30/06/2009 14:00
INVESTORS WHO HAVE ANY ADDITIONAL CONCERNS NOT COVERED BY THE INFORMATION IN THE RELEASE SHOULD CALL THE KEYDATA HELPLINE ON 0844 391 3412.
Following their appointment on Monday 8 June 2009, the joint Administrators of Keydata Investment Services Limited (‘the Company’ or ‘KIS’) have been working towards selling the business in order to provide continuity for investors. However, potential issues have just come to light which mean that a sale of the Company as a whole will now not be possible.
Below, we have set out these issues and how they affect each element of KIS’s business. The business comprises six different elements:
KIS’s own products and Lifemark’s products
1. Products invested with SLS Capital S.A. (“SLS”) (£103m invested)
In the last few days the Administrators have become aware that income on these products has not been paid by SLS since October 2008. No investor has so far suffered an income shortfall as a result of this non-payment as the gap was filled by KIS’s own corporate funds.
The Administrators have also identified that early redemptions of these products have been dealt with in an irregular fashion.
The Administrators have been unable to satisfy themselves as to the safe custody of the underlying assets in SLS and, indeed, information received over the weekend suggests that the assets have been liquidated and may have been misappropriated. The Administrators are now working with the authorities in an effort to trace the funds.
For the time being no income payments or redemptions on these products will be possible.
It is understood that some 5,500 investors are impacted.
KEYDATA SECURE INCOME BOND – GROWTH (ISSUE 1)
KEYDATA SECURE INCOME BOND – INCOME (ISSUE 1)
KEYDATA SECURE INCOME BOND 2 – GROWTH
KEYDATA SECURE INCOME BOND 2 – INCOME
KEYDATA SECURE INCOME BOND 2 – QUARTERLY INCOME (USD)
KEYDATA SECURE INCOME BOND 3 – GROWTH
KEYDATA SECURE INCOME BOND 3 – INCOME
2. KIS products invested with Lifemark S.A. (“Lifemark”) (£349m invested)
The Administrators have received confirmation of the existence of the underlying assets supporting these products. However, the Administrators have identified that early redemptions of these products have been dealt with in an irregular fashion. For the time being no early redemptions on these products will be possible.
Income on these products has been paid regularly and will now continue to be processed to investors as received. However, as reported earlier, these products were also the subject of earlier concerns as to whether they comply with ISA tax rules. Accordingly, it has been agreed with HMRC that the Administrators will deduct tax at source from all income generated from these products pending clarification of tax issues. It is understood that some 23,000 investors are impacted.
KEYDATA DEFINED INCOME PLAN (ISSUES 1 - 8)
KEYDATA SECURE INCOME BOND 4
KEYDATA SECURE INCOME PLAN (ISSUES 1 - 12 & 14)
KEYDATA DEFINED INCOME PLAN (SPECIAL EDITIONS)
KEYDATA DEFINED INCOME PLAN 5 YEAR SPECIAL EDITION (ISSUES 2-8)
THE INCOME PLAN (ISSUES 1 - 12 & 14)
3. Lifemark products invested with Lifemark (£2m invested)
The Administrators have received confirmation of the existence of the underlying assets supporting these products. However, the Administrators have identified that early redemptions of these products have been dealt with in an irregular fashion. For the time being no early redemptions on these products will be possible.
Income from these products has been paid regularly and will continue to be processed for investors as received subject to the tax deductions referred to above.
The products concerned are listed below. It is understood that some 80 investors are impacted.
LIFEMARK SECURE INCOME BOND 1 EURO – QUARTERLY INCOME
LIFEMARK SECURE INCOME BOND 2 SEK – ANNUAL INCOME
LIFEMARK SECURE INCOME BOND 2 SEK – QUARTERLY INCOME
LIFEMARK SECURE INCOME BOND 3 EURO – QUARTERLY INCOME
LIFEMARK SECURE INCOME BOND 3 SEK – ANNUAL INCOME
LIFEMARK SECURE INCOME BOND 3 SEK – QUARTERLY INCOME
LIFEMARK SECURE INCOME BOND 4 EURO – ANNUAL INCOME
LIFEMARK SECURE INCOME BOND 4 SEK – ANNUAL INCOME
LIFEMARK SECURE INCOME BOND 5 EUR – ANNUAL INCOME
LIFEMARK SECURE INCOME BOND 5 EUR – QUARTERLY INCOME
LIFEMARK SECURE INCOME BOND 5 SEK – ANNUAL INCOME
LIFEMARK SECURE INCOME BOND 5 SEK – QUARTERLY INCOME
LIFEMARK SECURE INCOME BOND 7 EURO – QUARTERLY INCOME
LIFEMARK SECURE INCOME BOND 8 SEK – QUARTERLY INCOME
4. KIS products backed by blue chip financial institutions (£191m invested)
These products are unaffected by the Administrators’ current concerns regarding underlying assets or historic processing of redemptions. The Administrators have now recommenced the processing of income, maturity and early redemptions payments on these products. However, income payments will be subject to the tax deductions referred to above.
The products concerned are listed below. It is understood that some 14,500 investors are impacted.
ACCUMULATING INVESTMENT PLAN
ANNUAL KICKOUT PLAN
CAPITAL PROTECTED BONUS PLAN
KEYDATA CAPITAL PROTECTED GROWTH PLAN 1
KEYDATA DEFINED GROWTH PLAN (ISSUE 1)
KEYDATA DGP HAMMOND CHAMPNESS PENSION SCHEME
KEYDATA DGP PLUS (ISSUES 11,12,14 & 15 (OPTIONS 1 AND 2))
KEYDATA DYNAMIC GROWTH PLANS 5-7, 9-12 & 14-20
KEYDATA DYNAMIC GROWTH PLAN 8 – BALANCED GROWTH
KEYDATA DYNAMIC GROWTH PLAN 8 – OPPORTUNITY GROWTH
KEYDATA DYNAMIC GROWTH PLAN PLUS (ISSUES 1 - 12 & 14 - 16)
KEYDATA DYNAMIC GROWTH PLAN PLUS (SPECIAL EDITION ISSUES 1 & 2)
KEYDATA EXTRA INCOME PLAN (ISSUES 8-12 & 14-26)
KEYDATA FTSE GROWTHBUILDER PLAN – CAUTIOUS GROWTH
KEYDATA FTSE GROWTHBUILDER PLAN – MAXIMUM GROWTH
KEYDATA FTSE GROWTHBUILDER PLAN 2KEYDATA INNOVATIVE GROWTH PLAN
KEYDATA INNOVATIVE GROWTH PLAN (ISSUE 2)
KEYDATA PROTECTED PORTFOLIO PLAN
KEYDATA SECURE GROWTH PLAN
KEYDATA UK PROTECTED GROWTH PLAN
5. Products invested with Hometrak S.A. (“Hometrak”) (£2m invested)
The Administrators are seeking confirmation as regards the status of the underlying assets which relate to these funds. The Administrators have identified that early redemptions of these products have been dealt with in an irregular fashion.
In the last few days the Administrators have become aware that income on these products has not been paid by Hometrak since February 2008. No investor has so far suffered an income shortfall as a result of this non-payment as the gap was filled by KIS’s own corporate funds.
For the time being no income payments or early redemptions on these products will be possible.
Affected products are listed below. It is understood that some 240 investors are impacted.
KEYDATA INCOME PROPETY BOND 1 – INCOME PROPERTY – ANNUAL INCOME
KEYDATA INCOME PROPERTY BOND 1 –INCOME PROPERTY – QUARTERLY INCOME
KEYDATA INCOME PROPERTY BOND 2 – INCOME PROPERTY 2 – ANNUAL INCOME
KEYDATA INCOME PROPERTY BOND 2 – INCOME PROPERTY 2 – QUARTRLY INCOME
KEYDATA INCOME PROPETY BOND 3 – INCOME PROPERTY 3 – ANNUAL INCOME
KEYDATA INCOME PROPERTY BOND 3 – QUARTERLY INCOME
KEYDATA INCOME PROPERTY BOND 4 – INCOME PROPERTY 4 – INCOME
KEYDATA INCOME PROPERTY BOND 5 – INCOME PROPERTY 5 – INCOME
KEYDATA INCOME PROPERTY BOND 6 – INCOME PROPERTY 6 – INCOME
Third party products
6. Administrative processing services for third party clients, including where KIS acts as the ISA Plan Manager (£2,206m invested)
KIS provides certain services to other financial institutions including plan management, the processing of application forms, changes to investors’ details and making income payments. In many cases an investor may not be aware KIS was involved providing these services.
The Administrators confirm that those investors whose relationship with KIS was only through the provision of back office services can be assured that their investments are safe and that income payments and other processing on those accounts is now fully operational.
In respect of some products where a KIS Stocks & Shares ISA vehicle has been used we are concluding our investigations so we can provide comfort to HMR&C that we can pay income gross rather than net of tax. KIS Cash ISA products are unaffected by this. Please bear with us whilst we conclude these investigations.
Next steps
Our investigations are continuing and we are working closely with the FSA and other authorities on these issues. We are also in contact with the FSCS regarding this matter so that, if there is compensation for FSCS to pay, it can step in as quickly as possible. If that happens, the Administrators and FSCS will work together to ensure that investors know how to make a claim for compensation.
As a result of these issues, we are unable to sell the whole business as a going concern. We will now be looking to sell the business that provides services in relation to third party products and are in talks with interested parties on this point. In the meantime the Joint Administrators, the FSA, and a group of banks to which KIS provides account management and administrative services, including Credit Suisse, Morgan Stanley and HSBC, are working together to ensure the continued orderly running of KIS’s services until a disposal can be secured.
Income processing and taxation
The Administrators are very aware of the uncertainty and hardship which has been caused due to the suspension of income payments. Where we have now agreed with HMRC to deduct income tax at the basic rate from income payments, investors will receive their income net of tax. Processing of tax deductions will prove an administrative challenge in the short term and it is likely there will be further delays before payments can be made.
We will work as hard as we can to get income flowing here and anticipate that payments will commence this week. We will continue to provide updates as soon as we have any new information for investors.
Summary
In summary, Dan Schwarzmann, joint Administrator and partner of PricewaterhouseCoopers LLP said:
“We are very disappointed not to have been able to effect a sale of the business as a going concern as this would have provided some much needed stability for investors, employees and creditors.
“We understand how worrying this new information must be for investors but would like to reassure all of them that we very much have their interests at the forefront of our minds as we seek to fully understand all the issues. We are working very hard in conjunction with the FSA and other authorities to obtain information regarding the whereabouts of the underlying funds in SLS.
“I would also reiterate my earlier confirmation regarding funds held by KIS. The funds, which totalled £70m at the date of our appointment, are all held in secure segregated client bank accounts and are not affected by the insolvency of KIS.
“I would encourage investors to continue to visit the website at www.pwc.co.uk/KIS where we will update new information as soon as we can.”
For further information and regular updates please visit the following website http://www.pwc.co.uk/KIS or call our helpline on 0844 391 3412.
ENDS
Dan Schwarzmann and Mark Batten of PricewaterhouseCoopers LLP were appointed joint Administrators of Keydata Investment Services Limited (KIS) on Monday 8 June 2009. The appointment was made based on an application to Court by the Financial Services Authority (FSA) on insolvency grounds.
KIS designs, distributes and administers structured investment products. KIS operates from three locations, being London, Glasgow and Reading and administers its own products and also portfolios for third parties.
The total list of products which may not be ISA compliant is: Secure Income bonds (SIB) issues 1 - 4,
Secure Income Plans (SIP) issues 1-12 and 14 and Defined Income Plans (DIP) issues 1 - 8. The Administrators understand that the value of these investments is around £250m and these issues impact around 30,000 investors.
The following Venture Capital Trusts are separate legal entities and not subject to the Administration: Keydata AIM VCT plc, Keydata AIM VCT 2 plc, Keydata Income VCT 1 plc and Keydata Income VCT 2 plc.
Role of the Financial Services Compensation Scheme (the “FSCS”)
FSCS is the statutory compensator of last resort for retail customers of authorised financial services firms that cannot meet their liabilities. It is an independent body set up under the Financial Services & Markets Act 2000. The service is free to consumers. FSCS was set up primarily to assist private individuals, although some small businesses are also covered.
For investment claims, the amount of compensation which may be payable to eligible claimants by FSCS is 100% of the first £30,000 and 90% of the next £20,000 (subject to a maximum of £48,000 per person).
For more information on compensation investors should refer to the FSCS website (www.fscs.org.uk) or FSA (www.fsa.gov.uk).
For more information contact:
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