chairman peter gray emphasises long-term outlook for the Investment trust despite losses in NAV per share of 40% in the year to 31 august
Peter Gray, chairman of the £7.6m Close Finsbury Eurotech investment trust, has confirmed the future of the trust is safe.
The announcement follows discussions on the trust's future that concluded the long-term investment case for the trust remains intact.
However, the group has moved to cap the total expense ratio (TER) of the trust at 3.5%, with Reabourne Technology Investment Management deferring any fees that take expenses above that level until further notice.
Gray said: 'The board and its advisers have devoted much time and thought over the past year to a re-examination of the assumptions upon which this trust was launched and a re-assessment of the case for continuing the trust in its current form.
'The investment adviser's report describes this process in greater detail but, in summary, the conclusion that has been reached is that the long-term investment case for the trust remains intact.'
The decision comes after three years of troubled technology markets in Europe that have led to a significant decline in the net asset value of the trust.
In the year to 31 August 2002, Gray said, the trust's preliminary results show a further deterioration in market conditions in the technology sector worldwide, with the market indices reflecting most closely the investment focus of the trust, the FTSEeTX Share and the FTSEeTX Innovation indices, falling in sterling-adjusted terms by 44.8% and 43.7% respectively.
The net asset value per share of the trust fell by 40% in that time, from 42.5p to 25.5p, while the share price fell by 51.1%, from 40.5p to 19.8p, Gray said.
The long-term performance benchmark, the MSCI Pan-European Index, which reflects the performance of European stock markets generally rather than the technology sector in particular, fell by 21.8%, he added.
Gray said: 'Europe continues to offer attractive opportunities for investment in technology because of its greater scope for technology adoption relative to the US, its leadership in important areas of technology such as wireless and the existence of a number of individual companies of world-class quality in a broad range of sectors.
'Furthermore, the very problems presented to the generalist investor by the fact many of the most attractive investment opportunities are represented by small, low-profile, under-researched companies offers exceptional opportunities to a strong, research-driven investment team, focused on early stage investment, such as Reabourne Technology Investment Management.'
But, he warned: 'The year ahead will test the validity of these conclusions and, as indicated in the prospectus, shareholders will have an opportunity to vote on the future of the trust in December 2003.'
On the capping of the total expenses of the trust, Gray said: 'Assets of the trust have now fallen to a level at which current expenses represent an undue burden on their ability to generate reasonable returns for shareholders.
'The largest expenses are the investment managers and advisers fees. Following extensive discussions, Close Finsbury Asset Management and Reabourne Technology Investment Management have offered to defer their fees with effect from 1 December 2002 to a level that will enable the total expense ratio of the company to be capped at 3.5% per year.
'This arrangement will continue until both the investment management fee in any one year exceeds the fee that would have been payable under the original basis and the cumulative deficit in investment management fees since the introduction of the capped total expense ratio has been eliminated, subject to the NAV of the trust being in excess of £17.5m.'
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