Final Results
AIM Distribution Trust PLC (The)
08 June 2006
THE AIM DISTRIBUTION TRUST PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 31 MARCH 2006
FINANCIAL HIGHLIGHTS
2006 2005
pence pence
(Restated)
Net asset value (per share) 70.0 66.6
Interim distribution (per share) 2.0 2.0
Cumulative gross distributions paid since launch 51.8 49.8
Total return (net asset value plus cumulative distributions paid) 121.8 116.4
The statement to shareholders by the Chairman, Sir Aubrey Brocklebank, includes
the following comments:
Introduction
The year to 31 March 2006 has seen a mixed performance by the Company's
investments. However, the better performers have outweighed the poorer ones to
produce a positive result for the year.
Net Asset Value
At 31 March 2006, the Net Asset Value per share ('NAV') stood at 70.0p. This
represents an increase of 5.4p or 8.1% since the previous year-end (including
the 2p dividend paid during the year).
Format of Accounts
When the Company revoked investment company status in order to pay a capital
dividend. It adopted the standard Companies Act format for its accounts, which
included a Profit and Loss account. It has now become common practice for
Venture Capital Trusts to continue to present their accounts in accordance with
the Statement of Recommended Practice for Investment Trusts ('SORP'), even
though they may have revoked investment company status. The Board feels that
the SORP presentation is much more useful to readers of the accounts and,
therefore, these and future accounts will be prepared in accordance with the
SORP, an updated version of which was published in December 2005.
The most noticeable change to the accounts as a result of these changes is that
the Company is presenting an Income Statement (analysed between Revenue and
Capital) rather than a Profit and Loss account.
For this accounting period, your Company is required to adopt FRS 21, under
which dividends have to be accounted for in the period in which they are liable
to be paid, rather than the period in respect of which they are declared.
The Company has also had to adopt FRS 26, which requires quoted investments to
be valued at bid-prices. Previously the Company valued quoted investments at
mid-market prices. The comparative figures for 2005 have been restated. As a
result, the NAV at 28 February 2005 has been reduced from 68.0p, as previously
reported, to 66.6p.
VCT Qualifying investments
With a significant number of disposals taking place in the previous year, the
Company has been active in making new investments in the year under review. A
total of nine new VCT qualifying investments were made at a total cost of £1.6
million.
The Company also made a small number of disposals and part disposals of
holdings, which generated proceeds of £1.2 million and realised gains of
£522,000.
Results and Dividend
The return on ordinary activities after taxation was £862,000 (2005: £522,000),
comprising a revenue loss of £35,000 and a capital surplus of £897,000.
On 1 March 2006, the Company declared an interim tax-free distribution of
realised gains of 2p per share (2005: 2p per share) in respect of the year ended
31 March 2006. This was paid on 29 March 2006. The Directors are not proposing
to declare any further dividends in respect of the year to 31 March 2006.
Non-VCT Qualifying investments
The Company has historically held a proportion of its funds in fixed income
securities. At 31 March 2006, the Company held gilts and bonds with a total
value of £1.7 million.
The VCT regulations significantly restrict the type of investments which can be
made by the Company, meaning that some attractive investment opportunities which
the Manager might otherwise recommend cannot form part of the Qualifying
portfolio. The Manager has consistently been able to keep this Qualifying
portfolio well within the limits prescribed by VCT regulations, therefore the
Board has asked the Manager to take a more active role with some non-VCT
qualifying investments. This should allow the Company to benefit more fully from
the Manager's specialist expertise, thereby enhancing returns for shareholders
whilst retaining the Company's VCT tax status.
Share buybacks
The Board is conscious that the Company's share price is affected by the
illiquidity of its shares in the market. In line with widespread practice
amongst VCTs, the Company has a policy of purchasing its own shares. During the
year the Directors used this power to acquire 511,853 shares at an average price
of 60.8p per share. The Board intends to continue with the policy of buying in
shares at approximately a 10% discount to the latest published NAV (subject to
regulatory and other restrictions) and a special resolution is proposed for the
forthcoming AGM.
Annual General Meeting
The Annual General Meeting of the Company will be held at Port of Liverpool
Building, Pier Head, Liverpool, L3 1NW at 2.00 pm on 6 July 2006.
Outlook
The Company now has a well-balanced and diversified investment portfolio, with a
good mix of younger and more developed companies. With some commentators now
expressing uncertainty about the short-term prospects for equity markets, the
Company is in a better position than previously to weather more difficult times
should they arise.
With a lower level of cash resources than at this time last year, there is
likely to be a reduced number of new investments made in the forthcoming year.
The Board will, however, continue to encourage the Investment Manager to seek
profit-taking opportunities from the existing portfolio and also hopes to see
positive results from a more active approach to its non-VCT qualifying
investment portfolio.
INCOME STATEMENT
for the year ended 31March 2006
Year ended 31 March 2006 Year ended 31 March 2005
(as restated)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income 168 - 168 209 - 209
Gains on investments - 1,014 1,014 - 605 605
168 1,014 1,182 209 605 814
Investment management fees (39) (117) (156) (27) (82) (109)
Other expenses (164) - (164) (181) (2) (183)
Return on ordinary activities before tax (35) 897 862 1 521 522
Tax on ordinary activities - - - - - -
Return attributable to equity (35) 897 862 1 521 522
shareholders
Return per share (0.2p) 5.3p 5.1p - 3.2p 3.2p
The revenue and capital movements in the year relate to continuing operations.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Year ended 31 March 2006 Year ended 31 March 2005
(as restated)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Return attributable to equity shareholders (35) 897 862 1 521 522
Total recognised gains/(losses) for the
year (35) 897 862 1 521 522
Prior year adjustment (note b) - (215) (215)
Total recognised gains and losses since
last annual report (35) 682 647
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Year ended Year ended
31 March 31 March
2006 2005
(as restated)
£'000 £'000
Opening shareholders' funds 10,831 11,118
Prior year adjustment (note b) - (304)
Issue of shares 611 -
Share issue costs (53) -
Purchase of own shares (313) (177)
Total recognised gains/(losses) for the year 862 522
Distributions paid (336) (328)
Closing shareholders' funds 11,602 10,831
BALANCE SHEET
at 31 March 2006
2006 2005
(as restated)
£'000 £'000 £'000 £'000
Fixed assets
Investments 11,638 8,927
Current assets
Debtors 51 94
Cash at bank and in hand 47 2,237
98 2,331
Creditors: amounts falling due within one year (134) (427)
Net current (liabilities)/assets (36) 1,904
Net assets 11,602 10,831
Capital and reserves
Called up share capital 4,145 4,063
Capital redemption reserve 266 138
Share premium 348 -
Special reserve 1,176 1,607
Capital reserve - unrealised (812) (1,116)
Capital reserve - realised 6,467 6,092
Revenue reserve 12 47
Equity shareholders' funds 11,602 10,831
Net asset value per share 70.0p 66.6p
CASHFLOW STATEMENT
for year ended 31 March 2006
Year ended Year ended
31 March 2006 31 March 2005
£'000 £'000 £'000 £'000
Net cash outflow from operating activities (120) (107)
Capital expenditure
Purchase of investments (2,807) (3,070)
Sale of investments 1,159 3,970
Net cash (outflow)/inflow from capital expenditure (1,648) 900
Equity distributions paid (336) (328)
Net cash (outflow)/inflow before financing (2,104) 465
Financing
Applications for share issue 271 340
Share issue costs (22) (31)
Purchase of own shares (335) (155)
Net cash inflow/(outflow) from financing (86) 154
(Decrease)/increase in cash in the year (2,190) 619
Reconciliation of net cash flow to movement in net
funds
2006 2005
£'000 £'000
(Decrease)/increase in cash during the year (2,190) 619
Net funds at 1 April 2005 2,237 1,618
Net funds at 31 March 2006 47 2,237
NOTES
Accounting policies
a. Basis of accounting
The Company has prepared its financial statements under UK Generally Accepted
Accounting Practice ('UK GAAP'). Where presentation guidance set out in the
Statement of Recommended Practice 'Financial Statements of Investment Trust
Companies' revised December 2005 ('SORP') is consistent with the requirements of
UK GAAP, the Directors have sought to prepare the financial statements on a
basis compliant with the recommendations of the SORP.
The financial statements are prepared under the historical cost convention
except for the revaluation of certain financial instruments.
b. Restatement of accounts
The comparative figures have been restated as a result of the Company adopting
the new applicable Financial Reporting Standards (FRS). Accordingly the net
assets for 2005 have been decreased by £215,000 as follows:
Prior year adjustment £'000
Restatement of investments held at 1 April 2004 to bid price (304)
Net effect on reserves at 1 April 2004 (304)
Unrealised and realised movements on investments restated to bid price 89
(215)
c. Presentation of Income Statement
In order to better reflect the activities of an investment trust company and in
accordance with guidance issued by the AITC, supplementary information which
analyses the income statement between items of a revenue and capital nature has
been presented alongside the income statement. The net revenue is the measure
the directors believe appropriate in assessing the Company's compliance with
certain requirements set out in Section 842 Income and Corporation Taxes Act
1988.
d. Investments
All investments are designated as 'fair value through profit or loss' assets and
are initially measured at cost. Thereafter the investments are measured at
subsequent reporting dates at fair value.
Listed fixed income investments and investments quoted on the Alternative
Investment Market ('AIM') are designated measured using bid prices with
illiquidity discounts applied where deemed appropriate.
In respect of unquoted instruments, fair value is established by using
International Private Equity and Venture Capital Valuation Guidelines. Where no
reliable fair value can be estimated for such unquoted equity investments they
are carried at cost, subject to any provision for impairment. Where an investee
company has gone into receivership or liquidation the investment, although not
physically disposed of, is treated as being realised.
Gains and losses arising from changes in fair value are included in the income
statement for the year as a capital item and transaction costs on acquisition or
disposal of the investment expensed.
It is not the Company's policy to exercise either significant or controlling
influence over investee companies. Therefore the results of these companies are
not incorporated into the revenue account except to the extent of any income
accrued.
e. Income
Dividend income from investments is recognised when the shareholders' rights to
receive payment has been established, normally the ex dividend date.
Interest income is accrued on a timely basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount, and only where there
is reasonable certainty of collection.
f. Expenses
All expenses are accounted for on accruals basis. In respect of the analysis
between revenue and capital items presented within the income statement, all
expenses have been presented as revenue items except that expenses which are
incidental to the disposal of an investment are deducted from the disposal
proceeds of the investment.
g. Deferred taxation
Deferred taxation is provided in full on timing differences that result in an
obligation at the balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they crystallise based on
current tax rates and law. Timing differences arise from the inclusion of items
of income and expenditure in taxation computations in periods different from
those in which they are included in financial statements.
Announcement based on draft accounts (unqualified audit report)
The financial information set out in the announcement does not constitute the
Company's statutory accounts in accordance with s240 CA85 for the year ended 31
March 2006. The statutory accounts for the year ended 31 March 2006 will be
finalised on the basis of the financial information presented by the directors
in this preliminary announcement and will be delivered to the Registrar of
Companies following the Company's Annual General Meeting.
A copy of the full annual report and financial statements for the year ended 31
March 2006 will be printed and posted to shareholders. Copies will also be
available to the public at the registered office of the Company at 69 Eccleston
Square, London SW1V 1PJ.
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