Fund manager urges Cyprus residents to prepare for euro switchover

The January 2008 euro-switchover date is looming, and a leading financial institution has urged Cyprus savers and investors – and their financial advisers – to make sure investments are euro-ready.

Graham Mudie, Intermediary Development Manager, Lloyds TSB Cyprus told the Financial Mirror that it is crucial that investors and their advisers are prepared for the fundamental changes that take place when Cyprus adopts the euro as its currency.

“It’s a huge change for everyone in Cyprus, be they financial professionals or private investors, as one now has to think in a completely different currency,” said Graham Mudie.

“It’s perhaps the most fundamental economic change that can affect a country, and has consequences beyond how goods are priced in the shops. For instance, those who are using investment to derive an income – among whom are many British expats in Cyprus – must be careful of a possible currency risk if they do not receive their income in euros. Exchange rate fluctuations can add an element of uncertainty for those who are using income from investments to fund expenditure. That is, unless they are receiving investment income in the currency which they also use for their spending.”

Recognising that increased numbers of people would wish to derive investment income in euros, Lloyds TSB Offshore fund managers last year launched a fund to help them do just that.

The aim of Lloyds TSB Euro High Income Fund is to maintain a high income through investment in a spread of fixed interest securities denominated predominately in euros. It was launched on 2 October 2006 and its realised annual yield to 2 October 2007 was 4.73%, excluding any initial charges or redemption charges. The Euro High Income Fund is currently delivering 4.6% income as at 31 October 2007, paid quarterly, in euros, although these levels of income cannot be guaranteed.

“An income delivered in euros should appeal to those who are preparing to switch their ‘home’ currency to the euro and are seeking a good income from their capital,” said Graham.

The Euro High Income Fund takes holdings in investment-grade Eurobonds and distributes income every quarter. It is backed by a good investment management pedigree, as it draws on the experience of the fixed-income specialists of SWIP – Scottish Widows Investment Partnership. SWIP is one of Europe’s largest asset managers and is part of the Lloyds TSB Group, with in excess of GBP98 bln of funds under management.

The investment policy is directed to supporting the payment of dividends above the level of short term euro interest rates. This policy will result in a gradual reduction in the capital value of the shares, except when bond prices generally are rising.

Intermediaries may contact Graham Mudie on 25 503 188 or by email at [email protected]. Private investors should contact their local financial adviser, or visit www.funds.lloydstsb-offshore.com.