The Best and Worst: Trusts show some fancy steps: PEP Investment Trusts

STEPPED preference shares, found within split-level investment trusts, offer a predetermined increase in income and capital value. There are fewer than a half-dozen in issue, so it is not surprising that they have been in demand while interest rates and dividends from ordinary shares have been falling.

River & Mercantile invests in large British companies with high-yield shares. Vivien Gould, manager of River & Mercantile, said holders of the trust's stepped shares were entitled to a dividend increase of 5 per cent a year and an equivalent increase in net asset value. They now trade at a premium to asset value.

European investment trusts have been disappointing, despite the high hopes when political reform began in East. But Deborah Rodriguez Pringle, manager of Fleming Euro Fledgling over the past two years, believes shares in European smaller companies may begin to move by the end of this year. 'In the UK, small company shares performed strongly before the economy had shown any real signs of recovery,' she said.

Personal Assets, where manager Ian Rushbrook owns just under 30 per cent of the shares, is not performing as strongly as it was a year or two ago. Nevertheless, over a 12-month period it has still turned a pounds 1,000 investment into nearly pounds 1,207. Investment is concentrated in larger companies, with 70 per cent of it invested in the UK. No switch is planned to smaller company shares, Mr Rushbrook said, because he believes the strength of their share price is not entirely justified by growth in underlying earnings.

----------------------------------------------------------------- Table: Best & Worst: PEP Investment Trusts ----------------------------------------------------------------- (Qualifying for Personal Equity Plans) ----------------------------------------------------------------- The best Pounds ----------------------------------------------------------------- 1 Ivory & Sime Personal Assets 2203.34 2 River & Mercantile Stepped Pref (2000) 1878.86 3 Law Debenture 1873.36 4 Moorgate Gen Consol Stepped Pref (1997) 1815.53 5 Glasgow Shires 1745.67 ----------------------------------------------------------------- The worst ----------------------------------------------------------------- 49 Foreign & Colonial Eurotrust 945.46 50 Ivory & Sime Continental Assets 923.34 51 Martin Currie European 801.24 52 Foreign & Colonial German 789.05 53 Fleming Euro Fledgling 716.50 ----------------------------------------------------------------- The chart shows the value of pounds 1,000 invested over 3 years to 1 July, the shares valued on a mid-market basis, all income reinvested. Excludes charges. Source: Chase de Vere/Micropal -----------------------------------------------------------------