Final Results

ABERFORTH GEARED CAPITAL & INCOME TRUST plc PRELIMINARY RESULTS For the year-ended 31 December 2003 FEATURES Total Returns Total Assets 34.4% Net Asset Value of Notional Package1 71.1% Net Asset Value of Capital Shares2 1,407.5% Total Dividend per Income Share 8.20p [+2.5%] 1 Notional Package is made up of 70% Income Shares and 30% Capital Shares. 2 Capital Shares asset performance assumes Income Shares have a capital entitlement of 100p each. Aberforth Geared Capital & Income Trust plc invests only in small UK quoted companies, does not invest in any unquoted securities, AIM listed securities or securities issued by investment trusts or investment companies. CHAIRMAN'S STATEMENT TO SHAREHOLDERS INTRODUCTION The year to December 2003 has seen most stockmarkets around the world generate positive returns, welcome relief after the negative returns of the recent past. A common characteristic was the out-performance by small over larger companies. In the UK the Hoare Govett Smaller Companies Index (Excluding Investment Companies) (HGSC (XIC)) produced a total return of 43.0% while the FTSE All-Share Index (representative of "larger companies") achieved a total return of 20.9%. In the year under review, AGCiT generated a 34.4% return on its total assets. The effect of the gearing employed by the company was to translate this into a 71.1% return on Shareholders' funds. After allowing for the 100p capital entitlement of the Income Shares the Net Asset Value of a Capital Share has risen from 10.9p on 31 December 2002 to 164.32p on 31 December 2003. The relationship between the return on total assets and that to Shareholders illustrates the effect of the capital structure. The returns in 2003 provide a timely example of how powerful the effect of the gearing can be. Total asset returns for the first quarter were - 2.6%, consistent with the -6.1% decline in the HGSC (XIC). As these declines followed the negative returns recorded in 2002, the first quarter was sufficient to extinguish any value in the Capital Shares. However, the 38.0% return on total assets since 31 March 2003 has been sufficient to restore considerable value to the Capital Shares as illustrated above. Disappointingly, the history of equity markets suggests that the scale of the year's return from both the HGSC (XIC) and on the total assets is likely to prove a rare phenomenon. Encouragement, however, can be taken from the fact that, despite the strong performance in 2003, the small company investment universe still stands at a valuation level that is not out of line with its historic averages both on an absolute basis and relative to larger companies. DIVIDEND The dividends declared by the portfolio's 85 investments have, by and large, been in line with the expectations of your Managers. Your Board is therefore pleased to be able to recommend a second interim dividend of 5.125p per Income Share. It is intended that this dividend will be paid on 26 February 2004 to Shareholders on the register on 30 January 2004. This payment represents a 2.5% increase over the 5.0p dividend paid in respect of the comparative period last year. Income Shareholders may recall that the Interim Dividend was also increased by 2.5%; therefore the aggregate dividend increase for 2003 is also 2.5%. YOUR BOARD I was delighted to welcome John Richards to your Board as an Independent Non Executive Director on 29 October 2003. John is a Chartered Accountant and is the Finance Director of The Miller Group, the largest private property development and house building company in the UK. John has experience in a number of industries and I am sure he will make a valuable contribution to your Board's deliberations. OUTLOOK Small UK quoted companies performed well in stockmarket terms during 2003, not only by achieving strong absolute gains but also by out- performing larger companies. However, the small company universe is valued, in price earnings terms, only 7.3% above the average level of the 13 years of your Managers' investment history. This valuation does not seem unreasonable at a time when there is cause for greater optimism about the economic outlook than there was twelve months ago. Dividend cover for smaller companies is also robust and at 2.6x is in line with its longer term level. As a consequence, smaller companies, in aggregate, appear well placed to increase their dividends. Suitably harnessed dividend growth can be a powerful driver to capital performance from equity portfolios and, as a result, can generate returns consistent with the requirements of both Income and Capital Shareholders in AGCiT. Your Board is confident that the combination of your Managers' investment philosophy and the breadth of their opportunity base provides a solid platform on which satisfactory investment returns can be generated. Alastair C Dempster Chairman 21 January 2004 The Statement of Total Return, summary Balance Sheet and summary Cash Flow Statement are set out below: - STATEMENT OF TOTAL RETURN (Incorporating the Revenue Account 1) (unaudited) 7 September 2001 - to - 2003 31 December 2002 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Realised gains/(losses) on sales - 323 323 - (766) (766) Unrealised gains/(losses) - 17,611 17,611 - (6,449) (6,449) _________________________________________________ Gains/(losses) on investments - 17,934 17,934 - (7,215) (7,215) Dividend income 2,963 - 2,963 2,971 245 3,216 Interest income 71 - 71 154 - 154 Other income 1 - 1 11 - 11 Investment management fee (154) (361) (515) (181) (422) (603) Other expenses (158) - (158) (181) - (181) ------ ------ ------ ------ ------ ------ Net return before finance costs and taxation 2,723 17,573 20,296 2,774 (7,392) (4,618) Interest payable and similar charges (627) (1,463) (2,090) (554) (1,293) (1,847) ------ ------ ------ ------ ------ ------ Return on ordinary activities before tax 2,096 16,110 18,206 2,220 (8,685) (6,465) Tax on ordinary activities - - - - - - ------- ------ ------ ------ ------ ------ Return attributable to non-equity shareholders 2,096 16,110 18,206 2,220 (8,685) (6,465) Dividends and other appropriations in respect of non-equity shares (2,009) (67) (2,076)(1,960) (69) (2,029) ------- ------ ------ ------ ------ ------ Transfer to / (from) reserves 87 16,043 16,130 260 (8,754) (8,494) ======= ====== ====== ====== ====== ====== Returns per non-equity interest Income Share 8.56p - 8.56p 9.06p - 9.06p ------- ------ ------ ------ ------- ------- Capital Share - 153.43p 153.43p - (82.71p) (82.71p) ------- ------ ------ ------ ------- ------- NOTES 1. 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. 2. The calculations of revenue return per Income Share are based on net revenue of £2.096 million (2002: £2.220 million) and on 24.5 million Income Shares. The calculations of capital return per Capital Share are based on net capital profits of £16.110 million (2002: losses of £8.685 million) and on 10.5 million Capital Shares. SUMMARY BALANCE SHEET (unaudited) 31 31 December December 2003 2002 £'000 £'000 Securities officially listed on the London Stock Exchange 74,199 59,685 -------- -------- Debtors 338 349 Cash at bank 1 1 Creditors (1,550) (1,258) -------- -------- Net current liabilities (1,211) (908) -------- -------- Total assets less current liabilities 72,988 58,777 Creditors (amounts falling due after more than one year) (30,887) (32,873) -------- -------- Total net assets 42,101 25,904 ======= ======= Capital and reserves: non-equity interests Called up share capital 350 350 Reserves: Capital redemption reserve 50 50 Special reserve 33,929 33,929 Capital reserve - realised (3,737) (2,236) Capital reserve - unrealised 11,162 (6,449) Revenue reserve 347 260 -------- -------- 42,101 25,904 ======== ======== Net Asset Values: - per Income Share 62.37p 56.65p - per Capital Share 255.42p 114.52p NOTE The Company had 24.5m Income Shares and 10.5m Capital Shares in issue as at 31 December 2003 and 31 December 2002. SUMMARY CASH FLOW STATEMENT (unaudited) 7 September 2001 - to- 2003 31 December 2002 £'000 £'000 CASH FLOW STATEMENT Net cash inflow from operating activities 2,374 2,274 -------- -------- Returns on investment and servicing of finance Non-equity dividends paid (1,978) (735) Interest and other finance costs paid (2,080) (1,840) -------- -------- Net cash outflow from returns on investment and servicing of finance (4,058) (2,575) -------- -------- Capital expenditure and financial investment Payments to acquire investments (20,868) (87,058) Receipts from sales of investments 24,548 20,158 Net cash outflow from capital expenditure -------- -------- and financial investment 3,680 (66,900) -------- -------- Net cash inflow/(outflow) before financing activities 1,996 (67,201) -------- -------- Financing activities Issue of shares - 35,050 Redemption of shares - (50) Expenses paid in respect of share issue - (671) Loans (repaid)/drawn down (1,996) 32,873 -------- -------- Net cash (outflow)/inflow from financing activities (1,996) 67,202 -------- -------- Change in cash during the period - 1 ======== ======== Reconciliation of change in cash to movement in net debt Change in cash during the period - 1 Loans repaid/(drawn down) 1,996 (32,873) Amortisation of issue costs during the period (10) - -------- -------- Change in net debt 1,986 (32,872) Net opening debt (32,872) - -------- -------- Net closing debt (30,886) (32,872) ======== ======== NOTES 1. The foregoing do not comprise Statutory Accounts (as defined in section 240(5) of the Companies Act 1985) of the Company. 2. It is anticipated that the Annual Report will be posted to shareholders on 26 January 2004. Members of the public may obtain copies from Aberforth Partners, 14 Melville Street, Edinburgh EH3 7NS or from its website at www.aberforth.co.uk. CONTACT: John Evans Aberforth Partners 0131 220 0733 Aberforth Partners, Secretaries - 21 January 2004 ANNOUNCEMENT ENDS ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2004/01/21/20040121BIT00820/wkr0001.doc