Annual Report and Accounts

Deutsche Equity Income Trust PLC 25 October 2002 DEUTSCHE EQUITY INCOME TRUST PLC PRELIMINARY ANNOUNCEMENT OF RESULTS Extract from the Chairman's Statement Although our performance during the first half of our financial year was good, with a gain in our net asset value per share of 12.5%, I am sorry to have to report that for the year as a whole there was a decline of 17.5%. It is little consolation that the UK market, as measured by the FT-SE All-Share Index, fell by even more, 23.0%. It is our policy to invest in the shares of companies with above average dividend yields and sound finances but even so we were unable to avoid the impact of the worst bear market to hit the London stock exchange since the collapse of 1974. Somewhat better news was that our share price moved from a small discount to a small premium to net asset value reducing its fall to 13.5%. Although the shares of most investment trusts now trade at significant discounts we are pleased that there has been sufficient demand for our shares to prevent this happening. It is unusual for share prices to fall severely during a period when both monetary and fiscal policy are expansionary as they have been in this country. The problems have largely come from outside, in particular the collapse of the technology bubble, to which we had little exposure, the accounting and fraud scandals in some US corporations and the threat of war in Iraq. The timing of a recovery in the stock market as a whole is impossible to predict but we will be continuing to follow our usual investment style which has worked well over the last decade in generating income and avoiding the most overvalued areas of the market. Although our revenue available for shareholders saw a good increase in the previous financial year, this year it has fallen by 13.9%. There have been many dividend cuts by companies during the period and in order to ensure that the capital value of the trust fell less than that of the market we have been obliged to select an investment portfolio with a lower yield than last year. We are therefore drawing on our revenue reserves to propose a final dividend of 5.10p per share, which will make with the dividend of 2.50p already paid a total dividend per share for the year of 7.60p, 0.7% higher than last year. We believe that for the market to make significant progress we will need to see improved corporate earnings and in particular dividend growth. Meanwhile, we are encouraged by the value that is now appearing in the stock market and after two difficult years feel that the outlook for the coming year is more promising. J. Leigh Pemberton, Chairman The final dividend of 5.10p per share will be paid on 27 December 2002 to shareholders on the register at the close of business on 15 November 2002. The financial information set out overleaf does not constitute the Company's statutory accounts for the years ended 30 September 2002 or 2001. The financial information for 2001 is derived from the statutory accounts for 2001 which have been delivered to the Registrar of Companies. The Auditors have reported on the 2001 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 2002, which have not yet been reported on by the Auditors, will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The annual report will be sent to shareholders and will also be made available to the public at the Company's registered office. ANNUAL GENERAL MEETING The Annual General Meeting will be held on Monday, 16 December 2002 at 11.00 a.m. One Appold Street, London EC2. Registered Office: One Appold Street London EC2A 2UU 25 October 2002 By order of the Board M Pope Joint Company Secretary For further information please contact Graham Ashby at Deutsche Asset Management Tel: 020 7545 6000 STATEMENT OF TOTAL RETURN (incorporating the revenue account*) Year to 30 September 2002 Year to 30 September 2001 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 --------------------------------------------------------------------------------------------------- Realised and unrealised losses on - (15,322) (15,322) - (13,933) (13,933) investments Income 3,555 - 3,555 4,041 - 4,041 Investment management fee (589) (252) (841) (628) (269) (897) Other expenses (185) - (185) (172) - (172) --------------------------------------------------------------------------------------------------- Net return before finance costs and taxation 2,781 (15,574) (12,793) 3,241 (14,202) (10,961) Interest payable (2) - (2) (3) - (3) --------------------------------------------------------------------------------------------------- Return on ordinary activities before tax 2,779 (15,574) (12,795) 3,238 (14,202) (10,964) Tax on ordinary activities - - - (10) - (10) --------------------------------------------------------------------------------------------------- Return on ordinary activities after tax for the financial year attributable to equity 2,779 (15,574) (12,795) 3,228 (14,202) (10,974) shareholders Dividend in respect of equity shares (3,022) - (3,022) (3,002) - (3,002) --------------------------------------------------------------------------------------------------- Transfer (from)/ to reserves after aggregate dividend paid and proposed of 7.60p (2001 - 7.55p per share) (243) (15,574) (15,817) 226 (14,202) (13,976) --------------------------------------------------------------------------------------------------- Return per ordinary share 6.99p (39.17)p (32.18)p 8.12p (35.72)p (27.60)p *The revenue column of this statement is the profit and loss account of the Company. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period. BALANCE SHEET as at 30 as at 30 September 2002 September 2001 £'000 £'000 ----------------------- ----------------------- Fixed assets Investments 74,599 90,149 Current assets Debtors 1,514 2,039 Cash at bank and in hand 1,219 1,122 ----------------------- ----------------------- 2,733 3,161 Creditors: amounts falling due within one year (2,959) (3,120) ----------------------- ----------------------- Net current (liabilities)/assets (226) 41 ----------------------- ----------------------- Net assets 74,373 90,190 ----------------------- ----------------------- Capital and reserves Called-up share capital 9,941 9,941 Share premium account 20,373 20,373 Other reserves Capital redemption reserve 12,609 12,609 Capital reserve - realised 54,928 56,865 Capital reserve - unrealised (23,728) (10,091) Revenue reserve 250 493 ----------------------- ----------------------- Total equity shareholders' funds 74,373 90,190 ----------------------- ----------------------- Net asset value per ordinary share Basic 187.0 p 226.8 p CASH FLOW STATEMENT Year ended Year ended 30 September 2002 30 September 2001 £'000 £'000 --------------------------------- --------------------------------- Operating activities Cash received from investments 3,420 3,957 Interest received 36 155 Cash received from stocklending and underwriting 3 46 Investment management fees paid (845) (928) Cash paid to and on behalf of directors (49) (49) Other cash payments (134) (122) --------------------------------- --------------------------------- Net cash inflow from operating activities 2,431 3,059 --------------------------------- --------------------------------- Servicing of finance Interest paid (2) (3) --------------------------------- --------------------------------- Net cash outflow from servicing of finance (2) (3) --------------------------------- --------------------------------- Taxation Overseas tax received/(paid) 18 (19) Income tax received 13 17 --------------------------------- --------------------------------- Taxation received/(paid) 31 (2) --------------------------------- --------------------------------- Financial investment Purchase of investments (59,935) (71,337) Sale of investments 60,574 74,072 --------------------------------- --------------------------------- Net cash inflow from financial investment 639 2,735 --------------------------------- --------------------------------- Equity dividends paid (3,002) (2,942) --------------------------------- --------------------------------- Increase in cash 97 2,847 --------------------------------- --------------------------------- This information is provided by RNS The company news service from the London Stock Exchange

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