INVESCO Recovery Trust 2005 plc
Unaudited Preliminary Announcement
For the Six Months Ended 30 April 2002
Chairman's Statement
In this, my first interim report to shareholders as the Chairman of INVESCO
Recovery Trust 2005, I am disappointed to have to report a decrease in the
total assets less current liabilities of the Trust, which fell by 2.6%, during
the first six months of the Trust's current financial year.
There is no single benchmark against which the Company's investment performance
should be measured. However, the Board considers the performance of the FTSE
Actuaries 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 six months ended 30
April 2003 are respectively -0.5%, 2.8% and 22.3%, which compare with the total
return on the portfolio that we calculate to be -0.7%.
The nature of the Trust's investments, whether equity or fixed interest, are
orientated towards company specifics and the Board considers that the
performance of the two company orientated indices, namely the FTSE Actuaries
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 February, March and April 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 six month period end and the date of
the last declared net asset value on 11 June 2003, the total net assets less
current Liabilities of the Trust have increased by 13.7%, which exceeds the
capital returns of both the FTSE Actuaries All-Share Index of 7.3% and the
Merrill Lynch Sterling High Yield Index of 6.5%.
The structure of the Trust has remained robust throughout this difficult
period. The revenue account remains in good shape and the portfolio consists of
securities that have good recovery potential and, as always, have no exposure
to other split capital trusts. The Board and the Investment Manager have not
been forced by circumstances to change the investment stance of the Trust at a
disadvantageous time. Therefore the geared exposure to a wide range of
securities with capital upside remains.
A second interim dividend of 2.2625p per Ordinary Share has been declared in
respect of the financial period ending 30 April 2003 and will be paid on 31
July 2003 to shareholders on the register on 27 June 2003. The first interim
dividend of 2.2625p was paid on 30 April 2003 in accordance with our indicated
timetable.
The gearing of the Trust means that the change in the net asset value of the
Ordinary Shares will be greater than the change in total assets less current
liabilities. In particularly adverse circumstances the final capital
entitlement of the Zero Dividend Preference Shares of 174.7 p per share would
not be met in full. I refer you to the tables included below that show the
impact of changes in total assets less current liabilities in the different
classes of equity in the Trust.
Projected Net Asset Value of Ordinary Shares
Percentage Growth per annum in Total -4.3 nil 5.0 10.0 12.7
Assets less Current Liabilities
Approximate NAV per share (pence) 0.0 22.9 51.5 82.3 100.0
The above projected net asset values show the estimates of capital repayments
which could be made to the ordinary shareholders assuming a variety of
different growth rates in the Trust's total assets less current liabilities to
wind-up in 2005.
Projected Net Asset Value of Zero Dividend Preference Shares
Percentage Growth per annum in Total -37.5 -30.0 -20.0 -10.0 -4.3
Assets less Current Liabilities
Approximate NAV per share (pence) 0.0 29.7 77.9 136.4 174.7
If the total assets less current liabilities of the Trust remain at the 30
April 2003 interim level, then the Zero Dividend Preference shareholders would
receive their pre-determined final capital entitlement of 174.7p. However, if
the total assets less current liabilities fell at a rate greater than 4.3% per
annum (the level at which approximate net asset value per Ordinary Share is
0.0p) then the Zero Dividend Preference shareholders would receive an amount
below the final capital entitlement of 174.7p. The table above illustrates this
point.
The unusual circumstances in the UK equity market in the last three months of
this reporting period depressed share prices and particularly recovery stock
share prices too far. We are in the midst of a recovery in those prices, which
I expect to continue.
Lord Naseby
Chairman
19 June 2003
Statement of Total Return
(Incorporating the Revenue Account)
Six months to 30 April
2003
(Unaudited)
Revenue Capital Total
�'000 �'000 �'000
(Losses)/gains on investments - - (2,151) (2,151)
realised
- unrealised - 1,189 1,189
Exchange differences
Income
UK dividends 1,037 - 1,037
UK unfranked investment income 141 - 141
Deposit interest 22 - 22
Gross return 1,200 (962) 238
Investment performance management fee - - -
- note 1
Other expenses (148) - (148)
Net return before finance costs and 1,052 (962) 90
taxation
Finance costs of non-equity interests - (700) (700)
Interest payable - note 1 (64) (254) (318)
Return on ordinary activities before 988 (1,916) (928)
taxation
Tax on ordinary activities - note 2 - - -
Return on ordinary activities after 988 (1,916) (928)
tax for the financial period
(attributable to equity shareholders)
Dividend in respect of equity shares - (784) - (784)
note 3
Transfer to/(from) reserves 204 (1,916) (1,712)
Basic return per Ordinary Share - note 5.70p (11.06) (5.36)p
4 p
Basic return per Zero Dividend - 5.52p 5.52p
Preference Share
- note 4
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
period.
Statement of Total Return
(Incorporating the Revenue Account)
Year to
31
October
Six months to 30 April 2002
2002
(Unaudited) (Audited)
Revenue Capital Total Total
�'000 �'000 �'000 �'000
Gains/(losses) on investments - 2,495 2,495 2,919
- realised
- unrealised - 3,632 3,632 (10,369)
Exchange differences - - - -
Income
UK dividends 674 - 674 1,625
UK unfranked investment 87 - 87 198
income
Deposit interest 115 - 115 155
Gross return 876 6,127 7,003 (5,472)
Investment performance - (457) (457) -
management fee - note 1
Other expenses (135) (5) (140) (278)
Net return before finance 741 5,665 6,406 (5,750)
costs and taxation
Finance costs of non-equity - (646) (646) (1,330)
interests
Interest payable - note 1 (63) (252) (315) (635)
Return on ordinary activities
before
taxation 678 4,767 5,445 (7,715)
Tax on ordinary activities - (1) 1 - -
note 2
Return on ordinary activities
after tax
for the financial period 677 4,768 5,445 (7,715)
(attributable to equity
shareholders)
Dividends in respect of (784) - (784) (1,567)
equity shares
- note 3
Transfer (from)/to reserves (107) 4,768 4,661 (9,282)
Basic return per Ordinary 3.91p 27.52p 31.43p (44.54)p
Share - note 4
Basic return per Zero - 5.10p 5.10p 10.49p
Dividend Preference Share -
note 4
Balance Sheet
At 30 April At 31 At 30 April
October
2003 2002 2002
(Unaudited) (Audited) (Unaudited)
�'000 �'000 �'000
Fixed Assets
Investments
Listed at market value 35,182 37,077 45,737
35,182 37,077 45,737
Current assets
Amounts due from brokers 661 626 -
Tax recoverable - - 23
Prepayments and accrued 759 381 355
income
Cash at bank 1,709 1,478 6,569
3,129 2,485 6,947
Creditors: amounts falling due within one
year
Amounts due to brokers 299 544 -
Accruals and deferred income 209 203 610
Proposed dividend 392 392 392
900 1,139 1,002
Net current assets 2,229 1,346 5,945
Total assets less current 37,411 38,423 51,682
liabilities
Creditors: amounts falling due 10,000 10,000 10,000
after one year
Total net assets 27,411 28,423 41,682
Capital and reserves
Called up share capital 300 300 300
Share premium account 29,100 29,100 29,100
Other reserves:
Capital reserve - realised 8,287 11,392 11,452
Capital reserve - unrealised (16,827) (18,016) (4,015)
Redemption reserve 5,400 4,700 4,016
Revenue reserve 1,151 947 829
Shareholders' funds 27,411 28,423 41,682
Analysis of Shareholders'
funds
Equity interests (Ordinary 9,331 11,043 24,986
Shares)
Non-equity interests (Zero
Dividend
Preference Shares) 18,080 17,380 16,696
27,411 28,423 41,682
Net asset value per share -
note 5
Ordinary Share - basic 53.9p 63.8p 144.3p
Zero Dividend Preference Share 142.6p 137.1p 131.7p
Cash Flow Statement
Six months Year to Six months
to 30 April 31 to 30 April
October
2003 2002 2002
(Unaudited) (Audited) (Unaudited)
�'000 �'000 �'000
Cash flow from operating 683 1,645 662
activities
Servicing of finance (321) (635) (321)
Taxation - 141 119
Capital expenditure and financial
investment
Purchase of investments (12,322) (19,849) (4,341)
Sale of investments 12,975 20,679 10,170
Equity dividends paid (784) (1,775) (992)
Net cash inflow before 231 206 5,297
management of liquid resource
Management of liquid (230) (217) (4,834)
resources
Increase/(decrease) in cash 1 (11) 463
Cash outflow from increase in 230 217 4,834
liquid resources
Movement in net funds in the 231 206 5,297
period
Net debt at beginning of the (8,522) (8,728) (8,728)
period
Net debt at the end of the (8,291) (8,522) (3,431)
period
Notes to the Interim Accounts
1. Interest payable on debt to finance investments is allocated 80% to capital
and 20% to revenue in line with the Board's expected long-term split of returns
from the investment portfolio of the Company. No capital investment performance
management fee is charged if the Total Assets growth does not exceed the hurdle
rate of 4.15% pa, 1% plus VAT is chargeable if growth exceeds the hurdle rate
but is less than twice the hurdle rate, and 1.5% plus VAT if the growth rate
exceeds twice the hurdle rate. This fee is, therefore, charged wholly to
capital and �nil has been accrued in these accounts based on a rate of 1.5% and
Total Assets as at 30 April 2003 (30 April 2002: �457,000 based on a rate of
1.5% and Total Assets as at 30 April 2002; 31 October 2002: no fee payable).
2. The tax effect of expenditure is allocated between capital and revenue on
the same basis as the particular item to which it relates, using the standard
rate of tax for the accounting period and the marginal method.
3. The Directors have declared interim dividends totalling 4.525p (2002:
4.525p) per Ordinary Share in respect of the year ending 31 October 2003. The
first interim dividend of 2.2625p was paid on 30 April 2003 and the Directors
have declared a second interim dividend of 2.2625p payable on 31 July 2003 to
shareholders on the register on 27 June 2003.
4. The revenue return per Ordinary Share is based on the net revenue return on
ordinary activities after taxation and on 17,320,000 Ordinary Shares, being the
number of Ordinary Shares in issue in the period.
The capital return per Ordinary Share is based on the net capital return on
ordinary activities after taxation and the capital return due to Zero Dividend
Preference Shares and on 17,320,000 Ordinary Shares in issue in the period.
The capital return per Zero Dividend Preference Share is the increase in the
calculated value per share for the period.
5. The net asset value per Ordinary Share of 1p is calculated after deducting
12,680,000 Zero Dividend Preference Shares of 1p each at �1 together with the
accumulated growth in their value to 30 April 2003 of �5,400,000 (31 October
2002: �4,700,000; 30 April 2002: �4,016,000) based on the final projected value
on 16 November 2005 of 174.7p per share.
6. It is the intention of the Directors to conduct the affairs of the Company
so that it satisfies the conditions for approval as an investment trust company
set out in section 842 of the Income and Corporation Taxes Act 1988.
7. The foregoing information at 31 October 2002 is an abridged version of the
Company's full accounts which carry an unqualified Auditor's report and have
been filed with the Registrar of Companies.
By order of the Board
INVESCO Asset Management Limited
Secretaries
19 June 2003
END