Rights & Issues convert Capital shares


#1

As I have eluded to in the past, it has been announced today that for every 1 capital share you will receive 4 income shares. When this was first publicly muted about 1 month ago the income (and to a lesser degree, the capital) shares shot up. Moving again today so maybe this boat has sailed but the capital shares still look to be at a 15% discount on the new structure, income not such a steal at 9%. Some wins and losses:
Income Shareholders would see a reduction of 16.7% in their proportion of income for 2016
balanced by a gain of 2.4% in their proportion of capital. Capital Shareholders would see a rise of 10.8% in their proportion of income for 2016 balanced by a loss of 0.9% in their proportion of capital. I’ll let you do the maths but it is a great stock with little coverage since it is too small for most investment houses to bother with.

Today’s LSE announcement


#2

If I had to pick my favourite Trust then Rights & Issues Capital would probably be it (it makes up ~5% of my portfolio). So when it converts to a single share class @james_pigott - this should make the trust easier to analyse - generally the stats on the trust in magazines and sites are hopeless as they can’t deal with the strange split of income and capital between the two share classes.
Hopefully the single share class will move it to a different AIC category and increase marketability. The bid-offer spread is generally very high with poor trading volumes - so I’m not sure I would buy now.

Why I like the trust

  • has excellent performance similar to the other similar trusts (Smaller Companies Divident - SDV, Acorn Income Fund - AIF and Aberforth Geared - AGIT) 12 ot of 402 trusts on 3 year NAV on Trustnet
  • has a low management charge, partly because the trust get income from running the Discretionary Unit Trust
  • manger has a large stake in the trust

Mind you the annual reports are among the most unformative I’ve ever read - and even finding the trusts web site can be a challenge.


#3

I’ve never heard of this investment trust so i’m amazed you two not only know it but are such big fans of it.

I’m off to find out more about this…


#4

I am very interested in this investment trust, would people still recommend after the change in capital structure ?


#5

They changed the capital structure because of a stubbornly persistent discount to NAV @shetland.

The previous capital structure allowed investors to choose capital or income units, though for the time I’ve been an investor the capital units paid special dividends.

The other change they introduced was a discount management programme to protect a maximum of 10% discount. They have been purchasing back their own stock every month since the proposal was adopted, and it has succeeded in narrowing the discount.

The management team have been in the job for a long time and have delivered great performance throughout, and it’s that you’re buying in to here. They all have large shareholdings in the trust themselves, so their financial interests are aligned with shareholders too.

This is a core holding for me.


#6

Rabsteel, Many thanks for your reply. I will add this to my buy list. I am in the process of moving all my OEICS into IT’s because of the high platform charges imposed by my provider. This is one of several questions I have over various IT’s, would it be better to post a separate question for each of them or one question covering all of them.


#7

I would discuss your other trusts in the moving from OEICs to trusts discussion your created @Shetland.


#8

Post it in the other discussion you created @shetland, it seems more appropriate.

If you put the @ symbol in front of any members name they will get notified that you mentioned them.


#9

This is so fascinating, Right issued capital is a way in which an organization can sell their shares in order to raise capital. This kind of issues gives existing investor securities called rights which gives investors the rights to buy new offers. We can begin investing with less capital. This is the best investment plan I have ever heard. For more information about capital shares, you could look here. Hope so it will be useful to all.