Interim Results
Close Brothers Aim Vct PLC
19 October 2001
CLOSE BROTHERS
AIM VCT PLC
Interim Report for the six months to
31 August 2001
Chairman's Statement
The period under review has been a poor one for stockmarkets generally and AIM
was no exception, falling by 23.1% in the six months to 31 August, with
technology stocks still leading the way down. Against this background, a fall
in net asset value of the Ordinary and 'C' shares of 7.6% and 3.6%
respectively, after taking account of the 5p capital dividend paid to ordinary
shareholders in July, does show the resilience of the investment portfolios,
although, it is disappointing to report a negative return. Since the end of
the period the tragic events of September 11th have further destabilised the
markets and the AIM index dropped a further 18.7% between 31 August and 12
October. Over the corresponding period the estimated net asset values of the
Ordinary shares and 'C' shares have fallen a further 12.1% and 2.0%
respectively.
On the 12th October the unaudited net asset value per share of the Ordinary
shares is 87p and that of the 'C' shares 89p. In both cases this is
substantially in excess of the quoted market price. The difference may be
explained by the lack of liquidity in both shares while the majority of
shareholders hold onto their shares in order to keep their tax benefits. The
retention time expires five years from the date of subscription by Ordinary
shareholders and three years from the date of subscription by 'C' ordinary
shareholders. Where the board considers it appropriate we will use the powers
that shareholders have granted us to buy in the Company's shares for
cancellation. In order to enable us to do so, shares have to be available in
the market and only a very limited amount have been available to date.
Revenue Return and Dividends
Ordinary shares
The total return before tax for the first six months to 31 August 2001
amounted to a negative £1,428,000 (negative 12.9 pence diluted per share) made
up of a revenue return of £56,000 and a negative capital return of £1,484,000.
The total return for the comparable six month period of trading to 31 August
2000 amounted to a negative total return of £574,000 made up of a revenue
return of £163,000 and a negative capital return of £737,000 equivalent to a
total negative diluted return per share of 5.2 pence.
The revenue return in this half year has fallen in comparison to the previous
first half in 2000 as a result of falling interest rates and funds further
invested in AIM quoted companies. As a consequence your board has declared a
lower net interim dividend of 0.5 pence per ordinary share (2000: 1.25p)
payable on 30 November 2001 to shareholders on the register on 2 November
2001.
'C' shares
The total return before tax for the first six months to 31 August 2001
amounted to a negative £514,000 (negative 2.6 pence per share) made up of a
revenue return of £251,000 and a negative capital return of £765,000. There is
no comparable six month period of trading to 31 August 2000.
Your board has declared a net interim dividend of 1.0 pence per 'C' share
payable on 30 November 2001 to shareholders on the register on 2 November
2001.
Portfolio Activity
Ordinary shares
In the first six months of the current financial year your company made seven
investments, of which four were new and three were further funding of existing
holdings. This was at a total cost of £965,000 bringing the cost of
investments at 31 August 2001 to £8.31m. Of the investments in the three
existing holdings, one, Adval was to enable the company to purchase FT
Knowledge which will expand its product scope and customer base in the
e-learning arena. Protec was a financing of a new management team and security
business after a reorganization of the original business. Ideal Shopping was
an investment to provide the company with working capital whilst it sorts out
a large insurance claim as the result of a fire and to finance the TV shopping
channel which is growing its sales well.
The new investments are attractive for different reasons. Capcon is a
re-formed security consultancy with target clients such as brewers, pub
operators and ferry companies. Tepnel has the technology to automate the
purification of genetic material and Hearing Enhancement, an OFEX company, has
a contract to provide Orange with devices to enable hearing aid users to use
mobile phones without interference. Fitzhardinge is a traditional property
consultancy with established revenue streams. The flow of new companies has
been tolerable, although we have turned away investment opportunities on the
grounds of both price and quality.
A number of disposals have been made during the period, realising a net profit
of £34,000. These include the complete disposal of Aortech which has gone to
the full list, some profit taking in Metnor and Mears and the disposal of Lady
in Leisure where we considered it was best to sell at a loss. After these
disposals, your company now has 35 qualifying holdings, representing a level
of 85% invested in qualifying investments against our prospectus target of
80%. We will continue to make disposals where we consider there are
opportunities to invest in something better and to maintain a balanced
portfolio.
'C' shares
Nine qualifying investments in the period at a cost of £2.8m were made
bringing the total cost of investments at 31 August to £4.45m. Of these
investments, five are in companies where the Ordinary shares portfolio has no
holding. The other four holdings are covered in the Ordinary share section
above, with the exception of Blooms of Bressingham which is an existing
holding in the Ordinary shares portfolio and where the 'C' portfolio invested
when the company acquired Jardinerie earlier in the year. Oasis Healthcare is
a new holding in a company buying up chains of dental practices. The 'C' share
issue now has 15 qualifying holdings, representing a level of 27% invested in
qualifying investments. Although there have been no new investments since the
end of the period there are a number now under consideration and we remain
confident that there will be enough of sufficient quality to achieve the 70%
threshold.
Outlook
At the end of August the stockmarket was already discounting much of the
deterioration in the economy that had occurred over the summer. The events of
11th September and uncertainty over what will follow from it has exacerbated
the problem of lack of liquidity in the AIM market and has led to some
precipitous falls in share prices. However, prompt action by central banks on
both sides of the Atlantic in cutting interest rates shows the level of
commitment to mitigating the inevitable effects of the uncertainty caused by
the war on terrorism. This should help to restore some sort of stability
although lack of liquidity in small companies may hold back the performance of
some shares while such market conditions persist.
So far the uncertain outlook has not had an impact on the potential flow of
investments and if anything these have speeded up since the summer after a
lean time earlier in the year when investors and companies struggled to agree
on price. There are some interesting opportunities in quoted companies needing
further finance. The small size of companies in which we can invest may enable
them to be more nimble in reaction to an economic slowdown than larger
companies and therefore more resilient in a downturn. Many of them also have
novel technologies which should benefit from growing demand irrespective to
some degree of the economic climate. Periods of uncertainty can give rise to
good investment opportunities and we shall continue to invest, as indeed we
must to achieve and maintain our qualifying investment requirement, on a stock
specific basis where we see sound growth prospects at attractive ratings.
M A F Reeve
Chairman 19 October 2001
Unaudited Statement of Total Return
(incorporating the profit and loss account)
for the six months to 31 August 2001
ORDINARY SHARES
Six months to Six months to Year to
31 August 2001 31 August 2000 28 February 2001
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Losses
on - (1,389)(1,389) - (596) (596) - (1,646)(1,646)
investments
Income 112 - 112 244 - 244 379 - 379
Investment (35) (95) (130) (47) (141) (188) (84) (254) (338)
management
fees
Other (21) - (21) (34) - (34) (63) - (63)
expenses
Return on 56 (1,484)(1,428) 163 (737) (574) 232 (1,900)(1,668)
ordinary
activities
before tax
Tax on (2) 2 - - - - (50) 50 -
ordinary
activities
Return
attributable
to 54 (1,482)(1,428) 163 (737) (574) 182 (1,850)(1,668)
Shareholders
Dividends (50) - (50) (126) (2,519)(2,645) (226)(3,022)(3,248)
Transfer to/ 4 (1,482)(1,478) 37 (3,256)(3,219) (44)(4,872)(4,916)
(from)
reserves
Return per
ordinary
share
Basic 0.5p (14.7)p (14.2)p 1.6p (7.3)p (5.7)p 1.8p (18.3)p(16.5)p
Diluted 0.5p (13.4)p (12.9)p 1.5p ( 6.7)p (5.2)p 1.6p (16.7)p(15.1)p
All revenue and capital items in the above statement derive from continuing
operations.
Unaudited Statement of Total Return
(incorporating the profit and loss account)
for the six months to 31 August 2001
'C' SHARES
Six months to Six months to Year to
31 August 2001 31 August 2000 28 February 2001
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Losses on - (647) (647) - - - - (41) (41)
investments
Income 439 - 439 - - - 254 - 254
Investment (60) (162) (222) - - - (17) (88) (105)
management
fees
Other (35) - (35) - - - (18) - (18)
expenses
Return on 344 (809) (465) - - - 219 (129) 90
ordinary
activities
before tax
Tax on (93) 44 (49) - - - (44) 18 (26)
ordinary
activities
Return
attributable
to
Shareholders 251 (765) (514) - - - 175 (111) 64
Dividends (200) - (200) - - - (156) - (156)
Transfer to/ 51 (765) (714) - - - 19 (111) (92)
(from)
reserves
Return per
ordinary
share
Basic 1.3p (3.9)p (2.6)p - - - 1.4p (0.9)p 0.5p
Diluted 1.3p (3.9)p (2.6)p - - - 1.4p (0.9)p 0.5p
All revenue and capital items in the above statement derive from continuing
operations.
Unaudited Statement of Total Return
(incorporating the profit and loss account)
for the six months to 31 August 2001
TOTAL
Six months to Six months to Year to
31 August 2001 31 August 2000 28 February 2001
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Losses on - (2,036) (2,036) - (596) (596) - (1,687)(1,687)
investments
Income 551 - 551 244 - 244 633 - 633
Investment (95) (257) (352) (47) (141) (188) (101) (342) (443)
management
fees
Other (56) - (56) (34) - (34) (81) - (81)
expenses
Return on 400 (2,293) (1,893) 163 (737) (574) 451 (2,029) (1,578)
ordinary
activities
before tax
Tax on (95) 46 (49) - - - (94) 68 (26)
ordinary
activities
Return 305 (2,247) (1,942) 163 (737) (574) 357 (1,961) (1,604)
attributable
to
Shareholders
Dividends (250) - (250) (126) (2,519) (2,645) (382)(3,022)(3,404)
Transfer
to/ 55 (2,247) (2,192) 37 (3,256) (3,219) (25)(4,983)(5,008)
(from)
reserves
Unaudited Summary Balance Sheet
At 31 August 2001
ORDINARY SHARES
31 August 2001 31 August 2000 28 February
2001
£'000 £'000 £'000
Fixed asset investments
Qualifying investments 8,645 9,860 9,601
Non-qualifying investments 996 4,776 1,995
9,641 14,636 11,596
Current assets
Debtors 92 185 165
Short term money market deposits 473 1,130 502
565 1,315 667
Creditors: due within one year (123) (2,683) (690)
Net current assets 442 (1,368) (23)
Net assets 10,083 13,268 11,573
Represented by:
Called up share capital 5,030 5,038 5,038
Special reserve 4,496 4,506 4,508
Capital redemption reserve 20 12 12
Capital reserve
Realised 185 516 248
Unrealised 333 3,100 1,752
Revenue reserve 19 96 15
Total shareholders' funds 10,083 13,268 11,573
Net asset value per ordinary
share
Basic 100.2 pence 131.7 pence 114.8 pence
Diluted 99.7 pence 128.8 pence 113.0 pence
Unaudited Summary Balance Sheet
At 31 August 2001
'C' SHARES
31 August 2001 31 August 2000 28 February
2001
£'000 £'000 £'000
Fixed asset investments
Qualifying investments 4,456 - 2,271
Non-qualifying investments 11,988 - 8,983
16,444 - 11,254
Current assets
Debtors 131 - 82
Short term money market deposits 1,989 - 687
2,120 - 769
Creditors: due within one year (366) - (240)
Net current assets 1,754 - 529
Net assets 18,198 - 11,783
Represented by:
Called up share capital 10,005 - 6,250
Share premium account - - 5,625
Special reserve 8,999 - -
Capital reserve
Realised (188) - (70)
Unrealised (688) - (41)
Revenue reserve 70 - 19
Total shareholders' funds 18,198 - 11,783
Net asset value per ordinary
share
Basic 90.9 pence - pence 94.3 pence
Diluted 90.9 pence - pence 94.3 pence
Unaudited Summary Balance Sheet
At 31 August 2001
TOTAL
31 August 2001 31 August 2000 28 February 2001
£'000 £'000 £'000
Fixed asset investments
Qualifying investments 13,101 9,860 11,872
Non-qualifying investments 12,984 4,776 10,978
26,085 14,636 22,850
Current assets
Debtors 223 185 247
Short term money market deposits 2,462 1,130 1,189
2,685 1,315 1,436
Creditors: due within one year (489) (2,683) (930)
Net current assets 2,196 (1,368) 506
Net assets 28,281 13,268 23,356
Represented by:
Called up share capital 15,035 5,038 11,288
Share premium account - - 5,625
Special reserve 13,495 4,506 4,508
Capital redemption reserve 20 12 12
Capital reserve
Realised (3) 516 178
Unrealised (355) 3,100 1,711
Revenue reserve 89 96 34
Total shareholders' funds 28,281 13,268 23,356
This interim report was approved by the Board of Directors on 19 October
2001
Signed on behalf of the Board of Directors by
M A F Reeve Chairman
Unaudited Cashflow Statement
for the six months to 31 August 2001
ORDINARY SHARES
Six months Six months Year to
to to
28 February
31 August 31 August 2001
2001 2000
£'000 £'000 £'000
Operating activities
Dividend income received 32 30 67
Investment income received 55 95 201
Deposit interest received 12 55 66
Other income received 5 6 7
Investment management fees paid (143) (265) (363)
Other cash payments (21) (42) (67)
Net cash outflow from operating (60) (121) (89)
activities
Taxation
UK corporation tax repaid 88 - -
Investing activities
Purchase of qualifying investments (965) (2,646) (3,873)
Purchase of non-qualifying - (999) (999)
investments
Disposals of qualifying investments 530 3,640 4,228
Disposals of non-qualifying 1,001 1,000 3,629
investments
Net cash inflow from investing 566 995 2,985
activities
Equity dividends paid
Revenue dividends paid on ordinary (100) (101) (227)
shares
Capital dividends paid on ordinary (504) (1,010) (3,528)
shares
Net cash outflow before financing (10) (237) (859)
Financing
Redemption of shares net of expenses (19) (31) (31)
Cancellation of share premium - - (6)
Net cash outflow from financing (19) (31) (37)
Decrease in cash and cash equivalents (29) (268) (896)
Unaudited Cashflow Statement
for the six months to 31 August 2001
'C' SHARES
Six months Six months Year to
to to
28 February
31 August 31 August 2001
2001 2000
£'000 £'000 £'000
Operating activities
Dividend income received - - -
Investment income received 297 - 83
Deposit interest received 85 - 61
Other income received 4 - 1
Investment management fees paid (182) - (32)
Other cash payments (43) - (7)
Net cash inflow from operating 161 - 106
activities
Taxation
UK corporation tax paid - - -
Investing activities
Purchase of qualifying investments (2,843) - (2,311)
Purchase of non-qualifying (5,990) (8,983)
investments
Disposals of qualifying investments - -
Disposals of non-qualifying 2,996 - -
investments
Net cash outflow from investing (5,837) - (11,294 )
activities
Equity dividends paid
Revenue dividends paid on ordinary (156) - -
shares
Capital dividends paid on ordinary - - -
shares
Net cash outflow before financing (5,832) - (11,188)
Financing
Issue of equity net of expenses 7,134 - 11,875
Net cash inflow from financing 7,134 - 11,875
Increase in cash and cash equivalents 1,302 - 687
Unaudited Cashflow Statement
for the six months to 31 August 2001
TOTAL
Six months Six months Year to
to to
28 February
31 August 31 August 2001
2001 2000
£'000
£'000 £'000
Operating activities
Dividend income received 32 30 67
Investment income received 352 95 284
Deposit interest received 97 55 127
Other income received 9 6 8
Investment management fees paid (325) (265) (395)
Other cash payments (64) (42) (74)
Net cash inflow/(outflow) from operating 101 (121) 17
activities
Taxation
UK corporation tax repaid 88 - -
Investing activities
Purchase of qualifying investments (3,808) (2,646) (6,184)
Purchase of non-qualifying investments (5,990) (999) (9,982)
Disposals of qualifying investments 530 3,640 4,228
Disposals of non-qualifying investments 3,997 1,000 3,629
Net cash (outflow)/inflow from investing (5,271) 995 (8,309)
activities
Equity dividends paid
Revenue dividends paid on ordinary shares (256) (101) (227)
Capital dividends paid on ordinary shares (504) (1,010) (3,528)
Net cash outflow before financing (5,842) (237) (12,047)
Financing
Issue of equity net of expenses 7,134 - 11,875
Redemption of shares net of expenses (19) (31) (31)
Cancellation of share premium - - (6)
Net cash inflow/(outflow) from financing 7,115 (31) 11,838
Increase/(decrease) in cash and cash 1,273 (268) (209)
equivalents
Review report by the auditors on the interim information
Independent Review Report to Close Brothers AIM VCT PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 31 August 2001 which comprises the statement of total
return, the balance sheet, the cash flow statement. We have read the other
information contained in the interim report and considered whether it contains
any apparent misstatements or material inconsistencies with the financial
information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the interim report in accordance with the
Listing Rules of Financial Services Authority which require that the
accounting policies and presentation applied to the interim figures should be
consistent with those applied in preparing the preceding annual accounts
except where any changes, and the reason for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999
/4 issued by the Auditing Practices Board. A review consists principally of
making enquiries of management and applying analytical procedures to the
financial information and underlying financial data and based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities
and transactions. It is substantially less in scope than an audit performed in
accordance with Auditing Standards and therefore provides a lower level of
assurance than an audit. Accordingly, we do not express an audit opinion on
the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 August 2001.
Deloitte & Touche
Chartered Accountants
Stonecutter Court
1 Stonecutter Street
London EC4A 4TR 19 October 2001
Further information
For further information, please contact Andrew Buchanan, Close
Investment on 020 7426 4000
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