By Adam Lewis Scottish Value Trust (SVT) and Warrants & Value Investment Trust (WVIT) are to be m...
By Adam Lewis
Scottish Value Trust (SVT) and Warrants & Value Investment Trust (WVIT) are to be merged following approval at a recent SVT EGM, although the close vote by WVIT shareholders has delayed its windup.
As of 27 March, 89.93% of WVIT's shareholders had agreed to accept the offer but officially 90% are needed for the windup to go ahead, so the period has been extended to 4 April. However, Donald Robertson, lead investment manager at WVIT, is confident the merger will go through.
Robertson said that with the size of the warrant universe WVIT can invest in decreasing, falling from £1bn in 1994 to £700m today, the merger is seen as a way of playing warrants which still exist but with a reduced exposure to them.
SVT and WVIT are already in the same sector, follow the same benchmark, the FTSE World Index, and the same objectives, so Colin McLean, lead investment manager of SVT, made the decision to merge the two portfolios and run them along the same lines. SVT has a fund size of £100m and aims to achieve long-term capital growth by investing solely in closed-ended funds, principally in investment trusts, single-country funds and other securities in the financial sector.
WVIT's portfolio size is about £45m and aims to achieve long-term capital growth via investing in investment trust warrants and capital shares and warrants of other UK and overseas firms.
Robertson said the merger is a vehicle for broadening out the interest of the company and not being so dependent on warrants. He said: "We will retain a substantial interest in warrants in the new trust but they are now in an umbrella so they are not as risky. We will start off with about £40m but over time this may change. This year, a number of warrants will expire and we believe most will pay the subscribed price to turn them into ordinary shares."
The combined trust will go by the name of Scottish Value Trust and will be co-managed by McLean and Robertson.
It will remain in the International Capital Growth sector and will concentrate on investing in ordinary shares.
Robertson said that short-term there will be no change to the current holdings of both trusts, as for the moment it is a pure merger of the portfolios.
Both trusts have 38 holdings. As of the end of February 2001, SVT's largest holding was in Enterprise Capital Trust, with 12.89% exposure, while WVIT's largest holding was in Jupiter European Opportunities, in which it had 10.9% of its portfolio invested.
Over three years to 21 March, SVT has returned 45.1% on a mid to mid share price basis, against the sector average return of 19.9%. Over the same period, WVIT fell just short of the sector, returning 18.6%. SVT's NAV returned -1.7% year to 28 February, compared with the FTSE World Index's -3.4%, WVIT's NAV returned -1%.
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