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Active Cap Trust Plc (AIT)

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Monday 12 July, 2004

Active Cap Trust Plc

Final Results

Active Capital Trust PLC
12 July 2004

To:            RNS

From:          Active Capital Trust plc

Date:          12 July 2004

Results for the year to 31 May 2004


  • Successful merger between 3PC Investment Trust plc and The AIM Trust plc
    completed in July 2003 and the Company has been renamed Active Capital Trust
    plc

  • Net asset value increase of 57 per cent over the year to 31 May 2004
  • Share price increase of 62 per cent over the year to 31 May 2004


In July of 2003, the Company merged with The AIM Trust plc and changed its name
from 3PC Investment Trust ('3PC') to Active Capital Trust. I became Chairman of
the enlarged company upon merger and I am pleased to report on a successful year
to 31 May 2004.

Merger


The terms and background to the merger were set out in the merger documentation
and I summarised them in the interim accounts. Given that this is the first full
set of annual accounts since the merger, I have set out the basis of merger one
last time.


The merger of 3PC and The AIM Trust completed on 29 July 2003 with the issue of
1,086 new Active Capital Trust shares for every 1,000 AIM Trust shares held.
There were benefits to both companies arising from the merger, including:


  • a more favourable basis of charging investment management fees

  • fixed running costs being spread over a larger asset base

  • a revised investment objective and policy providing greater
    diversification in the investment portfolio and increased scale for
    exploiting opportunities

  • bank debt ('gearing') to enhance performance in improving markets.


The merger terms were based on the formula asset value per share of 3PC and The
AIM Trust, of 79.9 pence and 86.8 pence respectively. These figures compare to
3PC's last year end net asset value of 75.2 pence at 31 May 2003 and The AIM
Trust's net asset value of 72.2 pence at 31 January 2003 (their last financial
reporting dates). For former AIM Trust shareholders wishing to compare this
year's results to the last reported figure of 72.2 pence per share, the
equivalent figure at 31 January 2003 (adjusted for the 1,086 to 1,000 shares
issued) was 66.4 pence per new Active Capital Trust share. The merger almost
doubled the size of the Company, increasing the number of shares in issue from
43.0 million to 82.7 million.


The Board of the Company has been drawn from both 3PC and The AIM Trust and
comprises of six directors, with myself as the Chairman and Brian Holford as the
Deputy Chairman.


Background


The past year has seen an improvement in the small company sector, not just in
the absolute performance with the FTSE AIM Index rising 39.9% and FTSE Small Cap
(ex IC) Index rising 23.1% over the year, but also relative to larger companies
with the FTSE All-Share Index increasing by only 11.8%.


The more recent results, however, have seen small companies give up some of
their earlier gains and they have fallen back more than larger companies.


The past year has also seen the re-emergence of corporate activity in the small
company arena with a significant number of new issues and secondary fund
raisings.

Results for the year to 31 May 2004


Against this background of strong small company markets, I am pleased to report
that the Company's portfolio of small company stocks has performed well. Over
the year, net asset value per share (NAV) increased 56.6% from 75.20 pence to
117.74 pence. Since the launch of the Company in May 2001, the NAV has increased
19.7% against a fall in the FTSE AIM Index of 29.4% and fall in the FTSE
All-Share Index of 22.7%. This makes Active Capital Trust one of the best
performing smaller company trusts over this three year period.


Revenue is derived from fixed interest securities, deposit income and dividends
from investments. Revenue for the period amounted to £1.55m and after the
deduction of investment management expenses and other costs, a pre-interest loss
of £576,000 was incurred. The Company paid interest on its borrowings of £1.9m
resulting in a pre-tax loss of £2.4m or 3.18 pence per share (this compares with
a 0.42 pence per share revenue profit last year). It is the Company's policy to
charge all expenses and interest costs against revenue.


Realised and unrealised capital gains contributed 44.14 pence per share
resulting in a total return in the year of 40.96 pence per share.


As last year, the Company is not in a position to pay a dividend in respect of
the year; the Company's objective is to provide capital growth.


As part of the merger, Active Capital Trust assumed £30m of bank debt 
('gearing'). This represented 44% of shareholders' funds at the time of the
merger. With the growth in asset value the same level of debt represented 31% of
shareholders' funds or 24% of total assets at 31 May 2004.


The Company's ordinary shares were trading on a discount of 17% to NAV at 31 May
2004 which represents a slight narrowing over the year. The Company's share
price increased by 61.6% over the year to 97.75 pence at 31 May 2004.


Capital Structure


Active Capital Trust has a unique capital structure, which was introduced at the
launch of 3PC. This structure seeks to provide the benefits of a venture capital
style, within an investment trust environment. The capital structure comprises
two types of shares - ordinary shares and founder shares.


The ordinary shares are the shares traded on the London stock exchange and the
founder shares are held by ISIS Asset Management and its fund management team.
All of the assets of the Company are for the benefit of the ordinary
shareholders until a capital re-organisation takes place, which will be by May
2007. By this date it is the intention to distribute out of the Company's
capital (subject to there being sufficient assets) a sum of 99.9 pence per share
by way of a return of the original subscription monies, together with a targeted
return of up to a further 55 pence per share. The targeted return is a sum
equivalent to 7.5% per annum compounded annually based on the original
subscription price of £1 per share. Once the capital return and targeted return
have been paid out, the founder shares will share ownership in 20% of any
remaining assets.


The Board will consider, at the appropriate time, the best means for the
realisation of maximum value for shareholders from the Company's investment
portfolio. The Company's constitution contains the structure described above and
this has implications for the way the portfolio is managed over the next three
years. As the capital return and targeted return should be made in cash, the
fund managers need not only to grow the asset value from 117.7 pence at 31 May
2004 to over 155 pence but the investments must also be realised over this
period of time. A large number of the Company's holdings have been reasonably
long term in nature with the fund managers having developed a venture capital
style approach of supporting a growth business plan. Since making the
investments, the fund managers have built up a very strong base of knowledge and
understanding of each company and its management team. The maturity of the
portfolio is such that individual investments should be coming to their
realisation point within the remaining life of Active Capital Trust. The fund
managers have strategies and targets in place for all the large investments as
to how and at what value realisation can be made and the events that need to
take place for valuation changes to be recognised.


The fund managers are incentivised to achieve these objectives, as they share in
the potential value of the founder shares. This is important as in order to
maximise the potential of the Company's portfolio we need to have continuity in
the investment management process and benefit from the managers' in-depth
knowledge of the companies.


Outlook


Some nervousness has returned to stock markets with geo-political issues still
impacting on the general direction of markets. The rising level in interest
rates, which have an effect on some of the higher geared smaller companies, and
the high oil price will impact the cost base of most companies. A further year
of rapid growth in small company markets is therefore unlikely, however, on more
stock specific issues the portfolio does contain a number of companies which can
grow in value independent of the general stock market levels. Over the next
three years, we hope to benefit from the investments made in the past three
years.


Jon Pither

Chairman




For further information contact:

Bill Brown
Investment Manager          020 7506 1100
ISIS Asset Management plc


Michael Campbell
Company Secretary           0131 465 1000
ISIS Asset Management plc




Unaudited Consolidated Statement of Total Return (incorporating the revenue
account) of the Group


                                                                            
                                                     Year to 31 May 2004             
                                                Revenue    Capital      Total 
                                                  £'000      £'000      £'000 
  Gains on investments                                -     33,739     33,739 
  Realised exchange differences                       -          2          2 
  Income                                          1,550          -      1,550 
  Investment management fee                     (1,623)          -    (1,623) 
  Other expenses                                  (503)          -      (503) 

  Return on ordinary activities                                               
  before finance costs and                        (576)     33,741     33,165 
  taxation                                                                    

  Interest Payable                              (1,856)          -    (1,856) 

  Return on ordinary activity                   (2,432)     33,741     31,309 
  before tax                                                                  

  Tax on ordinary activities                          -          -          - 

  Return attributable to                                                      
  ordinary shareholders                         (2,432)     33,741     31,309 

  Transfer (from)/to reserves                   (2,432)     33,741     31,309 

  Return per ordinary share:                    (3.18)p     44.14p     40.96p 
 
 
Audited Statement of Total Return (incorporating the revenue account) of the
Company 

                                                                              
                                                     Year to 31 May 2003             
                                                Revenue    Capital      Total 
                                                  £'000      £'000      £'000 
  Losses on investments                               -    (2,325)    (2,325) 
  Realised exchange differences                       -        (5)        (5) 
  Income                                            919          -        919 
  Investment management fee                       (446)          -      (446) 
  Other expenses                                  (283)          -      (283) 

  Return on ordinary activities                                               
  before taxation                                   190    (2,330)    (2,140) 

  Taxation on ordinary                              (8)          -        (8) 
  activities                                                                  

  Return attributable to                                                      
  ordinary shareholders                             182    (2,330)    (2,148) 

  Transfer to/(from) reserves                       182    (2,330)    (2,148) 

  Return per ordinary share:                      0.42p    (5.41)p    (4.99)p 
 
 

                                                                              
  Unaudited Group Balance Sheet                                               
                                                          As at        As at  
                                                         31 May       31 May  
                                                           2004          2003 
                                                                    (Audited) 
                                                          £'000         £'000 
  Fixed Assets                                                                
  Listed investments                                     25,699         4,424 
  Quoted on the Alternative Investment Market            83,739        14,429 
  Quoted on OFEX                                            793           447 
  Unquoted investments                                    6,487         5,710 
  Unquoted corporate bonds                                1,656         1,300 
  UK government securities                                1,000         5,720 
                                                       ________      ________ 
                                                        119,374        32,030 
  Net current assets                                      8,056           315 
                                                       ________      ________ 
  Total assets less current liabilities                 127,430        32,345 
  Creditors: amounts falling due after more than       (30,000)             - 
  one year                                                                    
                                                       ________      ________ 
  Net assets                                             97,430        32,345 
                                                       ________      ________ 
  Financed by:                                                                
  Shareholders' funds                                    97,430        32,345 
                                                       ________      ________ 
  Net asset value per ordinary share:                    117.7p         75.2p 

  Ordinary shares in issue                           82,746,118    43,000,000 
 




Summarised Unaudited Consolidated Cash Flow Statement 
                                                                              
                                                       Year to       Year to  
                                                   31 May 2004    31 May 2003 
                                                                    (Audited) 
                                                         £'000          £'000 
  Net cash inflow from operating activities                  2            479 
  Servicing of finance                                 (1,674)              - 
  Taxation                                                   -          (371) 
  Capital expenditure and financial investment           9,904        (1,118) 
  Acquisitions and disposals                             (102)              - 

  Increase/ (decrease) in cash                           8,130        (1,010) 



  Reconciliation of net cash flow to movement in net debt                     

  Increase/(decrease) in cash in the year                8,130        (1,010) 
  Opening net cash                                         228          1,238 
  £30 million loan novated from The AIM Trust         (30,000)              - 
  plc                                                                         
  Currency gains                                             2              - 
  Closing net (debt)/ cash                            (21,640)            228 



  Reconciliation of operating profit to net cash flow from activities         

  Net return before finance costs and taxation           (576)            190 
  Decrease in prepayments, accrued income and              199            312 
  other debtors                                                               
  Increase/(decrease) in creditors                         379           (23) 
  Net cash inflow from operating activities                  2            479 
 







Notes


 1. The unaudited results which cover the year to 31 May 2004 have been drawn up
    in accordance with applicable accounting standards and adopting the
    Statement of Recommended Practice 'Financial Statements of Investment Trust
    Companies' issued in January 2003.


 2. On 28 July 2003 the High Court sanctioned the Scheme of Arrangement for the
    merger of 3PC Investment Trust plc and The AIM Trust plc. Under the terms of
    the Scheme of Arrangement the Formula Asset Values ('FAVs') per share of 3PC
    and The AIM Trust were calculated, as at 25 July 2003, as 79.9197p and
    86.8368p respectively and the FAV Ratio as 1.086551. The AIM Trust
    Shareholders on the register at the close of business on 25 July 2003
    received 1,086 new Active Capital Trust Shares for every 1,000 AIM Trust
    Shares held by them and so in proportion for any greater or lesser number of
    AIM Trust Shares. Dealing in new Active Capital Trust shares commenced on 29
    July 2003. Following the Merger, Active Capital Trust had 82,746,118
    ordinary shares in issue. As part of the Merger, 3PC Investment Trust
    changed its name to Active Capital Trust and bank debt of £30 million was
    novated from The AIM Trust to Active Capital Trust. The bank debt has an
    effective interest rate of 7.26 per cent per annum.


 3. Return per ordinary share is based on a weighted average of 76,447,553
    ordinary shares in issue (2003: 43,000,000).


 4. Income for the year to 31 May 2004 is derived from:



                       Year to 31 May 2004                  Year to 31 May 2003
                                     £'000                                £'000

    Equity investment                  989                                  150
    Fixed interest investment          384                                  713
    Deposit interest                   142                                   38
    Underwriting commission             35                                   18
                                     _____                                _____
                                     1,550                                  919


 5. No dividend will be paid in respect of the year to 31 May 2004 (2003:nil).


 6. The NAV per ordinary share is calculated on ordinary shareholders' funds of
    £97,430,000 (2003:£32,345,000) and 82,746,118 (2003:43,000,000) ordinary
    shares. Founder shareholders' funds represent £8,000 (2003: £8,000).


 7. These are not full accounts in terms of Section 240 of the Companies Act
    1985. The annual report for the year to 31 May 2004 will be sent to
    shareholders shortly and will then be available for inspection at 100 Wood
    Street, London EC2V 7AN, the registered office of the Company.


 8. Listed investments and those quoted on the AiM market or OFEX are valued at
    middle market prices. Unquoted investments are valued in accordance with
    Directors' valuations.


 9. The Annual General Meeting will be held on 12 October 2004.



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