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.
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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.
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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
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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
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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).
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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
======= ========
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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)
====== ======
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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.
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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.
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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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