Final Results

RIT Capital Partners PLC 20 May 2004 20 May 2004 PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 31 MARCH 2004 • A rewarding year for RITCP shareholders. • Net worth increased by £307.6 million. • Net asset value per share increased by 45.6% • Share price rose by 55.5% The following is the Chairman's Statement which will appear in the Annual Report. The year to 31 March 2004 has been a rewarding one. The net worth of your Company has increased by £307.6 million. Net asset value per share increased by 45.6% from 430.2p to 626.3p (before deducting the proposed dividend). Over the same period, the Morgan Stanley Capital International Index (in Sterling), the FTSE All-Share Index and the Investment Trust Net Assets Index increased by 21.7%, 26.6% and 33.5% respectively. Your Company's share price did better, rising by 55.5% during the year, as the discount to net asset value narrowed from 13.6% to 7.3%. This strong performance came about as a result of increased exposure to equities, good results from our external managers and successful stock selection in both the quoted and unquoted sections of the internally managed portfolio. ASSET ALLOCATION Set out below is our asset allocation at the year end. % of % of Portfolio at Portfolio at 31 March 31 March 2004 2003 ------------- ------------- Quoted investments 50.8 39.7 Hedge/other funds 14.8 15.2 Unquoted investments 21.6 17.4 Private equity partnerships 5.6 7.2 Government securities and money market funds 4.8 17.1 Property 2.4 3.4 ------------- ------------- 100.0 100.0 ------------- ------------- The principal change over the year has been an increase in the quoted investments section of the portfolio, with a commensurate reduction in our holding of government securities. In addition, the unquoted investments category increased, mainly as a result of the successful flotation of Shinsei Bank. THE QUOTED PORTFOLIO At the year end, 50.8% of the portfolio was held in quoted equities with a value of £497.2 million. Some £364.2 million, or nearly three quarters, of these funds is managed by 14 investment managers with specialist skills covering a wide geographical area. The remaining £133 million has been managed internally. In addition, 14.8% of the portfolio with a value of £144.7 million was invested in 23 hedge and 'long only' funds. Altogether some 65.6% of the portfolio was invested, either directly or indirectly, in quoted or marketable securities. In my Statement last year, I commented that after the extended bear market, we were beginning to see opportunities to invest in companies at levels of valuation not seen for some years. In the first half of the year, we therefore increased our stock market exposure significantly, identifying opportunities in Japan and the Far East, where we increased our exposure from 6.4% to 19.6% at the year end. In July 2003 we took advantage of unusually low rates of interest to borrow US$150 million at a rate of 3.93% fixed for a period of five years. We invested part of the proceeds of this loan during the first half of the year. At the year end some £47.4 million, representing 4.8% of the portfolio, had been invested in government securities and money market funds. In addition, we had cash balances of some £90 million, largely offset by the US$ loan. THE UNQUOTED PORTFOLIO At the year end, £266.2 million, or approximately 27.2% of the portfolio, was held in unquoted investments. Their value increased by £87 million, in large measure due to one particularly successful investment, made some four years ago in Shinsei Bank in Japan, where the value has increased by approximately five times over its original cost. At the time of the flotation, we sold approximately one third of our holding. The remaining holding is held at a discount of 10% to its market value and remains categorised as an unquoted investment, as it is held through a limited partnership. This has been, from the outset, a landmark transaction. It was the first purchase of a major Japanese financial institution by a group of foreign investors, at a time when the banking sector in Japan was considered to be beset by intractable problems. Values in unquoted investments take time to mature and the Shinsei Bank story provides a good example of this. The rest of the portfolio is widely diversified and, as with the quoted portfolio, is in part managed internally and in part by external managers, through whom we have investments in some 34 private equity and venture capital partnerships. RESULTS AND DIVIDEND The total increase in net assets for the year under review was £307.6 million, of which £310.5 million was attributable to capital, partly offset by a revenue loss of £3.6 million, and movements on reserves of £0.8 million. We are proposing to pay a dividend of 3.1p per share on 14 July 2004 to shareholders on the register at 18 June 2004, the same level of dividend as last year. However, shareholders should be aware that this level of dividend might not be sustainable in future years. As always, the focus of your Company is on achieving capital growth rather than providing dividend income. OUTLOOK Stock Market conditions have become increasingly difficult since the new financial year began on 1 April. Our performance since then reflects this, with the most recently calculated net asset value per share at 18 May being 587.4p (after deducting the proposed dividend). However, Stock Market valuations remain relatively high on conventional criteria, reflecting low interest rates, easy monetary conditions, rising corporate profit margins and good company results. A number of unprecedented policy initiatives have been taken by governments, particularly in the USA, to stimulate and restore economic growth. They have so far been successful and recent OECD forecasts are optimistic about continuing progress for the major economies. In spite of these positive factors, there is growing concern about the future consequences of the initiatives which have been introduced to bring about growth. Interest rates are rising and there are signs of inflationary pressures. Energy prices, particularly oil, have increased significantly. Extraordinarily high levels of debt have been incurred at both government and consumer levels. At the same time, fiscal imbalances on an unprecedented scale have been created. No one can know what the outcome will be, but the risk reward ratio for stock markets must surely be less favourable than a year ago. To some extent, a highly diversified portfolio offers protection, but we have also taken steps since the year end to reduce our exposure to equities. In the circumstances of the fragility of the geopolitical situation and the economic unknowns this may well have been a prudent step to take. For further information please contact: Duncan Budge 020-7514 1928 CONSOLIDATED STATEMENT OF TOTAL RETURN For the year ended 31 March 2004 Revenue Capital Total £'000 £'000 £'000 Gains on investments - 292,697 292,697 Dealing losses (7,205) - (7,205) Investment income 17,078 - 17,078 Other income 406 - 406 Administrative expenses (7,075) - (7,075) Investment management fees (3,893) (2,366) (6,259) Other capital items - 19,494 19,494 ------ ------- ------- Net (loss)/return before finance costs and taxation (689) 309,825 309,136 Interest payable and similar charges (2,527) - (2,527) ------ ------- ------- (Loss)/return on ordinary activities before taxation (3,216) 309,825 306,609 Taxation on ordinary activities (425) 671 246 ------ ------- ------- (Loss)/return on ordinary activities after taxation attributable to equity shareholders (3,641) 310,496 306,855 Dividend (4,862) - (4,862) ------ ------- ------- Transfer (from)/to reserves (8,503) 310,496 301,993 ====== ======= ======= (Loss)/return per ordinary share (2.3p) 198.0p 195.7p Net asset value per ordinary share 623.2p The revenue column of this statement is the consolidated profit and loss account of the Group. The accompanying notes are an integral part of this statement. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 31 March 2004 £'000 ------- Return on ordinary activities after taxation 306,855 Exchange movements arising on consolidation 772 ------- Total recognised gains and losses 307,627 ======= CONSOLIDATED STATEMENT OF TOTAL RETURN For the year ended 31 March 2003 Revenue Capital Total £'000 £'000 £'000 Losses on investments - (114,750) (114,750) Dealing profits 182 - 182 Investment income 15,165 - 15,165 Other income 417 - 417 Administrative expenses (6,161) - (6,161) Investment management fees (2,926) (192) (3,118) Other capital items - 29,478 29,478 ------ ------- ------- Net return/(loss) before finance costs and taxation 6,677 (85,464) (78,787) Interest payable and similar charges (166) - (166) ------ ------- ------- Return/(loss) on ordinary activities before taxation 6,511 (85,464) (78,953) Taxation on ordinary activities (1,837) 2,049 212 ------ ------- ------- Return/(loss) on ordinary activities after taxation attributable to equity shareholders 4,674 (83,415) (78,741) Dividend (4,862) - (4,862) ------ ------- ------- Transfer from reserves (188) (83,415) (83,603) ====== ======= ======= Return/(loss) per ordinary share 3.0p (53.2p) (50.2p) Net asset value per ordinary share 430.2p The revenue column of this statement is the consolidated profit and loss account of the Group. The accompanying notes are an integral part of this statement. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 31 March 2003 £'000 Loss on ordinary activities after taxation (78,741) Exchange movements arising on consolidation 33 ------ Total recognised gains and losses (78,708) ====== CONSOLIDATED BALANCE SHEET 31 March 31 March 2004 2003 £'000 £'000 Fixed assets Investments 978,819 684,472 Tangible fixed assets 239 151 ------- ------- 979,058 684,623 ------- ------- Current assets 124,743 29,217 Creditors: Amounts falling due within one year (34,727) (32,859) ------- ------- Net current assets/(liabilities) 90,016 (3,642) ------- ------- Total assets less current liabilities 1,069,074 680,981 Creditors: Amounts falling due after more than one year Bank loans (81,516) - Provisions for liabilities and charges (10,045) (6,276) ------- ------- 977,513 674,705 ======= ======= Capital and reserves Called up share capital 156,848 156,848 Capital redemption reserve 33,308 33,308 Capital reserve - realised 622,869 554,625 Capital reserve - unrealised 147,407 (94,845) Revenue reserve 17,038 24,769 ------- ------- Equity shareholders' funds 977,470 674,705 Equity minority interests 43 - ------- ------- Capital employed 977,513 674,705 ======= ======= CONSOLIDATED CASH FLOW STATEMENT Year Ended Year Ended 31 March 31 March 2004 2003 £'000 £'000 Cash inflow from operating activities 19,412 30,152 ------- ------- Servicing of finance Bank and loan interest paid (2,546) (171) ------- ------- Net cash outflow from servicing of finance (2,546) (171) ------- ------- Taxation UK tax received/(paid) 1,613 (75) Overseas tax paid (993) (458) ------- ------- Net cash inflow/(outflow) from taxation 620 (533) ------- ------- Financial investment Purchase of investments (495,927) (355,406) Sale of investments 439,563 308,243 ------- ------- Net cash outflow from financial investment (56,364) (47,163) ------- ------- Capital expenditure Purchase of fixed assets (240) (49) Sale of fixed assets 53 6 ------- ------- Net cash outflow from capital expenditure (187) (43) ------- ------- Equity dividend paid (4,862) (4,862) ------- ------- Net cash outflow before management of liquid resources and financing (43,927) (22,620) ------- ------- Management of liquid resources Purchase of government securities (225,510) (216,978) Sale of government securities 290,378 228,812 ------- ------- Net cash inflow from management of liquid resources 64,868 11,834 ------- ------- Financing Increase in term loan 81,500 - Minority interests 43 - ------- ------- Net cash inflow from financing 81,543 - ------- ------- Increase/(decrease) in cash in the year 102,484 (10,786) ======= ======= NOTES 1 LOSS/(RETURN) PER ORDINARY SHARE The loss per share for the year ended 31 March 2004 is based on the revenue loss after tax of £3.6 million (31 March 2003: return of £4.7 million) and the capital return after tax of £310.5 million (31 March 2003: capital loss of £83.4 million) and the weighted average number of ordinary shares in issue during the year of 156.8 million (31 March 2003: 156.8 million). 2 NET ASSET VALUE PER ORDINARY SHARE The net asset value per share at 31 March 2004 is based on the net assets attributable to ordinary shareholders of £977.5 million (31 March 2003: £674.7 million) and the number of ordinary shares in issue at 31 March 2004 of 156.8 million (31 March 2003: 156.8 million). 3 MOVEMENTS IN FIXED ASSET INVESTMENTS Quoted Unquoted Funds and Other Total £'000 and Partnerships Securities £'000 Property £'000 £'000 £'000 At 31 March 2003 271,533 142,639 152,970 117,330 684,472 Reclassifications 1,565 (1,565) - - - Additions 382,995 44,528 81,903 225,004 734,430 Disposals (283,547) (17,137) (49,959) (294,650) (645,293) Revaluation 124,676 66,656 14,140 (262) 205,210 ------- ------- ------- ------- ------- At 31 March 2004 497,222 235,121 199,054 47,422 978,819 ======= ======= ======= ======= ======= Funds and partnerships comprise hedge funds, other funds and private equity partnerships. Other securities comprise government securities and investments in money market funds. 4 MOVEMENTS IN RESERVES Capital Capital Revenue Redemption Reserve Reserve Reserve £'000 £'000 £'000 At 31 March 2003 33,308 459,780 24,769 Retained loss for the year - - (8,503) Capital return for the year - 310,496 - Other movements - - 772 ------ ------- ------ At 31 March 2004 33,308 770,276 17,038 ====== ======= ====== 5 OTHER CAPITAL ITEMS Other capital items include profits arising on forward currency contracts, exchange movements and movements on provisions. 6 LITIGATION In November 1997 proceedings were issued in the New York Courts against a total of ten defendants, including the Company, by Richbell Information Services Inc. ('RIS') and certain connected entities. The proceedings relate to the Company's investment in H-G Holdings Inc. and a loan made to RIS by the Company's wholly-owned subsidiary, Atlantic and General Investment Trust Limited ('AGIT'). The claim against all of the defendants was for approximately US$240 million. On 15 March 2002 the New York Court dismissed the proceedings in their entirety at their initial stage for failure to state a claim upon which relief could be granted. On 1 April 2002 the plaintiffs filed an appeal against that dismissal. On 23 September 2003 the New York Appellate Court affirmed the dismissal of the proceedings as to thirty causes of action included in the claim and as to AGIT. The New York Appellate Court reinstated three of the causes of action as to seven of the defendants, including the Company, and referred the matter back to the New York Court for further proceedings with respect to those three causes of action. Based upon legal advice received, the Directors do not believe that the proceedings will have a material effect on the financial position of the Company. 7 UNAUDITED STATEMENTS The results for the year ended 31 March 2004 are unaudited and do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 March 2003 have been delivered to the Registrar of Companies. The auditors have made a report under Section 235 of the Companies Act 1985 on those statutory accounts which was unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. 8 ANNUAL REPORT It is intended that the Company's Annual Report and Accounts for the year ended 31 March 2004 will be posted to shareholders on Tuesday, 1 June 2004. Copies of this announcement and the Annual Report will be available to the public at the Company's registered office at 27 St James's Place, London SW1A 1NR. This information is provided by RNS The company news service from the London Stock Exchange FR ALMFTMMABBMI

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