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BFS set to suspend dividends on trust

The board of BFS income & growth trust is proposing terminating dividends for the remaining life of the company in a bid to meet zero shareholders&#39 capital entitlement.

In a move which could spell the end of its investment company status, the trust&#39s board is “seriously considering” suspending dividends until the company winds up in August 2005 to give it a hope of returning zero shareholders&#39 final redemption.

Under investment trust rules, a trust must pay out at least 85 per cent of its revenue. Failure to do so would trigger a vote by shareholders on whether to wind up or roll over the trust into a further investment.

It is also seeking to pay off £15m of debt – reducing it to £35m from £50m – using cash on deposit with banks and initiating a buy-back policy from zero shareholders in an effort to create a buffer against further market volatility.

The trust&#39s interim results show the value of its total assets plummeted to £107m from £177.2m in the eight months to April.

Unless the assets recover and grow at an annual rate of 21.4 per cent over the next three years, zero shareholders are unlikely to get their full entitlement.

Chairman Peter Kennedy says: “By reducing debt and cancelling some of the existing zero shares, the board hopes that the company will be better insulated against further market weakness while being in a position to benefit from any market recovery.”

Simpsons partner Andrew Merricks says: “It is no surprise. We are starting to see these trusts come out and admit how much trouble they are in.”

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