Final Results

GARTMORE DISTRIBUTION TRUST PLC Announcement of Preliminary Results for the year to 30th April 2003 The Directors announce the Group's results for the year to 30th April 2003 as follows:- Overview * GDT Securities PLC Zero Dividend Preference shareholders were paid 109.37p per share, being their accrued pre-determined entitlement at 30 April 2002, in respect of 80% of their holdings in May 2002. * In November 2002, a further redemption of 20.8% of each GDT Securities PLC Zero Dividend Preference shareholder's then current holding was made at 115.32p, being their accrued pre-determined entitlement at that time. * In aggregate, 84.2% of GDT Securities PLC Zero Dividend Preference shares in issue at 30 April 2002 have been redeemed at their accrued pre-determined capital entitlement. * GDT Securities PLC Zero Dividend Preference shares are 24% covered for full repayment on 30 April 2004. Total Assets (at bid prices) need to rise by 321% if these shares are to be paid their full pre-determined capital entitlement on that date. * Holders of Ordinary shares will receive no return unless the Zero Dividend Preference shareholders have been paid in full. Chairman's Statement During the period under review the total assets of the Company fell from £ 116.0m to £5.1m. This reflects the two redemptions of Zero Dividend Preference shares following the realisation of the Equity Portfolio and a substantial decline in value of the Company's remaining income share holdings. In accordance with the resolutions approved by shareholders in respect of the controlled realisation of the investment portfolio over the period to 30 April 2004, the sale of the Company's Equity Portfolio enabled Zero shareholders to be paid their accrued pre-determined entitlement of 109.37p per share in respect of 80% of their holdings in May 2002. In November 2002, a further redemption of 20.8% of each Zero shareholders then current holding was made at 115.32p, being their accrued pre-determined entitlement at that time. These redemptions amounted to £91.2m and £5.0m respectively. The income share market has continued to come under considerable pressure, in part due to the weakness of the broader UK equity market, but also because of the severe financial difficulties that have affected a number of highly geared split capital investment trusts. This has resulted in limited liquidity in the income share market with wide spreads emerging between mid and bid prices on all but the more highly rated Category `AAA' trusts. We are, therefore, continuing to value the Company's remaining income share portfolio each month based on bid prices. The Company's investment portfolio now comprises income shares, of which, 75% are rated Category `A' trusts. Of these, 42% are `AAA' or `AA' rated, which means that these funds have no more than 5% of their assets in other split capital trusts, and 33% are `A' rated (between 5% and 10% in other splits). The sector's problems have also led to many income shares appearing undervalued and the Managers have been careful not to dispose of shares at unjustifiably low prices. Nevertheless, in addition to the redemptions referred to above, the Company has accumulated a further £1.9m in cash and near cash from both realisations of investments and dividend income. The Managers continue to employ a rigorous investment process designed to maximise the amount realised while obtaining realistic prices in order to optimise the return to shareholders. Bearing in mind Zero shareholders' preference for further payments at the earliest opportunity, and dependent upon market conditions, the Board may make further distributions to Zero shareholders of smaller amounts, compared with the distributions of £5 million or more which were originally anticipated. Meantime, based on the investment portfolio at the Company's year-end and current market conditions, dividend income should continue to accrue at the rate of approximately £1.4 million per annum. The uncertainty regarding further income share disposals and the prices attainable is reflected in the low share price of the Zeros which, at 23.5p at 30 April 2003, were trading at a substantial discount to their net asset value (NAV) of 31.2p. The Zero asset entitlement continues to accrue at the rate of 9.556% per annum until its ultimate redemption date of 30 April 2004. This will result in the NAV entitlement rising from 119.8p per share at the end of April 2003 to 131.3p at 30 April 2004. To fulfil this obligation would require an increase in total assets at bid prices from £5.1m to £21.7m over the same period. Regrettably, as has been previously foreshadowed, it is unlikely that Ordinary shareholders will receive any return of capital. This is reflected in the current share price of 0.1p. The prospects for the UK equity market are largely dependent on the corporate earnings outlook, which remains uncertain. However, the recent increase in corporate activity suggests share prices are at attractive levels and investor confidence is improving. Sentiment in the income share market is likely to remain particularly sensitive to movements in the broader FTSE All-Share Index. However, there have been encouraging signs recently that liquidity is beginning to improve. The systemic collapse that occurred in a section of the split capital sector appears largely to have been played out as only one further share listing suspension has been announced in the six months to 30 April 2003. The majority of the market now consists of good quality income shares, and share prices have started to recover, albeit from very depressed levels. We would expect the value of the Company's remaining income shares to respond positively to any further improvement in the broader equity market. Consideration is being given by the Board to all appropriate strategic options which may be in the best interests of all shareholders prior to the Zero shareholders' ultimate redemption date of 30 April 2004. The conclusions to these considerations will be circulated to all shareholders at the appropriate time. Group Total Return Year to 30th April 2003 Revenue Capital Total Return £'000 £'000. £'000 Income and Gains Dividends and other income 2,643 - 2,643 Net loss on investments - (17,270) (17,270) ------------ ------------ ------------ Return before Expenses, Interest 2,643 (17,270) (14,627) and Taxation Expenses Management fees (24) - (24) Other expenses (203) - (203) ------------ ------------ ------------ Return before Interest and Taxation 2,416 (17,270) (14,854) Interest Payable Finance charges - - - ------------ ------------ ------------ Return before Taxation 2,416 (17,270) (14,854) Taxation - - - ------------ ------------ ------------ Return after Taxation 2,416 (17,270) (14,854) Appropriated to Non-Equity Shareholders Minority interest: - (1,984) (1,984) GDT Securities Zero: Repayment premium reserve ------------ ------------ ------------ Return on ordinary activities to 2,416 (19,254) (16,838) Equity Shareholders Appropriated to Equity Shareholders Dividends: On the Ordinary shares - nil - - - ------------ ------------ ------------ Transferred to/(from) Reserves: Ordinary shares 2,416 (19,254) (16,838) ------------ ------------ ------------ Total Return per Ordinary share *2.2p (17.5p) (15.3p) Notes * Distributable reserves are insufficient to meet the full redemption value of the Zero Dividend Preference shares. Therefore, in accordance with s264 of the Companies Act 1985, the Company is prevented from making a distribution to its Ordinary shareholders. In addition, despite being an investment company, the Company is prevented from making a distribution to its Ordinary shareholders under s265 of the Companies Act 1985 as its assets are less than one and a half times the aggregate of its liabilities. The revenue column shown above represents the profit and loss account of the Group. All revenue and capital items derive from continuing activities. Management fees (which were waived with effect from 13 May 2002) and all administrative expenses are charged 100% to the Revenue account. In the prior year, management fees and interest payable were allocated as to 50% to Revenue account and 50% to Capital account. Group Total Return (comparative) Year to 30th April 2002 Revenue Capital Total Return £'000 £'000. £'000 Income and Gains Dividends and other income 15,283 145 15,428 Net loss on investments - (72,260) (72,260) ------------ ------------ ------------ Return before Expenses, Interest 15,283 (72,115) (56,832) and Taxation Expenses Management fees (508) (508) (1,016) Other expenses (448) - (448) ------------ ------------ ------------ Return before Interest and Taxation 14,327 (72,623) (58,296) Interest payable Finance charges (4,324) (4,324) (8,648) ------------ ------------ ------------ Return before Taxation 10,003 (76,947) (66,944) Taxation - - - ------------ ------------ ------------ Return after Taxation 10,003 (76,947) (66,944) Appropriated to Non-Equity Shareholders Minority interest: - (9,743) (9,743) GDT Securities Zero: Repayment premium reserve ------------ ------------ ------------ Return on ordinary activities to 10,003 (86,690) (76,687) Equity Shareholders Appropriated to Equity Shareholders Dividends: On the Ordinary shares - 8.1p (8,897) - (8,897) ------------ ------------ ------------ Transferred to/(from) Reserves: Ordinary shares 1,106 (86,690) (85,584) ------------ ------------ ------------ Total Return per Ordinary share 9.1p (78.9p) (69.8p) Group Balance Sheet At At 30 April 30 April 2003 2002 £'000 £'000 Current Assets Listed investments 3,317 58,323 Debtors 269 2,827 Short-term deposits - 47,748 Cash at bank 1,638 8,134 ------------ ------------ 5,224 117,032 Creditors: amounts falling due within one year (80) (994) ------------ ------------ Net Assets 5,144 116,038 ------------ ------------ Capital and Reserves Called-up share capital 1,098 1,098 Other reserves: Special reserve 159,993 159,993 Capital reserve - realised (137,782) (115,914) Capital reserve - unrealised (42,320) (45,083) Revenue reserve 4,371 1,955 ------------ ------------ Equity shareholders' (shortfall)/funds (14,640) 2,049 Minority interest: 19,784 113,989 GDT Securities Zero ------------ ------------ Capital Employed 5,144 116,038 ------------ ------------ Net Asset Value per share (as per FRS4): GDT Securities Zero 119.8p 109.4p Ordinary shares (13.3p) 1.9p Available Assets per share (as per Articles): GDT Securities Zero 31.2p 109.4p Ordinary shares Nil 1.9p Group Cash Flow Year to Year to 30 April 30 April 2003 2002 £'000 £'000 Revenue Activities Net dividends 3,485 15,324 and interest received from investments Interest received on deposits 268 595 Underwriting commission 17 - Expenses paid, allocated to revenue (410) (950) ------------ ------------ 3,360 14,969 ------------ ------------ Servicing of Finance Interest paid, allocated to revenue - (4,324) ------------ ------------ Taxation Income tax recovered - 167 ------------ ------------ Investment Activities Acquisitions of investments - (115,450) Disposals of investments 37,968 242,537 Expenses and interest recovered/(paid), 617 (7,130) allocated to capital ------------ ------------ 38,585 119,957 ------------ ------------ Financing Redemption of GDT Securities Zeros (96,189) - ------------ ------------ Equity Share Dividend paid Ordinary shares - (10,874) ------------ ------------ Net Cash (Outflow)/Inflow (54,244) 119,895 ------------ ------------ Reconciliation of Net Cash (Outflow)/ Inflow to Movement in Net Debt Balance brought forward 55,882 (64,013) Net cash (outflow)/inflow (54,244) (119,895) ------------ ------------ Balance at 30 April 1,638 55,882 ------------ ------------ Comprising: Short-term deposits - 47,748 Bank balances 1,638 8,134 ------------ ------------ 1,638 55,882 ------------ ------------ Notes to the Accounts Full statutory accounts for the year to 30 April 2002 included an unqualified audit report and have been filed with the Registrar of Companies. GDT Securities PLC, which issued the Zero Dividend Preference shares, has not traded during the year. GMIT Subsidiary Limited and GSET Dealing Limited are the Company's dealing subsidiaries. They have also not traded during the year to 30 April 2003. Total return per Ordinary share has been calculated on the negative return to Ordinary shareholders of £16,838,000 (2002: negative return of £76,687,000) and 109,842,768 Ordinary shares (2002: 109,842,768) in issue throughout the year. Listed investments are all listed in the UK. FRS 4 requires the accounts to be presented in a way that reflects the financial obligations of the Company to its subsidiary, GDT Securities PLC, Accordingly, Net Asset Values per share have been calculated as per FRS4 on attributable assets and shares in issue at the period end as follows: At At 30 April 30 April 2003 2002 £'000 £'000 16,510,947 (104,223,106) 19,784 113,989 GDT Securities Zeros 109,842,768 (109,842,768) Ordinary (14,640) 2,049 shares ------------ ------------ 5,144 116,038 ------------ ------------ Fundamental Uncertainty - Going Concern and Investment Valuations On 26th June 2002, following approval by the shareholders, the Directors resolved to realise the assets of the Group in a controlled manner by no later than 30th April 2004. As permitted by FRS 18 'Accounting Policies', the Directors have decided to prepare the financial statements on a going concern basis since they consider this is the most appropriate basis to adopt in the circumstances and provides the most relevant information for shareholders. While the financial statements are prepared on a going concern basis, the Directors have made certain adjustments to the method of valuing the Group's assets. In particular, the investment portfolio has been valued at bid-price values, net of notional dealing charges, as the Directors consider these values provide a better representation than middle-market values, of their intention to realise the portfolio. However, certain investments within the remaining income share portfolio are subject to a deficiency of market liquidity, as a result of prevailing market conditions. The value of investments included in the financial statements potentially affected by deficient market liquidity amounts in total to £657,000 (2002: £6,273,000) The Directors recognise that, in current market conditions, there is uncertainty as to the ability to realise some, or all of these investments at their quoted bid-price valuations. Consequently, further adjustments may be necessary, but at this stage it is not possible to determine the extent to which, if any, they need to be made. The Directors do not intend to sell such investments below bid-price valuations in the short term and, consequently, they believe it appropriate to carry these investments at bid prices, as they continue to anticipate a return to normal market conditions within the controlled realisation time scale. Accounting Policies The financial statements, which are made up to 30th April 2003, have been prepared in accordance with applicable accounting standards and comply in all material respects with the Statement of Recommended Practice for Investment Trusts. Revenue Revenue includes dividends receivable from investments marked ex-dividend on or before the balance sheet date, with the exception of dividends of a capital nature, which are credited to Capital reserve. Deposit interest receivable is accounted for on an accruals basis. Management Fees, Administrative Expenses and Interest Payable Following shareholder approval to a controlled realisation of the portfolio to 30th April 2004, it was decided that any Management fees and all administrative expenses should be charged 100% to Revenue account. In the prior year, management fees and interest payable are allocated 50% to Revenue account and 50% to Capital account, with all other administrative expenses are charged 100% to Revenue account. Investments Investments are treated as current assets and are shown in the balance sheet at valuation. The difference between book cost and valuation is shown under Capital reserve - unrealised. Listed investments have been valued at bid prices, net of notional realisation costs, at the close of business on 30th April 2003. Profits or losses on the realisation of investments are taken to Capital reserve - realised in accordance with the Company's Articles of Association and are not distributable. Winding-up Following approval by shareholders on 26th June 2002, the assets of the Group will be realised in a controlled manner by no later than 30th April 2004. Annual Report and Accounts The financial information set out in the announcement does not constitute the Group's statutory accounts for the years ended 30th April 2003 or 2002. The financial information for the year ended 30th April 2002 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The statutory accounts for the year to 30th April 2003 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors reported on those accounts; their reports were unqualified and did not contain statements under s237(2) or s237(3) of the Companies Act 1985. The Annual Report for the year to 30 April 2003 will be posted to shareholders shortly. Copies will be available from the Registered Office of the Company: Gartmore House, 8 Fenchurch Place, London EC3M 4PB. Annual General Meeting The Company's Annual General Meeting for 2003 will be held at Gartmore House, 8 Fenchurch Place, London EC3M 4PB on Thursday, 31 July 2003, at 11.00 a.m. Gartmore Distribution Trust PLC Gartmore Investment Limited - Secretaries 1 July 2003

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