Leggmason Inv Inc & Grwth Tst PLC
24 May 2002
LeggMason Investors Income & Growth Trust plc ('the Company')
Loan Repayment, Accounting Policy and Dividends
Following on from the statement made in February on dividends and the difficult
market environment, the Board believes that a range of pro-active measures
should be introduced to enhance the financial strength of the Company. This
follows significant falls in both the capital value of the Company's investment
in the shares of split capital investment trusts and the income from those
shares. The Board of Directors has reviewed the Company's current position, and
has concluded that the Company will take the following steps:
The Company will repay £5 million of bank debt out of a total of £52 million.
This will save some £375,250 per annum although there will be an initial cost of
£271,000 for early termination of that proportion of the Company's interest rate
swap that secures a fixed rate of interest. The Company has not breached its
asset to debt banking covenants but is taking this step to lower gearing, reduce
risk and to improve cash flow. If conditions change, the Board may take steps to
reduce debt further.
Accounting Policy on allocation of expenses
At launch, the Company charged 70 per cent. of its expenses to capital. The
Directors and the Investment Manager have now concluded that future investment
returns are likely to be lower than initially expected and may come
predominantly from income receipts rather than capital growth. Accordingly, the
Directors have decided to change the allocation of expenses from 70 per cent. to
capital and 30 per cent. to income to 25 per cent. to capital and 75 per cent.
to income. The consequence of this reallocation will result in less net revenue
for distribution and more capital retained in the Company. This shift follows
recent practice in the investment trust industry and advice given by the
Association of Investment Trust Companies.
1.) Redeemable Preference Shareholders
The asset to liability ratio of the Company has fallen to a level whereby the
Company is unable to meet the requirements of the Companies Act 1985 S265 and is
therefore unable at this stage to pay the dividend due to redeemable preference
shareholders at the end of June. If the Company's assets to liabilities ratio
returns to above the required 1.5:1, both immediately before and after any
dividend payment, any outstanding payment will be paid at the next dividend
2.) Ordinary Shares
As recently reported, a number of investment trusts and companies in which the
Company invests have reduced their dividends to lower and more sustainable
levels reflecting the current investment and lower inflationary environment. The
change in the Company's policy of allocating expenses to capital means that
there will be less revenue available to pay out as dividends to shareholders.
Because of all of these factors, it is unlikely that ordinary shareholders will
receive a dividend in the foreseeable future. It is hoped that the ordinary
shares will be in the position to benefit from the stronger asset base of the
Company which may contribute towards and allow for the resumption of dividends
if conditions significantly improve.
The Investment Portfolio
As at 17 May 2002 the total assets of the Company amounted to £96.3 million
which were attributable as follows:
Split Capital Shares & Investment Trusts £57.9 million 60.1%
UK Equities £11.4 million 11.8%
Fixed Interest £4.3 million 4.5%.
Cash £22.7 million 23.6%
Following repayment of £5 million which will be effected out of the Company's
cash resources, it is initially expected that the Company's total assets will be
attributable as follows:
Split Capital Shares & Investment Trusts £57.9 million 63.7%
UK Equities £28.8 million 31.6%
Fixed Interest £4.3 million 4.7%.
Cash £ nil 00.0%
The Board is sensitive to their obligations to all shareholders and has sought
to strike the difficult balance between all classes in the light of
unprecedented and unforeseeable market circumstances.
Alan Kerr / Andrew Whalley
020 7537 0000
24 May 2002
This information is provided by RNS
The company news service from the London Stock Exchange