Final Results
09 May 2003 - 1:50AM
UK Regulatory
RNS Number:8710K
Pennine AIM VCT II PLC
08 May 2003
Chairman's Statement
THE YEAR TO 28 FEBRUARY 2003
This has been another difficult year for your company due to continuing stock
market and economic uncertainties. Following the boom years of the 1990's, the
new millennium has recorded three years of falling equity markets.
Particular concern has arisen from key indicators that point to a slowing of
global economic growth, an unclear view of corporate earnings and a growing
number of high profile profit warnings and corporate bankruptcies.
In addition, the forced selling of equities by the major insurance companies, in
order to maintain their solvency requirements, has until recently depressed UK
markets. These events are especially damaging to investor confidence and to the
future of the major stock market indices. The economic climate has been further
weakened by the military campaign in Iraq by western coalition forces. It is
also possible that military activity in the Middle East, as part of the wider
war on terrorism, may continue for the foreseeable future.
INVESTMENTS
During the year your company took the opportunity to realise capital gains on
its holding in CRC Group. This action was deemed necessary as CRC has become
the largest, as well as one of the best performing holdings in the portfolio.
Similarly, we decided to secure some more profits in Aero Inventory, another of
the fund's top performers. The proceeds from these sales, coupled with the
redemption of the remaining corporate bonds, have enabled the portfolio to add
to its existing investmentsin Hearing Enhancement, Hot Group and VI Group, all
at reduced valuation levels as part of further funding rounds.
We have witnessed a fair degree of corporate activity involving several of our
investee companies during the financial year. This resulted in our acceptance
of a cash offer for our holding in Mission Testing. Furthermore, in July your
company accepted a cash offer from the management of Optoplast after the
decision was taken to de-list the business. Finally, LeisureHunt became the
subject of an all share offer by World Travel Holdings.
Against the backdrop of falling share prices, the decision was taken to dispose
completely of the holdings of IS Solutions and Sopheon. You may recall that both
companies had seen their value increase many fold during the so-called 'Internet
Bubble', and that your company had been successful in securing significant
profits on both investments before the collapse of the technology sector.
The valuation of the fund's unquoted investments has also been adversely
affected by the economic slowdown. This trend has been most noticeable within
the technology sector. It is with much regret that I have to inform you that in
our unquoted investment portfolio a full provision has been made against
TravelStore, where some small recovery may materialise, and EgoSystems,
Freeserve Motorists Clubs and Simply Hub.
REVENUE
The consequence of being almost fully invested in qualifying companies,
especially those at an early stage in their development, is that dividend income
into the fund has been reduced in recent years. Therefore, we report a small
loss on the revenue account for this year.
DIVIDENDS AND CAPITAL DISTRIBUTION
The directors propose a capital distribution in respect of cumulative realised
gains of 5p for the 12 months ended 28 February 2003. This is a lower
distribution than in previous years, reflecting the cash resources available for
distribution and the prudent view of the Board in the current market where
valuations are historically low. The proposed distribution will be paid
(subject to shareholder approval) on 13 June 2003 to shareholders on the
Register as at 23 May 2003.
NET ASSET VALUE
Prior to the proposed distribution of 5p, the net asset value of the company
fell by 30.3% to 59p in the 12 months ended 28 February 2003. This figure is
broadly in line with thefall of 32.6% suffered by the AIM Index over the same
period. Shareholders who initially subscribed #1 per ordinary share (80p after
tax relief) in May 1997 have now received total tax free distributions of 41.5p
since the inception of the company.
In accordance with shareholder authority, the company purchased an aggregate of
256,500 ordinary shares for cancellation at prices ranging from 61p to 74p per
share. This has reduced the number of shares in issue to 4,280,200. Since
these purchases were made at a discount to the underlying asset value of the
company, the NAV per share has been enhanced by 0.63p.
THE FUTURE
The recent falls in corporate profits, slower manufacturing output, lower
consumer demand and widespread global political uncertainties are all
contributing to the drain on the major economies of the world. The western
alliance's war on terrorism will undoubtedly become a feature of the
geo-political landscape for the foreseeable future. Furthermore, recently
published retail figures suggest that the war in Iraq has had a negative effect
on consumer confidence. However, it is not felt that the prevailing political
instabilities will have a permanent effect on the economic outlook, despite the
fact that we are not yet seeing a strong recovery in company earnings. It is
noteworthy that UK equities generally look cheap in relative terms on a dividend
yield and Price to Earnings basis. The Manager's long-term view is one of
relative optimism, with key economic trends returning to a pattern of modest
growth and corporate earnings gradually recovering. It is likely that any
sustained recovery in main market indices will be followed with an increase in
the valuation of AIM-listed companies.
The decline in asset values has meant that administrative expenses as a
percentage of net asset values have increased and your board continues to look
at ways of addressing this.
The Board still awaits the long-promised legislation on VCT mergers and
wind-ups, the expectation of which has again been delayed until early summer.
As stated at last year's AGM, in answer to the concerns of some shareholders,
your Board does not intend to wait the five years (agreed at that meeting)
before putting proposals to shareholders. However, until the Government releases
this legislation your Board will not be in a position to assess the range of
options available to your Company. In the meantime, your Board will be taking
advantage of any market buoyancy to realise capital gains wherever possible 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 challenging year.
JOHN GOLDSCHMIDT
Chairman
7 May 2003
Statement of total return (incorporating the revenue account) of the Company
For the year to For the year to
28 February 2003 28 February 2002
Revenue Capital Total Revenue Capital Total
#000 #000 #000 #000 #000 #000
(Losses)/gains on
investments
-realised (29) (29) - 42 42
- unrealised - (1,001) (1,001) - (1,027) (1,027)
Income 51 - 51 117 - 117
Investment management fee (51) - (51) (73) - (73)
Other expenses (92) - (92) (96) - (96)
Net return before finance
costs and taxation (92) (1,030) (1,122) (52) (985) (1,037)
Interest payable - - - - - -
Return on ordinary
activities before tax (92) (1,030) (1,122) (52) (985) (1,037)
Tax on ordinary activities - - - - - -
Return on ordinary
activities after tax for the
financial year (92) (1,030) (1,122) (52) (985) (1,037)
Dividends in respect of
non-equity shares (22) - (22) (22) - (22)
Return attributable to
equity shareholders (114) (1,030) (1,144) (74) (985) (1,059)
Dividends in respect of
equity shares - (214) (214) - (454) (454)
Transfer to reserves (114) (1,244) (1,358) (74) (1,439) (1,513)
Return per ordinary share
Basic and fully diluted (2.58)p (23.31)p (25.89)p (1.62)p (21.58)p (23.20)p
All revenue and capital items in the above statement are from continuing
operations. No operations were acquired or discontinued in the year.
Balance Sheet
28 February 2003 2003 2002
#000 #000
Fixed assets
Investments 2,300 4,013
Current assets
Debtors 11 52
Cash at bank and in hand 256 292
267 344
Creditors: amounts falling due within one year (256) (521)
Net current assets/(liabilities) 11 (177)
Total assets less current assets/(liabilities) 2,311 3,836
Capital and reserves
Called-up share capital 428 454
Capital reserve - realised 948 955
Capital reserve - unrealised - (1,330)
Capital redemption reserve 34 8
Revenue reserve (259) (145)
Special Reserve 1,160 3,894
Total shareholders' funds 2,311 3,836
Total shareholders' funds are attributable to:
Equity shareholders 2,311 3,836
Non-equity shareholders - -
2,311 3,836
Net asset value per ordinary share 53.99p 84.55p
The financial statements were approved by the Board of Directors on 7 May 2003
and were signed on its behalf by:
John Goldschmidt
Chairman
Cash Flow Statement
For the year to For the year to
28 February 2003 28 February 2002
#000 #000
Net cash flow from operating activities
Investment income received 85 91
Deposit interest received 8 26
Other cash payments (167) (181)
Net cash outflow from operating activities (74) (64)
Returns on investments and servicing of finance (24) (20)
Taxation - -
Capital expenditure and financial investment 683 (752)
Equity dividends paid (454) (458)
Net cash inflow/(outflow) before financing 131 (1,294)
Financing
Purchasing of own shares (167) (28)
Decrease in cash in year (36) (1,322)
Reconciliation of net cash flow to movement in net funds
Decrease in cash in the year (36) (1,322)
Net funds at 28 February 2002 292 1,614
Net funds at 28 February 2003 256 292
Notes
1. This preliminary statement is extracted from the company's accounts for the year to 28 February
2003 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 5.0 pence per share to be
paid on 13 June 2003 to shareholders on the Register of Members at the close of business on 23
May 2003.
3. The audited accounts will be despatched to shareholders by 20 May 2003 and copies of this
announcement are available at the Companies registered office: Port of Liverpool Building, Pier
Head, Liverpool L3 1NW. A copy of this document has also been submitted to the UK Listing
Authority and will be available for inspection at the UK Listing Authority's Document Viewing
Facility which is situated at : Financial Services Authority, 25 The North Colonnade, Canary
Wharf, London E14 5HS.
4. The return per share is based on the weighted average number of ordinary shares in issue
throughout the year of 4,417,958 shares (2002 - 4,564,919 shares).
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UWSVROARVRAR
