Legg Mason's continued participation in the investment trust market hinges upon whether the zerohold...
Legg Mason's continued participation in the investment trust market hinges upon whether the zeroholders in its International and European Utilities trusts vote to rollover the respective vehicles.
The £177.8m International Utilities trust is due to be wound up on 31 December unless a prior special resolution or reconstruction proposal is passed at an EGM. European Utilities faces a 31 July 2004 wind-up date.
If the £207.6m combined mandates are closed, besides losing around £1.6m in annual management fees, the group will review whether it should withdraw from the investment trust market. The assets of the two trusts almost matches the £231m the group manages across its eight unit trusts.
Legg Mason's investment trust stable has been shrinking over the last two years following the delisting of the American Assets, Income & Growth and Strategic Assets splits after their share prices collapsed. The group's Enterprise trust was taken over by Schroders in May, but it still retains management of the Legg Mason Aim VCT.
At current market levels, holders of ordinary shares in International Utilities will receive none of their capital back, only dividends, after the trust posted losses of '45.76% and '89.4% in 2001 and 2002, respectively. Zeroholders' entitlements are covered, however.
As such, only the zeroholders are considered likely to vote for a rollover, although the board was unavailable for comment.
Ordinary shareholders in the £29.8m European Utilities have seen a 27.01% decline in their stocks' value.
Deepak Chowdhury, chief executive of Legg Mason, said: 'International Utilities' board of directors is reviewing a number of scenarios. Our strategy with regard to investment trusts is partly dependant on the outcome of this meeting and of European utilities next year.'
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