Select Committee on Treasury Minutes of Evidence


Annex B (continued)

Aberdeen Preferred Income Trust PLC

INSTITUTIONAL REPORT

August 2002




OBJECTIVE

  The Group invests mainly in securities which produce high investment yields, including convertible preference shares, preference shares, income shares of other investment trusts and other fixed interest securities including bonds to produce a high gross portfolio yield together with an exposure to equity markets.

MANAGER'S REPORT

    —  Gilts strong particularly shorter maturities

    —  High yield bonds weak

    —  Convertibles mainly lower

    —  Income shares collapse

  An extraordinary month in the securities markets with extreme volatility in equity markets and a flight to quality in bond markets. High yield bonds were generally very nervous on worries about the overall economic background. Equities were very weak and volatile in the absence of serious buying interest. Over the month the FTSE 100 Index lost nearly 9 per cent however the fall was nearly 20 per cent at one stage before a late rally. In the circumstances convertibles were again relatively resilient although lower for choice. The split capital sector could find no support in the face of the poor market background and July and August have seen the suspension of a number of trusts some of which have announced liquidation/receiverships.

  The Ordinary shares, Subordinated Loan Stock and 2008 Zeros currently have no attributable asset value. The Stepped Preference Share asset value is represented only by its accrued income. The asset values of the 2003 and 2005 Zeros have seen further marked erosion since the end of July.




Aberdeen High Income Trust PLC

INSTITUTIONAL REPORT

June 2002




OBJECTIVE

  Aberdeen High Income Trust aims to provide high income and potential for capital and income growth from investment mainly in UK split capital investment trusts.

MANAGER'S REPORT

    —  Company remains in breach of bank and debenture covenants.

    —  Debenture stockholders meeting held 10 June 2002 to approve proposals for the future.

    —  Proposals accepted by debenture holders, no further dividend payments to shareholders until bank repaid in full.

  The Company has already announced that it is in breach of its financial covenants under the terms of the loan agreement with Bank of Scotland PLC and the Trust Deed of the 7.1 per cent Debenture Stock 2008. The Company issued a circular convening a meeting for Debenture holders on 10 June 2002. The circular provided an update of the Company's financial position; put forward proposals to address the issues concerning the breach of the covenants contained in the trust deed and the facility agreement with Bank of Scotland PLC and sought approval from Stockholders to amend the Trust Deed in conjunction with those porposals.

  Details of the Proposals can be found in the circular a copy of which is available from Aberdeen Asset Managers' Limited, One Bow Churchyard, London EC4M 9HH. The following summary of the proposals should not be read in isolation:

  The Company will not seek an immediate realisation of the portfolio, although it may sell individual holdings as opportunities arise.

  £12 million will be prepaid to the bank and debenture holders and the Company will seek to make quarterly payments against the remaining value of the bank loan and Debenture.

  Covenant breaches will be waived and the covenant suspended for two years. The Company will not be required to maintain investment trust status. Aberdeen Asset Manager's Limited has agreed to waive its management fee payable on the gross assets of the company and the Directors have reduced their fees.

  As a result of the breach of the financial convenants and the level of the Company's assets, the Company remains unable to pay dividend in respect of the ordinary shares and preferred income shares and in the circular it stated that it will make no distributions to shareholders without the consent of Bank of Scotland PLC, without their permission, until all amounts due to the bank have been repaid in full.




Leveraged Income Fund Limited

INSTITUTIONAL REPORT

June 2002




OBJECTIVE

  Launched in April 1998. The Company's principal investment objective is to provide Ordinary Income shareholders with an initial high income and opportunity for capital growth over the planned life of the Company and to provide Zero Dividend Preference shareholders with their fixed capital entitlement. The Company principally invests in equities and bonds, with a particular focus upon returns from split capital investment trusts and closed end funds.

MANAGER'S REPORT

    —  Agreement with Bank of Scotland on amendments to the loan facility.

    —  Seeking loan stock holders approval to new terms.

  On 11 June the board announced that it had reached agreement with RBS for amendments to the terms of the loan facility, subject to the agreement of the loan stock holders. From revenue received each year the company will repay up to £3 million of the loan in the first six months, following which 50 per cent of the revised annual loan stock coupon of 4 per cent may be paid. Any surplus revenue in the six months will further reduce bank debt. Within 12 months up to £5 million of the loan will be repaid from revenue, after which the balance on the revised annual loan stock coupon of 4 per cent may be paid. Various other conditions also apply to this revised facility, but the loan stock holders will need to agree to the revised arrangements. The outstanding £875,000 interest payment relating to the loan stock holders will be authorised by the bank if the requisite document is signed and certain conditions are satisfied.




The Enhanced Zero Trust PLC

INSTITUTIONAL REPORT

August 2002




OBJECTIVE

  The Enhanced Zero Trust PLC aims to achieve an above average return from investment in zero dividend preference shares through the use of gearing.

MANAGER'S REPORT

    —  Reconstruction approved by shareholders.

    —  £7.25 million debt repaid.

    —  £6 million injection by Aberdeen Asset Management PLC.

  Since the end of July the Company has made the following announcement:

  "The Company announces today, 14 August 2002, that the financial reconstruction of the Company approved by Ordinary Shareholders at a class meeting and at an extraordinary general meeting held on 7 August 2002, has today been completed.

  Accordingly, the Company has repaid £7.25 million of its existing bank loan, converted £20.25 million of its existing bank loan into 20,250,000 Class `C' Preference Shares which have been allotted to The Governor and Company of the Bank of Scotland, and allotted 6,075,000 Class `D' Preference Shares, including 6,000,000 to Aberdeen Asset Management PLC as consideration for a £6 million cash injection".





 
previous page contents

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 17 October 2002