Final Results

Herald Investment Trust PLC 14 February 2002 PRELIMINARY STOCK EXCHANGE ANNOUNCEMENT HERALD INVESTMENT TRUST plc Results for the year to 31 December 2001 14 February 2002 BOARD STATEMENT CHAIRMAN'S STATEMENT The difficult market background in 2001 has adversely affected Herald Investment Trust in its eighth year. The derating of many of the Trust's underlying investments that started in 2000 continued in 2001, and this was compounded by trading conditions that transpired to be even weaker than the Manager expected. The portfolio entered the year much more defensively positioned in choice of stocks, and with over 15% in cash and gilts, compared with a year earlier. In 2000 net disposals of £44m were made from the UK portfolio, and we modified the remit so that the UK element could be reduced. The Trust is now at least 50% UK and Europe as compared with at least 50% in the UK previously. Over the same period the US element was increased by £14m. Whilst this proved absolutely the correct direction, it transpired that the move was not aggressive enough to avoid the adverse market movements in the UK and Europe in particular. The UK portfolio was down c40%, and Europe a similar amount. In spite of this the overall reduction in assets was limited to 27%. This reflected the high cash/ gilt balances, the reduction in the UK weighting, which at one point fell to a low of 45%, utilising the flexibility in last year's change of remit to its maximum, and much stronger performances in the US and Far East markets. Furthermore, the defensive stock selection led to the greatest outperformance relative to the average performance of stocks in Trust's defined remit, in each of its four geographic markets, in any year of the Trust's history. Nevertheless, this is not reflected in performance relative to the Hoare Govett Smaller Companies Index (HGSCI), which remains in the long term the most important benchmark. We view the technology bubble as a transitory aberration, which has passed. The HGSCI declined only 15.5%, and the Russell 2000 Technology Index in the US, fell 22.5% in local currency terms. However, investors should also be aware that the sectors in which the fund focuses have performed much worse. For example the FTSE-Information Technology index fell 66.3%, and Techmark 100 fell 42.6%, in spite of the much stronger contribution from the healthcare and biotechnology stocks, in which this Trust does not invest. The HGSCI media sector fell by 39.4%, which provided no shelter in the storm. In fact the weighted average decline of the four sectors in the HGSCI, which include most of the Trust's UK holdings, fell 49.2%. It is interesting to note that in both the US and Europe large capitalisation stocks in the target sectors declined slightly more than small capitalisation stocks. The Manager had hoped that the smaller company focus would have provided slightly more protection than has transpired. This reflected a cautious view on the more difficult environment for the major markets of PCs and telecommunications including mobile phones, which are so heavily weighted in the world technology indices. This caution proved correct, but has led to a further derating of stocks across the board including smaller companies. Unfortunately the Manager does not see a resumption of growth in these major markets to the levels of the second half of the 1990s, and remains concerned that the product cycles of much of the sector are ex-growth, which may not be popularly perceived. Technology investing is all about product cycles, and we continue to look for emerging new companies, and we strongly believe that the smaller companies arena provides opportunities for this. In the media sector, terrestrial TV's structural difficulties were foreseen. Eventually there will be a recovery in the advertising cycle, albeit it is strange in the UK to have a sharp advertising downturn coinciding with a consumer boom. Advertising may remain weak even when interest rates start to rise and the consumer retreats. The high cash and gilt level has led to an increase in revenue, so we are able to maintain a dividend with improved cover. As in previous years all expenses have been charged through the profit and loss account. We are pleased that we have been able to pay a dividend, albeit modest, throughout the life of the Trust. Clearly capital appreciation is the principal objective. Overall, whilst we reiterate last year's warning, that future performance from yesterday's growth markets may prove difficult, and whilst there remain more macro uncertainties than usual, we are more confident that there are opportunities to exploit. Investors must, I fear, be patient, but valuations clearly have a much lower starting point as well. Changes to Board Tim Abell, who has been a Director of the Company since its inception in 1994, will not be standing for re-election at the Annual General Meeting on 17 April 2002. We would like to thank him for his enormous contribution during his time on the Board and wish him well in the future. We would also like to welcome on to the Board Clay Brendish who brings to the Board over 30 years' experience in the computer systems environment and high technology industry. Clay Brendish was formerly Executive Chairman of Admiral plc and, in turn, Deputy Chairman of CMG plc when the companies merged, he has also held a number of Government advisory posts. He is a trustee of the Economist Newspapers Limited, a member of the Independent Television Commission, a council member of the City University of London and is President of the Institute of Management. In addition, we are pleased to report that Douglas McDougall, OBE, has agreed to join the Board. Douglas McDougall has extensive experience in the fund management industry and is a former senior partner of Baillie Gifford & Co. He is chairman of the Law Debenture Corporation plc, Foreign & Colonial Eurotrust plc, The Independent Investment Trust PLC and 3i Bioscience Investment Trust plc. He is a former chairman of IMRO, of the Association of Investment Trust Companies and of the Fund Managers' Association. Shareholders will be asked to vote on their appointment at the Annual General Meeting. Martin Boase Chairman 13 February 2002 Statistics and Performance Report At inception At At Performance Performance since since inception 16 February 1994 31 December 2000 31 December 31 December 2001 2000 Basic NAV per share 98.7p+ 447.5p 322.9p -27.8% +227.2% Diluted NAV (FRS14) 98.7p+ 431.4p 314.5p -27.1% +218.6% Fully diluted NAV per 98.7p+ 432.0p 314.4p -27.2% +218.5% share Share price 90.9p 491.0p 306.0p -37.7% +236.6% Warrant price 45.5p 382.5p 212.5p -44.4% +367.0% FTSE 100 Index 3,417.7 6,222.5 5,217.4 -16.2% +52.7% HGSC Index (ext. cap 1,750.0 2,702.2 2,283.4 -15.5% +30.5% gains ex investment co's) Russell 2000 (small 83.2* 128.3 102.1 -20.4% +22.7% cap) Technology Index (in sterling terms) + 100p is shareholders' subscription price before launch costs of 1.3p. * 9 April 1996, being the date funds were first available for international investment. Portfolio Performance for the 12 months to 31 December 2001 Performance (total return) Equity markets UK -40.5% Europe ex. UK -42.7% Americas -8.0% Japan -58.2% Asia Pacific ex. Japan 12.9% - ends - For further information please contact: Ms Katie Potts, Manager Herald Investment Trust plc 020 7553 6300 Baillie Gifford & Co. Secretaries 0131 222 4000 The following is the unaudited preliminary statement for the year to 31 December 2001 which was approved by the Board on 13 February 2002. The Directors of Herald Investment Trust plc are recommending to the Annual General Meeting of the Company to be held on 17 April 2002 the payment of a final dividend of 0.85p net (0.85p net last year) per ordinary share for the year ended 31 December 2001. HERALD INVESTMENT TRUST plc STATEMENT OF TOTAL RETURN (unaudited and incorporating the revenue account*) for the year ended for the year ended 31 December 2001 31 December 2000 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Losses on investments - (103,929) (103,929) - (55,069) (55,069) Unrealised gain on loan - 341 341 - 110 110 Currency (losses)/gains - (61) (61) - 79 79 Income (note 1 ) 4,728 - 4,728 6,508 - 6,508 Investment management fee (3,205) - (3,205) (5,230) - (5,230) Other administrative expenses (272) - (272) (390) - (390) Net return before finance costs and taxation 1,251 (103,649) (102,398) 888 (54,880) (53,992) Finance costs of borrowings (75) - (75) (84) - (84) Return on ordinary activities 1,176 (103,649) (102,473) before taxation 804 (54,880) (54,076) Tax on ordinary activities (31) - (31) (26) - (26) Return on ordinary activities 1,145 (103,649) (102,504) 778 (54,880) (54,102) after taxation Ordinary dividend payable (718) - (718) (713) - (713) (note 2) Transfer to/(from) reserves 427 (103,649) (103,222) 65 (54,880) (54,815) Return per Ordinary share (note 3) Basic 1.36p (123.01p) (121.65p) 0.93p (65.67p) (64.74p) Diluted (FRS14) 1.32p (119.45p) (118.13p) 0.89p (63.03p) (62.14p) Dividend per Ordinary share 0.85p 0.85p * The revenue column of this statement is the revenue account of the Company. All revenue and capital items in the above statement derive from continuing operations. HERALD INVESTMENT TRUST plc SUMMARISED BALANCE SHEET at 31 December 2001 (unaudited) 31 December 2001 31 December 2000 £'000 £'000 NET ASSETS Investments at market value 258,901 365,575 Net liquid assets 16,723 13,032 Total assets (before deduction of bank loan) 275,624 378,607 Bank loan (note 4) (2,892) (3,233) 272,732 375,374 CAPITAL AND RESERVES Called-up share capital 21,113 20,968 Capital reserves 249,480 352,694 Revenue reserve 2,139 1,712 EQUITY SHAREHOLDERS' FUNDS 272,732 375,374 Net asset value per ordinary share (note 5) Basic 322.94p 447.55p Diluted (FRS14) 314.53p 431.43p Fully diluted 314.42p 431.98p Ordinary shares in issue 84,453,686 83,873,599 DISTRIBUTION OF ASSETS at 31 December 2001 (unaudited) 31 December 2001 31 December 2000 % % Equities: United Kingdom 51.0 55.7 Continental Europe 5.7 7.2 Americas 21.7 16.6 Japan 0.2 0.6 Asia Pacific 5.7 4.5 84.3 84.6 UK bonds 9.6 12.0 Net liquid assets 6.1 3.4 Total assets (before deduction of bank loan) 100.0 100.0 HERALD INVESTMENT TRUST plc SUMMARISED CASH FLOW STATEMENT (unaudited) for the year ended for the year ended 31 December 2001 31 December 2000 £'000 £'000 £'000 £'000 NET CASH INFLOW FROM OPERATING ACTIVITIES 1,571 348 NET CASH OUTFLOW FROM SERVICING OF FINANCE (79) (83) FINANCIAL INVESTMENT Purchase of investments (124,980) (212,244) Sale of investments 130,695 196,392 Currency movement (61) 79 NET CASH INFLOW/(OUTFLOW) FROM FINANCIAL INVESTMENT 5,654 (15,773) EQUITY DIVIDEND PAID (713) (705) NET CASH INFLOW/(OUTFLOW) BEFORE USE OF LIQUID RESOURCES 6,433 (16,213) AND FINANCING MANAGEMENT OF LIQUID RESOURCES Decrease/(increase) in term deposits 4,000 (4,000) FINANCING Issue of Ordinary shares 580 912 NET CASH INFLOW FROM FINANCING 580 912 INCREASE/(DECREASE) IN CASH 11,013 (19,301) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS Increase/(decrease) in cash in period 11,013 (19,301) (Decrease)/increase in short term investments (4,000) 4,000 Exchange movement on loan 341 110 MOVEMENT IN NET FUNDS IN PERIOD 7,354 (15,191) NET FUNDS AT 1 JANUARY 8,997 24,188 NET FUNDS AT 31 DECEMBER 16,351 8,997 HERALD INVESTMENT TRUST plc NOTES 31 December 2001 31 December 2000 £'000 £'000 1. Income Income from investments and interest receivable 4,724 6,462 Other income 4 46 2. The proposed final dividend will be paid on 19 April 2002 to all shareholders on the register at the close of business on 22 March 2002. 3. Return per ordinary share Revenue return 1,145 778 Capital return (103,649) (54,880) The basic return per ordinary share is based on the above totals of revenue and capital and on 84,262,972 ordinary shares (2000 - 83,571,294) being the weighted average number of ordinary shares in issue during the year. The diluted returns per ordinary share are calculated on the above totals of revenue and capital and the weighted average number of warrants in issue during the year adjusted by the difference between the average price of the ordinary shares during the year and the subscription price of 100p, giving a weighted average of 86,769,677 (2000 - 87,065,313) shares. 4. A five year multi-currency loan was arranged with The Royal Bank of Scotland plc in 1999. The loan expires on 7 January 2004. At 31 December 2001 and 2000 there were outstanding drawings of yen 551,550,000. 5. Net asset value per ordinary share is based on net assets of £272,732,000 (2000 - £375,374,000) and 84,453,686 (2000 - 83,873,599) ordinary shares, being the number of ordinary shares in issue at each date. The diluted net asset per ordinary share, calculated in accordance with Financial Reporting Standard 14 (FRS 14) is 314.53p (2000 - 431.43p). This is based on net assets of £272,732,000 (2000 - £375,374,000) and on 86,711,381 (2000 - 87,006,178) ordinary shares, being the number of ordinary shares in issue at the year end plus the notional number of ordinary shares that would have been issued for no consideration using a year end share price of 306.0p (2000 - 491.0p). The fully diluted net asset value per ordinary share has been calculated on the assumption that the warrants in issue were fully exercised at the year end at 100p each resulting in net assets of £276,086,000 (2000 - £379,308,000) and 87,807,349 (2000 - 87,807,349) ordinary shares in issue. During the year 580,087 warrants were exercised at 100p. The number of outstanding warrants at 31 December 2001 was 3,353,663 (20000 - 3,933,750). 6. At the Annual General Meeting held in April 2001 the Company was granted authority to purchase up to 12,572,652 ordinary shares (equivalent to 14.99% of its then issued share capital). No Ordinary shares were bought back during the year and therefore at 31 December 2001 the Company's authority to buy back shares remained unchanged at 12,572,652. HERALD INVESTMENT TRUST plc NOTES (Ctd) 7. The financial statements for the year to 31 December 2001 have been prepared on the basis of the accounting policies set out in the Company's financial statements at 31 December 2000. The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2001. The financial information for 2000, is derived from the statutory accounts for 2000 which have been delivered to the Registrar of Companies. The Auditors have reported on the 2000 accounts, their report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for 2001 will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. This information is provided by RNS The company news service from the London Stock Exchange

Companies

Herald Investment Trust (HRI)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today