RNS Number:5521I
Britannic UK Income Trust PLC
11 March 2003
Britannic UK Income Trust PLC
chairman's statement
Since my statement in the report and accounts for the year ended 10 August 2002,
stock markets have continued to decline with global economic and political
uncertainty dominating the world headlines. In the six months since 10 August
2002, the FTSE 350 Index has fallen by 13.1% and the Datastream Highly Geared
Ordinary Index has fallen by 19.8%. This latter index measures the performance
of geared income shares of split capital investment trusts, which form part of
the Company's portfolio.
net assets
In the six months to 10 February 2003 the gross assets less current liabilities
of the Company have declined 35% from #157m to #102m. Part of this decline was
due to repayment of #25m of the Company's loan, which resulted in the Company's
indebtedness decreasing to #25m at 10 February 2003. Excluding this loan
repayment, gross assets less current liabilities declined by 19% over the six
months to 10 February 2003, which can be attributed as follows:
Decline in value of shares of split capital investment trusts (#16.3m)
Decline in value of UK equities (#15.8m)
Decline in value of bond portfolio (#1.5m)
Costs charged to capital (#0.9m
Gains on equity futures transactions #4.5m
(#30.0m)
dividends
The Company has not paid dividends on Ordinary Shares since June 2002. The
monthly Guaranteed Income Share dividends continue to be paid although the
Manager who acts as Guarantor to the Company paid those for the months of
October and November 2002 and January, February and March 2003. As a result of
the different tax regime that applies to the payment of dividends by the Manager
on the Guaranteed Income Shares, the Manager must pay these dividends grossed up
at the basic rate of income tax. Discussions are currently taking place as to
whether the Manager is entitled to recovery of the net dividend or the grossed
up amount from the Company.
actions taken by the board
On 10 January 2003 the directors issued a Stock Exchange announcement regarding
a number of proposals. These were put to shareholders in a circular on the 21
February 2003 and are required to be approved by shareholders at meetings to be
held on 20 March 2003. The Board is seeking shareholders' approval for the
following:
* A cancellation of the share premium account of the Company which would allow
the Company to resume dividend payments on the Guaranteed Income Shares;
* A cancellation of the share premium account of the Subsidiary and authority to
buy back Zero Dividend Preference Shares for cancellation should market
conditions improve; and
* A proposal from the Manager (Britannic Investment Managers Limited) to make a
capital injection for the benefit of Zero Dividend Preference Shareholders at
the end of the life of the Subsidiary.
Your Board believes these proposals are in the best interests of the Group and
the shareholders as a whole and urges shareholders to vote in favour of the
proposals at the forthcoming shareholder meetings.
capital structure
As I commented in last year's annual report, the structure of the Company is
complex. The capital comprises #75m Guaranteed Income Shares, #150m Ordinary
Shares and #45m Zero Dividend Preference Shares. The Board continues to
recognise its responsibilities to all classes of shareholders. In addition, the
Board also has to take into account the rights of all other parties including
the banks and the manager who acts as guarantor to the Guaranteed Income Shares.
The Board has taken the actions outlined above in order to try to achieve some
value over the remaining life of the trust for the Zero Dividend Preference
Shareholders and, potentially, the Ordinary Shareholders. The Zero Dividend
Preference Shares are due to be redeemed in some three and a half years time on
11 August 2006.
outlook
There remains considerable uncertainty as to the outlook for financial markets
particularly over the short term. This uncertainly is driven by a difficult
geopolitical background with events in the Middle East dominating the news.
Confidence in financial markets has been further shaken by the global economic
slowdown currently being experienced. Although political and economic concerns
are weighing heavily on markets at the moment the valuation attractions of UK
equities together with the assumption of global economic recovery argue for a
positive view of equities. Fears of a consumer
slowdown have risen but your manager expects UK profits to be relatively robust
and remains positive in relation to the markets over the medium and longer term.
David MacLellan, Chairman
10 March 2003
Group Statement of Total Return
For the Period 11.08.02 to 10.02.03
11.08.2002 to 10.02.03 18.06.01 to 10.02.02 18.06.01 to
10.08.02
(unaudited) (audited)
(unaudited)
Revenue Capital Total Revenue Capital Total Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000
Realised losses on investments - (2,886) (2,886) - (5,653) (5,653) (31,153)
Unrealised losses on investments - (26,239) (26,239) - (45,020) (45,020) (111,443)
Total losses on investments - (29,125) (29,125) - (50,673) (50,673) (142,596)
Investment income 3,818 - 3,818 10,955 - 10,955 20,476
Investment management fee (423) (282) (705) (502) (1,506) (2,008) (3,360)
Other expenses (183) - (183) (224) - (224) (457)
Payments under guarantee provision
agreement (1,750) - (1,750) - - - -
Net return on ordinary activities 1,462 (29,407) (27,945) 10,229 (52,179) (41,950) (125,937)
before finance costs and taxation
Interest payable and similar (994) (652) (1,646) (1,097) (3,223) (4,320) (12,147)
charges
Return on ordinary activities 468 (30,059) (29,591) 9,132 (55,402) (46,270) (138,084)
before tax
Tax on ordinary activities - - - - - - -
Return on ordinary activities after 468 (30,059) (29,591) 9,132 (55,402) (46,270) (138,084)
tax
Non equity minority interests - (2,179) (2,179) - (1,999) (1,999) (4,052)
Return attributable to members of 468 (32,238) (31,770) 9,132 (57,401) (48,269) (142,136)
the parent company
Dividends and appropriations in (875) (373) (1,248) (3,062) (369) (3,431) (6,422)
respect of guaranteed income shares
Return attributable to equity (407) (32,611) (33,018) 6,070 (57,770) (51,700) (148,558)
shareholders
Dividends in respect of ordinary - - - (6,000) - (6,000) (9,000)
shares
Transfer to/(from) reserves (407) (32,611) (33,018) 70 (57,770) (57,700) (157,558)
Return per share (p):
Guaranteed income shares - non 1.34 0.00 1.34 5.25 0.00 5.25 (8.68)
equity
Ordinary shares - equity (0.31) (24.89) (25.19) 5.21 (49.54) (44.33) (113.37)
balance sheets
as at 10.02.03 as at 10.08.02
(unaudited) (audited)
Group Company Group Company
#'000 #'000 #'000 #'000
Fixed assets
Investments 99,760 99,800 154,594 154,584
Current assets
Debtors 789 789 1,562 1,562
Cash at bank and in hand 2,961 2,935 2,849 2,824
3,750 3,724 4,411 4,386
Creditors: amounts falling due
within one year 1,935 1,985 2,339 2,339
Net Current Assets 1,815 1,739 2,072 2,047
Total assets less Current Liabilities 101,575 101,539 156,666 156,631
Creditors: amounts falling due
after more than one year
Bank loan 25,000 25,000 50,000 50,000
Amounts due to subsidiary - 51,222 - 49,042
Loan interest 1,060 1,060 687 687
Net (liabilities) / assets 75,515 24,257 105,979 56,902
Capital and reserves
Called up share capital 2,250 2,250 2,250 2,250
Share Premium account 136,500 136,500 136,500 136,500
Special reserve 75,000 75,000 75,000 75,000
Capital reserve - realised (53,915) (53,915) (47,543) (47,543)
Capital reserve - unrealised (137,682) (137,682) (111,443) (111,443)
Redemption reserve 1,108 1,108 735 735
Revenue reserve 1,022 996 1,428 1,403
Shareholders' funds 24,283 24,257 56,927 56,902
Non equity minority interests 51,232 - 49,052 -
75,515 24,257 105,979 56,902
Attributable to:
Guaranteed income shares - non equity 72,358 72,358 71,985 71,985
Ordinary shares - equity (48,075) (48,101) (15,058) (15,083)
24,283 24,257 56,927 56,902
Net asset value per share (p)
Guaranteed income shares - non equity 96.48 95.98
Ordinary shares - equity (32.05) (10.04)
group cash flow statement
11.08.2002 to 18.06.2001 to 18.06.2001 to
10.02.2003 10.02.2002 10.08.2002
(unaudited) (unaudited) (unaudited)
#000 #000 #000
net cash inflow from operating activities 1,810 8,183 16,520
servicing of finance
Loan & overdraft interest paid (1,663) (1,697) (10,824)
Non - equity dividends paid (1,312) (2,625) (4,812)
capital expenditure and financial investment
purchases of investments (9,961) (424,744) (462,833)
sales of investments 31,898 39,624 164,889
Gains on equity futures transactions 4,449 - -
Net cash inflow/(outflow) for capital expenditure 26,436 (385,120) (297,944)
and financial investment
Equity dividends paid - (3,000) (9,000)
Cash inflow/(outflow) before financing 25,271 (384,259) (306,060)
financing
issue of shares - 225,000 225,000
issue of preference shares to minority - 45,000 45,000
shareholders
new loan repayable 2006 - 130,000 130,000
launch expenses - (11,250) (11,250)
loan repayments made (25,000) - (80,000)
Net cash inflow/(outflow) from financing (25,000) 388,750 308,750
Increase in cash 271 4,491 2,690
Note:
1. The statement of total return (incorporating the revenue account),
balance sheet and cashflow statement set out above do not represent full
accounts in accordance with Section 240 of the Companies Act 1985. The accounts
have been prepared in accordance with the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies".
2. The same accounting policies have been applied in preparing the
accounts throughout the period.
3. Investment management fees and loan finance costs have been allocated
as follows:
From 18 June 2001 to 10 August 2002: 75% to capital 25% to revenue
From 11 August 2002 to 10 February 2003: 40% to capital 60% to revenue
4. The group accounts include the consolidation of Britannic UK Income
Securities PLC.
5. Copies of the Interim Report will be posted to Shareholders on 17
March 2003 and will be available to the public at Britannic Investment Managers
Limited, Britannic Court, 50 Bothwell Street, Glasgow G2 6HR.
For further information contact:
Donna Reid
Britannic Investment Managers Limited Britannic Asset Management Press Office
0141 - 222 - 8000 0141 8225 / 6 / 7
Announcement Ends
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