Interim Results
Close Brothers Aim Vct PLC
15 October 2004
15 October 2004
Close Brothers AIM VCT PLC ('the Company')
Interim Results to 31 August 2004
CHAIRMAN'S STATEMENT
Introduction
Your company has made further progress in the six months to 31 August 2004. The
initial 'D' Share issue was closed in April having raised £3.34m. The C Shares
merged with the Ordinary Shares on 31 May 2004. A Top-up issue of Ordinary
shares was launched in May and raised £2.5m and this was followed by a further
Top-up issue of Ordinary Shares launched in September which raised £1.6 million.
Plans for a further 'D' Share issue and the Tender Offer were progressed. These
are both being formally announced today and details are given below. Although
VCTs generally look set for an interesting future, following the Chancellor's
granting of 40% income tax relief in the Budget in March, the stock market has
been a more challenging environment in the last six months.
Your board welcomes the increase in income tax relief, available to investors,
from the current 20% to 40% and the increase in the upper limit of this relief
from £100,000 to £200,000, for shares issued by VCTs in the tax years 2004/5 and
2005/6. It must be stressed that the tax treatment of existing shares purchased
by investors prior to 6 April 2004 remains unchanged.
Conversion of 'C' shares into Ordinary shares
The 'C' Shares converted into Ordinary Shares on 31st May 2004 on the basis of a
calculation of their respective Net Asset Values as at 29th February 2004, as
explained in my statement in the Report and Accounts, which resulted in 1.07654
Ordinary Shares for every 'C' share. As a result the company now has two classes
of share capital, being Ordinary Shares and 'D' Shares.
Dividends
The unaudited Net Asset Value (NAV) at 31 August was 77.2p per Ordinary Share.
Your board is recommending an interim revenue dividend of 0.25p per share in
respect of the ordinary shares (2003: 0.5p revenue dividend). The unaudited NAV
at 31 August of the 'D' Share portfolio was 95.1p per 'D' Share and your board
has declared a revenue dividend of 0.5p per 'D' Share. These dividends will be
paid on 10 December 2004 to shareholders on the respective registers on 26
November 2004. It is your Board's policy to declare capital dividends when
appropriate. This unfortunately is not possible in the case for the Ordinary
Share portfolio in respect of the six-month period under review, although the
potential for paying them in future has improved considerably, following the
improvement in AIM, since its March 2003 lows. It is of course too early
realistically to expect capital dividends from the 'D' Share portfolio.
Market Background and Performance
The six-month period to 31 August 2004 was a mixed one for your company's
investments. Investor sentiment generally during the period has been dominated
by increasing international and domestic nervousness, particularly in the UK,
caused by the potential vulnerability to rising interest rates of consumers
weighed down by record levels of debt. However, as I write, fears of further
large interest rate rises are abating and expectations are still for the UK
economy to grow.
In the six-month period AIM witnessed numerous fundraisings by both new and
existing companies. In all, 192 companies floated on AIM and a total of £2.5bn
was raised. However, in the Manager's opinion market conditions for fundraisings
became more difficult as the period progressed, reflecting not least market
weakness and reducing cash balances. Given this backdrop, the net asset value of
the Ordinary Shares declined by 15.4%. This compares with a 6.6% decrease in the
AIM index. Shareholders should note that the AIM index includes companies, which
do not qualify as VCT investment, such as resource companies, which have been
one of the main drivers of performance of the index throughout the six months,
representing around 25% of AIM's value.
As at 31 August 2004, the Ordinary Share portfolio was 83.2% invested in
qualifying investments.
The 'D' Share portfolio was approximately 33% invested in qualifying investments
at 31 August and your board believes that your company's manager has made a good
start in the process of investing at a time when valuations may be seen in the
future to have been attractive. In the flood of new issues, which AIM has seen
in the six months to 31 August, there have been a number of investment
opportunities for your company. The 'D' Share portfolio in particular has
invested in several new holdings. AIM has grown throughout the period and as at
31 August 2004 there were 917 companies traded on AIM, which was in aggregate
capitalised at £23.6bn.
Share Price Discount and Buy-Back Facility
Your board believes that it is in the interests of all shareholders for it to
manage the discount to NAV at which the shares trade with a view to minimising
it as far as possible. As part of this process 279,052 Ordinary Shares and
170,000 'C' Shares (prior to conversion) were bought in for cancellation. In
addition, I would like to reiterate that shareholders wishing to sell should
first contact the Company in the interests of achieving a reasonable price. The
Board has adopted a share buy-back policy whereby the company, when not in a
close period, will buy-back: shares at no more than a 10% discount to the
prevailing NAV. This should help prevent the shares from trading at a wide
discount to NAV.
The Tender Offer and Top-Up Offers
Your board has announced today that it proposing to make a tender offer to
ordinary shareholders for up to 10% of their shares. We believe that this is an
innovative arrangement, which will enable shareholders to realise some of their
investment, if they so choose, at a price close to the NAV. Shareholders will be
able to sell more than 10% of their shares to the extent that other shareholders
do not wish to participate. However, I should point out that shareholders, who
deferred a capital gains tax liability through their investment, may crystallise
that liability to the extent that they tender shares and have no offsetting
allowances. The Tender Offer is dependent on the necessary resolution being
passed at an EGM and other shareholder meetings called for 26 November 2004.
Although the Top-up Offers have raised £4.1m in total the Tender Offer will be
funded by cash resources held within the ordinary share portfolio prior to
either Top-up Offer being launched. In addition while full take-up of the Tender
Offer would reduce the total assets of your company, the Top-up Offers
effectively mean that the size of your company overall is not markedly changed.
However, those investing through either Top-up Offer have been able to benefit
from the Chancellor's new tax benefits relating to VCT investment.
Issue of 'D' Shares
In order to allow both existing and potential new investors to take advantage of
these tax changes your board will be launching soon a further issue of 'D'
shares to raise up to £15m. There was an initial issue of 'D' Shares at the
beginning of this year and this issue will be a further offering of the same
class of shares. As at 5 April 2004 3.34m 'D' shares had been allotted and as at
31 August the 'D' share portfolio was 33.8% invested in qualifying AIM
companies. This issue will close on 5 April 2005, unless it is fully subscribed
for at an earlier date and the new 'D' Shares will receive any first dividend as
an interim dividend in approximately a year's time.
Outlook
The fundamentals of the UK economy remain favourable, with GDP growth forecast
to be over 3% in 2004 and almost 3% in 2005. Inflation and unemployment levels
remain low. Although interest rates have increased further increases are
generally considered to be limited. They are still low by historical standards.
Your Manager anticipates that smaller company share price performance is likely
to be driven by earnings growth and earnings expectations upgrades. As such,
stock selection will be the key determinant of performance. The Manager
continues to see a healthy pipeline of potential qualifying AIM companies
raising funds and anticipates the Company making several additional investments
in the forthcoming months.
Michael Reeve
Chairman
14th October 2004
Statement of total return
(incorporating the revenue account)
for the six months to 31 August 2004
Ordinary Shares
Unaudited Unaudited Audited
Six months to Six months to Year to
31 August 2004 31 August 2003 29 February 2004
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on - (3,890) (3,890) - 5,656 5,656 - 9,023 9,023
investments (note 3)
Income (note 4) 237 - 237 236 - 236 436 - 436
Investment management (79) (238) (317) (67) (198) (265) (144) (434) (578)
fees (note 2)
Other expenses (75) - (75) (70) - (70) (139) - (139)
Return on ordinary 83 (4,128) (4,045) 99 5,458 5,557 153 8,589 8,742
activities before tax
Tax on ordinary (3) 3 - - - (14) 14 -
activities (note 5) -
Return attributable to 80 (4,125) (4,045) 99 5,458 5,557 139 8,603 8,742
shareholders
Dividends (note 6) (83) - (83) - - - (124) - (124)
Transfer (from)/to (3) (4,125) (4,128) 99 5,458 5,557 15 8,603 8,618
reserves
Return per share (note 7) 0.3p (13.0)p (12.7)p 0.3p 17.2p 17.5p 0.4p 27.4p 27.8p
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued during the period.
Statement of total return
(incorporating the profit and loss account)
for the six months to 31 August 2004
'D' Shares
Unaudited Unaudited Audited
Six months to Six months to Year to
31 August 2004 31 August 2003 29 February 2004
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on - 22 22 - - - - - -
investments (note 3)
Income (note 4) 37 - 37 - - - - - -
Investment management (8) (23) (31) - - - - - -
fees (note 2)
Other expenses (8) - (8) - - - - - -
Return on ordinary 21 (1) 20 - - - - - -
activities before tax
Tax on ordinary 4 (4) - - - - - - -
activities (note 5)
Return attributable to 25 (5) 20 - - - - - -
shareholders
Dividends (note 6) (17) - (17) - - - - - -
Transfer to/(from) 8 (5) 3 - - - - - -
reserves
Return per share (note 7) 0.8p (0.1)p 0.7p - - - - - -
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued during the period.
Statement of total return
(incorporating the profit and loss account)
for the six months to 31 August 2004
Total
Unaudited Unaudited Audited
Six months to Six months to Year to
31 August 2004 31 August 2003 29 February 2004
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on - (3,868) (3,868) - 5,656 5,656 - 9,023 9,023
investments (note 3)
Income (note 4) 274 - 274 236 - 236 436 - 436
Investment management fees (87) (261) (348) (67) (198) (265) (144) (434) (578)
(note 2)
Other expenses (83) - (83) (70) - (70) (139) - (139)
Return on ordinary 104 (4,129) (4,025) 99 5,458 5,557 153 8,589 8,742
activities before tax
Tax on ordinary activities 1 (1) - - - - (14) 14 -
(note 5)
Return attributable to 105 (4,130) (4,025) 99 5,458 5,557 139 8,603 8,742
shareholders
Dividends (note 6) (83) (17) (100) - - - (124) - (124)
Transfer to/(from) 22 (4,147) (4,125) 99 5,458 5,557 15 8,603 8,618
reserves
The revenue columns of this statement represent the profit and loss account of
the Company.
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued during the period.
Balance sheet
as at 31 August 2004
Ordinary Shares
Unaudited Unaudited Audited
31 August 2004 31 August 2003 29 February 2004
£'000 £'000 £'000
Fixed asset investments
Qualifying investments 19,552 18,406 21,886
Non-qualifying investments 3,005 4,504 4,505
22,557 22,910 26,391
Current assets
Debtors 1,363 98 539
Cash 2,003 2,353 1,572
3,366 2,451 2,111
Creditors: due within one year (221) (94) (246)
Net current assets 3,145 2,357 1,865
Net assets 25,702 25,267 28,256
Represented by:
Called up share capital 16,641 14,956 14,898
Share premium 687 - -
Special reserve 12,225 13,380 13,308
Capital redemption reserve 381 99 157
Capital reserves:
- realised (1,940) (1,151) (1,555)
- unrealised (2,388) (2,194) 1,355
Revenue reserve 96 177 93
Total equity shareholders' funds 25,702 25,267 28,256
Net asset value per share 77.22 p 80.37 p 90.22 p
Balance sheet
as at 31 August 2004
'D' Shares
Unaudited Unaudited Audited
31 August 2004 31 August 2003 29 February 2004
£'000 £'000 £'000
Fixed asset investments
Qualifying investments 1,108 - -
Non-qualifying investments - - -
1,108 - -
Current assets
Debtors 18 - -
Cash 2,131 - -
2,149 - -
Creditors: due within one year (77) - -
Net current assets 2,072 - -
Net assets 3,180 - -
Represented by:
Called up share capital 1,672 - -
Share premium 1,505 - -
Special reserve - - -
Capital redemption reserve - - -
Capital reserves:
- realised (20) - -
- unrealised 22 - -
Revenue reserve 1 - -
Total equity shareholders' funds 3,180 - -
Net asset value per share 95.11 p - -
Balance sheet
as at 31 August 2004
Total
Unaudited Unaudited Audited
31 August 2004 31 August 2003 29 February 2004
£'000 £'000 £'000
Fixed asset investments
Qualifying investments 20,660 18,406 21,886
Non-qualifying investments 3,005 4,504 4,505
23,665 22,910 26,391
Current assets
Debtors 1,381 98 539
Cash 4,134 2,353 1,572
5,515 2,451 2,111
Creditors: due within one year (298) (94) (246)
Net current assets 5,217 2,357 1,865
Net assets 28,882 25,267 28,256
Represented by:
Called up share capital 18,313 14,956 14,898
Share premium 2,192 - -
Special reserve 12,225 13,380 13,308
Capital redemption reserve 381 99 157
Capital reserves:
realised (1,960) (1,151) (1,555)
unrealised (2,366) (2,194) 1,355
Revenue reserve 97 177 93
Total equity shareholders' funds 28,882 25,267 28,256
The interim information was approved by the Board of Directors on 14 October
2004.
Signed on behalf of the Board of Directors by
Michael Reeve
Chairman
Cashflow statement
for the six months to 31 August 2004
Ordinary Shares
Unaudited Unaudited Audited
Six months to Six months to Year to
31 August 2004 31 August 2003 29 February 2004
£'000 £'000 £'000
Operating activities
Dividend income received 91 78 156
Investment income received 84 112 205
Deposit interest received 33 44 75
Other income received 1 5 5
Investment management fees paid (342) (255) (558)
Other cash payments (105) (112) (164)
Net cash outflow from operating activities (238) (128) (281)
Taxation
UK corporation tax paid - - -
Investing activities
Purchase of qualifying investments (2,105) (1,712) (2,799)
Purchase of non-qualifying investments - - (1)
Disposals of qualifying investments 884 131 672
Disposals of non-qualifying investments 1,502 2,496 2,496
Net cash inflow from investing activities 281 915 368
Equity dividends paid
Revenue dividends paid on ordinary shares (125) (151) (151)
Capital dividends paid on ordinary shares - - -
Net cash (outflow)/inflow before financing (82) 636 (64)
Financing
Issue of equity net of expenses 794
Redemption of shares net of expenses (281) (23) (104)
Net cash inflow/(outflow) from financing 513 (23) (104)
Increase/(decrease) in cash 431 613 (168)
Cashflow statement
for the six months to 31 August 2004
'D' Shares
Unaudited Unaudited Audited
Six months to Six months to Year to
31 August 2004 31 August 2003 29 February 2004
£'000 £'000 £'000
Operating activities
Dividend income received - - -
Investment income received - - -
Deposit interest received 19 - -
Other income received - - -
Investment management fees paid (24) - -
Other cash payments (19) - -
Net cash outflow from operating activities (24) - -
Taxation
UK corporation tax paid - - -
Investing activities
Purchase of qualifying investments (1,086) - -
Purchase of non-qualifying investments - - -
Disposals of qualifying investments - - -
Disposals of non-qualifying investments - - -
Net cash outflow from investing activities (1,086) - -
Equity dividends paid
Revenue dividends paid on ordinary shares - - -
Capital dividends paid on ordinary shares - - -
Net cash inflow/(outflow) before financing - - -
Financing
Issue of equity net of expenses 3,241 - -
Net cash inflow from financing 3,241 - -
Increase in cash 2,131 - -
Cashflow statement
for the six months to 31 August 2004
Total
Unaudited Unaudited Audited
Six months to Six months to Year to
31 August 2004 31 August 2003 29 February 2004
£'000 £'000 £'000
Operating activities
Dividend income received 91 78 156
Investment income received 84 112 205
Deposit interest received 52 44 75
Other income received 1 5 5
Investment management fees paid (366) (255) (558)
Other cash payments (124) (112) (164)
Net cash outflow from operating activities (262) (128) (281)
Taxation
UK corporation tax paid - - -
Investing activities
Purchase of qualifying investments (3,191) (1,712) (2,799)
Purchase of non-qualifying investments - - (1)
Disposals of qualifying investments 884 131 672
Disposals of non-qualifying investments 1,502 2,496 2,496
Net cash (outflow)/inflow from investing (805) 915 368
activities
Equity dividends paid
Revenue dividends paid on ordinary shares (125) (151) (151)
Capital dividends paid on ordinary shares - - -
Net cash (outflow)/inflow before financing (1,192) 636 (64)
Financing
Issue of equity net of expenses 4,035 - -
Redemption of shares net of expenses ( 281) (23) (104)
Net cash inflow/(outflow) from financing 3,754 (23) (104)
Increase/(decrease) in cash 2,562 613 (168)
Publication
This interim report is being sent to shareholders and copies will be made
available to the public at the registered office of the Company.
This information is provided by RNS
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