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Perpetual Inc&Growth (PLI)

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Friday 26 May, 2000

Perpetual Inc&Growth

Final Results

Perpetual Income&Growth Inv Tst PLC
26 May 2000


The investment of the Company's portfolio has, over the last six months, been
conducted against a background of extraordinary and very volatile stock market
conditions.  A rapid rise in the price of shares in the telecoms, media and
technology ('TMT') sectors, for most of the period, has been followed by a
significant decline since the end of the first week in March.  This has
created short-term difficulties in achieving our investment objectives but we
believe that much of the lost ground will be retrieved as the balance between
TMT and 'old economy' stocks continues to be restored.

Income performance has benefited from maintaining our strategy during the
turmoil of the last six months of the financial year, and revenue available
for distribution is up by 22.2% on last year.

This increase in income comes from £1,386,000 of special non recurring
dividends and an additional £998,000 of other income from mainly a shift in
the portfolio to stocks that pay more dividend income.  Against this
additional income, management expenses and interest costs increased by
£309,000, mainly from higher management fees as a result of higher average
funds under management over the last year compared to the previous year, and
from interest on higher gearing.  In addition, £273,000 of surplus
irrecoverable advance corporation tax was written off.  It is proposed that a
final dividend of 2.66p per share be paid on 13th July 2000 to shareholders on
the register at the close of business on 9th June 2000.  This proposed final
dividend results in a total dividend for the financial year of 4.5p per share:
an increase of 11.1% compared to 1999.

The Company's net asset value was down 9.8% over the year to 136.2p at the
year end compared to the FT-SE All-Share Index increase of 7.5% over the same
period. Since the end of the year, the net asset value has recovered a further
6.4p to 142.6p at 12th May 2000 (an increase of 4.7%) while the FT-SE
All-Share Index has fallen 3.8%.

Your Board has set a gearing limit of 20% of net assets, of which the £30
million debenture is strategic.  The remaining 7.5% of the limit is used
tactically by the Fund Manager and stood at £8 million (3.3%) at the year end.

There are some important matters to be considered at the forthcoming Annual
General Meeting.  First we shall be proposing that the Company should have
powers to buy-back its own shares and secondly, that the directors should have
limited powers to allot new shares.

Now that the law allows us to do so, we believe that obtaining share buy-back
powers has become a matter of course and 'good house-keeping' for all
investment trusts.  If you allow the Company to have such powers we anticipate
that our Investment Manager will be able to take any appropriate action,
within parameters to be determined by the directors, to return value to
shareholders through on market purchases of up to 14.99% of shares until the
following Annual General Meeting.

I would like to take this opportunity to inform you that Mark Barnett has
taken over the running of the Company's portfolio from Neil Woodford.  Mark
joined Perpetual four years ago and works closely with Neil in Perpetual's UK
investment team.  The Board would like to thank Neil for his excellent
management of the portfolio to date and wish Mark every success in continuing
to manage our investments in accordance with our strategic objectives.

We believe that the Company's portfolio is strategically well placed in the
current benign environment and a further improvement in our relative
performance should take place during the coming year.

Sir Patrick Sheehy
26th May 2000

Manager's Review

Economy and Market

The first half of the period saw market expectations of economic growth around
the world improve. Within the UK, worries over possible recession gave way to
growing optimism and a shift in investor sentiment in favour of cyclical
sectors of the market.  However, in September, the Monetary Policy Committee
(MPC) surprised many by reversing its June reduction in interest rates and
lifting them back to 5.25% (from 5.0%).  This action raised concerns that, in
its desire to fulfil its inflation control mandate, the MPC might raise rates
to a level that could choke off economic growth.  As a consequence, market
sentiment shifted rapidly away from economically sensitive stocks towards more
defensive sectors. 

Coincidentally, the market rapidly developed an obsessive interest in
technology media and telecommunications stocks - the so-called TMT sectors. 
This phenomenon continued and, indeed, intensified right up to the closing
weeks of the review period, with little or no apparent consideration given to
the attainability of earnings implicit in the rapidly escalating share prices.
This shift into TMT stocks was funded largely by indiscriminate selling of
so-called 'old economy' companies, regardless of such fundamental attractions
as management skills, financial strength, quality of earnings and dividend

The second half of the period under review was characterised by broadening
global and UK economic recovery, rising oil and industrial commodity prices,
recovery in the domestic housing market, rising real wages and strengthening
consumer confidence.  During these months, the MPC, determined to act
pre-emptively against possible inflationary pressures, raised Sterling
interest rates, in three further quarter-point moves, from 5.25% to 6%.
In the final weeks of the review period, there was evidence of growing
disquiet within the TMT sectors, and the beginnings of a return to favour of
many 'old economy' companies.  As investors began to undertake a more rational
and considered appraisal of earnings capabilities, some of the extreme over
and under valuations that had built up began to unwind.  At the time of
writing, this process is still underway, and would appear to have some way to

Company Risk Profile

The Company's objective is to generate capital growth with a higher than
average income from investment in the UK equity market. This is achieved by
investing mainly in above average yielding UK equities. In addition, up to 5%
of the portfolio may be invested in bonds. Our investment strategy has not
changed significantly from last year and is covered in more detail in the next
section; and the portfolio at 31st March 2000 is described in the Investment
Portfolio Statement.

By investing almost entirely in UK equities, the portfolio is exposed mainly
to the risks associated with UK equity markets. The impact of currency
exchange rate fluctuations was minimal and it was believed that to engage in
any currency hedging programmes would not have been beneficial.

Using the resources available from shareholders' funds, it is the Company's
policy to be fully invested. Being an investment trust, it also has the
ability to gear and, in the past, has used the flexibility of an uncommitted
overdraft facility of up to 20% of net asset value. The Directors decided with
the Manager last year to replace a proportion of this borrowing with a
£30,000,000 6.125% Debenture 2014 for long term strategic purposes, as it is
believed that UK equities will provide better returns than the cost of the
debenture over the same period. At the time the debenture was launched, it was
anticipated that interest rates could fall further to align with European
rates. Therefore, the debenture's fixed rate of 6.125% per annum was swapped
for three years into a floating rate of six months LIBOR + 0.29% to take
advantage of potential lower UK interest rates within this time. The remaining
proportion of the uncommitted overdraft facility of up to 20% of net asset
value, which is at a cost of Citibank NA's UK base rate + 0.5%, has been
retained for short term tactical opportunities.

Investment Strategy and Performance

Our investment strategy remained largely unchanged throughout the review
period, and reflected our view that we were likely to see a period of
sustained growth and subdued inflation in the UK, coupled with more positive
global economic activity than markets were generally expecting.  The focus of
our portfolio remained on economically sensitive sectors of the market, with
investments held throughout the twelve month period in areas such as
resource-related cyclicals (eg ICI, Rio Tinto), construction and building
materials (eg Blue Circle), financial stocks (e.g. Abbey National, Barclays,
Lloyds and Standard Chartered), and retailers (e.g. Next, Signet).  We also
held investments in food producers and retailers (e.g. Northern Foods, Tate &
Lyle, Iceland, Sainsbury, Tesco) and selected utilities companies (eg
PowerGen, Scottish Power, Severn Trent, United Utilities), where concerns over
the regulatory environment and general disenchantment with so-called 'old
economy' stocks had resulted in share prices that, in our opinion, represented
significant undervaluations of assets, earnings streams and quality of

During the review period, new investments were made in the international
consumer trading groups Allied Domecq, Diageo and Unilever.  Within the
construction and building materials sector we added RMC, Wimpey and Wolseley
and the Carillion spin-off from Tarmac, while raising the weightings of our
existing real estate investments in Brixton Estates, Chelsfield, Hammerson
Properties and Land Securities.

Along with broadening global economic activity came rising demand and firming
prices for oil and industrial commodities: the portfolio added investments in
the oil companies BP Amoco, Enterprise Oil, and Shell Transport & Trading, the
precious metals and speciality chemicals group Johnson Matthey, and the mining
company Lonmin (formerly Lonrho).

Within the financial sector, we added Bank of Scotland and Halifax, while
retaining a significant holding in Royal Bank of Scotland following its
takeover of National Westminster Bank. Amongst retailers, we added Boots,
Debenhams and Selfridges.

During the year, we reduced our holdings of financials, particularly HSBC,
National Westminster Bank and Royal Bank of Scotland, Barclays and Prudential.
We also sold Reuters, Philips Electronics, Securicor, Dixons, EMAP, Burmah
Castrol, 3i and Celltech and, from these and other sales of investments,
realised net gains of £39.3 million.

From the point of view of performance, the year under review was very much one
of two halves.  Performance during the first half benefited from the shift in
market sentiment towards cyclical sectors, where our portfolio was
concentrated.  However, for most of the second half, the market's increasingly
intense focus on technology and internet-related stocks, and the dramatic rise
of share prices within these sectors, and our reluctance to include in our
portfolio stocks that we felt were significantly overvalued on the basis of
any rational assessment, resulted in significant relative underperformance.
However, in the final weeks of the review period, a sharp correction amongst
technology stocks, and the beginnings of a reappraisal of 'old economy'
stocks, contributed to a rebound in portfolio performance that has continued
after the close of the review period.

Current Prospects

The economic recovery, that we forecast a year ago, has come through both
domestically and internationally.  At the same time, the level of inflation
has remained below market expectations.  Economic recovery in the UK and
elsewhere in the world is proving more rapid than many expected, leading the
MPC to raise interest rates twice in the first two months of 2000 to their
current level of 6%.

We believe that the traditional inflationary pressures from sources such as
higher commodity prices and a tighter labour market will, in this economic
cycle, be more than offset by the lack of pricing power, the disinflationary
effects of excess capacity within the retail industry downward regulatory
pressure on utility prices, and the supply side benefits on productivity form
the proliferation of information technology.  We expect continued economic
growth in an environment that is broadly non-inflationary and conducive to low
interest rates. 

In summary, we believe that the sectors in which we are invested are well
positioned to benefit from continued economic growth, low inflation and low
interest rates.  Valuations in these areas are however extremely low, and
appear to be discounting near recession conditions.  Consequently they offer
very attractive investment opportunities.  Additional support is provided by
buoyant merger and acquisition activity, with corporates taking advantage of
low valuations by making cash bids at significant premiums.

Summary of Results
as at 31st March 2000
                                          2000         1999     % change

Total net assets (£'000)               240,258      265,647       (9.6%)

Net asset value per share - basic       136.2p       151.0p       (9.8%)

                          - diluted     130.2p       142.5p       (8.6%)

Share price                             103.5p       127.3p      (18.7%)

FT-SE Actuaries All-Share Index         3110.6       2894.8        7.5%

Dividends per share - interim            1.84p        1.53p       
                    - interim            0.00p        1.10p
                    - final              2.66p        1.42p
                    - total              4.50p        4.05p       11.1%

Earnings per share - basic
(1999 restated)                           5.2p         4.3p       20.9%

Earnings per share - diluted
(1999 restated)                           5.1p         4.1p       24.4%

Net yield based on dividends
per share and share price
 at 31st March 2000                       4.3%         3.2%       34.4%

FT-SE Actuaries All-Share
Index yield                               2.1%         2.6%      (19.2%)

Statement of Total Return
(incorporating the revenue account) 
Year ended 31st March 2000

                                    2000               1999 (restated)
                        Revenue  Capital    Total   Revenue  Capital    Total
                          £'000    £'000    £'000     £'000    £'000    £'000

on investments                                         
 -realised                        39,261   39,261             34,243   34,243 
 -unrealised                     (63,318) (63,318)           (33,370) (33,370)
foreign exchange                     
translation gains                    172      172                178      178

Income                   11,383            11,383     8,999             8,999
management fee             (742)  (1,730)  (2,472)     (638)  (1,488)  (2,126)
Other expenses             (266)     (10)    (276)     (174)     (11)    (185)

Net return before 
finance costs
and taxation             10,375  (25,625) (15,250)    8,187     (448)   7,739

Interest payable
and similar
charges                    (708)  (1,653)  (2,361)     (595)  (1,389)  (1,984)

Return on ordinary
activities before tax     9,667  (27,278) (17,611)    7,592   (1,837)   5,755

Tax on ordinary
activities                 (447)     130     (317)      (47)      78       31

Return on ordinary 
activities after tax
for the financial year    9,220  (27,148) (17,928)    7,545   (1,759)   5,786

Dividends in respect
of equity shares         (7,939)           (7,939)   (7,127)           (7,127)

Transfer to/(from)
reserves                  1,281  (27,148) (25,867)      418   (1,759)  (1,341)

Return per ordinary
Basic                      5.2p   (15.4p)  (10.2p)     4.3p    (1.0p)    3.3p

Diluted                    5.1p   (15.0p)   (9.9p)     4.1p    (0.9p)    3.2p

The revenue column of this statement is the Profit and Loss account of the
Company and the 1999 revenue column has been restated for the adoption of
FRS16 'Current Taxation' in that UK dividends are disclosed net of tax

The directors have reviewed their expectations of the long-term split of
capital and revenue returns from the Company's portfolio.  As a result, the
directors have changed the accounting policy so that 70%, instead of 50%, of
annual management fee and finance costs are charged to capital, with the
remainder to income.  This has increased revenue returns and reduced capital
returns for the period by £967,000 (1999 £822,000).

All revenue and capital items in the above statement derive from continuing

No operations were acquired or discontinued in the year.

The Board approved this preliminary statement, which has been agreed with the
auditors, on 26th May 2000.  The financial information set out above does not
constitute the Company's statutory accounts for the years ended 31st March
2000 or 1999, but is derived from those accounts. Statutory accounts for 1999
have been delivered to the Registrar of Companies and those for 2000 will be
delivered following the Company's annual general meeting. The auditors have
reported on those accounts; their reports were unqualified and did not contain
statements under s237(2) or (3) Companies Act 1985.

Copies of this statement will be available from the Company's registered
office at Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxon, RG9


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