AIB Govett is to rename First Ireland trust, Govett European Technology and Income as part of the tr...
AIB Govett is to rename First Ireland trust, Govett European Technology and Income as part of the trust's restructuring proposals announced last week.
The investment portfolio will be divided in half with 50% in income generating assets, such as shares from split capital trusts and corporate bonds, the other 50% will be invested in European technology companies.
The capital structure of the trust will contain geared ordinary shares, zero dividend preference shares and bank borrowings. The geared ordinary shares will offer a yield of 8.5%, while the zeros have a gross redemption yield of 9%. This means for each 100p invested holders of the zero can expect 182p when the trust winds up in 2007.
The announcement of the trust's new structure came in the same week as European Technology & Income, managed by Aberdeen Asset Management, decided to repay £25m of its £202m bank borrowings following the recent decline in technology stocks. Over the past few months the managers of the offshore closed-end fund have been implementing a defensive strategy to mitigate against declines in the technology market by selling some of the portfolio's technology shares and investing the proceeds in income producing stocks and Nasdaq put options.
The current breakdown of the portfolio is 30.9% technology, 1.3% Nasdaq put options, 3.3% income producing securities and 64.5% bonds.
The fund was launched in the first quarter of this year with the portfolio split in half with 50% in technology companies and 50% in high yielding bonds. In the placing period the fund raised £400m gross but the decline in technology shares have left it with a portfolio currently valued at £307m.
Chris Fishwick, head of specialist funds at Aberdeen, said: "The decline in the value of the technology share portfolio has reduced the proportion of the fund's assets likely to produce capital growth and the reduction in level of the bank facility has the effect of a modest de-gearing of the income shares and capital shares. We will continue to consider the level of gearing against the background of market developments."
The capital shares in the fund were issued on 24 February at 15p and rose to 30.5p on 6 March, their price on 4 July was 11.5p. The income shares are currently priced at 70p after being issued at 85p.
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