Final Results

Witan Investment Trust PLC 08 March 2006 8 March 2006 WITAN INVESTMENT TRUST PLC Unaudited Preliminary Results for the year ended 31 December 2005 Financial Highlights Year ended Restated 31 December 2005 Year ended 31 December 2004 Per Ordinary Share: in pence in pence Net Asset Value 469.5 390.2 Earnings 8.96 8.63 Dividends - two interims 8.80 8.60 Extracts from the Chairman's Statement: Highlights of the Year • Total shareholder return of 27.9% • NAV performance in line with the benchmark • The Board of F & C Pacific appoints Witan Investment Services • Discount management policy enhances NAV • New Board appointments • Total expense ratio of 0.47% (2004: 0.60%) Shareholder Returns Witan's share price rose by 24.9% over the year, giving a total return to shareholders including dividends of 27.9% (source: AITC). This strong performance was achieved as a result of universally strong equity markets and our discount management policy. The surprise this year has been the scale and breadth of the return from global equity markets (UK + 22% and World (ex UK) +24.8%, sterling adjusted) while at the same time volatility has continued at historically very low levels. In other words, high returns have come with seemingly low levels of risk. This has been the case in almost all equity markets, even in the traditionally more volatile emerging economies. We are taught that these conditions cannot continue for long: either returns will be lower or volatility will rise. Your Board believes this is the wrong time to be taking on more risk and is firmly of the belief that the diversity of holdings and of managers will help if conditions become more adverse. In my statement last year I said 'the Board will continue to employ share buy-backs with a new aim of permanently reducing the level of the discount to well below 10% (with debt at fair value) over the medium term'. The discount at the year-end was 9.8% compared to 13.8% twelve months prior. To achieve this level of discount reduction the Board has purchased 44 million shares (13% of the share capital), enhancing the NAV by £15.9 million or by about 1.2% per share. The discount management policy has been a positive contributor both to the share price and to Net Asset Value (NAV) performance. WITAN INVESTMENT TRUST PLC Page 2 of 11 Unaudited Preliminary Results for the year ended 31 December 2005 NAV Performance In September 2004 your Board took the decision to reduce the UK proportion of the portfolio and increase the Trust's exposure to overseas markets. I am pleased to report that this has been a positive contributor to the investment performance of the Trust. On the other hand your Board expected that equity returns were likely to be in high single figure percentages, not in the high twenties. I am pleased to report that the NAV has risen in line with our long-term benchmark, as this measure of performance was going to be a difficult one for us to match in very strong market conditions. The positive effects of gearing, share buy-backs and asset allocation made up the shortfall against the benchmark that resulted from the underlying investment performance. Dividends Your Board has declared a second interim dividend of 5.00 pence per ordinary share to make a total distribution for the year of 8.80 pence (2004: 8.60 pence). This represents an increase of 2.3%, which is in line with the RPI and in accordance with our stated dividend policy. Witan Investment Services In the Interim Report I highlighted the decision of the board of F & C Pacific Investment Trust PLC to appoint Witan as executive manager of its new multi-manager structure, together with a change of the name to Witan Pacific Investment Trust PLC. This relationship, combined with your Board's decision to take full responsibility for the marketing of the Witan brand, has required us to set up and authorise with the FSA a new wholly-owned subsidiary, Witan Investment Services Limited ('WIS'). This new subsidiary will actively seek new clients. Those investment trust boards wishing to review their current arrangements can use WIS to access, for the first time, suppliers of services from outside the industry. In this way Witan Investment Services intends to generate additional income for Witan itself. Board Changes In reviewing the changes your Board has made over the last two years, I was struck by this quote from a headhunter writing in a paper about boards. He is talking about the difficulties of recruiting and bringing the correct sort of imagination to the table and points out the relevance of being taught Latin and Greek: 'What our ancestors show us, in their eccentric way, is a profound truth about human thinking. By focusing the mind on difficult but useless and seemingly irrelevant things, you free it from premature engagement. Conversely by focusing on manifestly relevant facts and proven expertise, you often fix it forever in yesterday's problems and yesterday's world.' WITAN INVESTMENT TRUST PLC Page 3 of 11 Unaudited Preliminary Results for the year ended 31 December 2005 We say goodbye to Christopher Clarke and Charlie McVeigh. Christopher retires after thirteen years on the Board, the first seven of which were spent as managing director, a particularly good period for Witan. With these two retirements we lose a great deal of experience. Both Christopher and Charlie have helped Witan in an imaginative and constructive way and we shall miss their wise counsel. We welcome Tony Watson and Jane Platt to the Board. They both bring strong experience of investment management and also of business management. I am confident that they will keep us moving forward. New Accounting Standards These accounts are the first full year audited accounts produced under the new accounting standards ('International Financial Reporting Standards' or 'IFRS'). Conclusion In conclusion, 2005 was a vintage year for stock markets and in particular for the Witan shareholder. Following the changes of the last eighteen months, your Board views the future with confidence. It now has in place the structure, approach and flexibility to take advantage of ever-changing global investment markets. Harry Henderson 8 March 2006 WITAN INVESTMENT TRUST PLC Page 4 of 11 Unaudited Preliminary Results for the year ended 31 December 2005 Consolidated Income Statement (Unaudited) (Audited) Year ended Year ended 31 December 2005 31 December 2004 Restated (see note 22) Revenue Capital Revenue Capital return return Total return return Total £'000 £'000 £'000 £'000 £'000 £'000 Investment income 33,463 - 33,463 34,373 - 34,373 Other income 5,579 - 5,579 3,018 - 3,018 Gains on investments held at fair value through profit or loss - 229,694 229,694 - 100,865 100,865 ---------- ---------- ---------- ---------- ---------- ---------- Total income 39,042 229,694 268,736 37,391 100,865 138,256 ---------- ---------- ---------- ---------- --------- ---------- Expenses Management fees (531) (1,649) (2,180) (933) (3,523) (4,456) Other expenses (4,208) - (4,208) (3,199) - (3,199) ---------- ---------- ---------- ---------- ---------- ---------- Profit before finance costs and 34,303 228,045 262,348 33,259 97,342 130,601 taxation Finance costs (2,613) (7,644) (10,257) (2,617) (7,619) (10,236) ---------- ---------- ---------- ---------- ---------- ---------- Profit before taxation 31,690 220,401 252,091 30,642 89,723 120,365 ---------- ---------- ---------- --------- ---------- ---------- Taxation (3,688) 1,920 (1,768) (1,312) 154 (1,158) ---------- ---------- ---------- ---------- ---------- ---------- Profit for the year 28,002 222,321 250,323 29,330 89,877 119,207 ====== ====== ====== ====== ====== ====== Earnings per ordinary share (note 9) 8.96p 71.16p 80.12p 8.63p 26.46p 35.09p ====== ====== ====== ====== ====== ====== The total column of this statement represents the Group's Income Statement, prepared in accordance with IFRS. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Trust Companies. All items in the above statement derive from continuing operations. All income is attributable to the equity holders of Witan Investment Trust plc, the parent company. There are no minority interests. WITAN INVESTMENT TRUST PLC Page 5 of 11 Unaudited Preliminary Results for the year ended 31 December 2005 Consolidated and Company Statement of Changes in Equity (Unaudited) Group Year ended 31 December 2005 Capital Other Ordinary share Share redemption capital Retained capital premium reserve reserves earnings Total £'000 £'000 £'000 £'000 £'000 £'000 At 31 December 2004 84,736 16,237 9,090 1,170,296 42,280 1,322,639 Profit for the year - - - 222,321 28,002 250,323 Ordinary dividends paid - - - - (27,738) (27,738) Buy-backs of ordinary shares (10,989) - 10,989 (160,307) - (160,307) ---------- ---------- ---------- ---------- ---------- ---------- At 31 December 2005 73,747 16,237 20,079 1,232,310 42,544 1,384,917 ======= ======= ======= ======== ======= ======= (Unaudited) Company Year ended 31 December 2005 Capital Other Ordinary share Share premium redemption capital Retained capital reserve reserves earnings Total £'000 £'000 £'000 £'000 £'000 £'000 At 31 December 2004 84,736 16,237 9,090 1,170,296 42,280 1,322,639 Profit for the year - - - 222,239 28,084 250,323 Ordinary dividends paid - - - - (27,738) (27,738) Buy-backs of ordinary shares (10,989) - 10,989 (160,307) - (160,307) ----------- ----------- ----------- ----------- ----------- ----------- At 31 December 2005 73,747 16,237 20,079 1,232,228 42,626 1,384,917 ======= ======= ======= ======== ======= ======= (Audited) Group and Company Year ended 31 December 2004 Restated (see notes 22 and 23) Capital Other Ordinary share Share premium redemption capital Retained capital reserve reserves earnings Total £'000 £'000 £'000 £'000 £'000 £'000 At 31 December 2003 85,880 16,237 7,946 1,094,385 41,131 1,245,579 Profit for the year - - - 89,877 29,330 119,207 Ordinary dividends paid - - - - (28,181) (28,181) Buy-backs of ordinary shares (1,144) - 1,144 (13,966) - (13,966) ----------- ----------- ----------- ----------- ----------- ----------- At 31 December 2004 84,736 16,237 9,090 1,170,296 42,280 1,322,639 ======= ======= ======= ======== ======= ======= WITAN INVESTMENT TRUST PLC Page 6 of 11 Unaudited Preliminary Results for the year ended 31 December 2005 Consolidated and Company Balance Sheets as at 31 December 2005 (Audited) Group and (Unaudited) (Unaudited) Company Group Company 2004 31 December 31 December Restated 2005 2005 (see note 22) £'000 £'000 £'000 Non current assets Investments held at fair value through profit or loss 1,445,566 1,446,384 1,390,325 ------------- ------------- ------------- Current assets Other receivables 4,653 4,783 11,969 Cash and cash equivalents 86,319 85,302 79,568 ------------- ------------- ------------- 90,972 90,085 91,537 ------------- ------------- ------------- Total assets 1,536,538 1,536,469 1,481,862 ======== ======== ======== Current liabilities Other payables 4,873 4,804 12,384 ------------- ------------- ------------- Total assets less current liabilities 1,531,665 1,531,665 1,469,478 ------------- ------------- ------------- Non current liabilities 81/2 per cent. Debenture Stock 2016 45,779 45,779 45,949 6.125 per cent. Secured Bonds due 2025 98,414 98,414 98,335 3.4 per cent. cumulative preference shares of £1 2,055 2,055 2,055 2.7 per cent. cumulative preference shares of £1 500 500 500 ------------ ------------ ------------ 146,748 146,748 146,839 ------------ ------------ ------------ Net assets 1,384,917 1,384,917 1,322,639 ------------ ------------ ------------ Equity attributable to equity holders Ordinary share capital 73,747 73,747 84,736 Share premium 16,237 16,237 16,237 Capital redemption reserve 20,079 20,079 9,090 Other capital reserves 1,232,310 1,232,228 1,170,296 Retained earnings 42,544 42,626 42,280 ------------ ------------ ------------ Total equity 1,384,917 1,384,917 1,322,639 ======= ======= ======= Net asset value per ordinary share 469.5p 469.5p 390.2p ======= ======= ======= WITAN INVESTMENT TRUST PLC Page 7 of 11 Unaudited Preliminary Results for the year ended 31 December 2005 Consolidated and Company Cash Flow Statements for the year ended 31 December 2005 Group and Company Year ended 31 December 2004 Group Company Restated Year ended Year ended (see note 22) 31 December 31 December 2005 2005 £'000 £'000 £'000 Operating activities Profit before taxation 252,091 252,091 120,365 Interest paid 10,131 10,131 10,144 Gains on investments held at fair value through profit or loss (229,694) (229,612) (100,865) Net sales of investments held at fair value through profit or loss 173,175 173,175 47,190 (Increase)/decrease in other receivables (480) (610) 988 Increase in other payables 142 73 557 Loss on debenture buy-back 51 51 14 Increase in unrealised gain on derivatives 14 14 36 Cash inflow from futures contracts 1,315 1,315 129 Cash inflow from forward exchange contracts - - 3,330 Scrip dividends included in investment income (509) (509) (46) ------------ ------------ ------------ Net cash inflow from operating activities before interest and taxation 206,236 206,119 81,842 Interest paid (10,131) (10,131) (10,144) Amortisation of debt issue costs 79 79 79 Tax on overseas income (2,032) (2,032) (1,142) ------------ ------------ ------------ Net cash inflow from operating activities 194,152 194,035 70,635 ------------ ------------ ------------ Financial investment Investment in subsidiary - (900) - ------------ ------------ ------------ Financing activities Equity dividend paid (27,738) (27,738) (28,180) Buy-backs of ordinary shares (160,307) (160,307) (13,966) Repurchase of debt (221) (221) (64) ------------ ------------ ------------ Net cash outflow from financing (188,266) (188,266) (42,210) ------------ ------------ ------------ Increase in cash and cash equivalents 5,886 4,869 28,425 Cash and cash equivalents at the start of the year 79,568 79,568 56,435 Effect of foreign exchange rate changes 865 865 (5,292) ------------ ------------ ------------ Cash and cash equivalents at the end of the year 86,319 85,302 79,568 ======= ======= ======= WITAN INVESTMENT TRUST PLC Page 8 of 11 Unaudited Preliminary Results for the year ended 31 December 2005 Notes : 1. Accounting policies The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ('IFRS'). These comprise standards and interpretations approved by the International Accounting Standards Board ('IASB'), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee ('IASC') that remain in effect, to the extent that they have been adopted by the European Union. The disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS are given in notes 22 and 23. These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates. (a) Basis of preparation The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The principle accounting policies adopted are set out below. Where presentational guidance set out in the Statement of Recommended Practice ('the SORP') for investment trusts issued by the Association of Investment Trust Companies ('the AITC') in January 2003 (revised in December 2005) is consistent with the requirements of IFRS, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. (b) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and the entity controlled by the Company (its subsidiary) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation. (c) Presentation of Income Statement In order to better reflect the activities of an investment trust company, and in accordance with guidance issued by the AITC, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. In accordance with the Company's status as a UK investment company under section 266 of the Companies Act 1985, net capital returns may not be distributed by way of dividend. Additionally, the net revenue is the measure the directors believe appropriate in assessing the Group's compliance with certain requirements set out in section 842 of the Income and Corporation Taxes Act 1988. (d) Income Dividends receivable on equity shares are recognised as revenue for the year on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the year end are treated as revenue for the year. Provision is made for any dividends not expected to be received. The fixed returns on debt securities and non-equity shares are recognised on a time apportionment basis so as to reflect the effective yield on the debt securities and shares. Interest receivable from cash and short term deposits is accrued to the end of the period. Stock lending fees and underwriting commission are recognised as earned. Where the Group has elected to receive its dividends in the form of additional shares rather than cash, the amount of cash dividend foregone is recognised as income. Any excess in the value of shares received over the amount of cash dividend foregone is recognised as a gain in the Income Statement. (e) Expenses All expenses and interest payable are accounted for on an accruals basis. Expenses are presented as capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect the investment management fees and finance costs are allocated 25% to revenue and 75% to capital to reflect the Board's expectations of long term investment returns. Any performance fees payable are allocated wholly to capital, reflecting the fact that, although they are calculated on a total return basis, they are expected to be attributable largely, if not wholly, to capital performance. Transaction costs incurred on the acquisition or disposal of investments are expensed and included in the costs of acquisition or deducted from the proceeds of sale as appropriate. WITAN INVESTMENT TRUST PLC Page 9 of 11 Unaudited Preliminary Results for the year ended 31 December 2005 (f) Taxation The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the taxable profit for the period. Taxable profit differs from net profit as reported in the Income Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that were applicable at the balance sheet date. In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Income Statement is the 'marginal basis'. Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Income Statement, then no tax relief is transferred to the capital return column. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Investment trusts which have approval as such under section 842 of the Income and Corporation Taxes Act 1988 are not liable for taxation on capital gains. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the Income Statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. (g) Investments held at fair value through profit or loss When a purchase or sale is made under a contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date. All the Group's investments are defined by IFRS as investments held at fair value through profit or loss. All investments are designated upon initial recognition as held at fair value through profit or loss, and are measured at subsequent reporting dates at fair value, which is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. Investments in unit trusts or OEICs are valued at the closing price, the bid price or the single price as appropriate, released by the relevant investment manager. Fair values for unquoted investments, or for investments for which there is only an inactive market, are established by using various valuation techniques. These may include recent arm's length market transactions, the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. Where there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, that technique is utilised. Where no reliable fair value can be estimated for such instruments, they are carried at cost, subject to any provision for impairment. WITAN INVESTMENT TRUST PLC Page 10 of 11 Unaudited Preliminary Results for the year ended 31 December 2005 (h) Cash and cash equivalents Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. (i) Dividends payable Interim dividends are recognised in the period in which they are paid. Final dividends are not recognised until approval by the shareholders in general meeting. (j) Non current liabilities All debentures and secured bonds are initially recognised at cost, being the fair value of the consideration received, less issue costs where applicable. After initial recognition, all interest-bearing loans and borrowings are subsequently measured at amortised cost. Amortised cost is calculated by taking into account any discount or premium on settlement. The costs of arranging any interest-bearing loans are capitalised and amortised over the life of the loan. (k) Foreign currency translation Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction. Foreign currency monetary assets and liabilities that are fair valued and are denominated in foreign currencies are re-translated into sterling at the rate ruling on the balance sheet date. Foreign exchange differences arising on translation are recognised in the Income Statement. (l) Derivative financial instruments The Group's activities expose it primarily to the financial risks of changes in market prices, foreign currency exchange rates and interest rates. Derivative transactions which the Company may enter into comprise forward exchange contracts (the purpose of which is to manage currency risks arising from the Company's investing activities), quoted options on shares held within the portfolio, or on indices appropriate to sections of the portfolio (the purpose of which is to provide protection against falls in the capital values of the holdings) and futures contracts on indices appropriate to sections of the portfolio (the purpose of which is to provide protection against falls in the capital values of the holdings). The Company may also write options on shares represented in the portfolio where such options are priced attractively relative to the portfolio managers' longer term expectations for the relevant share prices. The Group does not use derivative financial instruments for speculative purposes. The use of financial derivatives is governed by the Group's policies as approved by the Board, which has set written principles for the use of financial derivatives. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the Income Statement as they arise. If capital in nature, the associated change in value is presented as a capital item in the Income Statement. Notes 2 to 25 are set out in the attached file. Paste the following link into your web browser to download the PDF document related to this announcement: http://www.rns-pdf.londonstockexchange.com/rns/5281z_-2006-3-8.pdf WITAN INVESTMENT TRUST PLC Page 11 of 11 Unaudited Preliminary Results for the year ended 31 December 2005 26. 2005 Accounts The preliminary figures for the year ended 31 December 2005 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. 27. 2004 Accounts The figures and financial information for the year ended 31 December 2004 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. 28. Annual Report and Annual General Meeting The full annual report and accounts will be posted to shareholders in the week beginning 20 March 2006 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 2.30 pm on Monday 24 April 2006 at Merchant Taylors' Hall, 30 Threadneedle Street, London EC2R 8JB. For further information please contact: James Budden Witan Investment Trust plc Telephone: 020 7227 9772 or Eleanor Mitchell Quill Communications Telephone: 020 7758 2240 This information is provided by RNS The company news service from the London Stock Exchange

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