Preliminary Announcement
May 28 2003 - 12:10PM
UK Regulatory
RNS Number:6385L
Enterprise Venture Capital TrustPLC
28 May 2003
CHAIRMAN'S STATEMENT
In a recently published independent review* the Enterprise O Shares were ranked
1st in the protected VCTs and 6th overall (in a field of 68 VCTs) while the
Company's A Shares were placed 2nd in their direct peer group and 5th overall.
These results, when compared to others in the market, but not in absolute terms,
are pleasing.
Absolute performance of the O Shares is in line with expectation; absolute
performance of the A Shares did not defy the appalling market conditions but, as
evidenced above, was markedly better than that of most other VCTs and, more
importantly, the A Share Fund is, in our equity investment adviser's opinion,
well placed to benefit from a rise in overall economic conditions.
A Share Fund
Very few companies escaped the problems posed by the very difficult economic
conditions in the year to 31st March but it was a time which was particularly
unhelpful for the early stage companies in which the A Share Fund is, for the
most part, invested. Things did improve in the second half of the year as
evidenced by the fact that the rate of decline in the FTSE All-Share and the
Techmark indices reduced substantially. Nevertheless the two indices declined by
35.4% and 50.8% respectively over the twelve month period. By contrast, the net
asset value per A Share fell by only 13.4% to 82.11p (2002: 94.85p).
At 31st March the total value of venture capital investments, at valuations
based on BVCA guidelines, amounted to #17.2m comprising #3.6m in quoted
investments (12.4% of net assets) and #13.6m in unquoted investments (46.6% of
net assets).
By their nature, many of the companies in which Enterprise has invested may be
expected to require further rounds of finance as they grow. It is important
that the Company should be in a position to participate in that funding process
where appropriate. Enterprise has some #3.25m available for investment and it
remains the Board's intention to seek to invest this in attractively priced
opportunities as well as to support existing companies within the portfolio.
No A Share dividend is proposed (2002: nil)
O Share Dividend
In February 2000 the Board re-affirmed its commitment to realising the assets of
the O Share Fund in order to make a distribution to O Shareholders as soon as
possible after April 2004. Due to the earlier realisation of several of the
Fund's investments the Board has decided to make an early distribution of part
of the Fund. I am delighted to announce that on 20th June 2003 a dividend of 35p
will be paid on each O Share. For a VCT qualifying investor, this dividend will
bear no tax consequence and importantly has no impact on any CGT deferral
arrangements any shareholder may have in place. This dividend, an interim
dividend for the year ending 31st March 2004, follows the O Share dividend of
2.0p (2002: 1.5p) for the year ended 31st March 2003 which was paid on that
date.
The O Share Fund continues to achieve its objectives of providing an attractive
return whilst maintaining substantial protection of capital within a tax
efficient vehicle. At the time of writing the total return of the O Share Fund
is 110.5p (including dividends paid or proposed of 56.6p). For those investors
who took advantage of the income tax relief available this represents a gross
return of almost 40%, whilst for those investors able to defer their CGT
liability the return is substantially greater.
Dividend Investment Opportunity
It has become common practice in VCTs to offer top-up share issues at regular
intervals with a view to providing some balance to share buy backs. The Company
began doing this in November 2002 and intends to repeat it when paying the 35p
dividend to O Shareholders. This A Share offer will be open to all but is
particularly aimed at O Shareholders at the time of receiving a significant
return of capital, thus giving the opportunity to take advantage of new tax
reliefs for the 2003/04 tax year by investing in A Shares.
Venture capital and development capital investment opportunities are currently
available at valuations representing historical lows. Although investing at
such times in the economic cycle presents risks, our equity investment adviser
believes this also to be a time of great opportunity for the Enterprise A
Portfolio, as economic recovery takes place and the portfolio investments
mature. Noble Fund Managers does not expect recovery to be immediate but is
cautiously optimistic for the medium term.
For those O Shareholders who were able to take full advantage of the tax reliefs
offered at the time of their original investment and are also entitled to all of
the new tax reliefs on offer, this is an opportunity to obtain a form of double
tax relief. If an O Shareholder were to invest all of the proposed 35p dividend,
then for each #1,000 originally invested this would represent in total #270 of
income tax relief and #540 of CGT deferral. Coupled with the dividends already
returned to the O Shareholders of #216 per #1,000 (excluding the 35p dividend),
this means that a Shareholder's entire A investment (which on present valuations
would be worth #869) would have a negative carrying cost to date of #26.
Corporate governance
The year under review saw the publication of the Higgs and Smith Reports which
prompted considerable debate over corporate governance issues. The Board's
position is reported fully in the Corporate Governance report on pages 15 and
16. In addition, a Directors' Remuneration Report is included for the first
time on page 21 and 22.
Outlook
It seems likely that difficult business conditions will continue for some time
to come but nevertheless there are indications of considerable upside potential
in a number of our investee companies (though we are unlikely to see any rapid
increase in net asset value in the short term).
It may be significant that corporate profits in the US have grown for two
quarters in a row with productivity improvements helping to offset weak demand.
This in turn seems to have given rise to increased investment in information
technology. As a result we may see continuing outperforming in the quoted
technology sectors both in the US and the UK with consequential benefits to
valuations in our venture capital portfolio, based as it is to a great extent on
'high-tech' companies.
Patrick Lawrence
Chairman
28th May 2003
* Source: Tax Efficient Review
STATEMENT OF TOTAL RETURN
(incorporating the Revenue Account*)
for the year ended 31st March 2003
Year ended 31st March 2003 Year ended 31st March 2002
Revenue Capital Total Revenue Capital Total
#000 #000 #000 #000 #000 #000
Losses on
investments - (2,006) (2,006) - (4,089) (4,089)
Income 778 - 778 1,098 - 1,098
Investment
management fees (264) - (264) (318) - (318)
Other expenses (300) - (300) (328) - (328)
______ ______ ______ ______ ______ ______
Return on ordinary
activities
before taxation 214 (2,006) (1,792) 452 (4,089) (3,637)
Tax on ordinary (37) - (37) (100) - (100)
activities
______ ______ ______ ______ ______ ______
Return on ordinary
activities after
tax for the
financial year 177 (2,006) (1,829) 352 (4,089) (3,737)
Dividends paid or
proposed (474) - (474) (355) - (355)
______ ______ ______ ______ ______ ______
Transfer from
reserves (297) (2,006) (2,303) (3) (4,089) (4,092)
______ ______ ______ ______ ______ ______
Return per O Share
of 10p 0.89p (0.05)p 0.84p 1.29p (0.22)p 1.07p
Return per A Share (0.22)p (12.73)p (12.95)p 0.32p (27.14)p (26.82)p
of 10p
Notes
All revenue and capital items in the above statement derive from continuing
operations.
The Company has only one class of business and derives its income from
investments made in shares, securities, loans and bank deposits.
* The revenue column in this statement is the profit and loss account of the
Company.
BALANCE SHEET
as at 31st March 2003
As at As at
31 March 31 March
2003 2002
#000 #000
Fixed assets
Investments 17,195 24,565
Monies pending investment 12,336 6,870
_______ _______
29,531 31,435
Current assets
Debtors 80 187
Cash at bank - 397
_______ _______
80 584
Creditors: amounts falling due within
one year (369) (533)
_______ _______
Net current (liabilities)/assets (289) 51
_______ _______
Net assets 29,242 31,486
_______ _______
Capital and reserves
Called up share capital 3,941 3,937
Capital redemption reserve 30 22
Share premium account 25,534 25,444
Special reserve 4,772 4,815
Capital reserve (realised) 300 342
Capital reserve (unrealised) (5,081) (3,117)
Revenue reserves (254) 43
_______ _______
Equity shareholders' funds 29,242 31,486
_______ _______
Net asset value per O Share 68.96p 70.13p
Net asset value per A Share 82.11p 94.85p
CASH FLOW STATEMENT
for the year ended 31st March 2003
Year ended Year ended
31st March 2003 31st March 2002
#000 #000 #000 #000
Operating activities
Investment income received -
qualifying 706 695
Deposit and similar interest received -
non qualifying 201 300
Interest purchased with (42) (64)
investments
Recovery of interest purchased with
investments 42 64
Investment management fees paid (193) (229)
Secretarial fees paid (128) (48)
Other cash payments (244) (191)
________ _______
Net cash inflow from operating
activities 342 527
Taxation
UK corporation tax paid (67) -
Financial investment
Sale of fixed income investments 6,000 3,000
Sale of qualifying loans 2,300 294
Sale of AIM and other quoted
investments 99 410
Purchase of fixed income - (5,563)
investments
Purchase of qualifying loans - -
Purchase of unquoted investments and
investments quoted on AIM (3,035) (2,424)
________ _______
Net cash (inflow)/outflow from 5,364 (4,283)
financial investment
Equity dividends paid
Dividends paid (830) (416)
________ _______
Net cash outflow from equity (830) (416)
dividends paid
_______ _______
Net cash inflow/(outflow) before use
of liquid resources and financing 4,809 (4,172)
Management of liquid resources
Movement in deposits (5,466) 781
Financing
New share issue 108 3,841
Repurchase of own shares (43) (130)
Share issue expenses (6) (211)
_______ ________
Net cash inflow from financing 59 3,500
_______ _______
(Decrease)/increase in cash (598) 109
_______ _______
The Company holds gilts and bonds primarily as investments and not as liquid
resources. Accordingly, movements in the holdings of these investments are shown
within "Financial investment" rather than within "Management of liquid
resources".
Return per Share
Basic revenue return per O Share is based on the net revenue from ordinary
activities after taxation of #211,206 and on 23,693,369 O Shares, being the
weighted average number of O Shares in issue during the year (2002: #305,464 and
23,769,395). Basic revenue return per A Share is based on the losses from
ordinary activities after taxation of #34,025 and on 15,649,740 A Shares, being
the weighted number of A Shares in issue during the year (2002: losses of
#47,650 and 14,872,353).
Basic capital return per O Share is based on net realised capital losses of
#25,850 (2002: gains of #2,398) and on net unrealised capital gains of #13,310
(2002: losses of #55,147) and on 23,693,369 O Shares (2002: 23,769,395 O
Shares). The capital return per A Share is based on net realised capital losses
of #16,253 (2002: losses of #131,332) and on net unrealised capital losses of
#1,977,035 (2002: losses of #3,905,024) and on 15,649,740 A Shares (2002:
14,872,353 A Shares).
The financial information set out in these statements does not constitute the
Company's statutory accounts for the year ended 31st March 2003 or the year
ended 31st March 2002 but is derived from those accounts. Statutory accounts for
2002 have been delivered to the Registrar of Companies, and those for 2003 will
be delivered following the Company's Annual General Meeting. The auditors have
reported on those accounts; their reports were unqualified and did not contain
statements under Section 237(2) or (3) of the Companies Act 1985.
Dividend
The directors propose that no final dividend be paid.
The Annual Report will be circulated by post to all shareholders and copies will
be available to members of the public from the Company's registered offices at
St Philip's House, St Philips Place, Birmingham, B3 2PP in June 2003.
This information is provided by RNS
The company news service from the London Stock Exchange
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