Shareholders in the Isis Investment Trust have voted in favour of extending of the life of the compa...
Shareholders in the Isis Investment Trust have voted in favour of extending of the life of the company to October 2007.
The move is part of a plan to reconstruct the portfolio and increase its gearing to 10%, by using a seven-year fixed rate bank loan. The £60m trust which invests in UK equities is managed by Paul Galloway of Friends Ivory & Sime.
During the reconstruction, every 1000 existing convertible annuity shares will be converted into one new ordinary share, while all warrants will be exercised at 107.5p. Existing ordinary shares will then be exchanged for new ordinary shares, so they have an initial NAV of 94p. Other changes voted upon at the 31 July shareholder meeting, include a switch from a performance fee based on a NAV relative to the FTSE All-Share, to share price performance relative to the index.
This makes it essential for the manager to control the level of the discount which will be minimised through an active share buyback strategy. Until 31 October, the trust will buy back shares should they trade at a discount of more than 5%.
After 31 October, shares will be bought back if the discount increases to above 9.9%. This target will fall by 1% per year until January 2006 when the discount is expected to be kept below 4.9%.
Between 31 December 1999 and 30 June 2000, the discount at which the company's ordinary shares traded at fell from 12.3% to 8.98%. When Isis announced its reorganisation proposals, the discount fell further with the ordinary shares since broadly trading at a discount of between 5% and 6%.
A total of 3,467,173 ordinary shares have now been bought back for cancellation, representing 14.9% of those in issue at 31 December 1999. This has resulted in a 2.2p per share increase in NAV.
Geoffrey Maddrell, chairman of Isis, said the net asset value per ordinary share fell by 5% during the first six months of the year, 15% less than the 6.5% fall in the FTSE All-Share Index. The trust also hopes to raise further funding from a placing and public offer for new shares, along with a placing of fixed rate annuity shares to Friends Provident on a one-for-10 ratio. This will be done on 31 October, on a basis that protects existing shareholders from the costs of the issue. The public offering is likely to be aimed at the intermediary market.
The board declared a second interim dividend of 7.40p per convertible annuity share, bringing the total for the half year to 14.97p. This is the same level as that paid last year, and reflects the absence of dividend growth in the FTSE 350 index.
'Necessary steps' taken
Penalty payments and enforcement policy
Fees as low as 0.04%
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Only 9,486 applied for the benefit in 12 months