Final Results

Witan Inv Tst PLC 31 January 2001 WITAN INVESTMENT TRUST PLC HENDERSON GLOBAL INVESTORS FOR IMMEDIATE RELEASE ON WEDNESDAY 31 JANUARY 2001 31 January 2001 WITAN INVESTMENT TRUST PLC Unaudited Preliminary Results for the Year Ended 31 December 2000 Financial Highlights (Audited) Year ended Year ended 31 December 2000 31 December 1999 Per Ordinary Share: pence pence Net asset value 521.5 560.7 Earnings 7.46 7.54 Dividends - interim and final (net) 7.75 7.60 Extracts from the Chairman's Statement: Overview Our net asset value was down over the year, but was within a whisker of our benchmark (-7.0% v -6.9%); on the other hand our market price compensated for that fall, and ended up fractionally higher than it was at the beginning of the year. We are recommending a marginally higher final dividend than last year but as you have already been warned some of it will come from revenue reserves. Your Board also decided during the year to raise fixed long-term gearing; to buy in more ordinary shares; to continue our successful marketing campaign; to apply three-quarters of the Trust's management fees and interest charges to capital from 2001, and to conclude an agreement with our Managers on their remuneration for the next three years. Ratings The first question you might raise is why investment trusts have experienced such a widespread reduction in discounts. The second question is why did our discount narrow more than most, and give shareholders shelter from the fall in world markets, when our own underlying portfolio bore the full brunt of it. -MORE- -2- WITAN INVESTMENT TRUST PLC Unaudited Preliminary Results for the Year Ended 31 December 2000 Extracts from the Chairman's Statement cont/d... Several factors contributed to this - general misapprehension and uncertainty about the value of individual stocks prompted people to buy international investment trusts to diversify their portfolios at a discount to markets; the removal of weak holders by the buy-back of ordinary shares also helped. In Witan's case, investor sentiment has improved due to the recognition of our good long-term performance as well as our low fixed annual management charge (with a benchmark performance fee) which has allowed us to implement our successful marketing campaign with an annual budget of £1.3 million. The introduction of more fixed gearing made our ordinary shares more attractive to some, although the subsequent closing of the discount has had an almost equal capital and income 'de-gearing' effect. Dividends The third question to examine together is the dividend and what our future distribution policy is likely to be. On the face of it the prospects for dividend income are pretty grim. Our recommended final dividend of 4.25 pence per share, making 7.75 pence per share for the year, already carves into our revenue reserves and there would have been an even larger swathe had we not received unexpectedly large 'special' dividends from companies such as Caledonia, Allied Zurich, Blue Circle and Smith & Nephew. To continue to maintain our dividend next year would, on forward estimates, make further deep inroads into our reserves if we were to continue to stick with our existing investment and accounting policies. Moreover, we have hesitated in the past about raising further long-term fixed borrowings because of the adverse effect it would have on the amount of distributable income available to shareholders. Clearly the moment had come to re-examine our options and to reassess our policies. Over the last ten years three-quarters of shareholders' total return has come from capital; our best expectations are that this will continue to be the case. We have therefore decided that in future we will apply three-quarters of all management fees and interest to capital to allow us greater freedom to continue our progressive dividend policy from the remaining income stream. Ideally this is not what we would choose, as the old investment disciplines can get watered down, but the lines between income and capital have become somewhat blurred and many of our shareholders, whether life-tenants, the retired or non-taxpayers, depend on a rising dividend income consistent with, as far as possible, the rise in the cost of living. -MORE- -3- WITAN INVESTMENT TRUST PLC Unaudited Preliminary Results for the Year Ended 31 December 2000 Extracts from the Chairman's Statement cont/d... Gearing Witan is the first UK investment trust to be given an AA+ rating by Standard & Poor's which enabled us to raise a £100 million 25 year Debenture on the finest terms. The terms were such that, when compared to the overall rate of return we had achieved on funds over the last decade, there should be a net benefit to ordinary shareholders over the life of the borrowing. Protection of Assets After so long a run of 'bull' markets the Board has spent time in examining ways of protecting the market value of shareholders' assets without throwing away too much upside potential from good stock selection. We believe that, by containing costs and with a judicial mix of gearing, share redemption, marketing and moving some money into 'absolute return funds', we have in small measure achieved this without compromising our investment stance. In our Manager's report you will find greater detail on these initiatives, but your attention should be drawn to our amazingly successful marketing campaign where Witan captured over 6% of the investment trust savings market through its Witanwisdom and Jump campaigns. Managers Half-way through the year, Christopher Clarke handed over his day-to-day responsibilities as head of our investment management team to James Robinson. The reason the transition went so smoothly was in no small measure due to the team building and control procedures which Christopher had instituted for us at Henderson Global Investors over the previous seven years, which provided the essential investment disciplines without snuffing out all individual enterprise. Under his guidance Witan had a very successful record and, personally, I would like to pay tribute for all he did for us and to say how delighted I am he remains on our Board. During the year we reviewed again the annual fees paid to our Manager to cover the next three years, based on our previous arrangements of a fixed annual fee (adjusted annually by the appropriate index) and a performance fee. You will remember we had already established in 1998 that an 'ad valorem' fee was not an appropriate measure for a fund the size of Witan and that we wanted to employ our own marketing manager. The Board recognised however that there was now a new scale of remuneration for individual investment managers, who increasingly command an international price, and that fact would have to be built into our calculations if we were to continue to attract the best talent. We concluded that we should retain a fixed fee, agreed at £4 million annually (subject to index adjustment), but increase -MORE- -4- WITAN INVESTMENT TRUST PLC Unaudited Preliminary Results for the Year Ended 31 December 2000 Extracts from the Chairman's Statement cont/d... our performance fee to a maximum of £1.5 million per annum, based on an outperformance of 1.5% over our benchmark as before, but at half this rate (with a cap of £0.75 million) if our asset value per share falls over the year but the Manager nevertheless outperforms the benchmark. Prospects After a challenging year, this is not the moment to become despondent; there are great investment opportunities around but stock selection will be key and the best way to play the game is from inside a well managed, diversified international portfolio. Lord Faringdon -MORE- -5- WITAN INVESTMENT TRUST PLC Unaudited Preliminary Results for the Year Ended 31 December 2000 Statement of Total Return (incorporating the revenue account) for the year ended 31 December 2000 (Audited and restated)* Year ended 31 December 2000 Year ended 31 December 1999 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Total capital (losses)/ -(153,837)(153,837) - 507,558 507,558 gains from investments Income from fixed asset 37,827 - 37,827 36,818 - 36,818 investments Other interest receivable 1,965 - 1,965 2,688 - 2,688 and similar income ---------- ---------- ---------- ---------- ---------- ---------- Gross revenue and capital 39,792 (153,837)(114,045)39,506 507,558 547,064 (losses)/gains Management fee (3,913) - (3,913) (4,370) - (4,370) Other administrative (2,460) - (2,460) (1,935) - (1,935) expenses ---------- ---------- ---------- ---------- ---------- ---------- Net return/(loss) on ordinary activities before interest payable and 33,419(153,837) (120,418)33,201 507,558 540,759 taxation Interest payable (5,311) - (5,311) (4,219) - (4,219) ---------- ---------- ---------- ---------- ---------- ---------- Net return/(loss) on ordinary activities before taxation 28,108(153,837) (125,729)28,982 507,558 536,540 Taxation on net return on (963) - (963) (710) - (710) ordinary activities ---------- ---------- ---------- ---------- ---------- ---------- Net return/(loss) on ordinary activities after taxation 27,145(153,837) (126,692)28,272 507,558 535,830 Dividends - preference (83) - (83) (83) - (83) shares ---------- ---------- ---------- ---------- ---------- ---------- Available for ordinary 27,062(153,837) (126,775)28,189 507,558 535,747 shareholders ---------- ---------- ---------- ---------- ---------- ---------- Dividends - ordinary shares Interim payment of 3.50p (12,703) - (12,703)(13,082) - (13,082) (1999: 3.50p) Final proposed of 4.25p (14,947) - (14,947)(15,084) - (15,084) (1999: 4.10p) ---------- ---------- ---------- ---------- ---------- ---------- (27,650) - (27,650)(28,166) - (28,166) ---------- ---------- ---------- ---------- ---------- ---------- Transfer (from)/to (588)(153,837)(154,425) 23 507,558 507,581 reserves ===== ====== ===== ===== ====== ====== Return/(loss) per 7.46p (42.43p) (34.97p) 7.54p 135.76p 143.30p ordinary share ===== ====== ===== ===== ====== ====== The revenue columns of this statement represent the revenue accounts of the Company. * Restated for the change in accounting policy (see note 5). -MORE- -6- WITAN INVESTMENT TRUST PLC Unaudited Preliminary Results for the Year Ended 31 December 2000 Balance Sheet at 31 December 2000 (Audited) 2000 1999 £'000 £'000 Fixed asset investments Listed in the United Kingdom 1,119,159 1,196,593 Listed abroad 773,638 928,713 Unquoted at directors' valuation 30,217 9,665 ------------ ------------- 1,923,014 2,134,971 ------------ ------------- Current assets Debtors 6,081 5,132 Cash at bank and short term deposits 69,657 9,653 ------------ ------------- 75,738 14,785 Creditors: amounts falling due within one year (18,065) (18,217) ------------ ------------- Net current assets/(liabilities) 57,673 (3,432) ------------ ------------- Total assets less current liabilities 1,980,687 2,131,539 Creditors: amounts falling due after more than one year (144,003) (46,000) Provisions for liabilities and charges - (74) ------------ ------------- Total net assets 1,836,684 2,085,465 ======= ======== Capital and reserves Called-up share capital 90,476 95,431 Share premium 16,237 16,237 Other reserves Redemption reserve 5,905 950 Capital reserve - realised 1,127,783 1,019,147 Capital reserve - unrealised 583,544 940,373 Revenue reserve 12,739 13,327 ------------ ----------Shareholders' funds (including non-equity interests of £ 1,836,684 2,085,465 2,555,000) ======= ======== Net asset value per ordinary share 521.5p 560.7p ======= ======== - MORE - -7- WITAN INVESTMENT TRUST PLC Unaudited Preliminary Results for the Year Ended 31 December 2000 Cash Flow Statement For the year ended 31 December 2000 (Audited) 2000 2000 1999 1999 £'000 £'000 £'000 £'000 Net cash inflow from operating activities 30,478 32,941 Servicing of finance Debenture and exchangeable bond interest (3,914) (4,603) paid Bank and loan interest paid (1,125) (142) Dividends paid on preference shares (83) (83) ---------- ---------- Net cash outflow from servicing of finance (5,122) (4,828) Taxation UK tax recovered/(paid) 625 (30) Overseas tax recovered 398 450 ---------- ---------- Net tax recovered 1,023 420 Financial investment Purchase of investments (714,370) (653,675) Sale of investments 773,132 700,369 Cash outflow from forward exchange contracts - (338) ---------- ---------- Net cash inflow from financial investment 58,762 46,356 Equity dividends paid (27,787) (28,282) Management of liquid resources Cash (placed on)/recalled from short term (20,000) 28,255 deposits ---------- ---------- Net cash inflow before financing 37,354 74,862 Financing Buy-back of ordinary shares (94,356) (15,734) Repayment of currency loan facility - (45,078) Redemptions of 61/4% exchangeable bond 2008 - (24,521) Issue of 6.125% secured bonds 2025 98,703 - Issue expenses paid in respect of 6.125% (633) - secured bonds 2025 ----------- ---------- Net cash inflow/(outflow) from financing 3,714 (85,333) ---------- ---------- Increase/(decrease) in cash 41,068 (10,471) ====== ====== Reconciliation of net cash flow to movement in net debt Increase/(decrease) in cash as above 41,068 (10,471) Cash outflow/(inflow) from liquid resources 20,000 (28,255) Cash (inflow)/outflow from debt financing (98,070) 69,599 ---------- ---------- Change in net debt resulting from cash flows (37,002) 30,873 Exchange movements (1,064) (2,637) Creditor for issue expenses of secured bonds 67 - ---------- ---------- (37,999) 28,236 Net debt at 1 January (36,347) (64,583) ---------- ---------- Net debt at 31 December (74,346) (36,347) ====== ====== - MORE - -8- WITAN INVESTMENT TRUST PLC Unaudited Preliminary Results for the Year Ended 31 December 2000 Notes 1. Share Buy-Backs During the year ended 31 December 2000 the Company made authorised market purchases for cancellation of 19,820,850 of its own ordinary shares of 25p each. 2. Issued Share Capital At 31 December 2000 there were 351,682,244 ordinary shares in issue (1999: 371,503,094). 3. Dividend A final dividend of 4.25p per share has been recommended, payable on 2 April 2001. The record date for the dividend will be 9 March 2001 and the ex-dividend date will be 7 March 2001. 4. Return/(Loss) per Ordinary Share Revenue return per ordinary share is based on earnings attributable to the ordinary shares of £27,062,000 (1999: £28,189,000) and on the weighted average number of ordinary shares in issue of 362,573,612 (1999: 373,863,778). Capital return per ordinary share is based on net capital losses for the year of £153,837,000 (1999: gains of £507,558,000) and on the weighted average number of ordinary shares in issue, as shown above. 5. Change in Accounting Policy In accordance with Financial Reporting Standard 16, Current Taxation ('FRS 16'), which became effective for accounting periods ending on or after 23 March 2000, investment income is shown net of the related tax credits. The comparative figures for the year ended 31 December 1999 have been restated accordingly. Adoption of FRS 16 has no effect on the revenue or capital returns per ordinary share, nor on the net asset value per ordinary share. 6. 2000 Accounts The preliminary figures for the year ended 31 December 2000 are an extract from the Company's latest accounts and do not constitute statutory accounts as defined by section 240 of the Companies Act 1985. These accounts have not yet been delivered to the Registrar of Companies, nor have the auditors yet reported on them. 7. 1999 Accounts The figures and financial information for the year ended 31 December 1999 are extracted from the latest published accounts of the Company and do not constitute the statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 237(2) or section 237(3) of the Companies Act 1985. - MORE - -9- WITAN INVESTMENT TRUST PLC Unaudited Preliminary Results for the Year Ended 31 December 2000 8. Annual General Meeting Copies of the Report and Accounts will be posted to shareholders in late February 2001 and will be available thereafter from the Secretary at 4 Broadgate, London EC2M 2DA. The Annual General Meeting will be held at Drapers' Hall, Throgmorton Avenue, London EC2N 2DQ on Friday 23 March 2001 at 2.15 pm. -ENDS- For further information, please contact: James Budden Witan Investment Trust plc Tel: 020 7410 3121 Gordon Puckey Quill Communications Tel: 020 7618 7943

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