Annex B (continued)|
The Media and Income Trust PLC and Media
The Group's investment objectives are to provide
capital growth to repay Zero holders their full final capital
entitlements, to provide Preferred Income Shareholders with growth
to cover their predetermined capital entitlement and to provide
them with an attractive income yield, with the opportunity for
income growth and to provide Ordinary Sharholders with the potential
for geared capital growth from the Group's investment portfolio
as well as a high level of income with the opportunity of income
May was a mixed month for global media stocks,
as better sector fundamental news in the US was offset by poor
sentiment in the broader markets on the back of geopolitical concerns.
Media, as a high beta sector, is vulnerable to the vicissitudes
of the broader market despite a brighter intra-sector backdrop.
Accordingly, the Dow Jones Stoxx 600 Media Index fell 4.1 per
cent in local currency (down 1.2 per cent in Sterling terms) whilst
the Bloomberg US Media Index rose 1.9 per cent in local currency
(up 1.8 per cent in Sterling terms).
The US media sector is providing the lead in
terms of evidence of the beginnings of an advertising recovery.
This is to be expected as the US led the sector into the advertising
recession. Again, as would be expected, the sub-sectors that fell
first, also appear to be recovering earliest. US radio, followed
by network TV, and most recently, by billboard have all shown
encouraging signs. The all-important "upfront" advertising
negotiations for the year ahead went surprisingly well. As one
commentator put it, "the buyers blinked first". As such,
CPMs look 10 per cent higher than last year. Particular strength
has been seen from auto, wireless and entertainment/movie buyers.
Clear Channel, the radio and billboard group, reported a very
encouraging set of Q1 figures.
In Europe, the main development over the months
was the release of the draft Communications Bill in the UK. This
was surprising in its breadth of proposed changes to legislation,
including allowing; joint ownership of national radio and TV licenses;
joint ownership of regional TV and local radio licenses in the
same area; ownership of C5 by newspaper publishers with >20
per cent of the national newspaper market. This removes all foreign
ownership and cross-media restrictions on ownership, and effectively
makes all UK radio companies, and the ITV companies, potential
acquisition targets for international groups looking to diversify,
or gain a foothold in Europe.
In the short-term, the sector remains vulnerable
to sentiment in the broader market. Geopolitical risk remains
the key concern, and the sector would be clearly hit hard by further
terrorist attacks, or war in the Middle East. These events are,
by their nature, unforecastable, and as such we must continue
to focus on the sectors fundamentals. On this basis, we see nothing
that suggests that this is an atypical cycle. Advertising is a
cyclical beast, and macro data and newsflow from the companies
themselves, suggests that some recovery is being witnessed from
the depressed levels of last year. Whilst we do not predict a
"boom" recovery, we think the market is being too negative
in its estimation of the effect of operational leverage on the
earnings profile of cyclical companies in the sector. Just as
earnings collapsed for these companies when advertising slumped,
so they should see a good upswing, even on a relatively modest
recovery. The exceptions are the advertising agencies, which owing
to the fee-based nature of their business were somewhat protected
on the downside, but equally should not benefit on the upside
to the same extent as their more leveraged companies, the media
The Technology and Income Trust Limited
The investment objective is to provide Income
Shareholders with a preferred income and capital entitlement and
to provide Ordinary Shareholders with a high income and the potential
for capital growth from a portfolio invested in a combination
of shares in companies involved in technology sector and preference,
fixed interest and other high yielding securities.
On 3 December 2001 the Technology and Income
Trust Ltd made a recommended offer for the entire share capital
of European Technology and Income Trust. The offers were declared
unconditional in all respects subject to admission. Following
admission of the New Securities issed in connection with the Offers
made for The European Technology and Income Company Limited and
the Placings, the Company has repaid £54.5 million of its
loans from Bank of Scotland.
Gilts strong particularly shorter
An extraordinary month in the securities markets
with extreme volatility in equity markets and a flight to quality
in bond markets. Gilts were notably strong in shorter dates as
a continuation of historically low base rates seems more likely
despite the buoyancy of the housing market. Investment grade corporate
bonds were more subdued not matching the gilt strength and displaying
volatility on company specific news. High yield bonds were generally
very nervous on worries about the overall economic background.
In currency markets sterling was surprisingly strong gaining nearly
2 per cent versus the dollar and over 3 per cent versus the euro.
Equities were very weak and volatile in the
absence of serious buying interest. Over the month the FTSE 100
Index lost nearly 9 per cent, however the fall was nearly 20 per
cent at one stage before a late rally. Income shares in the troubled
split capital sector could find no support in the face of the
poor market background and actual insolvency of a number of trusts.
The market continued its downward trend in July,
the Nasdaq Composite Index falling 9.2 per cent in US dollar terms
but 11.3 per cent in sterling terms, as the US dollar weakened
substantially during the month. The market has become unnerved
because of a number of issues highlighted below.
Firstly the US consumer, who up until now has
proved relatively resilient, is indicating some nervousness as
evidenced by poor consumer confidence statistics. Also, GDP for
the second quarter came in at 1.1 per cent YoY, well below the
expected value of 2.3 per cent, whilst prior GDP estimates were
also substantially reduced. Accounting issues continue to plague
the market, whilst there is a growing acceptance that US stock
options will have to be expensed in some form, which would have
negative effect on reported earnings.
In terms of company specific news, Taiwan Semiconductor
have cut their capital expenditure plans by 20 per cent. This
was partly due to a big decline in volumes from their largest
customer Nvidia, but also due to a more general malaise in the
semiconductor market, where utilisation rates have fallen to around
75 per cent. The company is regarded as a proxy for the industry,
and the reduction in their spending plans took its toll on semiconductor
equipment vendors who were amongst the worst performers of the
On a positive note, having shunned technology
stocks, Warren Buffett has invested $500 million in Level 3 Communications,
a telecom services provider. The cash injection has enabled Level
3 to make an offer to buy competitor Williams Communications.
This consolidation is an encouraging sign and hopefully there
will be more M&A from the technology sector, and an interesting
call from a deep value investor.
The bulk of US companies reported second quarter
earnings during July. These were largely in line with expectations,
but guidance for next quarter (which is seasonally weak) has been
cautious, whilst few companies have been willing to project estimates
for 2003. The gaming sector which includes Activision, Electronic
Arts, Sony & Nintendo have remained resilient, whilst the
storage stocks have also guided relatively positively, indicating
that there are potential opportunities for the patient, long-term
St. David's Investment Trust PLC
The St. David's Investment Trust PLC aims to
provide high quarterly income with potential for capital and income
growth principally through investment in UK blue-chip and investment
trust income shares and euro denominated securities.
Following poor performance in June, the stockmarket
continued in its downward trend in July posting a further negative
total return of10.4 per cent. Fears that US economic recovery
was faltering, amidst the concerns of poor accounting practices
hit investor confidence sharply.
For the first time in a long while Telecom Services
outperformed the markets, largely owing to the continued rotational
sector selling. Insurance stocks remained weak on fears of weak
solvency ratios and mining stocks in particular fell sharply on
fears of a future divestment of South African assets in support
of Black Empowerment.
During the month, your Board continued discussions
with its bankers who have been very supportive of the Company
during the latest stockmarket falls. It has been agreed that the
St. David's Trust will repay debt to the value of £30 million
thus reducing the gearing of the Company. St. David's shareholders
should be aware that, currently, as a result of the decline in
the portfolio asset values and the level of bank debt and associated
swap breakage costs, particularly since 31 May 2002, the Company's
Zero Dividend Preference Shares 2003, Zero Dividend Preference
Shares 2008 and Preferred Annuity Shares do not have any value
attributable to them.
Jove Investment Trust PLC
The aim of the Company is to achieve a long-term
capital and income growth from a portfolio of high yielding securities.
A split-capital trust. The ZDPs are entitled
to a fixed rate of growth whereby the asset value of 50p per ZDP
rises by monthly increments to 100p at redemption on 1 November
2004. Income shareholders are entitled to all the available income
and to repayment of 50p/sh after the repayment of the ZDP, plus
retained earnings when the Company is wound up. Capital shareholders
get the remaining assets. A Geared Equity Unit comprises one income
share and one capital share. The Capital shares currently have
an NAV per share of 0p, and the Income share asset value per share
is also 0p.
July was another weak month for UK Equities,
with the FTSE All Share index falling by 9.2 per cent on the month.
Concern over global liquidity, US corporate governance and fears
over double dip recession in the US were behind this weakness.
Within the market capitalisation ranges of the UK equity market,
blue chip stocks outperformed both Mid Cap and Small Cap indices.
In general, defensive sectors outperformed and
those companies more exposed to global economic growth struggled.
The most striking performance of the month was the resurgence
of the telecommunications sector. The banking sector performed
better through the month, reflecting strong yield attractions
and relative profit security. Industrial stocks continued to suffer
from ongoing sterling strength.
The UK yields fell through July with the curve
exhibiting a bull steepening at the short end over the coure of
the month. The yield on the 2 year Gilt ended the month at 4.044
per cent whereas the yield on the 10 Gilt ended the month at 4.852
per cent. The 2's to 30's yield spread increased from +10bp to
+70bp over the course of the month.
The continued weakness in split capital markets
during July has seen a further deterioration in performance of
the sector. This has led to a number of trusts with assets of
close to or less than their debt. In this situation a number of
investment trust boards have decided to suspend the trading in
their shares. The sector has continued to see dividend cuts/suspensions
and repayments of debt. Liquidity is very limited and sentiment
Allocation of Expenses and Interest at
31 July 2002
Capital Structure at 31 July 2002
|Zero Dividend Preference shares||16,991,695
|Geared Equity Units*||[11,327,796]
* Comprising one Income and one Capital share.
Source: Aberdeen Asset Managers Ltd.
|Year end||28 February
|Annual General Meeting||June
|Launch date||January 1972
|Winding up date||November 2004
|SEAQ Page||51526 cap|
|SEAQ Page||51527 inc|
|SEAQ Page||51531 geared unit
|SEAQ Page||48168 zdp|
|Market makers||CSCS, HSBC, UBSW, CAZN, MLSB
The following announcement was declared to the Stock Exchange
on 14 March 2002.
As anticipated in the Chairman's Statement with the Annual
Report and Financial Statements dated 4 May 2001 the Board of
Jove Investment Trust plc has declared a ninth interim dividend
for the year ended 28 February 2002 of 1p per income share. It
is not the Board's intention to recommend any further dividend
for that year. The total of the nine interim dividends paid is
11p per income share (year to 28 February 2001: the same).
The ninth interim dividend will be paid on 25 May 2002 to
shareholders on the register at the record date of 22 March 2002
(with a provisional ex-dividend date of 20 March 2002).
Due to the unusual uncertainty of the amount of income likely
to be received from the Company's portfolio in the current year
just begun, the directors have decided to revert to the payment
of quarterly dividends with effect from 1 March 2002. The first
quarterly dividend payable for the current year to 28 February
2003 will therefore be declared in August 2002. The Board will
be reviewing the level of dividend distribution for the year ending
28 February 2003 in the light of the circumstances at that time.
It is the intention of the Board to distribute available
earnings and the Company's revenue reserves over the period until
the planned wind-up date of the Company in November 2004.
The following announcement was declared to the stock exchange
on 28 June 2002.
The Board of Jove Investment Trust PLC was today (28 June
2002) declared a first interim dividend for the quarter ended
31 May 2002 in respect of the year ending 2003 of 1p net per income
share. The fund interim dividend will have a record date of 12
August 2002 and will be paid on 31 August 2002 to shareholders
on the registration at record date.