Final Results

Witan Inv Tst PLC 29 January 2002 WITAN INVESTMENT TRUST PLC HENDERSON GLOBAL INVESTORS 29 January 2002 WITAN INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2001 Financial Highlights (Restated*) Year ended Year ended 31 December 2001 31 December 200 Per Ordinary Share: pence pence Net asset value 429.3 521.5 Earnings 8.40 8.95* Dividends - interim and final 7.95 7.75 *See note 2 on page 7 Extracts from the Chairman's Statement: General With few exceptions shareholders in public quoted companies had a universally unrewarding experience in 2001. Shareholders in Witan lost 17.7% of their underlying asset value, which mercifully was accompanied by a constant market discount and by a small rise in dividend. At first sight neither of these consolations gives cause for celebration as the former was not specific to Witan but applied to all generalist investment trusts and the latter has become the norm for those who have changed their accounting policy, as we did at the end of last year. On closer inspection the picture is rather more encouraging as historically discounts tend to rise in falling markets but our successful marketing campaign contained ours more than most. Furthermore, by applying charges in a more equitable way between capital and income we were able to meet our commitment, in an unfriendly income environment, to deliver to shareholders when possible an increase in dividend in line with inflation. Performance Analysis It is important for directors, managers and shareholders to know and be able to identify the reasons for underperforming our benchmark. Attribution is not always straightforward but it is a worthwhile exercise, particularly over a longer period than our accounting year. The following table gives total return figures, on a relative basis, over periods of one and three years. - 2 - WITAN INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2001 One Three year years Witan Total Return* -16.4 6.0 Benchmark Total Return -13.6 4.1 Relative performance -2.8 1.9 Attribution: Stock Selection 3.5 5.9 UK Mainstream UK Specialist Growth -2.5 -2.2 North America -1.0 -1.9 Europe excluding UK - 3.1 Japan 0.1 2.0 Pacific excluding Japan -0.4 - Emerging Markets -0.1 -0.3 -0.4 6.6 Geographical Asset Allocation (including gearing) -2.4 -4.7 *Source: AITC The key to good performance is stock selection: it transcends everything else. Gearing on the other hand is detrimental to performance in falling markets and the Board's decision to increase long-term borrowings last year has exacerbated our short-term underperformance this year, which should not strictly be held against our managers' results. We remain confident that our modest level of borrowings will be beneficial to shareholders over the 25 year life of the new secured bonds, which have been attributed an AA+ rating again by Standard & Poor's. Marketing As you are aware, we have committed up to £1.5 million in each of the last two years to a combination of the AITC's 'its' generic campaign and our own Witan specific marketing. By any standard our efforts have been very successful and individual shareholders, as opposed to institutional, have increased from 46% to 62% of our shareholder base. We would like to keep the momentum going in order to achieve our target of 75% as we believe it will help to reduce 'discount volatility' and it will help keep us in the forefront of the industry as new products appear and competition for savings grows. Conflicts of Interest There is some misconception about how potential conflicts of interest are dealt with by the Board and how we try to resolve them, particularly where members of the Board or the managers may be wearing two hats. Our rule is very simple - any investment 3 - WITAN INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2001 decision which may give rise to claims of partiality is scrutinised only by those members who have no personal or corporate interest in the outcome. Moreover, there is some curious belief that owning shares in another quoted closed-end investment trust managed by Henderson Global Investors confers some extra reward on our Manager which is palpably untrue. Nonetheless we subject any such purchase to independent scrutiny and, if we were to invest in an open-ended vehicle managed by them, we would expect no front-end load and no duplication of annual management charge. Likewise during the year the independent directors had a separate meeting to consider the early redemption terms of the Cazenove loan stock and whether or not to participate in the placing offer of its unquoted equity. A fully documented response was given to and accepted by the Board as not only are Cazenove the Company's stockbrokers but two Witan directors were either a partner or a retired partner. Directors At the AGM Robin Inchyra will not be seeking re-election and will be retiring from the Board after 23 years of indefatigable service to shareholders. His longevity on the Board may appear 'politically' incorrect to some. To us, as Chairman of the Audit Committee and as valuation arbiter of our unquoted portfolio, he has been scrupulous and conscientious; in our deliberations we benefited from his manner, judgement and recollection. He will be seriously missed at our Board meetings. Prospects Over the last eighteen months, and more particularly since 11 September, people's perception of risk has changed and their attitude to it is different. Slower economic growth and even the possibility of deflation, combined with the uncertainty engendered by terrorism, have made people much more risk averse. To some extent the smokescreen induced by Central Banks aggressively cutting interest rates has disguised the true picture. The splurge in consumer spending and cheap borrowing has prompted a partial recovery in stock markets which is a natural knee-jerk reaction to events but carries a rather hollow ring to it. The supposition that interest rates going down automatically makes equity prices rise looks a little too simplistic at this juncture of the economic cycle - ask the Japanese for their view. The crux of the matter for markets is not whether interest rates can decline still further; it is how good corporate profits and consumer confidence are likely to be. The fly in the ointment, as far as a speedy and painless recovery is concerned, is the serious overcapacity in a great number of industries from motor cars to insurance to investment banking to travel, as well as the underfunded infrastructure of railways, roads, health, schools and even corporate pension schemes. The full cost of this has yet to fall on shareholders, employees and taxpayers. We believe it will be sensible to keep pretty close to shore until a sustainable recovery of earnings becomes more visible. Lord Faringdon Chairman 28 January 2002 - 4 - WITAN INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2001 Statement of Total Return (incorporating the revenue account) (Restated*) Year ended 31 December 2001 Year ended 31 December 2000 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Total capital losses from investments - (316,911) (316,911) - (153,837) (153,837) Income from fixed asset investments 35,894 - 35,894 37,827 - 37,827 Other interest receivable and similar 2,369 - 2,369 1,965 - 1,965 income ----------- ----------- ----------- ----------- ----------- ----------- Gross revenue and capital losses 38,263 (316,911) (278,648) 39,792 (153,837) (114,045) Management fee (1,022) (3,065) (4,087) (978) (2,935) (3,913) Other administrative expenses (2,645) - (2,645) (2,460) - (2,460) ----------- ----------- ----------- ----------- ----------- ----------- Net return/(loss) on ordinary activities before interest payable and taxation 34,596 (319,976) (285,380) 36,354 (156,772) (120,418) Interest payable (2,533) (7,599) (10,132) (1,328) (3,983) (5,311) ----------- ----------- ----------- ----------- ----------- ----------- Net return/(loss) on ordinary activities before taxation 32,063 (327,575) (295,512) 35,026 (160,755) (125,729) Taxation on net return on ordinary (2,429) 1,514 (915) (2,485) 1,522 (963) activities ----------- ----------- ----------- ----------- ----------- ----------- Net return/(loss) on ordinary activities after taxation 29,634 (326,061) (296,427) 32,541 (159,233) (126,692) Dividends - preference shares (83) - (83) (83) - (83) ----------- ----------- ----------- ----------- ----------- ------------ Attributable to the ordinary shareholders 29,551 (326,061) (296,510) 32,458 (159,233) (126,775) ----------- ----------- ----------- ----------- ----------- ----------- Dividends - ordinary shares Interim payment of 3.60p (2000: 3.50p) (12,654) - (12,654) (12,703) - (12,703) Final proposed of 4.35p (2000: 4.25p) (15,298) - (15,298) (14,947) - (14,947) ----------- ----------- ----------- ----------- ----------- ----------- (27,952) - (27,952) (27,650) - (27,650) ----------- ----------- ----------- ----------- ----------- ----------- Transfer to/(from) reserves 1,599 (326,061) (324,462) 4,808 (159,233) (154,425) ====== ====== ====== ====== ====== ====== Return/(loss) per ordinary share 8.40p (92.71)p (84.31)p 8.95p (43.92)p (34.97)p ====== ====== ====== ====== ====== ====== The revenue columns of this statement represent the revenue accounts of the Company. *Restated for the change in accounting policy (see note 2 on page 7) - 5 - WITAN INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2001 Balance Sheet at 31 December 2001 (Restated*) 2001 2000 £'000 £'000 Fixed asset investments Listed in the United Kingdom 933,538 1,119,159 Listed abroad 657,787 773,638 Unquoted at directors' valuation 32,586 30,217 ------------- ------------- 1,623,911 1,923,014 ------------- ------------- Current assets Debtors 6,154 6,081 Cash at bank and short term deposits 45,931 69,657 ------------- ------------- 52,085 75,738 Creditors: amounts falling due within one year (19,677) (18,065) ------------- ------------- Net current assets 32,408 57,673 ------------- ------------- Total assets less current liabilities 1,656,319 1,980,687 Creditors: amounts falling due after more than one year (144,097) (144,003) ------------- ------------- Total net assets 1,512,222 1,836,684 ======= ======= Capital and reserves Called up share capital Preference shares 2,555 2,555 Ordinary shares 87,921 87,921 Share premium 16,237 16,237 Other reserves Redemption reserve 5,905 5,905 Capital reserve - realised 1,072,787 1,122,387 Capital reserve - unrealised 307,083 583,544 Revenue reserve 19,734 18,135 ------------- ------------- Shareholders' funds (including non-equity interests of £2,555,000) 1,512,222 1,836,684 ======= ======= Net asset value per ordinary share 429.3p 521.5p ======= ======= *Restated for the change in accounting policy (see note 2 on page 7) - 6 - WITAN INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2001 Cash Flow Statement 2001 2001 2000 2000 £'000 £'000 £'000 £'000 Net cash inflow from operating activities 31,543 30,478 Servicing of finance Debenture and secured bond interest paid (10,035) (3,914) Bank and loan interest paid (17) (1,125) Dividends paid on preference shares (83) (83) ------------ ------------ Net cash outflow from servicing of finance (10,135) (5,122) Taxation UK tax recovered 73 625 Overseas tax recovered 500 398 ------------ ------------ Net tax recovered 573 1,023 Financial investment Purchase of investments (585,091) (714,370) Sale of investments 567,686 773,132 Cash inflow from forward exchange contracts 185 - ------------ ------------ Net cash (outflow)/inflow from financial investment (17,220) 58,762 Equity dividends paid (27,601) (27,787) Management of liquid resources Cash recalled from/(placed on) short term deposits 5,000 (20,000) ------------ ------------ Net cash (outflow)/inflow before financing (17,840) 37,354 Financing Buy-back of ordinary shares - (94,356) Issue of 6.125 per cent. secured bonds 2025 - 98,703 Issue expenses paid in respect of 6.125 per cent. secured bonds 2025 (56) (633) ------------ ------------ Net cash (outflow)/inflow from financing (56) 3,714 ------------ ------------ (Decrease)/increase in cash (17,896) 41,068 ======= ======= Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash as above (17,896) 41,068 Cash (inflow)/outflow from liquid resources (5,000) 20,000 Cash outflow/(inflow) from debt financing 56 (98,070) ------------ ------------ Change in net debt resulting from cash flows (22,840) (37,002) Exchange movements (830) (1,064) Net (increase)/decrease in valuation of debt (150) 67 ------------ ------------ (23,820) (37,999) Net debt at 1 January (74,346) (36,347) ------------ ------------ Net debt at 31 December (98,166) (74,346) ======= ======= - 7 - WITAN INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2001 Notes : 1. Return/(loss) per ordinary share The revenue return per ordinary share is based on the earnings attributable to the ordinary shareholders of £29,551,000 (2000: £32,458,000 as restated) and on the weighted average number of ordinary shares of 25p each in issue during the year of 351,682,244 (2000: 362,573,612) The capital return per ordinary share is based on the net capital losses for the year of £326,061,000 (2000: losses of £159,233,000 as restated) and on the weighted average number of ordinary shares of 25p each in issue during the year, as stated above. 2. Change in accounting policy With effect from 1 January 2001 investment management fees and interest payable, which previously were charged wholly to the revenue account, are allocated 25% to revenue and 75% to capital. The comparative figures for the year ended 31 December 2000 have been restated accordingly. The effect of this change is that the net revenue on ordinary activities after taxation for the two periods is increased by £9,150,000 and £5,396,000 respectively. 3. Issued Share Capital The number of ordinary shares of 25p each in issue at 31 December 2001 was 351,682,244 (2000: 351,682,244). 4. Dividend A final dividend of 4.35p per share has been recommended, payable on 2 April 2002. The record date for the dividend will be 8 March 2002 and the ex-dividend date will be 6 March 2002. 5. 2001 Accounts The preliminary figures for the year ended 31 December 2001 are an extract from the Company's latest accounts for that period 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. 6. 2000 Accounts The figures and financial information for the year ended 31 December 2000 are an extract from the latest published accounts of the Company (restated as explained in note 2 above) 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. 7. Annual Report and Annual General Meeting The full annual report and accounts will be posted to shareholders in February 2002 and copies will be available from the Secretary at the Company's Registered Office, 4 Broadgate, London EC2M 2DA. The Annual General Meeting will be held at 7.00 pm on Tuesday 12 March 2002 at The Royal Horticultural Halls & Conference Centre. For further information please contact: James Budden Witan Investment Trust plc Telephone: 020 7818 3121 or Gordon Puckey Quill Communications Telephone: 020 7618 7943 This information is provided by RNS The company news service from the London Stock Exchange

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