RNS Number:1985J
Govett Enhanced Income Inv TrustPLC
25 March 2003
GOVETT ENHANCED INCOME INVESTMENT TRUST PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002
CHAIRMAN'S STATEMENT
I am sorry to have to report to you that a third year of weak equity markets has
continued to reduce shareholders' funds. Although the investment portfolio held
up well compared with its benchmark, this is of little comfort to shareholders.
Absolute falls in value reduced total resources from #95.6m to #70.9m, resulting
in net assets falling from #72.9m to #48.3m.
Due to the gearing effect of the bank debt and Zero Dividend Preference shares,
negative portfolio returns resulted in ordinary shareholders' net asset value
falling from 37.62 pence per share to 3.43 pence (after providing for the
payment of dividends totalling 6 pence per share). The net asset value currently
attributable to the ordinary shares, representing the accumulated revenue
reserves, reflects the minimum value to which the net asset value can fall under
the terms of the subscription agreement between the Company and its subsidiary
company, GEIIT Securities, upon their liquidation, rather than ownership of a
portion of the investment portfolio. Negative portfolio returns have also
affected the net asset value of the Zero Dividend Preference shares which
dropped from 123.22 pence per share to 112.61 pence.
At the end of December 2002, the portfolio was allocated 71% to UK equities, 3%
to Investment Fund shares, 22% to Fixed Income and 4% to net current assets
(principally cash).
Principally as a result of the difficulties in the split capital investment
trusts sector, earnings per ordinary share fell sharply during the year,
resulting in declared dividends totalling 6 pence, including the dividend of 2
pence per share paid on 28 February 2003, compared with 8.91 pence last year. It
is the Board's current intention that past and future revenue will be
distributed on a smoothed basis, although this policy will remain under review.
Given the weak absolute performance of the portfolio, the Board has continued to
review the options available to the Group. The subsidiary company bought back
3.86 million of its Zero Dividend Preference shares during the year, resulting
in an improvement in the cover for the Zero Dividend Preference shares. The
Board does not currently intend to reduce the bank debt of #22.7m at the current
low levels of the market.
The Board is seeking shareholder approval at the forthcoming Annual General
Meeting of the subsidiary company for the continuation of the share buy-back
facility. The Directors believe that the existence of a share buy-back facility
continues to be in the interest of the shareholders.
Equity markets continued to suffer extended weakness in early 2003. A resolution
to the latest crisis in the Gulf should improve investor sentiment.
Whilst sharing your disappointment over recent returns, your Board and the
Manager are doing all we can to improve shareholders' prospects for the
remaining life of the Group. As you will be aware, the Zero Dividend Preference
shares are due to mature on 31 March 2004 and your Board has started considering
the appropriate action to be taken over the coming year.
Finally I should like to thank Sir Victor Garland, who retired as a director of
the Company and its subsidiary on 7 January 2003, for his help and support to
the board since the launch of the Company in March 1999.
Jonathan Carr
Chairman
25 March 2003
Statement of Total Return (incorporating the revenue account*)
For the year ended 31 December 2002
Year ended 31 December 2002 Year ended 31 December 2001
Revenue Capital Total Revenue Capital Total
#000s #000s #000s #000s #000s #000s
Losses on investments - (20,784) (20,784) - (12,130) (12,130)
Income from equity investments 3,577 - 3,577 4,515 - 4,515
Interest receivable 1,116 - 1,116 1,552 - 1,552
Investment management fee (402) (402) (804) (490) (490) (980)
Other expenses (228) - (228) (275) (4) (279)
Net return/(loss) before finance 4,063 (21,186) (17,123) 5,302 (12,624) (7,322)
costs and taxation
Interest payable (676) (676) (1,352) (679) (679) (1,358)
Return/(loss) on ordinary activities 3,387 ( 21,862) (18,475) 4,623 (13,303) (8,680)
before taxation
Tax on ordinary activities (126) 128 2 (117) 112 (5)
Return/(loss) on ordinary activities 3,261 (21,734) (18,473) 4,506 (13,191) (8,685)
after tax before minority interest
Non-equity minority interest - 6,034 6,034 - (4,020) (4,020)
Return/(loss) for the financial year 3,261 (15,700) (12,439) 4,506 (17,211) (12,705)
Dividends in respect of equity (2,721) - (2,721) (4,041) - (4,041)
shares
Transfer to/(from) reserves 540 (15,700) (15,160) 465 (17,211) (16,746)
Return/(loss) per ordinary share for 7.19p (34.62)p (27.43)p 9.94p (37.95)p (28.01)p
the period (in pence)
*The Revenue column represents the Revenue Account of the Company.
The revenue and capital items in the above statement derive from continuing
operations. There were no recognised gains and losses other than presented
above.
Balance Sheets as at 31 December 2002
31st December 31st December 31st December 31st December
2002 2002 2001 2001
Group Company Group Company
#000s #000s #000s #000s
Investments at valuation 67,933 67,933 89,573 89,573
Current assets
Debtors 509 509 1,192 1,192
Cash at bank 3,796 3,719 6,529 6,435
4,305 4,228 7,721 7,627
Creditors: amounts falling due within one (1,279) (1,210) (1,669) (1,650)
year
Net current assets 3,026 3,018 6,052 5,977
Total assets less current liabilities 70,959 70,951 95,625 95,550
Creditors: amounts falling due after one year
Bank loan (22,677) (22,677) (22,677) (22,677)
Cumulative subordinated unsecured loan notes - (41,768) - (45,240)
2004
Liability for redemption of Zero Dividend - (4,498) - (10,532)
Preference shares of subsidiary (22,677) (68,943) (22,677) (78,449)
Net assets 48,282 2,008 72,948 17,101
FINANCED BY
Share capital 454 454 454 454
Special capital reserve 41,271 41,271 41,271 41,271
Capital reserve - realised (22,106) (22,106) (15,809) (15,809)
Capital reserve - unrealised (19,165) (19,165) (9,762) (9,762)
Revenue reserve 1,449 1,554 909 947
Total equity shareholders' funds 1,903 2,008 17,063 17,101
Minority interest - non-equity Zero Dividend 46,379 - 55,885 -
Preference shares 48,272 2,008 72,948 17,101
Net asset value per share (return of assets
basis)
Ordinary shares 3.43p 3.43p 37.62p 37.71p
Zero Dividend Preference shares of subsidiary 112.61p - 123.22p -
Cashflow Statement for the year ended 31 December 2002
31 December 2002 31 December 2001
#000s #000s
Operating activities
Investment income received 4,899 5,482
Deposit interest received 185 482
Management fees paid (859) (856)
Other cash payments (239) (289)
Net cash inflow from operating activities 3,986 4,819
Return on investments and servicing of finance
Interest paid (1,352) (1,359)
Taxation
UK tax recovered 367 199
Capital expenditure and investment activities
Net capital expenses paid - (77)
Sale of fixed asset investments 29,982 23,002
Purchase of fixed asset investments (29,328) (22,934)
Net cash inflow/(outflow) from capital activities and 654 (9)
investment activities
Equity dividends paid (2,916) (4,041)
Financing (3,472) -
Purchase of Zero Dividend Preference share in subsidiary
Decrease in cash (2,733) (391)
The Annual General Meeting of the Company will be held at 12 noon on 30 April
2003 at Shackleton House, 4 Battle Bridge Lane, London SE1 2HR. We look forward
to meeting shareholders at the AGM, which will be followed by a brief
presentation.
The Company's annual report and accounts will be sent to shareholders in March
2003. Copies will be available to the public at the registered office of the
Company, Shackleton House, 4 Battle Bridge Lane, London.
This preliminary announcement, which has been agreed with the auditors, was
approved by the Board on 25 March 2003. It is not the Company's statutory
accounts. The statutory accounts for the year ended 31 December 2002 have been
finalised but not yet approved by the board of directors or audited. The
statutory accounts for the year ended 31 December 2001 have been delivered to
the Registrar of Companies and received an audit report which was unqualified
and did not contain statements under s237(2) or (3) of the Companies Act 1985.
By order of the Board
Govett Secretaries Limited, Secretary
Shackleton House
4 Battle Bridge Lane
London SE1 2HR
Registered in England no: 3677235
25 March 2003
This information is provided by RNS
The company news service from the London Stock Exchange
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