INVESCO Geared Opportunities Trust plc
Preliminary Announcement
Unaudited Final Results
For the Year Ended 30 April 2003
Chairman's Statement
At the interim stage I was disappointed to report a fall in the total net
assets less current liabilities of the Trust of 27.1% during the period so I am
now, to some extent, pleased to be able to report a fall in the second half of
the Trust's year of only 3.8% which results in a fall during the year as a
whole of 29.9%.
There is no single benchmark against which the Company's investment performance
should be measured. However, the Board considers the performance of the FTSE
All-Share Index, the FTA Government All Stock Index and the Merrill Lynch
Sterling High Yield Index when assessing the performance of the Trust's
portfolio. The total returns for those indices for the year are respectively
-22.0%, 10% and 3.0% which compare with the total return on the portfolio of
-24.3%.
The nature of the Trust's investments, whether equity or fixed interest, are
orientated towards individual company circumstances and the Board considers
that the performance of the two company orientated indices, namely the FTSE
All-Share Index and the Merrill Lynch Sterling High Yield Index, are generally
more relevant to the Trust for performance comparison purposes. The total
return on the Trust's portfolio has fallen short of that of both of these
indices which the Board considers to be disappointing. However the conditions
prevailing in the UK equity market during the last three months of the Trust's
financial year were, in some respects, exceptional, exemplified by the FTSE 100
Index falling by 4.8% in one day in March only to regain its loss the next day.
During this time recovery stocks were particularly adversely affected. The
Board is pleased to note therefore that between the Trust's year end and the
date of the last declared net asset value on 25 June, the total net assets less
current liabilities of the Trust have increased by 12.6% which exceeds the
capital returns of both the FTSE All-Share Index of 6.7% and the Merrill Lynch
Sterling High Yield Index of 5.0%.
The decrease in the total assets less current liabilities for the year of 29.9%
means that, as a result of the Trust's geared structure and deducting prior
charges at par, the net asset value of the Geared Ordinary Shares at the
Trust's year end was nil. The Zero Dividend Preference Shares rank for
repayment ahead of the Convertible Unsecured Loan Stock and Geared Ordinary
Shares on a voluntary winding-up. At the Trust's year end the assets of the
Company provided cover of 1.8 times the repayment value of the Zero Dividend
Preference Shares. The repayment value of the Convertible Unsecured Loan Stock
was uncovered to the extent of the �1.4 million which equals the negative
equity value of Shareholders' Funds.
I am pleased to be able to update shareholders with the information that, as a
result both of the recent rise in the UK equity market and the out performance
of the Trust's portfolio, the Trust's last declared net asset value of the
Geared Ordinary Shares on 25 June, after deducting prior charges at par, was
17.8p and the middle market share price at the close of business that day was
23.5p which was a premium of 32% to the net asset value. Of course this also
means that the claim of the Convertible Unsecured Loan Stock as at the same
date is entirely covered by the total assets less current liabilities.
The Directors approved the payment of a fourth interim dividend per Geared
Ordinary Share of 2.275p which, when taken together with the quarterly
dividends already declared, makes a total of 9.1p per Geared Ordinary Share.
The total ordinary dividend for this year is the same as that paid in the
Trust's first four financial years. The fourth interim dividend will be paid on
31 July 2003 to shareholders on the register on 27 June 2003.
Outlook
The unusual circumstances in the UK equity market in the last three months of
the Trust's year depressed share prices, and particularly recovery stock share
prices, too far. We are in the midst of a recovery in those prices. However we
shall endeavour to be alert to the possibility that the current enthusiasm may
take prices to levels that do not fully reflect the circumstances in a still
difficult real world.
Philip Stephens
Chairman 30 June 2003
Statement of Total Return (Incorporating the Revenue Account)
for the year ended 30 April
2003 2002
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Losses on - (15,225) (15,225) - (706) (706)
investments
Exchange - - - - 1 1
differences
Income 2,649 - 2,649 2,516 - 2,516
Investment (125) (232) (357) (167) (311) (478)
management fee
Other expenses (184) - (184) (166) - (166)
Net return before 2,340 (15,457) (13,117) 2,183 (1,016) 1,167
finance
costs and
taxation
Interest payable (637) (1,172) (1,809) (631) (1,171) (1,802)
and similar
charges
Return on ordinary 1,703 (16,629) (14,926) 1,552 (2,187) (635)
activities before
taxation
Tax on ordinary - - - - - -
activities
Return on ordinary 1,703 (16,629) (14,926) 1,552 (2,187) (635)
activities
after taxation
for the
financial year
Appropriation in - (1,375) (1,375) - (1,277) (1,277)
respect of non-
Equity shares
Dividends in (1,688) - (1,688) (1,688) - (1,688)
respect of equity
shares
Transfer to/(from) 15 (18,004) (17,989) (136) (3,464) (3,600)
reserves
Basic return per 9.18p (89.64)p (80.46)p 8.37p (11.79) (3.42)p
Geared Ordinary p
Share
Basic return per - 10.38p 10.38p - 9.64p 9.64p
Zero Dividend
Preference Share
The revenue column of this statement is the profit and loss account of the
company. All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued in the year.
Reconciliation of Movements in Shareholders' Funds
for the year ended 30 April
2003 2002
Equity Non-equity Total Equity Non-equity Total
Interest Interest Interest Interest
�'000 �'000 �'000 �'000 �'000 �'000
Revenue return for 15 - 15 (136) - (136)
the year
Capital return for (16,629) - (16,629) (2,187) - (2,187)
the year
Appropriations in (1,375) 1,375 - (1,277) 1,277 -
respect of non-equity
shares
Net movement in (17,989) 1,375 (16,614) (3,600) 1,277 (2,323)
Shareholders' funds
Opening Shareholders' 16,576 17,882 34,458 20,176 16,605 36,781
funds
Closing Shareholders' (1,413) 19,257 17,844 16,576 17,882 34,458
funds
Balance Sheet
as at 30 April
2003 2002
�'000 �'000
Fixed assets
Investments 38,265 50,205
Current assets
Debtors 1,552 509
Cash at bank 974 6,431
2,526 6,940
Creditors: amounts falling due within one year (1,747) (1,487)
Net current assets 779 5,453
Total assets less current liabilities 39,044 55,658
Creditors: amounts falling due after more than (21,200) (21,200)
one year
Total net assets 17,844 34,458
Capital and reserves
Called-up share capital 318 318
Share premium account 30,114 30,114
Other reserves
Capital reserve - realised 1,376 6,134
Capital reserve - unrealised (20,240) (6,994)
Redemption reserve 6,007 4,632
Revenue reserve 269 254
Shareholders' funds 17,844 34,458
Analysis of Shareholders' funds
Equity interests (Geared Ordinary Shares) (1,413) 16,576
Non-equity interests (Zero Dividend
Preference Shares) 19,257 17,882
17,844 34,458
Net asset value per share
Geared Ordinary Share
- Basic - 89.4p
- Fully-diluted 67.9p 129.6p
Zero Dividend Preference Share 145.3p 135.0p
Cash Flow Statement
for the year ended 30 April
2003 2002
�'000 �'000
Cash inflow from operating activities 1,680 1,915
Servicing of finance (1,809) (1,802)
Taxation 8 123
Net financial investment (3,648) (284)
Equity dividends paid (1,688) (1,688)
Net cash (outflow)/inflow before management (5,457) (1,736)
of
liquid resources and financing
Management of liquid resources 3,993 3,624
(Decrease)/increase in cash (1,464) 1,888
Reconciliation of net cash flow to movement
in net funds
(Decrease)/increase in cash (1,464) 1,888
Cash inflow from increase in liquid resources (3,993) (3,624)
Change in net funds resulting from cash flows (5,457) (1,736)
Translation difference - 1
Movement in net debt in the year (5,457) (1,735)
Net debt at beginning of year (14,769) (13,034)
Net debt at end of the year (20,226) (14,769)
The accompanying notes are an integral part of this statement.
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 30 April 2003 or 2002. The financial
information for 2002 is derived from the statutory accounts for 2002 which have
been delivered to the Registrar of Companies. The auditors have reported on the
2002 statutory accounts and their report was unqualified and did not contain a
statement under s237(2) or (3) of the Companies Act 1985. The statutory
accounts for 2003 will be finalised on the basis of the information presented
by the Directors in this preliminary announcement and will be delivered to the
Registrar of Companies following the Company's Annual General Meeting.
Notes
1. Income
2003 2002
�'000 �'000
Income from investments
UK dividends 2,072 1,843
Unfranked investment income - interest 549 456
2,621 2,299
Other income
Deposit interest 28 216
Underwriting commissions - 1
28 217
Total income 2,649 2,516
Total income comprises:
Dividends 2,072 1,843
Interest 577 672
Other income - 1
2,649 2,516
Income from investments:
Listed UK 2,621 2,299
2,621 2,299
2. Investment management fee
2003 2002
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Investment management 106 198 304 142 265 407
fee
Irrecoverable VAT 19 34 53 25 46 71
thereon
125 232 357 167 311 478
(i) INVESCO Asset Management Limited acts as Managers and Secretaries to the
Company under an agreement dated 9 March 1998. This agreement was for an
initial fixed period of two years and was renewed on 16 June 2000. It is
terminable by one year's written notice subject to earlier termination as
provided for therein. The fee is calculated at the rate of 0.75 per cent. per
annum (plus VAT) by reference to the gross assets at the end of July, October,
January and April in the current accounting period. At 30 April 2003 �84,000
(2002: �120,000) was due for payment in respect of management fees.
(ii) The Managers, with their Associates, receive indirect benefits for certain
investment services in the form of soft commission resulting from agreements
with a number of brokers. The value of services supplied may depend upon a
minimum threshold of commissions or a percentage of such commissions arising on
dealings in securities for all clients, including this Company. Dealings are
effected at best terms and the practice of best execution is not compromised by
these arrangements.
3. Other expenses
2003 2002
�'000 �'000
General expenses 105 92
Aggregate Directors' fees (see below) 55 55
Auditors' remuneration - for audit services 15 14
- for other services 9 5
184 166
Of the Directors' fees disclosed above �21,000 (2002: �21,000) was payable to
third parties in respect of making available Mr Clark's and Mr Nathanson's
services as Directors.
Mr Clark's fees of �10,500 (2002: �10,500) was paid to Atlantic Wealth
Management Limited, a fellow subsidiary of the Manager and a Member of the
AMVESCAP Group.
The Directors' fees authorised by the Articles of Association are �100,000 per
annum.
4. Interest payable and similar charges
2003 2002
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Interest on CULS:
Repayable between 1 and 637 1,172 1,809 - - -
2 years, not by instalments
Repayable between 2 and - - - 631 1,171 1,802
5 years, not by instalments
637 1,172 1,809 631 1,171 1,802
5. Appropriation in respect of non-equity shares
2003 2002
�'000 �'000
Increase in the calculated value of the Zero 1,375 1,277
Dividend Preference Shares
6. Tax on ordinary activities
(a) Analysis of charge in year:
There is no liability to corporation tax for the year ended 30 April 2003
(2002: nil). UK dividends are not subject to UK corporation tax and other
income is offset by the management expenses of the year.
(b) Factors affecting current tax charge for the year:
2003 2002
�'000 �'000
Revenue on ordinary activities before 1,703 1,552
taxation
Theoretical tax at UK Corporation tax rate of 511 466
30% (2002: 30%)
Effects of:
- UK dividends which are not taxable (622) (553)
- movement in excess management expenses and 531 532
non-trading loan relationship debits
- expenses charged to capital for which a (420) (445)
deduction is claimed
Current tax charge for the year - -
(c) There is an unrecognised deferred tax asset of �2,368,000 (2002: �
1,842,000). The deferred tax asset relates to current and prior year unutilised
management expenses and non-trading loan relationship debits. It is considered
too uncertain that there will be taxable profits in the future against which
the deferred tax assets can be offset and, therefore the asset has not been
recognised.
7. Dividends in respect of equity shares
2003 2002
pence �'000 pence �'000
Dividends on Geared Ordinary Shares:
ordinary - first interim paid 2.275 422 2.275 422
ordinary - second interim paid 2.275 422 2.275 422
ordinary - third interim paid 2.275 422 2.275 422
ordinary - fourth interim payable on 2.275 422 2.275 422
31 July 2003
9.100 1,688 9.100 1,688
8. Return per share
The revenue return per Geared Ordinary Share is based on the revenue on
ordinary activities after taxation and on 18,549,891 (2002: 18,549,891) Geared
Ordinary Shares, being the number of Geared Ordinary Shares in issue during the
year.
The capital return per Geared Ordinary Share is based on net capital return on
ordinary activities after taxation and on 18,549,891 (2002: 18,549,891) Geared
Ordinary Shares, being the number of Geared Ordinary Shares in issue during the
year.
Capital return per Zero Dividend Preference Share is the increase in the
calculated value per Zero Dividend Preference Share for the year.
The terms of the Convertible Unsecured Loan Stock are such that conversion can
only take place on the business day prior to a voluntary winding-up. Therefore,
conversion would have no impact on the ongoing revenue and capital returns per
Geared Ordinary Share and accordingly, no diluted return per Geared Ordinary
Share has been disclosed.
9. Notes to the cash flow statement
(a) Reconciliation of revenue to net cash inflow from operating activities
2003 2002
�'000 �'000
Return before finance costs and taxation 2,340 2,183
(Increase)/decrease in debtors (361) 67
(Decrease) in creditors (67) (24)
Management fee allocated to capital reserve - (232) (311)
realised
Net cash inflow from operating activities 1,680 1,915
(b) Analysis of net (debt)/funds
1 May Cash 30 April
flow
2002 2003
�'000
�'000 �'000
�'000 �'000
Cash at bank 1,463 (1,464) (1)
Cash placed on short-term deposit 4,968 (3,993) 975
Debt due after 1 year (21,200) - (21,200)
Net debt (14,769) (5,457) (20,226)
The audited Report and Accounts will be posted to shareholders shortly. Copies
may be obtained during normal business from the Company's Registered Office, 30
Finsbury Square, London, EC2A 1AG.
The Annual General Meeting will be held at the Companies Registered Office on
Thursday, 31 July 2003 at 2.30pm.
By order of the Board
INVESCO Asset Management Limited - Secretaries
30 June 2003
END