Interim Results

Glasgow Income Trust PLC 13 June 2000 GLASGOW INCOME TRUST INTERIM RESULTS FOR THE SIX MONTHS TO 31 MARCH 2000 * Total return on net assets was 0.5%, below the FTSE All-Share Index return which was boosted by low-yielding Technology and Service stocks but above the return on the FTSE 350 Higher Yield Index, a more accurate performance indication of the type of share the Company holds. * A second interim dividend of 0.625p per ordinary share has been declared. A first interim dividend of 0.625p per share was paid on 31 May 2000. These dividends are at the same rate as last year. * Since the period end, the Company has raised gearing, to about 50% of net assets, so that the dividend yield may be raised. The Directors believe that the higher yield will encourage a reduction in the discount, 14.6% at 31 May 2000. It is intended that the value of the ordinary share portfolio will continue to exceed net assets, maintaining the growth characteristics of the trust. * The Board intends to pay total dividends of not less than 3.7p per share (1999: 3.0p) in the year to 30 September 2000 and not less than 4.7p per share in the year to 30 September 2001. * At the share price of 67.25p as at 31 May 2000, the minimum dividend forecast for the year to 30 September 2001 represents a net yield of 7%. For further information please contact: David Williams, Managing Director Glasgow Investment Managers 0141 572 2700 Glasgow Income Trust plc Interim Report 2000 Chairman's Statement Background The half year to 31 March 2000 witnessed a significant divergence in performance between the stocks of the so-called 'old' and 'new' economies. The total return of 11.3% on the FTSE All-Share Index was heavily influenced by the spectacular performance of low yielding stocks in two sector groupings, Information Technology, which returned 109.2%, and Non-Cyclical Services, which returned 34.4%. By contrast, the FTSE Higher Yield Index, more representative of the 'old' economy, returned -3.3%. Investment Returns The total return on the Company's net assets was 0.5%. Although comfortably ahead of the return on the Higher Yield Index this fell short of the return on the All-Share Index, the Company's benchmark, largely because the Company's dividend objective restricts the number of low-yielding equities which may be included in the portfolio. The demand for 'new' economy stocks also left a number of higher yielding 'old' economy stocks and sectors out of favour and the discount at which the ordinary share price stood to underlying net asset value per share widened from 3.7% to 15.7%. As a result the total return to a shareholder was -11.8%. Portfolio As the stockmarket rose total gearing was reduced, to 16.4% of net assets at 31 March 2000 from 20.7% at 30 September 1999. No major changes were made to the equity portfolio in the period under review. Some investments were made in Information Technology stocks, within the limits imposed by the Company's income objective, and they performed well. Investment Policy and Share Price Rating The level of the discount has been a matter of concern to the Board. During the first seven years of the Company's existence, until 1995, its ordinary shares traded more often at a premium to underlying net asset value per share than at a discount. Since 1995, however, they have traded consistently at a discount, generally within a range between 5% and 15%. The principal reason for this appears to be that the net dividend yield on the Company's shares, while significantly higher than the average yield of 2.1% on UK equities in general, is nonetheless lower - and thus less attractive to investors seeking income - than the very high yields available from a number of alternative investment vehicles. The Board, therefore, having considered a number of alternative strategies, has, since 31 March 2000, introduced higher gearing to the Company so that the yield on net assets may be increased. £9.9 million of five year zero coupon finance has been raised at a cost of 7.19% per annum all of which will be charged to capital. It is intended that gearing will not exceed 55% of shareholders' funds and that the portfolio's growth characteristics will be retained with holdings of ordinary shares continuing to exceed the value of net assets. The Directors believe that the higher yield will encourage a reduction in the discount. Dividends The Board has declared a second interim dividend of 0.625p per ordinary share, to be paid on 31 August 2000 to shareholders on the register at close of business on 4 August 2000. A first interim dividend of 0.625p per share was paid on 31 May 2000. The first and second interim dividends last year were also at the rate of 0.625p per share. As a result of the modification of strategy outlined above, the Board intends to pay total dividends of not less than 4.7p per share in the year to 30 September 2001. At the share price of 67.25p as at 31 May 2000, that would represent a net yield of 7%. In the year to 30 September 2000 the Board intends to pay total dividends of not less than 3.7p per share (1999: 3.0p per share). Outlook Since the beginning of 2000 the Monetary Policy Committee has raised interest rates twice, apparently in response to the inflationary pressures emanating from a buoyant housing market and accelerating employee earnings growth. The combination of higher interest rates and Sterling appreciation, however, is already beginning to restrain economic activity, principally through its impact on consumer confidence, which has weakened since its recent peak in January, and it now seems that the more optimistic forecasts of UK output growth in 2000 may not be met. If as a result inflation remains lower than currently forecast, interest rates may peak earlier and at lower levels than presently discounted in the money markets, a development which should rekindle interest in the more traditional sectors of the UK stockmarket. The Interim Report will be mailed to shareholders on 16 June 2000. Copies may be obtained from the Managers, Glasgow Investment Managers Limited, Sutherland House, 149 St Vincent Street, Glasgow G2 5DR after that date. R G Hanna Chairman GLASGOW INCOME TRUST PLC Consolidated Statement of Total Return (incorporating the Revenue Account) for the half year ended 31 March 2000 Half year to 31 March 2000 (unaudited) Revenue Capital Total £000 £000 £000 (Losses)/gains on - (284) (284) investments Dividends and interest 513 - 513 receivable Foreign income dividends - - - Profits less losses of 21 - 21 dealing subsidiary Traded option premiums 136 - 136 Investment management fee (36) (36) (72) Other administrative (77) - (77) expenses Net return before finance costs and taxation 557 (320) 237 Finance costs of borrowings 63 63 126 Return on ordinary activities Before taxation 494 (383) 111 Taxation - - - Return on ordinary activities after taxation for the 494 (383) 111 period Dividend on equity shares 388 - 388 Transfer to reserves 106 (383) (277) Return per ordinary share 1.59p (1.24)p 0.35p Dividends per ordinary 1.25p share Half year to 31 March 1999 (unaudited) Revenue Capital Total £000 £000 £000 (Losses)/gains on investments - 4,134 4,134 Dividends and interest 410 - 410 receivable Foreign income dividends 52 - 52 Profits less losses of 13 - 13 dealing subsidiary Traded option premiums 76 - 76 Investment management fee (34) (34) (68) Other administrative expenses (90) - (90) Net return before finance costs and taxation 427 4,100 4,527 Finance costs of borrowings 37 37 74 Return on ordinary activities Before taxation 390 4,063 4,453 Taxation - - - Return on ordinary activities after taxation for the 390 4,063 4,453 period Dividend on equity shares 388 - 388 Transfer to reserves 2 4,063 4,065 Return per ordinary share 1.26p 13.09p 14.35p Dividends per ordinary share 1.25p GLASGOW INCOME TRUST PLC Group Balance Sheet at 31 March 2000 31 March 2000 (unaudited) £000 % Fixed assets Investments listed on the London Stock Exchange - ordinary shares 24,887 105.2 - convertibles 2,182 9.2 Unquoted bonds 472 2.0 27,541 116.4 Current assets Debtors 575 Cash on short-term deposit 493 Investments of dealing subsidiary undertaking - 1,068 Creditors: amounts falling due within one 4,957 year Net current liabilities (3,889) (16.4) Net assets 23,652 100.0 Capital and reserves Called up share capital 7,761 Share premium account 2,061 Special reserve 5,000 Realised capital reserve 5,357 Unrealised capital reserve 2,549 Revenue reserve 924 Equity shareholders' funds 23,652 Net asset value per ordinary share 76.19p GLASGOW INCOME TRUST PLC Group Balance Sheet 30 September 1999 (audited) £000 £000 Fixed assets 25,247 105.5 Investments listed on the London Stock Exchange 3,156 13.2 - ordinary shares 488 2.0 - convertibles 28,891 120.7 Unquoted bonds Current assets Debtors 309 Cash on short-term deposit 200 Investments of dealing subsidiary undertaking 102 611 Creditors: amounts falling due within one year 5,573 Net current liabilities (4,962) 20.7 Net assets 23,929 100.0 Capital and reserves Called up share capital 7,761 Share premium account 2,061 Special reserve 5,000 Realised capital reserve 5,049 Unrealised capital reserve 3,240 Revenue reserve 818 Equity shareholders' funds 23,929 Net asset value per ordinary share 77.09p Note: These are not statutory accounts under section 240 of the Companies Act 1985 and are unaudited. The information relating to the group balance sheet as at 30 September 1999 is an extract from the latest audited accounts which have been delivered to the Registrar of Companies; the report of the auditors on these accounts was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

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