    Exposure to the UKCPT Property Portfolio which has strong income characteristics, including a longer average lease length and a strong tenant covenant profile, which will have a positive effect on dividend cover.

§    Access to UKCPT's additional cash resources, without the usual costs associated with raising new capital, which can be used to take advantage of investment opportunities that arise.

§    Flexibility to raise additional cash through debt and equity in future which had been limited in FCPT due to the FP holding and the terms of the Bonds.

§    More options to manage the repayment of the FCPT Bonds in 2015.

§    The potential for FCPT's Independent Shareholders to elect for cash under the Scheme. The Cash Option is offered at the same price as FP sold its FCPT Shares to Phoenix, although this price is currently at a discount to both the current market price and the NAV of an FCPT Share as at 31 March 2010.

For UKCPT Shareholders, the Scheme offers the following additional benefits.

§    Exposure to the FCPT Property Portfolio which has strong capital growth opportunities through its significant South East and Central London sector weightings.

§    The opportunity to acquire a significant prime UK commercial property portfolio with minimal associated transaction costs, funded by the issue of New UKCPT Shares to FCPT Shareholders at NAV.

§    An increase in the gearing of UKCPT, at minimal cost, through assuming the FCPT Bonds of £230 million, fixed at an interest rate of 5.23 per cent. per annum until 2015.

§    Reducing significantly Phoenix's majority shareholding in UKCPT, which as a result of the Scheme is expected to fall below 50 per cent. in the Enlarged UKCPT.

Further details on FCPT and UKCPT and the Combined Portfolio are set out in paragraph 18 below.

4.         The Scheme

The acquisition of FCPT's assets by UKCPT will be achieved through a voluntary solvent liquidation of FCPT. Upon the liquidation of FCPT, the liquidators will implement the Scheme by distributing FCPT's assets to UKCPT in return for an issue of New UKCPT Shares to FCPT Shareholders and the payment of cash, sufficient to meet elections under the Cash Option. The Scheme will result in all of the subsidiaries of FCPT being transferred to UKCPT and FCPT then being wound up.

Under the Scheme, FCPT Shareholders:

§    will receive New UKCPT Shares with an aggregate NAV equal to the aggregate NAV of their FCPT Shares; or

§    may elect to receive 91p in cash per FCPT Share.

FCPT Shareholders will be entitled to elect to receive their entitlement partly in cash and partly in New UKCPT Shares. 

If FCPT Shareholders make no election they will receive New UKCPT Shares under the Scheme.

The Scheme will be conditional, inter alia, on elections for the Cash Option not being made in respect of more than 170 million FCPT Shares (being 50 per cent. of the issued FCPT Shares held by FCPT's Independent Shareholders).  There will be no scaling back of elections for the Cash Option.  The record date for FCPT Shareholders to be entitled to elect for the Cash Option will be 14 June 2010.  Further details of the conditions to the Scheme are set out in paragraph 16 below.

Overseas Shareholders will be restricted as to the options available to them, as stated in paragraph 20 below.

The New UKCPT Shares will rank pari passu with the issued UKCPT shares in respect of any dividends declared, made or paid with a record date on or after the date of issue of the New UKCPT Shares.

The FCPT Board has been advised that the Scheme should be treated as a scheme of reconstruction for the purposes of UK taxation of capital gains and clearance has been granted by HMRC under section 138 of the Taxation of Chargeable Gains Act 1992.  Accordingly, FCPT Shareholders will be able to roll-over any capital gains on the FCPT Shares into the New UKCPT Shares.

The City Code on Takeovers and Mergers will not apply to this transaction, other than in the event of a competing Code regulated transaction.

5.         NAVs and property valuation

The New UKCPT Shares will be issued on a NAV for NAV basis.   It is intended that the NAV of an FCPT Share and a UKCPT Share will be calculated as at 30 June 2010 on the basis of a valuation of the respective FCPT and UKCPT Property Portfolios as at 31 May 2010. 

The NAV of each share will be calculated using each company's respective accounting policies (which are substantially similar) and the properties will be valued by independent valuers.  These NAVs will be adjusted for purchases or sales of properties between 31 May 2010 and 30 June 2010 and for any dividends declared with a record date in the period from 30 June 2010, being the date of the calculation of the respective NAVs, to the Effective Date.

As noted below, the costs of the transaction will be borne equally by all Continuing Shareholders. The calculation of the NAVs will be adjusted for any transaction costs already incurred by the respective companies prior to the calculation of the NAVs. It is intended that the auditors of each of FCPT and UKCPT will review the calculation of the NAVs used to calculate the number of New UKCPT Shares to be issued and will report to the Boards accordingly.

Illustrative financial effects

Based on the NAVs as at 31 March 2010 of 92.10p for FCPT and 75.60p for UKCPT, adjusted for dividends declared but not yet paid as at that date, an FCPT Shareholder would receive approximately 1.22 New UKCPT Shares in respect of each FCPT Share held.

Based on the share price of a UKCPT Share of 76.85p as at 8 June 2010, an FCPT Shareholder would receive New UKCPT Shares with an aggregate market price of £93.62 for every 100 FCPT Shares held, which have a current aggregate market price of £92.00 based on the share price of an FCPT Share of 92.00p as at 8 June 2010.

After the Effective Date, Continuing Shareholders in the Enlarged UKCPT will benefit from a substantial reduction in the running costs of the Enlarged UKCPT both as a result of the fixed costs being spread over a larger asset base and the significant reduction in the annual management fees as described in more detail in paragraph 7 below.

6.         Funding the Cash Option

Under the Cash Option, FCPT Shareholders may elect to dispose of some or all of their FCPT Shares for 91p per share in cash.  FP and Phoenix have undertaken not to elect for the Cash Option in respect of their holdings.  It is a condition of the Scheme that if elections under the Cash Option are made for more than 170 millionFCPT Shares (being 50 per cent. of the issued FCPT Shares held by FCPT's Independent Shareholders) then the Scheme will not proceed.

Consequently, the maximum aggregate amount of cash required by UKCPT to fund the Cash Option would be approximately £155 million, for 170 million FCPT Shares at 91p per share. UKCPT will fund the Cash Option through the combination of an issue of New UKCPT Shares for cash and its existing cash resources, including using its borrowing facilities.  The amount of cash required will depend on elections received under the Cash Option and cannot be determined in advance of the Scheme concluding.

Phoenix has agreed, conditional on the Scheme becoming effective, to subscribe for up to £130 million in New UKCPT Shares to fund partially the Cash Option, with a minimum commitment of £88 million, if required, in New UKCPT Shares.  Such New UKCPT Shares will be issued at a price equivalent to the discount or premium to the UKCPT NAV as at 30 June 2010 that 91p per share is to the FCPT NAV as at 30 June 2010 as calculated for the purposes of the Scheme.  Accordingly, the subscription for New UKCPT Shares by Phoenix would have neither a dilutive or accretive impact on the NAV per UKCPT Share.  UKCPT expects to fund the balance of the cash required for the Cash Option out of its existing reserved cash reserves and/or available debt, which amount in aggregate to approximately £90 million.

No underwriting commission will be payable to Phoenix in respect of this subscription commitment.  However, in consideration of Phoenix agreeing to fund partially the Cash Option, UKCPT intends to give Phoenix the option as to whether Phoenix's cash subscription is drawn down first to fund the Cash Option or whether UKCPT uses its existing cash resources and available cash reserves to fund the Cash Option first, provided that Phoenix will subscribe for only 50 per cent. of the first £50 million of the Cash Option.  Accordingly, the minimum amount of cash to be used by UKCPT to fund the Cash Option would be £25 million, assuming at least £50 million is payable to FCPT Shareholders under the Cash Option, and the maximum amount would be £67 million if Phoenix only subscribes for its minimum commitment of £88 million and the maximum amount is payable under the Cash Option.

On the assumption that part of UKCPT's existing cash resources are used to fund the Cash Option and based on the FCPT NAV as at 31 March 2010 of 92.10p, the Cash Option would result in a small enhancement to the Enlarged UKCPT's net assets, before taking into account the costs of the Scheme.  Any enhancement to the net assets, or reduction if the FCPT NAV as at 30 June 2010, as calculated for the purposes of the Scheme, is above or below 91p per share, will be for the benefit, or detriment, of all Continuing Shareholders.

7.         Reduction in management fees

Ignis will continue as the investment manager of the Enlarged UKCPT.  Ignis is a wholly owned asset management subsidiary of Ignis Asset Management Limited and is part of the Phoenix Group.  Ignis currently has approximately £69 billion of assets under management, of which approximately £3.3 billion are commercial property assets.

In proposing the Scheme, Ignis has agreed to reduce its basic management fee from 0.75 per cent. per annum of UKCPT's net assets and 0.50 per cent. of assets represented by debt to the following bases:

§    0.60 per cent. per annum on the Total Assets less Borrowings of the Enlarged UKCPT; plus

§    0.50 per cent. per annum on the Borrowings of the Enlarged UKCPT; less

§    a reduction in the basic fee on Total Assets to 0.25 per cent. per annum on any cash held by the Enlarged UKCPT in excess of 5 per cent. of its Total Assets.

No performance fee will be payable by the Enlarged UKCPT (performance fee arrangements are currently in place for FCPT).  Ignis will rebate to the Enlarged UKCPT any insurance commissions it receives in respect of the Combined Portfolio.

FCPT will terminate the appointment of F&C as its investment manager on the Effective Date and Ignis will be appointed as investment manager of the FCPT Property Portfolio on the Effective Date.  Notice has been served under the existing investment management contract with F&C which has a six month notice period. Ignis has agreed to meet any compensation due to F&C in respect of the balance outstanding of the six month notice period as at the Effective Date.  The Enlarged UKCPT's investment management agreement with Ignis will remain subject to termination by either Ignis or UKCPT at any time on not less than 12 months' written notice.

Ignis has a strong investment management team and has committed to add further asset management, research and administrative support for the management of the Enlarged UKCPT.  Ignis delegates, at its own cost, certain property management services to a third party managing agent.

The UKCPT Board understands that Ignis has arrangements in place between it and Phoenix and FP, as significant shareholders in the Enlarged UKCPT, for a partial rebate of fees to those shareholders.

It is estimated that the Total Expense Ratio of the Enlarged UKCPT will be approximately 0.7 per cent. per annum. The Total Expense Ratio for UKCPT for the year ended 31 December 2009 was approximately 0.9 per cent.

The total expense ratio for FCPT for the year ended 31 December 2009 as derived from its annual report and accounts was approximately 1.1 per cent. of average total assets less current liabilities (including the performance fee but excluding the reconstruction costs and the non-recoverable property expenses set out in those accounts).

The consent of the trustee of the FCPT Bonds will be required before Ignis can be appointed as investment manager of the subsidiaries of FCPT that are secured in favour of the Bonds.  Such consent must be given if Ignis is a reputable manager of suitable experience and Moody's Investor Services Limited has confirmed that it will not downgrade the Bonds as a result of the proposed change.  It is expected that consent will be given prior to the Effective Date.

8.         Dividends

It is intended that each of UKCPT and FCPT will pay an interim dividend in respect of the period up to 30 June 2010 at the current dividend level to ensure that all FCPT and UKCPT Shareholders are treated equally.  FCPT's final interim dividend will be paid immediately prior to the Effective Date. UKCPT's interim dividend will be paid in August to UKCPT Shareholders on its register as at a record date prior to the Effective Date of the Scheme.

Thereafter, the next dividend paid by the Enlarged UKCPT to Continuing Shareholders will be paid in October in respect of the period from 1 July 2010 to 30 September 2010. In the absence of unforeseen circumstances, the UKCPT Board has indicated that it intends to maintain the dividend payout from UKCPT, on its enlarged share capital, at the same level, namely 5.25p per share per annum which will be paid quarterly.  FCPT currently pays monthly dividends.

In the year ended 31 December 2009, FCPT Shareholders received 6.0p per FCPT Share in annual dividends. Based on the ratio described in paragraph 5 above, FCPT Shareholders would receive an increase of 6.75 per cent. (equivalent to 0.4p per current FCPT Share) in the annual dividends they receive in the future from their shareholding on the assumption that the Enlarged UKCPT maintains its current dividend payout level as noted above. 

9.         Change of UKCPT investment policy

In connection with the Scheme, UKCPT will amend its investment policy to increase the maximum limit on borrowings from the higher of 10 per cent. of the UKCPT Group's net assets and £80 million to 25 per cent. of the Total Assets of the Enlarged UKCPT's group of companies.  Otherwise, the investment policy of the Enlarged UKCPT will continue in its present form.

10.       Continuation votes

Under FCPT's articles the FCPT Board is obliged to propose a continuation vote at the annual general meeting in 2015 and the UKCPT articles include a similar obligation on the UKCPT Board in 2016.  A resolution will be proposed at the UKCPT EGM to amend its articles to require the continuation vote to be proposed in 2015. 

If this resolution to amend the articles is passed and the Scheme becomes effective, then in the event that the continuation vote is passed in 2015 the UKCPT Board would give consideration to offering shareholders who voted against that resolution the opportunity to realise their investment in UKCPT within a reasonable time period after the date of the annual general meeting in 2015, subject to any additional shareholder approvals required at the time to implement such an exit.  Continuing Shareholders should note that the decision on whether to introduce this exit mechanism is entirely at the discretion of the UKCPT Board. 

The UKCPT Board also intends that the existing discount control policy, including continuation votes if a discount persists, which is identical to the existing FCPT policy, will be maintained in its current form. 

11.       Costs of the Scheme

It is estimated that the costs of the Scheme incurred by FCPT and UKCPT will, in aggregate, be approximately £4.6 million, which is approximately 0.30 per cent. of the net assets of the Enlarged UKCPT (on the assumption that none of FCPT's Independent Shareholders elect for the Cash Option). These costs and expenses will be borne equally by all Continuing Shareholders.

In the event that the Scheme does not become effective, it is estimated that the costs incurred by FCPT and UKCPT will, in aggregate, be approximately £1.9 million.  FCPT and UKCPT have agreed to bear these costs in proportion to their respective net assets as at 31 March 2010, being 41 per cent. and 59 per cent. respectively.  These abort costs would amount to approximately 0.12 per cent. of the current NAV of an FCPT Share and a UKCPT Share.

12.       Directors

It is intended that John Stephen, Peter Niven and Nick Tostevin from the FCPT Board will join the UKCPT Board and that Keith Dorrian will resign from the UKCPT Board on or immediately prior to the Effective Date.  It is intended that John Stephen will be appointed as Chairman of the board of the Enlarged UKCPT and that Chris Hill will be appointed as Deputy Chairman.  It is therefore expected that following the Effective Date the board of the Enlarged UKCPT will comprise seven directors, being John Stephen, Chris Hill, Chris Fish, Peter Niven, John Robertson, Nick Tostevin and Andrew Wilson.

13.       Irrevocable undertakings

FCPT and UKCPT have each received irrevocable undertakings from FP and Phoenix to vote in favour of the Scheme and the associated resolutions, other than the related party resolutions referred to below, to be proposed at the FCPT EGM and the UKCPT EGM respectively, in respect of a total of 338,242,838 FCPT Shares, representing approximately 49.7 per cent. of the FCPT Shares, and a total of  796,265,311 UKCPT Shares, representing approximately 67.2 per cent. of the UKCPT Shares. FP and Phoenix have also irrevocably undertaken to receive New UKCPT Shares under the Scheme in respect of their investment in FCPT and not to elect for the Cash Option.

The Boards of FCPT and UKCPT consulted with a number of Independent Shareholders following the announcement on 23 April 2010 to ascertain their views on the outline proposal from Ignis.  More recently, the Boards have consulted with larger Independent Shareholders on the detailed terms of the recommended Proposals announced today. Following these discussions, each of the Boards and their respective advisers are confident that the recommended Proposals will be supported by their Independent Shareholders at the EGMs.

14.       Related party approval

The Scheme will be subject to a number of approvals as noted below.  The Scheme will be a related party transaction with Phoenix for the purposes of Chapter 11 of the Listing Rules because of the interests of Phoenix as a shareholder in both FCPT and UKCPT and as owner of Ignis, the investment manager of UKCPT. 

The Scheme will, therefore, be subject to approval by a simple majority vote of Independent Shareholders in FCPT. This approval will be a separate resolution from that required for the solvent liquidation of FCPT, where approval of 75 per cent. of FCPT Shareholders, including FP and Phoenix, present at the FCPT EGM is required.

UKCPT's participation in the Scheme and the issue of New UKCPT Shares to Phoenix will also be related party transactions and subject to approval by a simple majority vote of those Independent Shareholders in UKCPT present at the UKCPT EGM.

Shareholders should note that, if the Scheme becomes effective, it is estimated that Phoenix would hold 45.7 per cent. of the Enlarged UKCPT's issued shares if no elections are made for the Cash Option and 55.2 per cent. if the Cash Option is fully taken up and Phoenix subscribes for its maximum commitment of £130 million.  On the same basis, FP would hold 14.8 per cent. and 15.0 per cent. respectively of the Enlarged UKCPT.

15.       Relationship with larger shareholders

The Phoenix Group subsidiaries that own UKCPT Shares have entered into a relationship agreement with UKCPT which provides that members of the Phoenix Group will not take any action which would be detrimental to the general body of shareholders or that would prevent the Enlarged UKCPT Board or the Enlarged UKCPT's investment manager acting independently of the Phoenix Group.

The Phoenix Group, as the largest shareholder in the Enlarged UKCPT, recognises that any potential future growth of the Enlarged UKCPT may result in a dilution of the percentage shareholding of Phoenix. The Phoenix Group's investment in the Enlarged UKCPT remains a core part of the property exposure for its various life company subsidiaries.

16.       Conditions to the Scheme becoming effective

To become effective, the Scheme requires, amongst other things, the following events to occur:

§   an ordinary resolution of FCPT (requiring a simple majority vote of FCPT's Independent Shareholders present at the FCPT EGM) approving the related party features of the Scheme as described in paragraph 14 above;

§   an ordinary resolution of UKCPT (requiring a simple majority vote of UKCPT's Independent Shareholders present at the UKCPT EGM) approving UKCPT's participation in the Scheme and the issue of the New UKCPT Shares to Phoenix at a discount to NAV as described in paragraph 6 above;

§   special resolutions of FCPT (requiring approval by 75 per cent. of FCPT Shareholders present at the FCPT EGM) approving amendments to the articles to facilitate the proposals, to wind up FCPT and to appoint a Liquidator;

§   a special resolution of UKCPT (requiring approval by 75 per cent. of UKCPT Shareholders present at the UKCPT EGM) approving amendments to the articles to facilitate the proposals;

§   FCPT, UKCPT and the Liquidator entering into a transfer agreement setting out the terms upon which FCPT (acting through the Liquidator) transfers its assets to UKCPT in return for the issue of New UKCPT Shares and the payment of cash by UKCPT to fund the Cash Option;

§   elections for the Cash Option not being made in respect of more than 170 million FCPT Shares (being one half of the FCPT Shares held by FCPT's Independent Shareholders);

§   the FCPT Directors and the UKCPT Directors not resolving to abandon the Scheme if required pursuant to their fiduciary duties; and

§   the UKLA and the London Stock Exchange agreeing to the admission of the New UKCPT Shares to the Official List and to trading on the main market for listed securities of the London Stock Exchange respectively, subject only to allotment.

Under the terms of the debt facility between UKCPT and Lloyds TSB Scotland plc ("Lloyds"), Lloyds' consent is required to the change in the investment policy of UKCPT (such consent not to be unreasonably withheld or delayed) and to Phoenix ceasing to own over 50 per cent. of UKCPT's issued shares.  It is expected that such consent will be provided by Lloyds although the amendments to the terms of the debt facility that may be required in connection with such consent are still being discussed.

17.       Risk factors

The Boards of FCPT and UKCPT believe that the following are the key risk factors that relate to the Scheme.

§   The implementation of the Scheme is subject to a number of conditions and there is no certainty that the Scheme will become effective. In the event that these conditions are not satisfied, Shareholders will bear costs which are estimated as being equivalent to 0.12 per cent. of the NAV of an FCPT Share and a UKCPT Share.

§   New UKCPT Shares will be issued to FCPT Shareholders on the basis of a NAV for NAV ratio expected to be calculated as at 30 June 2010.  The NAV of an FCPT Share or a UKCPT Share will vary between the above calculation date and the Effective Date and the NAVs used for the purposes of the Scheme may be lower or higher than the illustrative figures in this announcement.

§   The NAVs are primarily based on the valuation of the underlying properties in each of UKCPT and FCPT. The valuation of property is inherently subjective due to the individual nature of each property and as a result valuations are subject to substantial uncertainty.

§   The performance of FCPT and UKCPT, and their respective NAVs and income returns, would be adversely affected by a downturn in the property market in the UK in terms of market value or a weakening of rental yields.  There remains considerable economic and fiscal uncertainty in the UK economy.

§   The market value of, and income derived from, the FCPT Shares and the UKCPT Shares can fluctuate. The market value of such shares may vary considerably from their underlying NAV. The market values of these shares, as well as being affected by their NAV, also take into account their dividend yield and prevailing interest rates.

§   There can be no guarantee that the expected benefits of the Scheme, as described in paragraph 3 above, will arise.

18.       Information on FCPT, UKCPT and the Combined Portfolio

FCPT

The FCPT Property Portfolio comprises 31 properties with an aggregate market value as at 31 March 2010 of approximately £770 million.  The FCPT Property Portfolio generates a current net annual rent of approximately £51 million, being an income return of 6.6 per cent.  

UKCPT

The UKCPT Property Portfolio comprises 38 properties with an aggregate market value as at 31 March 2010 of approximately £860 million.  The UKCPT Property Portfolio generates a current net annual rent of approximately £61 million, being an income return of 7.1 per cent.

Combined Portfolio

The Combined Portfolio would comprise 69 properties with an aggregate market value as at 31 March 2010 of approximately £1,630 million.  The Combined Portfolio would generate a current net annual rent of approximately £112 million, being an income return of 6.9 per cent.

A comparison of the FCPT Property Portfolio, UKCPT Property Portfolio and the Combined Portfolio is set out below.

FCPT Property Portfolio	UKCPT Property Portfolio	Combined Portfolio
Top ten properties (percentage of market value as at 31 March 2010)
St Christopher's Place, London (15.62%)	Junction 27, Birstall, Leeds (6.59%)	St Christopher's Place, London  (7.38%)
Newbury Retail Park, Newbury (8.59%)	The Parade, Swindon (6.59%)	Newbury Retail Park, Newbury (4.06%)
Cassini House, St James's Street, London (7.52%)	Great Lodge Retail Park, Tunbridge Wells (6.54%)	Cassini House, St James's Street, London (3.55%)
Sears Retail Park, Solihull (6.96%)	176/206 Kensington High Street, London  (5.79%)	Junction 27, Birstall, Leeds  (3.48%)
The Crescent, Wimbledon Broadway, London  (6.21%)	Kew Retail Park, Richmond (4.88%)	The Parade, Swindon  (3.47%)
84 Eccleston Square, London (5.39%)	Darwin Centre, Shrewsbury (4.24%)	Great Lodge Retail Park, Tunbridge Wells  (3.45%)
Stockley Park, 3 The Square, Uxbridge (4.74%)	Ocado Distribution Unit, Hatfield Business Area, Hatfield (4.06%)	Sears Retail Park, Solihull (3.29%)
Charles House, 5/11 Regent Street, London (4.39%)	Sovereign Centre, Weston-super-Mare (4.05%)	176/206 Kensington High Street, London  (3.05%)
Dane Street, Rochdale (4.36%)	15 Great Marlborough Street, London  (3.63%)	The Crescent, Wimbledon Broadway, London (2.93%)
Alhambra House, Wellington Street, Glasgow (3.47%)	Charter Place, Vine Street, Uxbridge (3.49%)	Kew Retail Park, Richmond  (2.57%)
Top ten tenants (percentage of current gross annual rent)
GB Gas Holdings Limited (5.1%)	Government (6.8%)	Government (3.6%)
Homebase Limited (4.6%)	B&Q plc (6.4%)	B&Q plc (3.5%)
Fujitsu Services Limited (3.8%)	Sony Computer Entertainment Europe Ltd (4.5%)	Homebase Limited (3.1%)
Asda Stores Limited (3.2%)	Ocado Limited (4.1%)	Asda Stores Limited (2.8%)
Exel Europe Limited (3.1%)	Coca-Cola Enterprises Limited (3.5%)	Sony Computer Entertainment Europe Ltd (2.4%)
Boots UK Limited (3.0%)	DSG Retail Ltd (3.4%)	GB Gas Holdings Limited (2.4%)
APL Group Limited (3.0%)	Argos Limited (3.1%)	Ocado Limited (2.2%)
Lafarge Cement UK plc (2.8%)	Telefonica O2 UK Limited (2.8%)	Boots UK Limited (2.1%)
Fluor Limited  (2.8%)	Marks & Spencer Plc (2.7%)	Coca-Cola Enterprises Ltd (1.9%)
Wincanton Holdings Limited (2.8%)	Nexen Petroleum UK Limited (2.6%)	DSG Retail Ltd (1.8%)
Average unexpired lease length (weighted by current gross annual rent)
7 years	9 years, 8 months	8 years, 6 months
Void rate (percentage of estimated rental value excluding developments)
3.2%	3.8%	3.5%

	FCPT Property Portfolio	UKCPT Property Portfolio	Combined Portfolio
Regional weightings (percentage of market value as at 31 March 2010)
City	1.0	-	0.5
Mid-town	-	-	-
West End	39.6	16.3	27.3
Inner London	6.2	3.3	7.2
Outer London	-	-	-
South	1.0	-	0.5
South East	21.2	34.3	25.5
South West	-	18.9	10.0
Eastern	2.3	-	1.1
East Midlands	-	5.5	2.9
West Midlands	14.5	9.6	11.9
York and Humberside	0.1	6.6	3.5
North West	7.7	3.1	5.3
North East	-	-	-
Scotland	6.4	2.4	4.3
Wales	-	-	-
Northern Ireland	-	-	-
Other	-	-	-
Sub-sector weighting (percentage of market value as at 31 March 2010)
Industrial - Rest UK	10.3	5.5	7.8
Industrial - South East	1.4	10.1	6.0
Office - City	1.0	-	0.5
Office - South East	11.7	8.0	9.8
Office - Rest UK	8.1	12.9	10.6
Office - West End	21.6	8.6	14.7
Retail Warehouse	19.9	23.6	21.9
Shopping Centres	-	17.7	9.3
Standard Retail - Rest UK	1.8	3.5	2.7
Standard Retail - South East	24.2	10.1	16.7

19.       Implementation Agreement

FCPT and UKCPT have entered into an Implementation Agreement which provides, inter alia, for the implementation of the Scheme and contains certain assurances and confirmations between the parties, including provisions to implement the Scheme on a timely basis and governing the conduct of the business of each of FCPT and UKCPT in the period prior to the Effective Date.  The Implementation Agreement also provides for the sharing of abortive costs of the transaction in proportion to FCPT and UKCPT's respective net assets as at 31 March 2010, as detailed in paragraph 11 above.

The Implementation Agreement terminates in certain circumstances, including:

(i)         immediately, if agreed in writing by the parties;

(ii)        immediately, if the Effective Date has not occurred by 28 October 2010;

(iii)       immediately, on the earliest to occur of the date (if any) on which the Scheme is withdrawn or lapses and the Effective Date; and

(iv)       immediately, if the resolutions at the EGMs are not passed by the requisite majority of FCPT or UKCPT Shareholders.

20.       Overseas Shareholders

The availability of the Scheme to FCPT Shareholders who are not resident in the United Kingdom, the Channel Islands and the Isle of Man may be affected by the laws of their relevant jurisdiction. Such persons should inform themselves of, and observe, any applicable legal or regulatory requirements of their jurisdiction. FCPT Shareholders who are in any doubt regarding such matters should consult an appropriate independent professional adviser in the relevant jurisdiction without delay.  Overseas Shareholders shall be deemed to have elected to receive New UKCPT Shares under the Scheme. The New UKCPT Shares to which such Overseas Shareholders would become entitled pursuant to the Scheme shall be allotted and issued to a nominee appointed by UKCPT as trustee for such shareholder on terms that they shall be sold on behalf of such shareholder as soon as reasonably practicable with such shareholder entitled to receive the net cash proceeds of sale, in pounds sterling, at the risk of such shareholder.  UKCPT reserves the right to treat Overseas Shareholder differently if it receives appropriate legal advice that such treatment would not infringe the relevant overseas legal or regulatory requirements.

21.       Indicative timetable

The Scheme will be implemented on the terms and subject to the conditions set out in this announcement and to be set out in the Scheme Circular, including obtaining relevant regulatory approvals and approval by the FCPT and UKCPT Shareholders. The Scheme Circular will provide full details of the Scheme, together with notices of the FCPT EGM and the expected timetable.  It is expected that the Scheme Circular and the UKCPT Circular and Prospectus will be published in early July 2010.

An indicative timetable of principal events is as follows:

Event	Indicative Timing
Record date for entitlement of FCPT Shareholders to elect for the Cash Option	14 June 2010
Posting of Scheme Circular and Prospectus to FCPT Shareholders	Early July 2010
Posting of UKCPT Circular and Prospectus to UKCPT Shareholders	Early July 2010
Latest time and date for receipt of elections for the Cash Option	Late July 2010
FCPT EGM and UKCPT EGM and announcement of results	Early August 2010
Effective Date	Early August 2010
FCPT in liquidation	Early August 2010
New UKCPT Shares issued	Early August 2010

A more detailed timetable will be included in the Scheme Circular and the UKCPT Circular.

22.       General

In deciding whether or not to vote in favour of the resolutions to implement the Scheme, FCPT Shareholders and UKCPT Shareholders should rely only on the information contained in, and should follow the procedures described in, the Scheme Circular and the UKCPT Circular respectively and the Prospectus.

Information on the tax consequences of the Scheme for the FCPT Shareholders will be contained in the Scheme Circular.

Enquiries:

Nigel Russell/Graeme Caton/Graham Reaves	G&N Collective Funds Services Limited	Tel: [phone]
UKCPT:
Chris Hill	Chairman of UKCPT, c/o Financial Dynamics	Tel: [phone]
John Llewellyn-Lloyd/Peter Tracey/Richard Crawley/Sunil Sanikop	Execution Noble & Co. Ltd	Tel: [phone]
Stephanie Highett/Richard Sunderland/Rachel Drysdale/Olivia Goodall	Financial Dynamics, Financial PR Adviser to UKCPT	Tel: [phone] [e-mail]
FCPT:
Robin Archibald	Winterflood Investment Trusts	Tel: [phone]
Douglas Armstrong	Dickson Minto W.S.	Tel: [phone]

Winterflood Investment Trusts, which is authorised and regulated by the Financial Services Authority in the United Kingdom, is acting for FCPT and no one else in relation to the Scheme and will not be responsible to anyone other than FCPT for providing the protections afforded to clients of Winterflood Investment Trusts nor for providing advice in relation to the proposed transaction.

Dickson Minto, which is authorised and regulated by the Financial Services Authority in the United Kingdom, is acting for FCPT and no one else in relation to the Scheme and will not be responsible to anyone other than FCPT for providing the protections afforded to clients of Dickson Minto nor for providing advice in relation to the proposed transaction.

Execution Noble, which is authorised and regulated by the Financial Services Authority in the United Kingdom, is acting for UKCPT and no one else in relation to the Scheme and will not be responsible to anyone other than UKCPT for providing the protections afforded to clients of Execution Noble nor for providing advice in relation to the proposed transaction.

This announcement is not intended to and does not constitute, or form any part of, an offer to sell or an invitation to subscribe for or purchase any securities or the solicitation of any vote or approval in any jurisdiction, pursuant to the Scheme or otherwise. The Scheme will be made solely through the Scheme Circular, which will contain the full terms and conditions of the Scheme (including details of how to vote in respect of the Scheme). Any response in relation to the Scheme will be made only on the basis of the information contained in the Scheme Circular and the Prospectus or any other document by which the Scheme is made. FCPT and UKCPT Shareholders are advised to read carefully the formal documentation in relation to the Scheme once it has been dispatched. This announcement does not constitute a prospectus or prospectus equivalent document.

Forward looking statements

This announcement contains statements about FCPT and UKCPT that are or may be forward looking statements. All statements other than statements of historical facts included in this announcement may be forward looking statements.  Without limitation, any statements preceded or followed by or that include the words "targets", "plans" "believes", "expects", "aims", "intends", "will", "may", "anticipates", "estimates", "projects", "continue", "should" or, words or terms of similar substance or the negative thereof, are forward looking statements. Forward looking statements include statements relating to the following: (i) future capital expenditure, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of FCPT's or UKCPT's operations and potential synergies resulting from the Scheme; and (iii) the effects of government regulation on FCPT's or UKCPT's business.

Such forward looking statements involve risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results to differ materially from those projected or implied in any forward looking statements. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward looking statements, which speak only as of the date hereof. FCPT and UKCPT disclaim any obligation to update any forward looking or other statements contained herein, except as required by applicable law.

APPENDIX
DEFINITIONS

The following definitions apply throughout this announcement unless the context requires otherwise.

"Associate"	has the meaning set out  in the Listing Rules
"Borrowings"	the principal amounts borrowed by the UKCPT Group for investment or working capital, not including any intra-group borrowings
"Cash Option"	the option for FCPT Shareholders to receive 91p per share in cash for some or all of their FCPT Shares under the Scheme as described in paragraph 6 of this announcement and subject as specified therein
"Combined Portfolio"	the FCPT Property Portfolio and the UKCPT Property Portfolio
"Continuing Shareholders"	the FCPT Shareholders who do not elect for the Cash Option and UKCPT Shareholders
"Dickson Minto"	Dickson Minto W.S.
"Effective Date"	the date on which the Scheme becomes effective pursuant to its terms
"EGMs"	the FCPT EGM and the UKCPT EGM
"Enlarged UKCPT"	UKCPT after the implementation and completion of the Scheme
"Execution Noble"	Execution Noble & Co. Ltd
"F&C"	F&C Investment Business Limited
"FCPT"	F&C Commercial Property Trust Limited
"FCPT Board"	the board of directors of FCPT
"FCPT Bonds" or "Bonds"	the £230,000,000 5.23 per cent. secured bonds due 2017 (but expected to be repaid in full on 30 June 2015) issued by F&C Commercial Property Finance Limited
"FCPT EGM"	the extraordinary general meeting of FCPT (or any adjournment thereof) to be held in connection with the Scheme for the purposes of, inter alia, obtaining shareholder approval for the Scheme and the steps necessary to implement the Scheme
"FCPT Property Portfolio"	the direct property assets of FCPT as at the date of this document
"FCPT Shareholders"	the holders of FCPT Shares
"FCPT Shares"	the existing fully paid ordinary shares of 1 pence each in the capital of FCPT
"Friends Provident" or "FP"	Friends Provident Life and Pensions Limited and Friends Provident Life Assurance Limited and, together with their parent undertakings and any other subsidiary undertakings of such parent undertakings, the "FP Group"
"HMRC"	HM Revenue & Customs
"Ignis"	Ignis Investment Services Limited
"Implementation Agreement"	the agreement entered into on 8 June 2010 between, inter alia, FCPT and UKCPT providing inter alia for the implementation of the Scheme
"Independent Shareholders"	the FCPT Shareholders and/or the UKCPT Shareholders as the context may determine excluding Phoenix and FP and their respective Associates
"Listing Rules"	the rules and regulations made by the Financial Services Authority in its capacity as the UKLA and contained in the UKLA's publication of the same name
"Liquidator"	the liquidator of FCPT being, initially, the person appointed upon the resolutions to be proposed at the FCPT EGM becoming effective
"London Stock Exchange"	London Stock Exchange plc
"NAV"	in relation to an FCPT Share, a UKCPT Share and/or a New UKCPT Share, as the case may be, means its net asset value on the relevant date as calculated on the basis of the relevant company's normal accounting policies
"New UKCPT Shares"	the ordinary shares to be issued by UKCPT to FCPT Shareholders pursuant to the Scheme and to Phoenix to fund partially the Cash Option
"Official List"	The Official List of the UKLA
"Overseas Shareholders"	FCPT Shareholders who are resident in, or nationals or citizens of, or whose registered address is in, a jurisdiction outside the United Kingdom, the Channel Islands and the Isle of Man or who are nominees of, or custodians or trustees for, residents, citizens or nationals of other countries
"Phoenix Group" or "Phoenix"	Phoenix Group Holdings, a company incorporated in the Cayman Islands (previously called Pearl Group) and its subsidiary undertakings
"Proposals"	the proposals set out in this announcement for the implementation of the Scheme
"Prospectus"	the prospectus to be published by UKCPT for the issue of New UKCPT Shares and their admission to the Official List and to trading on the main market of the London Stock Exchange
"Scheme"	a transfer by the Liquidator of the assets of FCPT to UKCPT in consideration of the payment of cash and the issue of New UKCPT Shares to FCPT Shareholders in respect of their interests in FCPT
"Scheme Circular"	the circular to be sent to FCPT Shareholders containing the terms and conditions of the Scheme, details of the proposals and the resolutions required to implement them
"Total Assets"	the aggregate gross value of the assets of the UKCPT Group less current liabilities other than Borrowings
"Total Expense Ratio"	the total costs of managing and operating UKCPT or the Enlarged UKCPT, as the case may, per annum divided by the average total assets less current liabilities, including management fees, administration fees, directors' fees, regulatory fees, valuation fees, audit fees, legal fees, etc. but excluding the direct costs incurred in the acquisition and disposal of assets and direct property related costs
"UKCPT"	UK Commercial Property Trust Limited
"UKCPT Board"	the board of directors of UKCPT
"UKCPT Circular"	the circular to be sent to UKCPT Shareholders containing the terms and conditions of the Scheme, details of the proposals and the resolutions required to implement them
"UKCPT EGM"	the extraordinary general meeting of UKCPT (or any adjournment thereof) to be held in connection with the Scheme for the purposes of, inter alia, obtaining shareholder approval for the steps necessary for UKCPT to participate in the Scheme
"UKCPT Group"	UKCPT and its subsidiary undertakings from time to time
"UKCPT Property Portfolio"	the direct property assets of UKCPT as at the date of this document
"UKCPT Shares"	the existing fully paid ordinary shares of 25 pence each in the capital of UKCPT
"UKCPT Shareholders"	the holders of UKCPT Shares
"UKLA"	the UK Listing Authority, being the Financial Services Authority Limited acting in its capacity as the competent authority for the purposes of Part IV of the Financial Services and Markets Act 2000
"United Kingdom" or "UK"	the United Kingdom of Great Britain and Northern Ireland
"Winterflood Investment Trusts"	Winterflood Securities Limited, acting through its division, Winterflood Investment Trusts

 

END

 

 

MSCUWRRRRWANRUR