INVESTEC HIGH INCOME TRUST PLC
Chairman's Statement
In the year to 31 March 2008, the total return on your Company's gross assets,
including income paid out as dividends and before loan interest, was (15.8)%.
This compares with a total return of (7.7)% from the FTSE All-Share Index and
(12.2)% from the FTSE 350 Higher Yield Index. Much of the better return from
the former can be attributed to exceptional performance from the resource
sector. On the other hand the performance of your portfolio was adversely
affected by the manager's adherence to a value contrarian investment style.
Ordinary shareholders suffered from a fall in net asset value per share of
47.0%, partly attributable to the Company's high level of gearing; however,
this was offset to some extent by the put option, which was bought towards the
end of the previous financial year to protect the portfolio against a large
fall in value.
Dividend
Dividend growth, however, remained strong and this has allowed your Company's
dividend to be maintained. We have highlighted a number of times in previous
years that the maturing investment trusts in the portfolio would hinder the
overall dividend growth of the portfolio and part of the dividend has been
financed through the use of our revenue reserve. Your directors have declared
a fourth interim dividend of 1.625p per ordinary share, making a total of 6.50p
for the full year. This dividend will be paid on 22 May 2008 to shareholders
on the register at 4 April 2008.
The Board will endeavour to maintain the dividend in the year ahead but given
the anticipated pressures on the revenue account in the current financial year,
there can be no assurance that dividends will be able to be maintained at the
level paid in recent years.
VAT
In June 2007 the European Court of Justice ruled that investment trust
management fees should be exempt from VAT. This decision has now been accepted
in principle by HM Revenue & Customs, although some procedural matters remain
to be resolved. The result is that future management fees will not be subject
to VAT. The Company has taken appropriate steps to reclaim the relevant VAT
that has been paid on past management fees, although the actual amount remains
uncertain. Accordingly we have not recognised any asset in the financial
statements.
The Board
We are pleased to welcome David Watts to the Board following his appointment
during the year. David brings with him a wealth of experience and knowledge and
the Board welcomes his important contributions to the active stewardship of the
Company. In accordance with the Company's Articles of Association, he will
stand for re-election at the forthcoming Annual General Meeting.
Outlook
The portfolio retains an emphasis on the very largest listed UK companies.
Overall, we remain concerned that the UK equity market is vulnerable to a
significant sell-off especially if the current fears of a recession in the UK
and US evolve into fears of a global recession. As a result we are comfortable
in keeping the put option in place.
It is now less than twelve months until we repay both our bank loan and zero
dividend preference shares. At the moment, it appears that there may be a
relatively small amount of assets remaining and a likely course of events is
that the Company will wind up at the end of March 2009. The Board has been
considering various options for ordinary shareholders at that time and expects
to make an announcement when the interim results are published in October.
Annual General Meeting
The Annual General Meeting will be held on Wednesday 9 July at the Manager's
office in London. I look forward to welcoming as many of you as possible.
Shareholders who are unable to attend the meeting are encouraged to use their
proxy votes.
James Dawnay
15 May 2008
TWENTY LARGEST INVESTMENTS
as at 31 March 2008
Valuation
COMPANY �'000
Royal Dutch Shell 'B' Shares 3,652
BP 3,354
HSBC Holdings 3,148
Vodafone 3,101
Merrill Lynch FTSE 100 Ex Top 20 Put Option 2,545
January 2009 (1)
GlaxoSmithKline 2,471
Unilever 2,087
HBOS 1,524
UK Treasury 4% 7/3/09 1,302
BT 1,302
Aviva 1,238
AstraZeneca 1,234
Accelerated Return 1,140
Cable & Wireless 8.75% 6/8/12 990
Lloyds TSB 817
Signet 803
Wolseley 773
Legal & General 568
European Equity Tranche Income 535
Jupiter Second Split 520
33,104
(1) The value of the option is linked to an index of equity stocks represented
by the FTSE 100 Index but excluding the largest 20 companies.
Unaudited Consolidated Income Statement
for the year ended 31 March 2008
Year ended Year ended
31 March 2008 31 March 2007
(Unaudited) (Audited)
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Investment Income 2,200 - 2,200 2,086 - 2,086
Other operating income 83 - 83 120 - 120
2,283 - 2,283 2,206 - 2,206
(Losses)/gains on investments
(Losses)/gains on fair value
through profit or loss financial
assets
- (9,944) (9,944) - 3,344 3,344
Total income 2,283 (9,944) (7,661) 2,206 3,344 5,550
Expenses
Management fees (127) (295) (422) (142) (330) (472)
Other expenses (284) (79) (363) (260) (102) (362)
Profit/loss before finance costs &
tax
1,872 (10,318) (8,446) 1,804 2,912 4,716
Finance costs (278) (1,868) (2,146) (278) (1,768) (2,046)
Profit/(loss) before tax 1,594 (12,186) (10,592) 1,526 1,144 2,670
Tax - - - - - -
Profit/(loss) for the year 1,594 (12,186) (10,592) 1,526 1,144 2,670
Return per ordinary share (basic &
diluted)
5.69p (43.52)p (37.83)p 5.45p 4.09p 9.54p
The total column of this statement represents the Group's Income Statement,
prepared in accordance with IFRS. The supplementary revenue and capital return
columns are both prepared under guidance published by the Association of
Investment Companies. All items in the above statement derive from continuing
operations. All profit is attributable to the equity shareholders of the
parent company.
Unaudited Consolidated Balance Sheet
as at 31 March 2008
31 March 2008 31 March 2007
(Unaudited) (Audited)
�'000 �'000
�'000 �'000
Non current assets
Investments held at fair
value through profit or
loss
Derivative 2,545 1,307
Non-derivative 40,689 52,017
43,234 53,324
Interest rate swap asset - 93
43,234 53,417
Current assets
Other receivables 368 354
Cash and cash equivalents 449 1,569
817 1,923
Total assets 44,051 55,340
Current liabilities
Other payables (194) (196)
Bank loan (14,600) -
Liability attributable to
zero dividend preference
holders (15,142) -
Interest rate swap (2) -
liability
(29,938) (196)
Total assets less current
liabilities
14,113 55,144
Non Current Liabilities
Bank loan - (14,600)
Liability attributable to
zero dividend preference
holders - (13,924)
- (28,524)
Net Assets 14,113 26,620
Equity attributable to
equity holders
Ordinary share capital 7,000 7,000
Cash flow hedging reserve (2) 93
Special reserve 19,740 19,740
Capital reserve - (6,925) (5,901)
realised
Capital reserve - (6,235) 4,927
unrealised
Revenue reserve 535 761
14,113 26,620
Total equity 14,113 26,620
Net asset value per 50.40p 95.07p
ordinary share:
Unaudited Consolidated Statement of Changes in Equity
for the year ended 31 March 2008
Cash
Flow
Capital Capital
Share Special Hedging Reserve Reserve Revenue Total
Capital Reserve Reserve Realised Unrealised Reserve Equity
�'000 �'000 �'000 �'000 �'000 �'000 �'000
Balance at 1 April 7,000 19,740 (238) (8,700) 6,582 1,055 25,439
2006
Changes in Equity
for 2007
Cash flow hedges -
gains/(losses)
taken to equity - - 331 - - - 331
Net income
recognised directly
in equity - - 331 - - - 331
Profit for the year 2,670 2,670
Total recognised
income and expense
for the year - - 331 - - 2,670 3,001
Transfer of capital - - - 2,799 (1,655) (1,144) -
items
Dividends paid to
equity shareholders
- - - - - (1,820) (1,820)
- - 331 2,799 (1,655) (294) 1,181
Balance at 31 March 7,000 19,740 93 (5,901) 4,927 761 26,620
2007
Balance at 1 April 7,000 19,740 93 (5,901) 4,927 761 26,620
2007
Changes in equity
for 2008
Cash flow hedges -
gains/(losses)
taken to equity - - (95) - - - (95)
Net income
recognised directly
in equity - - (95) - - - (95)
Profit for the year - - - - - (10,592) (10,592)
Total recognised
income and expense
for the year - - (95) - - (10,592) (10,687)
Transfer of capital - - - (1,024) (11,162) 12,186 -
items
Dividends paid to
equity shareholders
- - - - - (1,820) (1,820)
- - (95) (1,024) (11,162) (226) (12,507)
Balance at 31 March 7,000 19,740 (2) (6,925) (6,235) 535 14,113
2008
(unaudited)
Unaudited Consolidated and Company Cash Flow Statement
for the year ended 31 March 2008
31 March 2008 31 March 2007
(Unaudited) (Audited)
�'000 �'000 �'000 �'000
Cash flow from operating
activities
(Loss)/profit before tax (10,592) 2,670
Adjustments for:
Purchases of investments (1) (13,245) (21,723)
Sales of investments (1) 13,409 22,164
164 441
Losses/(gains) on investments 9,944 (3,344)
Financing costs 2,146 2,046
Operating cash flows before
movements in working capital
1,662 1,813
Decrease/( increase) in (34) 34
receivables
Increase in payables - 15
Net cash flow from operating
activities before and after
tax 1,628 1,862
Cash flow from financing
activities
Interest paid on borrowing (928) (926)
Equity dividends paid (1,820) (1,820)
Net cash flow from financing (2,748) (2,746)
activities
Net change in cash and cash
equivalents
(1,120) (884)
Cash and cash equivalents at
the beginning of the year
1,569 2,462
Net foreign exchange - (9)
movements
Cash and cash equivalents at
the end of the year
449 1,569
Cash and cash equivalents (which are presented as a single class of asset on
the balance sheet) comprise cash at bank and other short term investments with
a maturity of three months or less.
(1) Purchases and sales of investments are considered to be operating activities
of the Group and Company, given its purpose, rather than investing activities.
Notes
i) Dividends: A third interim dividend of 1.625p per ordinary share of 25p (2007:
1.625p per ordinary share of 25p) was paid on 21 February 2008. A fourth
interim dividend of 1.625p per ordinary share of 25p (2007: 1.625p per ordinary
share of 25p) will be paid on 22 May 2008 to shareholders on the register on 4
April 2008. The shares were quoted ex-dividend from 2 April 2008.
ii) The figures set out above are derived from the unaudited consolidated accounts
of Investec High Income Trust Plc and its subsidiaries for the year ended 2008
and the audited accounts for the year ended 2007. The 2008 accounts will be
sent to shareholders shortly.
iii) This preliminary statement is not the Group's statutory accounts.
The statutory accounts for the financial year ended 31 March 2007 have been
delivered to the Registrar of Companies and received an audit report which was
unqualified, did not include a reference to any matters to which the auditors
drew attention by way of emphasis without qualifying the report, and did not
contain statements under section 237(2) and (3) of the Companies Act 1985. The
statutory accounts for the financial year ended 31 March 2008 have not yet been
approved, audited or filed.
For further information please contact:
Martin Slade
Investec Investment Management Limited 020 7597 2000
END
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