Final Results

Henderson Technology Trust PLC 16 June 2000 HENDERSON TECHNOLOGY TRUST PLC HENDERSON TECHNOLOGY TRUST PLC Unaudited Preliminary Results for the year ended 30 April 2000 'Strong year with net assets rising by close to 140%' Highlights * Technology sector's growth continues significantly to outperform the overall market * Demanding valuations together with a strong flow of new issues suggest a period of consolidation over the summer * The long term outlook for the technology sector remains very encouraging 30 April 30 April Increase 2000 1999 % Total net assets £668,727,000 £279,946,000 +138.9 FTSE World Index*> 348.7 304.8 +14.4 Net assets per share Undiluted 452.8p 190.2p +138.1 Fully diluted 395.8p 175.3p +125.8 * capital return, sterling adjusted > formerly FT/S&P Actuaries World Index Extracts from the Chairman's Statement: The Company has enjoyed a remarkable and most successful year. Net assets rose by 138.9% to £669m as technology shares rose sharply in almost every country around the world. The Company achieved the highest absolute return in a financial year since its launch. In most regions, the Company significantly outperformed local technology benchmarks with particularly good returns in Europe and in the USA. All areas of the portfolio contributed to the strong absolute returns with Continental Europe the single biggest gainer (+237%) and even the worst performing region in the portfolio, (Asia ex Japan), delivering a Sterling based return of 109%. Our geographical asset allocation proved quite satisfactory and we were fortunate in our choice of sub-sectors both to emphasise and avoid. - MORE - - 2 - HENDERSON TECHNOLOGY TRUST PLC Unaudited Preliminary Results for the year ended 30 April 2000 The Company's exceptional asset growth together with renewed investor enthusiasm for technology shares led to a marked rerating of our shares and, for much of the last half year, they have traded at a premium to net asset value. We have nevertheless rejected any suggestion that we should have a major new share issue. The Board do not see any merit in size for its own sake nor do we believe the timing would have been appropriate, particularly so as we have been making cautionary noises about excessive speculation in the technology sector since last December. Performance Fee The Company's consolidated statement of total returns shows a significant increase in the revenue loss per ordinary share from 2.57p to 28.02p. In large part, this increased loss relates to a substantial increase in the performance related fee. The fee is calculated by taking 15% of the outperformance of the diluted net asset value as compared to the FTSE World Index. This fee arrangement was established at the Company's launch in 1996 with a review scheduled for 30 September 2001. Performance fees were earned in the financial years 1997-8 and 1998-9 as well as last year. The last few years have seen strong outperformance from technology shares culminating in the astonishing results recorded last year. Consequently, it now seems appropriate to review the fee arrangements and move the benchmark towards ones that directly reflect the Company's specialisation in technology and also its long term objective of generating strong absolute returns. Henderson has agreed to bring forward the review date for the fee and the new arrangements will take effect from 1 May 2000 and are explained in more detail at the end of this announcement. Review Equity markets enjoyed yet another year of good returns. The global economy has remained in good shape with continuing strength in the US economy helping to pull forward the more subdued economies of Asia and Europe. The latter in particular has begun to display more forward momentum but Asia remains handicapped by the comatose performance of its largest economy, Japan. Efforts to stimulate the Japanese economy have proved as futile as those designed to slow the US but to date this has not been a major source of concern for equity markets. With concerns mounting about the build up of inflationary pressures within the USA, the Federal Reserve has moved to reassert the brakes. Consequently equity markets have paused and then slipped back. Our financial year closed with equity markets around the world looking tired and apprehensive. - MORE - - 3 - HENDERSON TECHNOLOGY TRUST PLC Unaudited Preliminary Results for the year ended 30 April 2000 There was only one major story in equity markets last year, the extraordinary and completely unprecedented ascent of the technology sector. Technology shares soared in every market, massively outperforming other equity sectors and dragging up areas such as telecoms and media which were, not entirely correctly, perceived to be technology 'proxies'. Having been one of the very few proponents of technology investment in Europe we found ourselves swamped by the sudden surge in interest in the technology sector. This hysteria proved to be a global phenomenon. The technology boom was supported by very strong inflows into specialist mutual funds and by the institutional investor's penchant for retrospective and closet index tracking. Technology, as we have long argued, has been transforming the global economic and corporate landscape. The emergence of the internet has accelerated technology spending as companies and indeed entire economies rush to embrace this productivity enhancing panacea. Both consumers and corporations are dramatically increasing their expenditure on technology. In every major economy, technology is driving investment spending and, through its impact on productivity, raising the non-inflationary sustainable growth rate of that country. There is as yet no evidence of diminishing marginal returns, rather the reverse. It is hardly surprising that the technology sector finally began to attract so much attention. For years the sector has produced far stronger earnings growth than the broad market and last year was no exception. While a succession of more traditional companies announced disappointing earnings, technology companies led by those in the internet infrastructure and semiconductor sectors produced remarkable earnings growth. However, much of the performance delivered by the sector in the last year reflected a major upward rerating of growth stocks. Valuations for many companies climbed to indefensible levels and in the frantic rush into the sector, the bad rose alongside the good, in many instances by far larger amounts. Investment bankers enjoyed a field day, so too did the managers of technology companies. While the bankers unleashed a vast swarm of Initial Public Offerings (IPOs), secondary offerings and spin-offs, company founders sold holdings acquired for minuscule sums for amounts that would once have bought whole companies. We ended our year with technology share prices falling precipitously; by 30 April, most technology indices had declined by 20-30% from their peaks. As if to remind us of what had generated all that frenzied attention, the year also finished with the sector reporting the best quarterly results that our manager can remember in eighteen years as a sector specialist. Last year may have generated excesses in valuation but it also provided a considerable body of evidence to support the long term bull case for the industry. - MORE - - 4 - HENDERSON TECHNOLOGY TRUST PLC Unaudited Preliminary Results for the year ended 30 April 2000 Outlook The technology industry has played a critical role in enabling the global, and especially the US, economy to enjoy an extended period of expansion. That expansion has been accompanied by subdued inflationary pressures and a remarkable level of corporate prosperity. In recent months, however, there have been some signs, and a great deal of concern, that the extraordinary strength of the US economy is creating upward pressure on wages and that this will, together with a number of other factors, feed through to higher levels of inflation. There has been a notable shift at the US Federal Reserve and indeed at the European Central Bank towards a more restrictive monetary stance. With interest rates rising, economic commentators have been growing increasingly pessimistic about the authorities' ability to deliver a 'soft' landing. We remain believers in a soft landing. Before the end of the summer, we would expect to see clear evidence that the US economy is indeed slowing. This would allow the monetary authorities gradually to relax their stance, which would provide support for equity markets and for the technology sector. We continue to believe that the long term outlook for technology companies is excellent. Both consumer and corporate demand for technology is growing rapidly and the 'catch up' effect is causing spending in Europe and in Asia to accelerate. The internet remains the single most important driver of technology spending but it is by no means the only one. The wireless industry is enjoying continued strength and even the hitherto sluggish PC market is beginning to recover. Earnings growth for the sector over the next year should at least match, and probably exceed, that over the last twelve months. It should also compare very favourably with that of the overall market. Painful though the current technology correction has been, it must ultimately be considered healthy. We entered April with the highest level of cash and derivative hedging since this Company's launch, namely 20%. Such levels of liquidity have been helpful in reducing the damage done to our assets but are insufficient to provide more than a modest cushion given the extent of the share price falls. By late May, we had reduced our liquidity by more than a half. While we are encouraged by the way in which the correction has eliminated the froth in share prices built up between November and March, the sector remains well above its levels of a year ago. Typically, the most effective corrections result in the elimination of most of the previous twelve months' gains. Moreover, valuations remain demanding although some premium is certainly justified by the much higher growth rates that the industry is currently delivering. - MORE - - 5 - HENDERSON TECHNOLOGY TRUST PLC Unaudited Preliminary Results for the year ended 30 April 2000 The correction has, after a number of false starts, begun to drive IPOs back to the drawing board. This is a very healthy development. We believe that there remains some, albeit much reduced, risk to the sector and have therefore been feeding our cash in opportunistically. We are also on the point of finalising a number of committed loan facilities which, in aggregate, will allow us to gear the Company up to a limit of 40% should share prices reach particularly attractive levels. We believe that, by the fourth quarter of 2000, the sector will once again be moving upward against a backdrop of improved investor confidence in the prospects for the global economy. We do not believe that technology shares will return to the valuations seen earlier this year although the combination of continuing spectacular earnings growth together with some valuation expansion should allow many shares to move to new highs. However, a good many companies will never re-attain the share price peaks of earlier this year during the remainder of their corporate lifetimes. Feeding frenzies of the sort that have been enjoyed over the last year inevitably result in the consumption by investors of a substantial number of unappetising morsels. However, with the sharks gone and the waters clearing, there remain many opportunities to generate more normal but still highly attractive growth. While the stock market, distanced as it so often is from reality, may have driven technology share prices up to astral levels before plunging them down again, long term investors in this industry should take comfort from the extraordinarily positive fundamental outlook. The sustainability of the technology industry's health has always depended on its contribution to productivity enhancement. This Board believes that at no previous time has the industry delivered such vast, nor such rapid, nor such easily quantifiable returns on investment. For as long as that remains the case, investors in this industry with a sensible time horizon will enjoy continuing prosperity. - MORE - - 6 - HENDERSON TECHNOLOGY TRUST PLC Unaudited Preliminary Results for the year ended 30 April 2000 Group Statement of Total Return (incorporating the revenue account) for the year ended 30 April 2000 Year ended 30 April 2000 Year ended 30 April 1999 (Restated)* Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Total capital gains from - 429,750 429,750 - 81,935 81,935 investments Repurchase of warrants - (85) (85) - (40) (40) Income from fixed asset 2,073 - 2,073 1,256 - 1,256 investments Other interest receivable and similar income 6,516 - 6,516 2,036 - 2,036 ------- ------- ------- ------- ------- ------- Gross revenue and capital 8,589 429,665 438,254 3,292 81,895 85,187 gains Management fee (48,627) - (48,627) (6,690) - (6,690) Other administrative (636) - (636) (241) - (241) expenses ------- ------- ------- ------- ------- ------- Net (loss)/return on ordinary activities (40,674) 429,665 388,991 (3,639) 81,895 78,256 before interest payable and taxation Interest payable and (593) - (593) (125) - (125) similar charges ------- ------- ------- ------- ------- ------- Net (loss)/return on ordinary activities (41,267) 429,665 388,398 (3,764) 81,895 78,131 before taxation Taxation on ordinary (53) - (53) (25) - (25) activities ------- ------- ------- ------- ------- ------- Net (loss)/return on ordinary activities (41,320) 429,665 388,345 (3,789) 81,895 78,106 after taxation ====== ====== ====== ====== ===== ====== (Loss)/return per ordinary share Basic (28.02p) 291.32p 263.30p (2.57p) 55.63p 53.06p ====== ====== ====== ====== ===== ====== Diluted - 260.42p 235.38p - 53.87p 51.38p ====== ====== ====== ====== ===== ====== The revenue columns of this statement represent the revenue accounts of the Group. * Restated in accordance with FRS16 - see note 2. Summary of Group Net Assets (Audited) 30 April 2000 30 April 1999 £'000 £'000 --------------- ------------- Fixed asset investments 696,391 289,275 Net current (12,881) 3,679 (liabilities)/assets ----------- ---------- Total assets less current 683,510 292,954 liabilities Creditors: amounts falling due after more than one year (14,783) (13,008) ----------- ---------- Total Net Assets 668,727 279,946 ======== ======= Net asset value per ordinary share - undiluted 452.75p 190.16p - diluted 395.80p 175.29p - MORE - - 7 - HENDERSON TECHNOLOGY TRUST PLC Unaudited Preliminary Results for the year ended 30 April 2000 Notes: 1. (Loss)/return per ordinary share Revenue loss per ordinary share is based on the net loss after taxation attributable to the ordinary shares of £41,320,000 (1999: net loss of £3,789,000) and on 147,489,961 (1999: 147,209,643) ordinary shares, being the weighted average number of shares in issue during the year. Basic capital return per ordinary share is based on net capital gains of £429,665,000 (1999: £81,895,000) and on 147,489,961 (1999:147,209,643) ordinary shares, being the weighted average number of shares in issue during the year. The calculation of the fully diluted revenue and capital returns per ordinary share are carried out in accordance with Financial Reporting Standard No.14, Earnings per Share (FRS14). For the purposes of calculating diluted revenue and capital returns per share, the number of shares is the weighted average used in the basic calculation plus the number of shares deemed to be issued for no consideration on exercise of all warrants, by reference to the average price of the ordinary shares during the year. The calculations indicate that the exercise of warrants would result in a weighted average number of shares of 164,986,341 (1999: 152,022,886). 2. 1999 Accounts The figures and financial information for the period ended 30 April 1999 are an extract of the latest published accounts of the Group 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. The Company has adopted Financial Reporting Standard (FRS) 16 'Current Tax' under which UK franked dividend income should be accounted for net of the attributable tax credits. The comparative figures for the year ended 30 April 1999 have been restated accordingly. The effect of this change is that net return on ordinary activities before taxation is reduced by £65,000 (1999: £108,000). However, there is no effect on the revenue or capital returns per share, nor on the net asset value per share. 3. 2000 Accounts The preliminary figures for the year ended 30 April 2000 are an extract from the Group's accounts for that period. These accounts have not yet been delivered to the Registrar of Companies, nor have the Auditors yet reported on them. 4. Basis of consolidation The Group accounts consolidate the accounts of the Company and its wholly owned subsidiary undertaking, HTT Finance Limited. 5. Annual General Meeting The full annual report and accounts will be posted to shareholders in late June 2000 and copies will be available thereafter from the Secretary at the Company's Registered Office, 3 Finsbury Avenue, London EC2M 2PA. The Annual General Meeting will be held at 12.00 noon on Thursday 27 July 2000. - MORE - - 8 - HENDERSON TECHNOLOGY TRUST PLC Unaudited Preliminary Results for the year ended 30 April 2000 Largest Investments The largest 15 investments at 30 April 2000 Value of Holding (£'000) -------------------------------------------------------------- ------------------------------------------------------------- Advantest 14,612 Leading supplier of semiconductor (JAP) test systems -------------------------------------------------------------- ------------------------------------------------------------- Ericsson 13,680 Major supplier of wireless (SWE) infrastructure -------------------------------------------------------------- ------------------------------------------------------------- Xilinx 12,639 Leading producer of programmable (USA) logic devices -------------------------------------------------------------- ------------------------------------------------------------- Siebel 12,328 Market leader in customer (USA) relationship management software -------------------------------------------------------------- ------------------------------------------------------------- Texas 10,929 Leading producer in the digital Instruments signal processing market (USA) -------------------------------------------------------------- ------------------------------------------------------------- Oracle 10,728 Global leader in database management (USA) software -------------------------------------------------------------- ------------------------------------------------------------- Epcos 10,414 Major producer of capacitors (GER) -------------------------------------------------------------- ------------------------------------------------------------- Teradyne 10,193 US leader in semiconductor and (USA) telecommunications test equipment -------------------------------------------------------------- ------------------------------------------------------------- Applied 10,106 Global leader in semiconductor Materials production equipment (USA) -------------------------------------------------------------- ------------------------------------------------------------- Motorola 9,886 Diversified manufacturer of wireless (USA) equipment and semiconductors -------------------------------------------------------------- ------------------------------------------------------------- BEA 9,867 Major supplier of enterprise (USA) application integration software -------------------------------------------------------------- ------------------------------------------------------------- Ciena 9,480 Producer of dense wave division (USA) multiplexing equipment -------------------------------------------------------------- ------------------------------------------------------------- Bookham 9,390 Emerging supplier of optical (UK) components -------------------------------------------------------------- ------------------------------------------------------------- Scientific 9,147 Leading producer of Cable and Atlanta Satellite equipment (USA) -------------------------------------------------------------- ------------------------------------------------------------- Cisco 9,086 World leader in Networking equipment (USA) -------------------------------------------------------------- ------------------------------------------------------------- The valuations of these investments total £162,485,000 or 23.3% of the fixed asset investments of the Company. - MORE - - 9 - HENDERSON TECHNOLOGY TRUST PLC Unaudited Preliminary Results for the year ended 30 April 2000 New Performance Fee Arrangements Under the new performance fee arrangements from 1 May 2000, the performance fee will be split into two parts. The first part will be at the rate of 10% of the amount, if any, by which the increase in the undiluted net asset value of the ordinary shares over the financial year exceeds the increase in the Benchmark over the year. The Benchmark is a blend of worldwide technology indices, comprising 50% Pacific SE Technology, 15% Morgan Stanley Eurotec, 7.5% Techmark, 7.5% Euro NM, 15% Datastream Asian Electronics and 5% JASDAQ. The second part comprises a longer term incentive and will be at the rate of 5% of the amount, if any, by which the increase in the undiluted net asset value of the ordinary shares over each three year period exceeds LIBOR +5% over the same period. Each three year period will be discrete and hence the first will end on 30 April 2003. In the event of any underperformance, the arrangements include a mechanism whereby Henderson will only be paid subsequent fees once the levels on which previous fees have been based are exceeded. Transitional arrangements are being proposed for the first year (to 30 April 2001) under which the Company will pay a performance fee to Henderson based on the lower of what would have been payable (if anything) under either the new or the old arrangements. In addition, the management fee will become payable at the end of each quarter based on the gross assets at the end of that quarter. For further information please contact: Brian Ashford-Russell/Norman Brown or Peter Binns/Simon Ellis Henderson Technology Trust PLC Binns & Co. or Vicki Staveacre, Henderson Press Office Tel: 020 7786 9600 Tel: 020 7410 4100 Notes to Editors Pacific SE Technology - A long standing and broadly based US technology index against which the US part of the portfolio has been benchmarked for many years. Morgan Stanley Eurotec - Is Morgan Stanley's index of mid and large cap pan European technology stocks. Euro NM - The leading Stock Exchange for growth stocks in continental Europe. Datastream Asian Electronics - Is Datastream's index of electronic manufacturers in Asia including Japan. JASDAQ - Japan's answer to the NASDAQ. An index with Japanese growth stocks.

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