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Investment Trust Subscription Shares

Subscription shares are a new form of securities which have been issued by investment trusts.

Subscription shares have the same characteristics as warrants but with the additional benefit of being qualifying investments for the purposes of an existing PEP and for the stocks and shares component of an ISA (which warrants are not).

Five investment trusts have issued subscription shares so far - Perpetual Income & Growth, Dunedin Smaller Companies, RCM Technology, SR Europe and Henderson Opportunities Trust.

The April 2007 issue of Warrants Alert Professional said "We have good news. There is a chance – just a chance – that the warrants market might be seeing the dawn of a new era. Long-time subscribers will remember the heydays of the investment trust market in the mid-1990s when there were many more warrants in issue and plenty of opportunities for profit. Now we wonder whether the long cycle of investment fashion has turned full circle. Investment trusts are starting to issue subscription shares – a new variant of warrants. This month we have news of issues from SR Europe and Finsbury Technology Trust, and we have our hopes that more may follow."
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Andrew McHattie's book on covered warrants is the most detailed guide to this exciting market. You can order it now for just £13.99 (new low price from January 2005).
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McHattie Warrants Alert Fund unit trust
The only UK authorised unit trust specialising entirely in warrants.
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The McHattie Group publishes two advisory warrants newsletters - Warrants Alert and Warrants Alert Professional. Both newsletters include analysis of all kinds of warrants - investment trust warrants and subscription shares, corporate warrants, and covered warrants.
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Warning: you should not buy shares or warrants with money you cannot afford to lose. This web site is intended for UK investors. Options and other derivatives, warrants, and margined transactions. This warning notice draws your attention to some of the high risks associated with warrants. The risks attaching to instruments and transactions of this kind are usually different from, and can be much greater than, those attached to securities such as shares, loan stock and bonds, such transactions often having the characteristics of speculation as opposed to investment. Warrants may involve a high degree of 'gearing' or 'leverage'. This means that a small movement in the price of the underlying asset may have a disproportionately dramatic effect on your investment. A relatively small adverse movement in the price of the underlying asset can result in the loss of the whole of your original investment. Moreover, because of the limited life of warrants, they may expire worthless. A warrant is a right to subscribe for shares, debentures, loan stock or government securities, usually exercisable against the original issuer of the securities. Because of the high degree of gearing which they may involve, the prices of warrants can be volatile. Accordingly, you should not buy warrants with money you cannot afford to lose. You run an extra risk of losing money when you buy shares in certain smaller companies including ‘penny shares’. There is a big difference between the buying price and the selling price of these shares. If you have to sell them immediately, you may get back much less than you paid for them. The price may change quickly, it may go down as well as up, and you may not get back the full amount invested. It may be difficult to sell or realise the investment. Because of the volatile nature of the investment, a fall in its value could result in your recovering nothing at all. Changes in rates of exchange may have an adverse effect on the value or price of the investment in sterling terms. As with other investments, transactions in warrants, shares, and investment trusts may also have tax consequences and on these you should consult your tax adviser. We have taken all reasonable care to ensure that all statements of fact and opinion contained on this site are fair and accurate in all material respects. Investors should seek appropriate professional advice if any points are unclear. This site is intended to give general advice only, and the investments mentioned are not necessarily suitable for any individual. It is possible that the McHattie Warrants Alert Fund or officers of the McHattie Group may have a beneficial holding in any of the securities mentioned. Published by The McHattie Group, St Brandon's House, 29 Great George Street, Bristol, BS1 5QT. Tel: 01179 200 070. Fax: 01179 200 071. E-mail: enquiries at mchattie.co.uk. All rights reserved. No part of this site may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic, mechanical, photographic, or otherwise without the prior permission of the copyright holder. Authorised and regulated by the Financial Services Authority.
Securitised Derivatives: these instruments may give you a time-limited right to acquire or sell one or more types of instrument which is normally exercisable against someone other than the issuer of that investment. Or they may give you rights under a contract for differences which allow for speculation on fluctuations in the value of the property of any description or an index, such as the FTSE 100 Index. In both cases, the investment or property may be referred to as the “underlying instrument.”
These instruments often involve a high degree of gearing or leverage, so that a relatively small movement in the price of the underlying investment results in a much larger movement, favourable or unfavourable, in the price of the instrument. The price of these instruments can therefore be volatile.
These instruments have a limited life, and may (unless there is some form of guaranteed return to the amount you are investing in the product) expire worthless if the underlying instrument does not perform as expected.
You should only buy this product if you are prepared to sustain a total loss of the money you have invested plus any commission or other transaction charges.
You should consider carefully whether or not this product is suitable for you in light of your circumstances and financial position, and if in any doubt please seek professional advice.