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14 June 2002

SIT rejects 'costly' plan for shake-up

One of the biggest investment trusts in the UK has rejected a proposal from two shareholders to restructure itself by splitting its capital.

The board of the Scottish Investment Trust, chaired by Sir Angus Grossart, threw out the plan put by Axa Investment Management and Hermes Investment Management because the 35,000 private shareholders would have to bear the £22m (€ 34m) costs, reducing the value of the company's net assets.

SIT, which has £1.1bn under management, was also concerned about the increased continuing costs in the future.

Axa, which overall owns 10.6% of the shares, and Hermes, which overall owns 10.6%, suggested dividing the assets into a UK index fund and a managed fund in the belief that this would reduce the share price discount to net assets.

The board felt the proposal was "complex, costly, opaque and of uncertain outcome" and that it offered no potential to increase long-term value for shareholders.

It said that while index funds were fashionable, they gave no discretion over investment, whereas SIT's present structure, which had worked well for 115 years, allowed it to adapt its policies as conditions change.

Under the present structure, it had outperformed its benchmark and produced good long-term returns for shareholders.

Sir Angus said: "Having given careful consideration to the complex proposals put forward by Hermes and Axa, we strongly believe that they will not increase shareholder value. They would create a complicated structure that would be expensive to put in place and costly to run."

Martin Williams
Business AM