INVESCO Recovery 2005 Trust plc
Preliminary Announcement
Unaudited Final Results
For the Year Ended 31 October 2003
Chairman's Statement
In my first interim report as Chairman I was disappointed to have to report a
fall in the total assets less current liabilities of the Trust of 2.6% during
the period, so I am now very pleased to be able to report a rise in the second
half of the Trust's year of 26.7%, which results in a rise during the year as a
whole of 23.4%.
There is no single benchmark against which the Company's investment performance
should be measured. However, the Board considers the performance of the FTSE
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 Board considers the Merrill Lynch Sterling High Yield Index
normally to be more relevant to the fixed interest component of the Trust's
portfolio for comparison purposes rather than the FTA Government All Stock
Index. The total returns for those indices for the year are respectively 13.6%,
1.3% and 43.1% which compare with the total return on the portfolio of 29.9%.
The Board considers this to be a very satisfactory performance achieved over a
difficult year and results both from the rise in the UK equity market and the
good performance of the Trust's portfolio. The Trust's declared net asset value
of the Ordinary Shares at the end of its financial year, after deducting prior
charges at par, was 107.4p and the middle market share price at the close of
business that day was 82.0p which was a discount of 23.7% to the net asset
value.
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 assessing the future value of both the Zero Dividend Preference
Shares and Ordinary Shares, I have had tabulated what would happen in a number
of different scenarios.
Projected Net Asset Value of Ordinary Shares
% Growth per annum in Total -16.0 -10.0 -5.0 Nil 5.0 10.0
Assets less Current Liabilities
Approximate NAV per share (pence) Nil 29.1 54.9 82.2 110.9 141.2
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 November 2005.
Projected Net Asset Value of Zero Dividend Preference Shares
% Growth per annum in Total -50.9 -40.0 -30.0 -20.0 -16.0
Assets less Current Liabilities
Approximate NAV per share (pence) Nil 44.4 93.2 150.0 174.7
If the total assets less current liabilities of the Trust remain at the 31
October 2003 level, then the Zero Dividend Preference Shareholders would
receive their pre-determined final capital entitlement of 174.7p. However, the
table above illustrates what would happen if the total assets less current
liabilities fell.
The Directors approved the payment of a final dividend per Ordinary Share of
2.4p. This, when taken together with the third quarterly dividend already
declared at the same level, makes a total of 4.8p per Ordinary Share for the
second half of the financial year. This compares with a total of 4.525p
declared for the first half of the financial year and makes a total of 9.325p
per Ordinary Share declared for the financial year as a whole. This represents
an increase of 3.0% on the total dividend paid for the Trust's previous
financial year. The final dividend will be paid on 30 January 2004 to
shareholders on the register on 30 December 2003.
Outlook
The UK equity market has made a recovery from the low levels reached in March.
Statistics indicate that there is a positive economic recovery underway in the
US. The UK economy is encouraging. The UK equity market is supported by an
unusually high dividend yield relative to UK government bond yields. Following
a year during which the declared net asset value of the Ordinary Shares after
deducting prior charges at par rose above their issue price of 100 pence and in
which the dividend was increased, I am hopeful that the Trust can make further
progress during its current financial year.
Lord Naseby
Chairman
18 December 2003
Statement of Total Return (incorporating the revenue account) (unaudited)
for the year ended 31 October
2003 2002
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Gains/(losses) on - 10,078 10,078 - (7,450) (7,450)
investments
Income 2,286 - 2,286 1,978 - 1,978
Investment
performance
management fee - (831) (831) - - -
Other expenses (273) (3) (276) (273) (5) (278)
Net return before
finance costs
and taxation 2,013 9,244 11,257 1,705 (7,455) (5,750)
Interest payable and
similar
charges (128) (510) (638) (127) (508) (635)
Return on ordinary
activities
before taxation 1,885 8,734 10,619 1,578 (7,963) (6,385)
Tax on ordinary (16) 16 - - - -
activities
Return on ordinary
activities
after taxation for
the
financial year 1,869 8,750 10,619 1,578 (7,963) (6,385)
Appropriations in
respect of non-
equity shares - (1,441) (1,441) - (1,330) (1,330)
Dividends in respect
of equity
shares (1,615) - (1,615) (1,567) - (1,567)
Transfer to/(from) 254 7,309 7,563 11 (9,293) (9,282)
reserves
Basic return per 10.79p 42.20p 52.99p 9.11p (53.65) (44.54)
Ordinary Share p p
Basic return per Zero
Dividend
Preference Share - 11.36p 11.36p - 10.49p 10.49p
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 year.
Reconciliation of Movements in Shareholders' Funds (unaudited)
for the year ended 31 2003 2002
October
Non- Non-
Equity equity Equity equity
interests interests Total interests interests Total
�'000 �'000 �'000 �'000 �'000 �'000
Opening Shareholders' 11,043 17,380 28,423 20,325 16,050 36,375
funds
Revenue return for the 254 - 254 11 - 11
year
Capital return for the 8,750 - 8,750 (7,963) - (7,963)
year
Appropriations in (1,441) 1,441 - (1,330) 1,330 -
respect of non-equity
shares
Closing Shareholders' 18,606 18,821 37,427 11,043 17,380 28,423
funds
Balance Sheet (unaudited)
at 31 October
2003 2002
�'000 �'000
Fixed assets
Investments 44,589 37,077
Current assets
Debtors 300 1,007
Cash at bank 4,413 1,478
4,713 2,485
Creditors: amounts falling due within one year 1,875 1,139
Net current assets 2,838 1,346
Total assets less current liabilities 47,427 38,423
Creditors: amounts falling due after one year 10,000 10,000
37,427 28,423
Capital and reserves
Called-up share capital 300 300
Share premium account 29,100 29,100
Other reserves
Capital reserve - realised 6,191 11,392
Capital reserve - unrealised (5,506) (18,016)
Redemption reserve 6,141 4,700
Revenue reserves 1,201 947
Shareholders' funds 37,427 28,423
Analysis of Shareholders' funds
Equity interests (Ordinary Shares) 18,606 11,043
Non-equity interests (Zero Dividend 18,821 17,380
Preference Shares)
37,427 28,423
Net asset value per share
Ordinary Share - basic 107.4p 63.8p
Zero Dividend Preference Shares 148.4p 137.1p
These financial statements were approved by the Board of Directors on 18
December 2003.
Cash Flow Statement (unaudited)
for the year ended 31 October
2003 2002
�'000 �'000
Cash inflow from operating activities 2,071 1,645
Servicing of finance (638) (635)
Taxation - 141
Capital expenditure and financial investment 3,093 830
Equity dividends paid (1,591) (1,775)
Net cash inflow before management of liquid
resources and financing 2,935 206
Management of liquid resources (2,909) (217)
Increase/(decrease) in cash 26 (11)
Reconciliation of net cash flow to movement in
net debt
Increase/(decrease) in cash 26 (11)
Cash outflow from increase in liquid resources 2,909 217
Change in net funds/(debt) resulting from cash 2,935 206
flows
Net debt at beginning of year (8,522) (8,728)
Net debt at end of year (5,587) (8,522)
Notes (unaudited)
1. Income
2003 2002
�'000 �'000
Income from investments
UK dividends 1,833 1,625
UK unfranked investment income - interest 373 198
2,206 1,823
Other income
Deposit interest 76 155
Underwriting commissions and sundry income 4 -
80 155
Total income 2,286 1,978
Total income comprises:
Dividends 1,833 1,625
Interest 449 353
Other income 4 -
2,286 1,978
2. Return per share
Basic revenue return per Ordinary Share is based on the net revenue return on
ordinary activities after tax and on 17,320,000 (2002: 17,320,000) Ordinary
Shares in issue throughout the year.
Basic capital return per Ordinary Share is based on net capital return on
ordinary activities after tax and on 17,320,000 (2002: 17,320,000) Ordinary
Shares in issue throughout the year.
Capital return per Zero Dividend Preference Share is the increase in the
calculated value per Zero Dividend Preference Share for the year.
3. Net asset value per share
The net asset value per Ordinary Share and the net assets attributable at the
year-end were as follows:
Net asset value Net assets
per share attributable
2003 2002 2003 2002
pence pence �'000 �'000
Ordinary Shares - Basic 107.4 63.8 18,606 11,043
Zero Dividend Preference 148.4 137.1 18,821 17,380
Shares
Basic net asset value per Ordinary Share is based on the net assets
attributable at the year-end and on 17,320,000 (2002: 17,320,000) Ordinary
Shares, being the number of Ordinary Shares in issue at the year-end.
Net asset value per Zero Dividend Preference Share is based on the net assets
attributable at the year-end and on 12,680,000 (2002: 12,680,000) Zero Dividend
Preference Shares being the number of Zero Dividend Preference Shares in issue
at the year-end.
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 October 2003 or the year ended 31
October 2002. The financial information for 2002 is derived from the statutory
accounts for 2002, which have been delivered to the Registrar of Companies. The
auditors have reported on the 2002 accounts; their report was unqualified and
did not contain a statement under section 237(2) or (3) of the Companies Act
1985. The financial information for the year ended 31 October 2003 is
unaudited. The statutory accounts for 2003 will be finalised on the basis of
the financial information presented by the Directors in this preliminary
announcement and will be delivered to the Registrar of Companies following the
Company's Annual General Meeting.
The audited Report and Accounts will be posted to shareholders shortly. Copies
may be obtained during normal business hours from the Company's Registered
Office, 30 Finsbury Square, London, EC2A 1AG.
The Annual General Meeting will be held at the Company's Registered Office on
28 January 2004 at 12 noon.
By order of the Board
INVESCO Asset Management Limited - Secretaries 18 December 2003
END