Framlington Income Share Discussion Threads

[rob the slob] 14/10/2007 18:13

glen fiddich

I hope you followed your own advice and bought at 40p
They're 253p now, well ahead of your SOUNDLY conservative predictions!!!

well spotted!

[david77] 20/12/2004 13:34

Be very careful with Britannic UK Income ZDP shares

As far as I know, this is the only PREFERENCE share that comes third in order of preference - debt, then guaranted incs (or something like that), then zeros, then ords.

I had some Britannic zeros when the figures looked reasonable (and is the only zero I have lost money with) - don't trust www.splitsonline.co.uk with this zero.

[adrianmunsey] 20/12/2004 13:27

There has been a reduction of discount in the capital shares in the last 60 days. This now might mean we have had the best of these shares.

Britannic UK Income ZDP shares now look more interesting I think.

[washbrook] 02/12/2003 09:02

If you ever want to arbitrage against FTSE by going short on the FTSE futures this is one of the best shares .

[washbrook] 13/10/2003 09:36

ASSETTS 30.6.03=£74.388 nav per cap share 116.25p share price 56p
ASSETTS 9.10.03 =£79.223[+6.4%]nav cap share =134.59 [+15.7% share price 74p [+32.14%]

[sirlurkalot] 19/2/2003 10:56

I fundamentally disagree with your numbers. The best source of data for splits is splitsonline.co.uk. Trustnet's data is often wrong because they calculate on a full redemption basis, which is often not the case. I think that's what's happening here.

Splitsonline shows that if the market doesn't move until windup the return to the capital shares will be 3.8% pa. Of course the cap shares are highly geared, so if the market does better, returns will rise sharply, but of course you'll be losing a lot of your capital if the market drops up to windup.

There is something to be said for buying long-dated capital shares, but please take a look at splitsonline to find the correct data.

[glen fiddich] 07/1/2003 09:31

Split Capital Trusts have had a bad press of late - but is there hidden value there which is being seriously overlooked? The Trusts in bother are ones which have invested in other trusts and, as the market turned south, they got caught in a vicious circle: their assets were falling and the assets in the trusts they had invested in were falling. Plus they were highly geared into the bargain. These factors magnified losses to the extent that many have gone to the wall.

However, the good news is that these trusts only account for 30per cent of the Splits sector meaning that other trusts which haven't invested in their own kind have been unfairly tarnished. This spells opportunity writ large.

There seems to be a fantastic opportunity available with the capital shares of Framlington Income and Capital Trust. This trust is made up of, as the name suggests, capital and income shares. The capital shareholders stand to split what is left of the pot after the income shareholders have taken their pre-determined slice at wind-up on September 30, 2008.

The capital share price is currently 40p (although there is a near 30% bid/offer spread). That represents a whopping 60% discount to NAV. The hurdle rate (the amount the assets have to improve by each year to break even) is a paltry MINUS 4.5%. This means that the assets can fall in value by 4.5% each year to 2008 and you'd still get your money back. Obviously, anything greater than that and you'd probably end up losing the lot.

On the upside, if the market didn't move for the next six years you'd be looking at an 18.4% compounded annual return (that's equivalent to turning £1,000 into £2,754).

If the market goes up by 2.5% (that's the FTSE moving from 4,000 to 4,638 by September 2008) your £1,000 would be worth £3,944 at a compound rate of 25.7%. At a 5% increase, the FTSE would go to 5,360 and you'd get back £5,313 (32.1%).

There are also projections for 7.5% and 10% but while they may well be possible, the above figures at least keep it real.

The high returns are possible because of the high levels of gearing and the discount to NAV. If things improve only slightly, FRNC could head skywards fast. The other thing to consider is that there may well be significant price improvements within the next six years which would allow profit to be taken earlier at greater rates of return.

The underlying holdings of the trust are basically sound. The largest holdings (which make up 40% of the trust) include Glaxo, BP, HSBC, Lloyds, Anglo Irish, HBOS, National Grid, RBOS, P&O and Shell.

By their highly-geared nature, capital shares are a HIGH-RISK investment and you should only keep a small percentage in your portfolio. I recommend no more than 20%. However, they do represent a fantastic opportunity for spectacular returns if you have even modest growth expectations for the market as a whole over the medium term.

Has anyone got any comments?

Regards

GF

PS: My figures are from Trustnet.com which is an invaluable source - well worth a look if you're interested.