City Merchants High Yield Trust plc
Preliminary Announcement - Unaudited Interim Results
Six Months to 30 June 2003
Performance Statistics
30 June 31 December %
2003 2002 Change
Net asset value per Ordinary Share 156.4p 141.9p +10.2
Middle market quotation per
Ordinary Share 169.0p 170.5p -0.9
FT-Actuaries All-Share Index 1,971.26 1,893.73 +4.1
FTSE Actuaries Government Securities
- All Stocks 156.91 157.16 -0.2
The Directors have declared a second interim dividend of 3.0p per Ordinary
Share to be paid on 1 October 2003 to shareholders registered on 29 August
2003. This, together with the first interim dividend of 3.0p paid on 8 July
2003, makes a total of 6.0p for the period to 30 June 2003 in respect of the
year ending 31 December 2003 (2002: 6p). The third interim dividend will be
declared in November 2003 and the final in February 2004.
Managers' Review and Prospects
Better times returned to the markets in the first half of the year under
review, with equities showing an overdue recovery and bond markets continuing
to perform well. This was reflected in our net asset value moving higher by
almost 10%, combined with a reasonably consistent income flow. Although our top
four holdings remained unaltered, there were some material changes elsewhere in
the portfolio. Virtually none of these changes resulted from action on our
part, but were brought about by corporate activity of one description or
another. Of the more significant moves, Weight Watchers, HMV, Remy Cointreau,
Gala and William Hill bought back their bonds, H P Bulmer were the subject of a
bid, while we will shortly lose our holdings in Chelsea Village and Welcome
Break by repayment.
The insurance sector has also given the portfolio a major boost. The latest
report from Equitable Life showed that the Required Minimum Margin for Solvency
was comfortably covered, and although the bonds staged a material recovery they
still yield 14%. During the course of the first half we bought Royal and Sun
Alliance preference stock on a yield of over 15%, which illustrates how
depressed the market had become.
Normally at this time we have to note some disappointing investments, but this
time round there have been no disasters. In fact, Applied Graphics
Technologies, the parent company of Wace which we had written down to zero,
were the subject of a major reconstruction and we have now received 19p for
each of our preference shares. We are also hopeful (but not confident) that we
will receive a payment from the administrators of Scotia.
In summary, the Trust has had a very satisfactory period in asset value terms
but this strength has brought its own problems. Each time we lose one of our
ultra high-yielding bonds, we endeavour to replace that yield. In the main we
have managed to find alternatives, but this job is becoming increasingly
difficult. We have found a number of interesting investments in the mining
sector, but overall low interest rates around the world have meant lower yields
on new issues. The Trust is in very good shape, but maintaining the current
yield is taking all of our efforts and, rather than drawing on our fairly
modest revenue reserves to maintain the dividend, we expect in future that
dividends will relate more closely to net revenues earned in each period.
With regard to the ongoing management of the Company's investment portfolio,
Paul Read and Paul Causer, heads of INVESCO's award-winning Henley Fixed Income
team, have joined Richard Lockwood in the Management of the Trust. Richard
Lockwood has assumed a consultancy role within the AMVESCAP Group, but will
continue to co-manage the Company until the end of April 2004. He remains a
Director of the Company.
Richard Lockwood
Paul Read / Paul Causer
Managers
20 August 2003
Statement of Total Return
(Incorporating the Revenue Account)
Six months to 30 June 2003
(Unaudited)
Revenue Capital Total
�'000 �'000 �'000
Gains on investments - realised - 956 956
- unrealised - 4,626 4,626
Exchange profit on capital items - 24 24
Income
UK dividends 1,324 - 1,324
Unfranked investment income 1,831 - 1,831
Deposit interest 3 - 3
Underwriting and other commissions - - -
3,158 5,606 8,764
Investment management fee (202) (109) (311)
Other expenses (147) - (147)
Net return before finance costs
2,809 5,497 8,306
and taxation
Interest payable (186) (101) (287)
Return on ordinary activities
2,623 5,396 8,019
before tax
Tax on ordinary activities (390) 63 (327)
Return on ordinary activities after
tax for the financial period 2,233 5,459 7,692
Dividends in respect of equity
(2,255) - (2,255)
shares
Transfer (from)/to reserves (22) 5,459 5,437
Return per Ordinary Share 5.94p 14.53p 20.47p
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
December
2002
Six months to 30 June 2002 (Audited
(Unaudited)
Revenue Capital Total Total
�'000 �'000 �`000 �'000
Losses on investments - realised - (3,579) (3,579) (3,097)
- unrealised - 4,383 4,383 (1,073)
Exchange profit/(loss) on capital - 10 10 (224)
items
Income
UK dividends 1,507 - 1,507 2,829
Unfranked investment income 1,883 - 1,883 3,634
Deposit interest 13 - 13 17
Underwriting and other - - - 1
commissions
3,403 814 4,217 2,087
Investment management fee (218) (117) (335) (639)
Other expenses (119) - (119) (279)
Net return before finance costs 3,066 697 3,763 1,169
and taxation
Interest payable (211) (113) (324) (644)
Return on ordinary activities 2,855 584 3,439 525
before tax
Tax on ordinary activities (405) 69 (336) (629)
Return on ordinary activities 2,450 653 3,103 (104)
after
tax for the financial period
Dividends in respect of equity (2,255) - (2,255) (4,885)
shares
Transfer to/(from) reserves 195 653 848 (4,989)
Return per Ordinary Share 6.52p 1.74p 8.26p (0.28)p
Balance Sheet at
30 June 31 December 30 June
2003 2002 2002
(Unaudited) (Audited) (Unaudited)
�'000 �'000 �'000
Fixed assets
Listed investments at market value:
In the United Kingdom 57,020 56,029 59,826
Overseas 16,166 11,859 13,394
Unlisted investments at directors 279 437 1,324
valuation
73,465 68,325 74,544
Current assets
Tax recoverable 330 - 159
Prepayments and accrued income 1,453 1,254 1,969
Cash at bank 44 11 -
1,827 1,265 2,128
Creditors: amounts falling due within
one year
Amounts due to brokers 466 - -
Bank overdraft 12,900 13,000 14,265
Tax payable 709 390 766
Accruals and deferred income 185 229 209
Proposed dividends on Ordinary Shares 2,255 2,631 2,255
16,515 16,250 17,495
Net current liabilities (14,688) (14,985) (15,367)
Total assets less current liabilities 58,777 53,340 59,177
Capital and reserves
Called-up share capital 9,395 9,395 9,395
Share premium account 19,133 19,133 19,133
Special reserve account 20,000 20,000 20,000
Other reserves
Capital reserve - realised 14,171 13,338 13,246
Capital reserve - unrealised (5,363) (9,989) (4,533)
Revenue reserve 1,441 1,463 1,936
Equity shareholders' funds 58,777 53,340 59,177
Net asset value per Share 156.4p 141.9p 157.5p
Reconciliation of Movement in Shareholders' Funds
Six months to Year to Six months to
30 June 31 December 30 June
2003 2002 2002
(Unaudited) (Audited) (Unaudited)
�'000 �'000 �'000
Revenue return for the period (22) (278) 195
Capital return for the period 5,459 (4,711) 653
Net movement in Shareholders' Funds 5,437 (4,989) 848
Opening Shareholders' funds 53,340 58,329 58,329
Closing Shareholders' funds 58,777 53,340 59,177
Cash Flow Statement
Six months to Year to Six months to
30 June 31 December 30 June
2003 2002 2002
(Unaudited) (Audited) (Unaudited)
�'000 �'000 �'000
Net cash flow from operating 2,134 6,039 2,952
activities
Servicing of finance (300) (658) (332)
Taxation - (240) -
Capital expenditure and financial
investment
Purchase of investments (10,467) (20,566) (9,883)
Sale of investments 11,373 19,040 7,114
Equity dividends paid (2,631) (4,885) (2,631)
Cash (outflow) before financing 109 (1,270) (2,780)
Financing
(Decrease)/increase in (100) 960 2,225
borrowings
Increase/(decrease) in cash 9 (310) (555)
Cash outflow/(inflow) from
decrease/
(increase) in debt 100 (960) (2,225)
Change in net debt resulting from 109 (1,270) (2,780)
cash flows
Translation difference 24 (224) 10
Movement in net debt in the period 133 (1,494) (2,770)
Net debt at beginning of period (12,989) (11,495) (11,495)
Net debt at end of period (12,856) (12,989) (14,265)
Notes to the interim accounts
1. The revenue return per Ordinary Share is based on the net revenue return on
ordinary activities after tax and on 37,581,453 (31 December 2002: 37,581,453;
30 June 2002: 37,581,453) weighted average number of shares in issue during the
period.
The capital return per Ordinary Share is based on the net capital return on
ordinary activities after tax and on 37,581,453 (31 December 2002: 37,581,453;
30 June 2002: 37,581,453) weighted average number of shares in issue during the
period.
2. The net asset value per Ordinary Share has been calculated on 37,581,453
allotted and fully paid up Ordinary Shares in issue at 30 June 2003 (31
December 2002: 37,581,453; 30 June 2002: 37,581,453) and net assets
attributable to Ordinary Shareholders of �58,777,000 (31 December 2002: �
53,340,000; 30 June 2002: �59,177,000).
3. 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.
4. The foregoing results at 31 December 2002 are an abridged version of the
Company's full accounts which carry an unqualified Auditors' Report and which
have been filed with the Registrar of Companies.
By order of the Board
INVESCO Asset Management Limited
Secretaries
20 August 2003
END