Final Results
May 02 2001 - 12:52PM
UK Regulatory
RNS Number:0308D
Pennine AIM VCT PLC
2 May 2001
PENNINE AIM VCT PLC
Chairman's Statement
OVERVIEW
It is now five years since the launch of Pennine AIM VCT in March 1996. During
this period, shareholders have received tax-free distributions totalling 45p
and have also seen the net asset value of their shares (after distributions)
rise from the subscription price of 100p to 143.1p at 31 January 2001. This
tax-free total return of 88.43p is enhanced for those shareholders who will
have claimed 20% income tax relief at the time of their original subscription
and any capital gains deferral.
THE YEAR TO 31 JANUARY 2001
The volatility of world equity markets during the last twelve months has made
it a difficult year for your company. The year started strongly with TMT
stocks continuing their stellar performance of the final quarter of 2000.
However, by the end of April this momentum had abruptly stalled, as caution
regarding over-inflated valuations took hold. Subsequently, sentiment
throughout the market has retained a less than optimistic outlook during the
second half of the year.
QUOTED INVESTMENTS
Funds raised on the Alternative Investment Market during 2000 remained at
record levels, with total money raised reaching #3 billion, up from #0.9
billion in 1999. Of this, over #1.75 billion related to new issues. During the
year your company has invested over #618,000 in a total of five new qualifying
companies and the qualifying holding in Blooms of Bressingham has been
increased.
Following the strong performance of many of the shares within the portfolio in
the first quarter of 2000, we took the opportunity to realise capital gains on
the following holdings: Dragons Health Clubs, IS Solutions, Host Europe
(formerly Magic Moments), Mears and XKO. Furthermore, the entire holding in
Orchard Furniture was sold for an amount in excess of #220,000. In December
2000 Crown Sports announced that its share/cash offer for Dragons Health Clubs
had been declared unconditional. As a result your company received #360,133 in
cash and 1,026,490 shares in Crown Sports, realising a gain of 119.6% on an
initial investment of #310,000. Profits taken during the year have boosted our
cash balances, helping to preserve the asset value.
UNQUOTED
A total of #973,033 has been invested in the unquoted sector representing
15.5% of assets of the company. The majority of these investments are involved
with the "New Economy" and have suffered due to the sharp slow down in this
area. The Board has taken the view that prudent provisions should be made
against these investments with the exception of Forward Media and E-go Systems
which are valued at or above cost. These provisions amount to 7.7p per share
and the net loss per share on the unquoted portfolio is 5.3p.
The existing investment in Forward Media has been increased and the value has
also been increased to reflect the recent fund raising. We have also invested
in an unsecured loan in Internet Trading Clubs plc, an unquoted joint venture
with Freeserve, which focuses on the provision of a wide range of services for
motorists.
REVENUE
The consequence of being almost fully invested in qualifying companies,
especially those at an early stage of their development, is that dividend
income into the fund has been much reduced. This year we report a small loss
on revenue account, which is more than compensated for by a substantial return
on the capital account.
DIVIDENDS AND CAPITAL DISTRIBUTION
The directors propose a capital distribution of realised gains of 10p per
share for the twelve months ended 31 January 2001, bringing the total dividend
for the year to 20p per share. The proposed distribution will be paid (subject
to shareholder approval) on 6 June 2001 to shareholders on the Register as at
11 May 2001.
NET ASSET VALUE
Prior to distributions the net asset value fell by 11.6% in the year ended 31
January 2001. This compares favourably with the 35.2% fall in the FTSE AIM
Index in the same period. Since the year end, however, the market has
deteriorated further and the unaudited net asset value as at 31 March 2001 was
136.2p.
THE FUTURE
Major uncertainties still exist concerning the future of the global economy.
Current market sentiment is dominated by fears of the rate by which the US
economy is slowing against the backdrop of a continuing decline in corporate
earnings. However, most commentators suggest that recession can be averted and
conclude that a 'soft landing' can be engineered. Traditionally, a background
of falling interest rates has provided a solid platform for the growth of
businesses within the smaller companies sector.
Your Board has pursued a policy of profit taking from successful investments
with a view to building up cash either for distribution or reinvestment. In
the current climate it is comforting that 16.8% of the assets of the company
(after the proposed distribution) are held in cash and the Board believe that
the company is in a strong position to take advantage of future qualifying
investment opportunities at more attractive prices than in the recent past.
The fifth anniversary of the allocation of shares was 2 April 2001, since when
those shareholders who initially subscribed have been free to sell their
shares without incurring any loss of initial tax reliefs.
As mentioned in my January letter to shareholders which accompanied the
independent report on investments, your Board recognises its obligation to
give shareholders the choice of winding up the company at this year's AGM. A
Resolution to the Members to wind up the Company is contained in the Notice of
Meeting but I would urge you to join your directors in voting AGAINST this
resolution. We have been advised by the Inland Revenue that legislation on the
winding up and merger of VCTs will not be forthcoming until 2002. In view of
this, your Board believes that it would not be in the best interests of
shareholders to vote to wind up the company until at least the intention and
probable impact of the proposed legislation is known. In the January letter we
invited Members to tell us of their likely intentions at the end of the five
year qualifying period, to assist the Board in its planning. The results of
this canvass show that, of those who responded, 85% (representing 2,608,925
ordinary shares) were likely to retain their shareholding until the
legislation is in place.
Your Board recognises, however, that once this five year date has passed no
mechanism for winding up the company exists and considers it appropriate for
shareholders to have the opportunity to review the future of the company at
appropriate intervals. Accordingly a resolution is proposed to amend the
Articles to require the directors to put a proposal for the continuation of
the company, in its then form, to shareholders at the fifth annual general
meeting following the annual general meeting in 2001 and thereafter at five
yearly intervals. For such a resolution not to be passed at that time,
shareholders holding at least 25% of the ordinary shares then in issue must
vote against the resolution. This resolution would replace the existing
Article which provides that in addition to putting a proposal to the
shareholders at this time, the directors must also within six months present
reorganisation proposals to the shareholders. In the event that shareholders
vote to continue the company as a venture capital trust at the forthcoming
annual general meeting, it is considered out of line with standard venture
capital trust practice and an unnecessary expense to shareholders to present
such reorganisation proposals.
Your Board considers that it has a moral obligation to those investors who
wish to realise their investment in the company. There has for some time been
a policy in place for the company to buy back shares from shareholders and,
although the directors do not recommend that shareholders take advantage of
this facility at the present time, if shareholders wish to realise all or part
of their investment, they should apply to the company in writing stating the
number of shares they wish to sell. This may be particularly helpful to
personal representatives or executors of deceased members.
The company has been advised by Granville Baird that it is restricted under
the Financial Services Authority Listing Rules to paying no more than five per
cent above the average mid-market price of the shares for the five business
days prior to the buy back. As at 31 March 2001 (the latest practicable date
before publication) this would restrict the price to 115.5p which represents
15.2% discount to net asset value. This price may vary depending on movements
in the company's share price prior to the purchase of shares being made.
Shareholders should remember that any capital gains deferred by their original
investment will again become due on the sale of these shares and should seek
advice from their professional advisers if they are in any doubt about their
personal position.
For those shareholders who may wish to remain invested, the future investment
policy of your Board will be to realise capital gains within the VCT and to
distribute at least 10p per annum, gains permitting and subject to Inland
Revenue clearance, representing a 12.5% tax free yield on the original
investment (after initial income tax relief). We believe that many investors
will wish to take advantage of these tax-free gains and distributions.
Your board believes that, in the event of shareholders voting to continue the
life of the company, it is in the company's interests to extend the current
share option agreement, which was originally designed to provide an incentive
to the manager when it was envisaged that the company might well have a
limited life of five years. Details of these arrangements are set out in the
Report and Accounts, Special Business at the annual general meeting, which
details the reasoning behind, and directors' recommendations in respect of,
each of the proposed special resolutions.
In the meantime, your Board will be taking advantage of any market buoyancy to
realise capital gains while they are available and will distribute them to
shareholders as it judges appropriate.
I would like to take this opportunity to thank the directors, managers and
professional advisers for their contributions to the achievements made during
a most successful year.
HUGH GILLESPIE
Chairman
2 May 2001
PENNINE AIM VCT plc
Statement of total return (incorporating the revenue account) of the Company
For the year to For the year to
31 January 2001 31 January 2000
Revenue Capital Total Revenue Capital
Total
#000 #000 #000 #000 #000 #000
Gains/
(losses) on
investments
- realised - 2,461 2,461 - 702 702
- unrealised - (3,008) (3,008) - 2,834 2,834
Income 133 133 168 - 168
Investment (114) - (114) (89) - (89)
management
fee
Other (88) - (88) (86) - (86)
expenses
Net return
before (69) (547) (616) (7) 3,536 3,529
finance
costs and
taxation
Interest - - - (1) - (1)
payable
Return on
ordinary (69) (547) (616) (8) 3,536 3,528
activities
before tax
Tax on - - - 16 - 16
ordinary
activities
Return on
ordinary
activities
after tax (69) (547) (616) 8 3,536 3,544
for the
financial
year
Dividends in
respect of (22) - (22) (22) - (22)
non-equity
shares
Return
attributable (91) (547) (638) (14) 3,536 3,522
to equity
shareholders
Dividends in
respect of - (878) (878) - (462) (462)
equity
shares
Transfer (91) (1,425) (1,516) (14) 3,074 3,060
(from)/to
reserves
Return per
ordinary (12.15)p (14.17)p (0.32)p 76.62p 76.30p
share
Basic and
fully
diluted (2.02)p
All revenue and capital items in the above statement are from continuing
operations. No operations were acquired or discontinued in the year.
Notes:
1. This preliminary statement is extracted from the company's accounts for the
year to 28 February 2001, which remain subject to final audit and have yet
to be approved by shareholders and delivered to the Registrar of
Companies.
2. The directors recommend a distribution of realised capital gains of 10.0
pence per share to be paid on 6 June 2001 to shareholders on the Register
of Members at the close of business on 11 May 2001.
3. The audited accounts will be despatched to shareholders by 11 May 2001 and
copies of this announcement are available at the Companies registered
office: Port of Liverpool Building, Pier Head, Liverpool L3 1NW
4. The loss per share is based on the weighted average number of ordinary
share in issue throughout the year of 4,503,196 shares.
Balance Sheet
31 January 2001 2000
#000 #000
Fixed assets
Investments 5,247 7,832
Current assets
Debtors 43 117
Cash at bank and in hand 1,494 639
1,537 756
Creditors: amounts falling due within one year
(502) (534)
Net current assets 1,035 222
Total assets less current liabilities 6,282 8,054
Capital and reserves
Called-up share capital 439 462
Share premium - 3,924
Special reserve 3,924 -
Capital reserve - realised 1,786 458
Capital reserve - unrealised 207 3,215
Capital redemption reserve 22 -
Revenue reserve (96) (5)
Total shareholders' funds 6,282 8,054
Total shareholders' funds are attributable to:
Equity shareholders 6,282 8,054
Non-equity shareholders - -
6,282 8,054
Net asset value per ordinary share
143.12p
174.47p
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