INVESTEC HIGH INCOME TRUST PLC
Chairman's Statement
I am sorry to have to report that over the year to 31 March 2003 total assets
of your company, including accrued income, fell by 32.3%. This compares with
falls of 32.1% and 30.8% in the FTSE All Share and FTSE 350 Higher Yield
Indices respectively. Your Directors have declared a fourth interim dividend of
2.85p per Ordinary share (payable by cheque, posted today) making 9.25p for the
full year, which matches the previous year's payment.
The year under review has been highly volatile. Much of the equity market
decline occurred in the first six months. Since September markets have largely
been at the mercy of news from the Middle East. Commentators have divided
between those who expected a typical recessionary cycle to be resolved by
strong monetary and fiscal stimulus and those who feared latent imbalances in
the global economy would increase deflationary forces.
While the UK economy continues to perform relatively well, UK stock markets
have not been immune to the global downturn. The strongest sectors have been
defensive: food producers, tobacco and utilities. Telecoms, strongly influenced
by the performance of Vodafone, bounced back after a very weak two years; life
insurers, general industrials and media shares were the poorest performers.
On the whole your Company's equity portfolio has performed satisfactorily. Very
poor returns from the split capital investment trust portfolio, however, meant
that, overall, the Company's assets marginally underperformed the FTSE All
Share Index.
Your Board took a number of steps to protect its assets and ensure that the
Company did not breach its bank covenants. Towards the end of last year the
managers were instructed to raise �7.0 million in cash to offset bank debt,
effectively reducing borrowings to �12.6 million. Also, as announced last
December, the managers undertook certain derivative transactions, buying a put
on the FTSE 100 Index and selling a call in order to provide cost effective
protection on the downside.
The defensive measures outlined above stood the Company in good stead. In March
when the FTSE 100 Index hit a low point we were still in compliance with our
bank covenants and, consequently, were not obliged to sell equities at
depressed levels. That having been said, shareholders should be aware that our
current defensive posture with 23% of assets in cash, together with some loss
of income from the investment trust portfolio, means that revenue in the
current year is unlikely to match that for the year just ended. The Company may
also be restricted from paying a dividend by the provisions of Sections 263 and
264 of the Companies Act.
In considering the appropriate use of your company's cash reserves going
forward, your Board will bear in mind three considerations in particular:
first, the Company must not breach its bank covenants; secondly, with both
classes of share trading at a discount to net asset value, there is an argument
for using cash to buy back shares though your Board is committed not to buy
back Ordinary shares except when the full entitlement of Zero Dividend
Preference shares is covered at least 1.5 times; thirdly it will be in the
interests of both classes of shareholders to reinvest some cash into equities
once the outlook becomes clearer. At the time of writing, evidence of an
improving global economic picture is inconclusive.
Finally I would like to pay tribute to my predecessor as chairman, Roger Adams.
His untimely death last December after a short illness has robbed us of someone
with an unrivalled experience of the investment trust industry. Both Board and
Managers greatly miss his wisdom and good humour in difficult times.
James Dawnay
19 May 2003
Statement of Total Return
(incorporating the Revenue Account) of the Group (unaudited)
for the year ended 31 March 2003
Year ended Period from 10 March 2001
31 March 2003 to 31 March 2002
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Losses on - (15,392) (15,392) - (2,429) (2,429)
investments
Income 3,280 - 3,280 3,560 - 3,560
Investment (109) (255) (364) (143) (335) (478)
management fee
Other expenses (280) - (280) (217) - (217)
Net return 2,891 (15,647) (12,756) 3,200 (2,764) 436
before finance
costs and
taxation
Interest (373) (870) (1,243) (377) (880) (1,257)
payable
Return on 2,518 (16,517) (13,999) 2,823 (3,644) (821)
ordinary
activities
before taxation
Taxation - - - (95) 90 (5)
Return on 2,518 (16,517) (13,999) 2,728 (3,554) (826)
ordinary
activities
after taxation
Appropriation - (801) (801) - (754) (754)
to redemption
reserve
Return 2,518 (17,318) (14,800) 2,728 (4,308) (1,580)
attributable to
equity
shareholders
Dividends to (2,590) - (2,590) (2,590) - (2,590)
ordinary
shareholders
Transferred (72) (17,318) (17,390) 138 (4,308) (4,170)
(from) /to
reserves
Number of 28,000,000 28,000,000 28,000,000 28,000,000 28,000,000 28,000,000
Ordinary shares
Number of Zero 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000 8,400,000
Dividend
Preference
shares
Return per 8.99p (61.85) p (52.86) p 9.74p (15.38)p (5.64)p
Ordinary Share
Return per Zero - 9.54p 9.54p - 8.98p 8.98p
Dividend
Preference
Share
Consolidated Balance Sheet (unaudited)
as at 31 March 2003
31 March 2003 31 March 2002
�'000 �'000 �'000 �'000
Investments 27,414 48,049
Current assets
Investments - 54
Debtors 391 645
Cash and short term 7,975 3,493
deposits
8,366 4,192
Creditors: amounts falling 1,045 917
due
within one year
Net current assets 7,321 3,275
34,735 51,324
Creditors: amounts falling (19,600) (19,600)
due
after more than one year
Net assets 15,135 31,724
Capital and reserves
Called up share capital 7,000 7,000
Share premium - 19,740
Special reserve 19,740 -
Capital reserve - realised (7,737) (1,857)
Capital reserve - (13,889) (2,451)
unrealised
Revenue reserve 66 138
Total equity shareholders' 5,180 22,570
funds
Minority interests
Investec High Income 9,955 9,154
Securities plc
15,135 31,724
Net asset value per share:
Ordinary shares 18.50p 80.61p
Investec High Income
Securities plc
Zero Dividend Preference 118.51p 108.98p
Shares
Consolidated Cash Flow Statement (unaudited)
for the year ended 31 March 2003
2003 2002
�'000 �'000 �'000 �'000
Cash inflow from operating 2,902 2,329
activities
Taxation received 2 -
Return on investments and
servicing of finance
Interest paid (1,243) (1,243)
Capital expenditure and
financial investment
Purchases of investments (24,538) (83,623)
Sales of investments 29,955 33,127
5,417 (50,496)
Equity Dividends paid (2,492) (1,890)
Cash inflow/(outflow) before
management of
liquid resources and financing 4,586 (51,300)
Management of liquid resources
Short term deposits placed (4,500) (3,300)
Financing
Gross proceeds from issue of - 36,400
shares
Issue expenses paid - (1,260)
Bank loan drawn down - 19,600
- 54,740
Increase in cash 86 140
Reconciliation of net cash flow to movement in net debt
Increase in cash 86 140
Cash used to increase 4,500 3,300
liquid resources
Bank loan drawn down - (19,600)
Exchange movements (104) 53
Change in net debt 4,482 (16,107)
Net debt at beginning of (16,107) -
year
Net debt at end of year (11,625) (16,107)
Liquid resources comprise short term deposits The above financial information
does not constitute statutory accounts as defined in Section 240 of the
Companies Act 1985. The comparative financial information is based on the
statutory accounts for the period ended 31 March 2002. These accounts, upon
which the auditors issued an unqualified opinion, have been delivered to the
Registrar of Companies.
The Annual Report and Accounts for the year to 31 March 2003 contains the
annual results for Investec High Income Securities plc and will be posted to
shareholders in due course.
For further information please contact:
Heather Williams
Investec Investment Management Limited 020 7597 2000
J:WPHwIHITLSE AnnouncementsFinal Results 2003 announcement.doc
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