RNS Number:1012T
Leggmason Inv Inc & Grwth Tst PLC
10 December 2003
LEGGMASON INVESTORS INCOME & GROWTH TRUST PLC & LEGGMASON INVESTORS INCOME &
GROWTH SECURITIES PLC
Chairman's Statement
for the half year ended 31 October 2003
The last six months has witnessed an encouraging upward movement in global
equity markets and the FTSE All Share Index has risen by 12.4%. As a consequence
of these events the value of many of the split capital shareholdings held by
your Company have increased. However the debt owed by the Company is still
substantially higher than the Company's assets and the outlook for the Company's
equity shareholders remains bleak.
At 30 April 2003 the bank debt had been reduced to #17.5 million, an amount that
still exceeded the value of the gross assets of #9.1 million by #8.4 million.
During the period the portfolio has been reduced by taking advantage of the
strengthening prices and improving liquidity of some split capital trusts. The
funds raised by these sales have been used to pay down debt that by 31 October
2003 had been reduced to #11.9 million. In the same period the value of gross
assets had declined to #7.4 million and the deficit to #4.5 million.
The Board continues to be in regular contact with the lending banks, which have
remained supportive throughout. The banks have chosen not to demand repayment
but rather to allow the Company to continue in operation.
As reported in my last report to shareholders your Company's shares were
suspended on 8 October 2002 and currently remain suspended. Given the current
situation the Board has continued its conservative policy of not preparing the
accounts on a going concern basis and the portfolio has accordingly been valued
on a bid basis as at 31 October 2003.
Debt and the Banks
The Company has continued to repay the bank debt through the sale of the
investments in the remaining split capital investment trusts. The repayment
schedule and the cost of the swap and the breakage costs incurred whenever debt
is repaid was as follows :
Date Debt Repayment Repayment Costs Balance Outstanding
1 May 2003 Opening balance #17,495,275
29 May 2003 #900,000 #97,706 #16,595,275
18 July 2003 #1,683,000 #159,220 #14,912,275
2 October 2003 #1,352,081 #105,907 #13,560,194
28 October 2003 #1,707,674 #94,454 #11,852,520
26 November 2003 #2,502,158 #147,842 #9,350,362
The repayment costs reflect the prevailing forward interest rates at the time
the swap was broken.
The costs of running the Company continue to be kept to an absolute minimum with
the Directors and Legg Mason Investments (Europe) Limited (the Fund Manager),
forgoing all remuneration and administration expenses have been reduced to an
absolute minimum level.
Investment Portfolio
The main activity during the period has been the continued sale of assets in
order to further reduce the Company's bank debt, in accordance with the strategy
outlined in my report of 30 April 2003. The policy of disposal has to-date
focused on achieving fair value or better for the shares and avoiding forced
sales at valuations less than full value.
As at 31 October 2003, the percentage of the investment portfolio per ABN Amro
(ABNA) rating is shown below.
Composition of Portfolio Rating By ABNA Rating
ABNA Rating % held
A 83.2
B 0.0
C 10.2
Cash 6.6
Total 100%
The only investment activity during the period has been the sale of thirteen
holdings. The proceeds have been used to reduce the bank debt as noted above.
Dividends
No dividend has been declared to any share class as the asset values continue to
be less than the amount prescribed by Section 265 of the Companies Act 1985,
which requires assets to be 1.5 times liabilities. Regrettably, the Board do not
envisage a resumption of the dividend is likely.
Outlook
Although the outlook for further equity gains appears to be favourable, it is
tempered by the possibility of an upturn in the interest rate cycle. The level
to which the remaining split capital investment trust portfolio have fallen
combined with the on-going debt repayment obligations mean that there is no
realistic prospect of the market recovery benefiting the Company's equity
shareholders.
The Company is in a difficult financial position and it is likely that, subject
to the outcome of negotiations with the lending banks that the Company will be
wound-up with no return to shareholders.
Ken Greatbatch
Chairman
10 December 2003
LeggMason Investors Income & Growth Trust plc
Group statement of total return (unaudited)
(incorporating the revenue account)
for the half year ended 31 October 2003
(Unaudited) (Unaudited)
For the half year ended 31 October 2003 For the half year ended 31 October 2002
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Total capital - 3,843 3,843 - (51,402) (51,402)
gains/(losses) on
investments
Income from fixed 507 - 507 2,558 - 2,558
asset investments
Other interest 31 - 31 177 - 177
receivable and ------------ ----------- ----------- ----------- ----------- -----------
similar income
Gross revenue and 538 3,843 4,381 2,735 (51,402) (48,667)
capital
gains/(losses)
Investment - - - (94) (32) (126)
management fee
Other (78) - (78) (178) - (178)
administrative
expenses
Liquidation costs - - - - - -
- breakage costs
Liquidation costs - - - - - -
- other -------------- ------------ ------------- ----------- ----------- -----------
Net return/(loss) 460 3,843 4,303 2,463 (51,434) (48,971)
on ordinary
activities before
interest payable
and taxation
Interest payable (431) (594) (1,025) (1,003) (335) (1,338)
and similar -------------- ------------- ------------ ----------- ------------ -----------
charges
Net return/(loss) 29 3,249 3,278 1,460 (51,769) (50,309)
on ordinary
activities before
taxation
Tax on net (1) - (1) 3 - 3
return/(loss) on -------------- ------------- ------------ ----------- ----------- -----------
ordinary
activities
Net return/(loss) 28 3,249 3,277 1,463 (51,769) (50,306)
on ordinary
activities after
taxation
Capital - (3,277) (3,277) - 4,820 4,820
(gains)/losses
attributable to
the bank loan
Provision for - (748) (748) - (688) (688)
redemption of ZDP
shares in
subsidiary
Capital losses - 748 748 - 16,633 16,633
attributable to ----------- ----------- ----------- ----------- ----------- -----------
ZDP shares in
subsidiary
28 (28) - 1,463 (31,004) (29,541)
Dividends and
other
appropriations:
Redeemable
preference shares
Compounding - (314) (314) - (310) (310)
entitlement
Capital losses - 314 314 - 28,732 28,732
First interim - - - - - -
dividend of nil
(2002: 0.3p)
Second interim - - - - - -
dividend of nil
(2002: 1.8p)
Third interim - - - - - -
dividend of nil
(2002: 1.8p)
Reversal of third - - - - - -
interim dividend ------------ ------------ ------------ ----------- ----------- -----------
of 2002
- - - - - -
======= ======= ======= ======= ======= =======
Net return/(loss) 28 (28) - 1,463 (2,582) (1,119)
attributable to
ordinary shares
Ordinary shares
First interim - - - - - -
dividend of nil
(2002: nil)
Second interim - - - - - -
dividend of nil
(2002: nil)
Third interim - - - - - -
dividend of nil
(2002: nil)
Fourth interim - - - - - -
dividend of nil ----------- ----------- ----------- ----------- ----------- -----------
(2002: nil)
- - - - - -
----------- ----------- ----------- ----------- ----------- -----------
Transfer 28 (28) - 1,463 (2,582) (1,119)
to/(from) ======== ======= ======= ====== ====== ======
reserves
Return/(loss) per Pence Pence Pence Pence Pence Pence
ordinary share
Return/(loss) per 0.03 (0.03) - 1.71 (3.02) (1.31)
ordinary share
Loss per - - - - (28.42) (28.42)
redeemable
preference share
Loss per ZDP - - - - (106.30) (106.30)
share in the
subsidiary
The revenue columns of this statement represent the revenue accounts of the
Group.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued throughout the half year
ended 31 October 2003.
LeggMason Investors Income & Growth Trust plc
Group statement of total return (Audited)
(incorporating the revenue account)
for the half year ended 31 October 2003
(Audited)
For the year ended
30 April 2003
Revenue Capital Total
#'000 #'000 #'000
Total capital losses on investments - (54,301) (54,301)
Income from fixed asset investments 3,347 - 3,347
Other interest receivable and similar 162 - 162
income
------------- ------------ ------------
Gross revenue and capital gains/(losses) 3,509 (54,301) (50,792)
Investment management fee (94) (31) (125)
Other administrative expenses (296) - (296)
Liquidation costs - breakage costs - (1,216) (1,216)
Liquidation costs - other - (70) (70)
------------ ------------- ------------
Net return/(loss) on ordinary activities 3,119 (55,618) (52,499)
before interest payable and taxation
Interest payable and similar charges (1,524) (3,038) (4,562)
------------- ------------ -------------
Net return/(loss) on ordinary activities 1,595 (58,656) (57,061)
before taxation
Tax on net return/(loss) on ordinary 3 - 3
activities
------------ ------------- -------------
Net return/(loss) on ordinary activities 1,598 (58,656) (57,058)
after taxation
Capital gains/ (losses) attributable to - 9,772 9,772
the bank loan
Provision for redemption of ZDP shares in - (1,394) (1,394)
subsidiary
Capital losses attributable to ZDP shares - 17,339 17,339
in subsidiary
------------ ------------ ------------
1,598 (32,939) (31,341)
Dividends and other appropriations:
Redeemable preference shares
Compounding entitlement - (616) (616)
Capital losses - 29,038 29,038
First interim dividend of nil (2002: 0.3p) - - -
Second interim dividend of nil (2002: - - -
1.8p)
Third interim dividend of nil (2002:1.8p) - - -
Reversal of third interim dividend of 2002 1,800 - 1,800
------------ ------------ ------------
1,800 28,422 30,222
======= ======= =======
Net return/(loss) attributable to ordinary 3,398 (4,517) (1,119)
shares
Ordinary shares
First interim dividend of nil (2002: nil) - - -
Second interim dividend of nil (2002: nil) - - -
Third interim dividend of nil (2002: nil) - - -
Fourth interim dividend of nil (2002: nil) - - -
------------ ------------ ------------
- - -
======= ======= =======
Transfer to/(from) reserves 3,398 (4,517) (1,119)
======= ======= =======
Return/(loss) per ordinary share Pence Pence Pence
Return/(loss) per ordinary share 3.96 (5.27) (1.31)
Loss per redeemable preference share - (28.42) (28.42)
Loss per ZDP share in the subsidiary - (106.30) (106.30)
The revenue columns of this statement represent the revenue accounts of the
Group
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued throughout the half year
ended 31 October 2003.
Group balance sheet (unaudited)
as at 31 October 2003
(Unaudited) (Unaudited) (Audited)
As at As at As at
31 October 2003 31 October 2002 30 April 2003
#'000 #'000 #'000
Fixed asset investments
Listed in United Kingdom 6,738 15,099 7,494
Current assets
Debtors 216 970 611
Cash at bank 473 2,191 965
--------------- --------------- -------------
689 3,161 1,576
Current liabilities
Creditors: amounts falling due within one year (13,173) (1,893) (18,842)
---------------- ------------------ ---------------
Net current (liabilities)/ assets (12,484) 1,268 (17,266)
========== =========== ==========
Total assets less current liabilities (5,746) 16,367 (9,772)
Creditors: amounts falling due after more than - (21,187) -
one year
----------------- ------------------ ----------------
Total net liabilities (5,746) (4,820) (9,772)
========== =========== =========
Capital and reserves
Called-up share capital 22,425 22,425 22,425
Share premium account 97,064 97,064 97,064
Special reserve 17,550 17,550 17,550
Capital reserve - realised (114,637) (66,959) (104,776)
Capital reserve - unrealised (50,780) (94,115) (63,891)
Revenue reserve 4,545 2,582 4,517
-------------- ---------------- --------------
Shareholders' funds (23,833) (21,453) (27,111)
18,087 16,633 17,339
--------------- ----------------- ---------------
Minority interest - ZDP shares (5,746) (4,820) (9,772)
========= ========= =========
Funds attributable to:
Ordinary shares - - -
Redeemable preference shares - - -
Minority interest - ZDP shares - - -
----------------- ----------------- -----------------
- - -
=========== =========== ===========
Pence Pence Pence
Net asset value per share:
Ordinary share - - -
Redeemable preference share - - -
ZDP share in subsidiary - - -
This report was approved by the Board of Directors on 10 December 2003.
Ken Greatbatch
Chairman
Group cash flow statement (unaudited)
for the half year ended 31 October 2002
(Unaudited) (Unaudited) (Audited)
For the half year ended For the half year ended For the year ended
31 October 2003 31 October 2002 30 April 2003
#'000 #'000 #'000 #'000 #'000 #'000
Net cash inflow from operating 476 2,584 3,423
activities
Returns on investments and servicing of
finance
Interest and loan breakage costs paid (1,026) (3,602) (4,641)
Taxation
Tax recovered 351 5 25
Capital expenditure on financial
investments
Purchases of investments - (18,694) (18,694)
Sales of investments 5,349 28,456 31,102
----------- ----------- -----------
Net cash inflow from financial 5,349 9,762
investment
12,408
Equity dividends paid - - -
----------- ----------- -----------
Net cash inflow before financing 5,150 8,749 11,215
Management of liquid resources and
financing
Cash withdrawn from short term deposit - - 17,851
Financing
Loan repaid (5,642) (30,813) (34,505)
----------- ----------- -----------
Net cash outflow from financing (5,642) (30,813) (34,505)
----------- ----------- -----------
Decrease in cash (492) (22,064) (5,439)
======= ====== ======
LeggMason Investors Income & Growth Trust plc
Notes to the accounts
for the half year ended 31 October 2003
1. Accounts for the year ended 30 April 2003
The figures and financial information for year ended 30 April 2003 are
extracted from the latest published accounts of the Company and do not
constitute statutory accounts for that year. Those accounts have been
delivered to the Registrar of Companies and included the report of the
auditors which was unqualified and did not include a statement under either
Section 237(2) or Section 237(3) of the Companies Act 1985.
2. Zero Dividend Preference Shares
At 31 October 2002 the consolidated net assets of the Group were
insufficient to pay any of the final capital entitlement of the ZDP shares
of 212.75p. Even with the portfolio valued at mid-market prices, the assets
are #5.5 million below the level at which any asset value becomes
attributable to the ZDP shares. These shares were issued by the Company's
subsidiary, LeggMason Investors Income & Growth Securities plc. In
accordance with the reporting requirements of Financial Reporting Standard
4, the obligations under the loan and subscription agreements have been
accounted for in full rather than on the basis of the assets available.
However, due to the significant doubt that the parent Company will have any
assets available to meet these obligations, the net asset value per ZDP
share is shown at zero.
3. Going concern
The banks have indicated that they have no current intention of
demanding immediate repayment of the outstanding loan. However, if the
Bank were to require repayment of the debt, the Group would be unable to
meet this obligation and therefore the directors have decided that the
going concern basis of accounting is not appropriate. As a result the
accounts have been prepared on a break-up basis and include accruals for
breakage costs which would be payable in the event of the early
termination of the loan, and accruals for other costs which would be
payable in the event of the liquidation of the Group. In addition the
investments are valued at the amount that the directors would expect
them to realise in the event of liquidation.
LeggMason Investors Income & Growth Securities plc
Statement of total return (unaudited)
(incorporating the revenue account)
for the half year ended 31 October 2003
(Unaudited) (Unaudited)
For the half year ended 31 October 2003 For the half year ended 31 October 2002
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Accrued redemption premium - 748 748 - 688 688
receivable from parent company
Provision for bad debt - (748) (748) - (16,636) (16,636)
------------- ------------- ------------- ----------- ----------- -----------
Gross revenue and capital losses - - - - (15,948) (15,948)
Administrative expenses - - - - - -
------------- ----------- ----------- ----------- ----------- -----------
Net loss on ordinary activities - - - - (15,948) (15,948)
before taxation
Taxation on net loss on ordinary - - - - - -
activities
------------ ----------- ------------- ----------- ----------- -----------
Net loss on ordinary activities - - - - (15,948) (15,948)
after taxation
Appropriations in respect of
non-equity shares:
Provision for redemption of ZDP - (748) (748) -
shares
(688) (688)
Capital Losses attributable to - 748 748 - 16,633 16,633
ZDP shares
------------ ------------ ------------ ------------ ------------ ------------
Loss attributable to ordinary - - - - (3) (3)
shares
======= ======= ======= ======= ======= =======
Pence Pence Pence Pence Pence Pence
Loss per share:
Ordinary - - - - (5.00) (5.00)
ZDP - - - - (106.30) (106.30)
The revenue columns of this statement represent the revenue accounts of the
Company.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued throughout the half year
ended 31 October 2003.
LeggMason Investors Income & Growth Securities plc
Statement of total return (Audited)
(incorporating the revenue account)
for the half year ended 31 October 2003
(Audited)
For the year ended 30 April 2003
Revenue Capital Total
#'000 #'000 #'000
Accrued redemption premium - 1,394 1,394
receivable from parent company
Provision for bad debt - (17,342) (17,342)
------------- ----------- -----------
Gross revenue and capital losses - (15,948) (15,948)
Administrative expenses - - -
-------------- ------------ -------------
Net loss on ordinary activities - (15,948) (15,948)
before taxation
Taxation on net loss on ordinary - - -
activities
-------------- ------------- -------------
Net loss on ordinary activities - (15,948) (15,948)
after taxation
Appropriations in respect of
non-equity shares:
Provision for redemption of ZDP - (1,394) (1,394)
shares
Capital Losses attributable to - 17,339 17,339
ZDP shares
------------- ------------- -------------
Loss attributable to ordinary - (3) (3)
shares
======== ======= =======
Pence Pence Pence
Loss per share:
Ordinary - (5.00) (5.00)
ZDP - (106.30) (106.30)
The revenue columns of this statement represent the revenue accounts of the
Company.
All revenue and capital item in the above statement derive from continuing
operations. No operations were acquired or discontinued throughout the half year
ended 31 October 2003.
LeggMason Investors Income & Growth Securities plc
Balance sheet (unaudited)
as at 31 October 2003
(Unaudited) (Unaudited) (Audited)
As at As at As at
31 October 2003 31 October 2002 30 April 2003
#'000 #'000 #'000
Fixed asset investments
Listed in United Kingdom 5 5 5
Current assets
Debtors (see note 1) - - -
Cash at bank 5 5 5
----------- ----------- -----------
Net current assets 5 5 5
----------- ----------- -----------
Total net assets 10 10 10
======= ======= =======
Capital and reserves
Called-up share capital 13 13 13
Share premium 15,000 15,000 15,000
Reserve for redemption premium 3,087 1,633 2,339
Provision for bad debt (18,090) (16,636) (17,342)
Unrealised reserve - - -
Revenue reserve - - -
----------- ----------- -----------
10 10 10
======= ======= =======
Funds attributable to:
Equity shareholders 10 10 10
Non-equity shareholders - - -
----------- ----------- -----------
10 10 10
======= ======= =======
Pence Pence Pence
Net asset value per share:
Ordinary 20.00 20.00 20.00
ZDP - - -
This report was approved by the Board of Directors on 10 December 2003.
Ken Greatbatch
Chairman
LeggMason Investors Income & Growth Securities plc
Notes to the accounts
for the half year ended 31 October 2003
1. Going concern
The banks have indicated that they have no current intention of demanding
immediate repayment of the outstanding loan to the parent company. However, if
the Bank were to require repayment of the debt, the Group would be unable to
meet this obligation and therefore the directors have decided that the going
concern basis of accounting is not appropriate. As a result the accounts have
been prepared on a break-up basis. The parent company's accounts include
accruals for breakage costs which would be payable in the event of the early
termination of the loan, and accruals for other costs which would be payable in
the event of the liquidation of the Group. The Company's only investment is
valued at the amount that the directors would expect it to realise in the event
of liquidation.
2. Debtors
2003 2002
#'000 #'000
Loan to parent undertaking 15,003 15,003
Amount due from parent undertaking in respect of the subscription for 3,087 2,339
ordinary shares
------------ ------------
18,090 17,342
Less provision against doubtful recoverability of debt due from parent (18,090) (17,342)
------------- ------------
- -
======= =======
3. Accounts for the year ended 30 April 2003
The figures and financial information for year ended 30 April 2003 are extracted
from the latest published accounts of the Company and do not constitute
statutory accounts for that year. Those accounts have been delivered to the
Registrar of Companies and included the report of the auditors which was
unqualified and did not include a statement under either Section 237(2) or
Section 237(3) of the Companies Act 1985.
For further information:
Please contact:
Zoe Burton Tel: 020 7070 7474
e-mail: z.burton@leggmason.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
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