By James Thorneley Johnson Fry will offer commission on the purchase of the shares on its third spli...
By James Thorneley
Johnson Fry will offer commission on the purchase of the shares on its third split capital investment trust during the group's offer period.
The shares of Johnson Fry Income & Growth trust, managed by Alan Kerr, is expected to yield around 9%.
The portfolio will invest in UK equities, of which 30% will be invested the same stocks as held in the frAA-rated Johnson Fry UK Growth unit trust.
The remainder will be in a mixture of ordinary and income shares from split capital trusts and also is corporate bonds.
The Growth unit trust is ranked 42 out of 226 in the Micropal UK All Companies peer group over the three years to 1 March. During the period it rose 52.6% compared to a sector average rise of 44.5%.
Initial commission of 3% will be paid to authorised financial intermediaries as well as 0.5% annual commission for investments within an Isa or Pep.
As reported in Investment Week the offer period will straddle the two tax years, meaning up to £12,000 can be invested in the group's Isa product.
The first offer period opens on 15 March and closes on 3 April for Isa investors and the next day for non-Isa investors.
The second closing date for Isa investors will be 12 April and again the closing date for non-Isa applications is the day after.
The trust will be made up of ordinary shares and bank debt. The 100p shares as well as yielding 9% will have a relatively low hurdle rate of 3.4% meaning the underlying portfolio needs to grow by 3.4%pa to maintain the initial price of the shares.
The trust has no fixed life but a continuation vote will be held after 10 years.
If there is no growth in capital and income over the first 10 years of the trust the investor will receive back 139p, consisting of 49p capital and 90p in total income paid, for the 100p investment, a gross redemption yield (GRY) of 5.2%.
On the other hand if the growth in capital and income is 5%pa the investor will receive back 258p, 114p capital and 144p income, a GRY of 13.65%.
Income will be paid quarterly and investors will receive their first payment with an initial bonus in September 2000.
In order to achieve the relatively high yield the trust will gear its investments through a bank loan such that the initial gross assets will comprise 60% equity raised in the issue and 40% borrowings.
The group hopes to raise £60m in equity meaning the gross assets of the trust will be £100m.
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