1999 Annual Report

Directors' Report

Your Directors submit herewith their 1999 Report and Financial Statements.

Financial Results

During the 12 months to 31 July 1999 Strathmore Group Limited made a loss of $2,012,000. This was made up as follows:

The reported Consolidated Shareholders' Funds at 31 July 1999 were $3,524,000 which results in a net asset backing of 15.9 cents per share.

Dividend

No dividends have been declared payable.

Donations

Strathmore made no donations during the year.

Audit Fees and Other Services

Audit fees received or due and receivable by Strathmore’s auditors PricewaterhouseCoopers were $8,000 (1998 -$13,000) and $3,000 for CES Communications Limited. No other fees for any other services were paid to PricewaterhouseCoopers during the year (1998 - $1,000).

Committees of the Board

There are no committees of the Board, audit or otherwise.

The Year in Review

Strathmore's investment in CES Communications Limited ("CES") continued to disappoint with CES failing to achieve satisfactory revenues. For some considerable time CES continued under difficult financial conditions. It became inevitable that to continue on the path it was on, CES would require significant further funding. Your directors decided they were not prepared to risk further Strathmore funds, and in June 1999 our shareholding in CES was sold for a nominal consideration.

No share trading was undertaken by Strathmore in the last year. However as a result of foreign exchange positions taken, net losses of $164,000 were sustained.

The Current Position

At 31 July 1999 Strathmore’s assets primarily consisted of $2,252,000 cash deposits in varying currencies and a 33.1% stake in Wellington Drive Technologies Limited ("Wellington Drive").

In July and August shareholders were offered the opportunity to cancel 33.76% of their Strathmore shares by way of a share buyback and for each share cancelled they were to receive 3 Wellington Drive shares. This offer was accepted by 86.2% of Strathmore's shareholders at that time. As a result of this 6,450,540 Strathmore shares were cancelled and 19,351,620 Wellington Drive shares were distributed to shareholders. Wellington Drive has appealing prospects and it is hoped shareholders will be more than recompensed for their direct stake in Wellington Drive. This distribution has allowed Strathmore to restructure and the directors are grateful to those shareholders whom accepted the offer.

Strathmore shareholders will be aware that the Thomson family agreed to sell all of the Strathmore shares they owned to Saree Holdings Limited ("Saree"). Saree in turn on-sold most of these shares to a group of investors which resulted in Advantage Group becoming a cornerstone shareholder holding around 20% of Strathmore. Other shareholders include Cullen Investments, at 10%, with the balance held by other investors. These changes in shareholders were completed on 3 September 1999.

Strathmore acquired Antipodes IT Limited and its major investment being an interest in telecommunications and Internet software company, CommSoft, in return for 955,882 Strathmore shares issued at $0.18, a slight premium above then asset backing. Commsoft has developed a web browser-based business application for telephony management, cost allocation and tarrifing. Their business currently operates in New Zealand, Australia and the UK. The agreement allows Strathmore at its discretion to acquire a stake of up to 31% in CommSoft.

On completion of all these transactions Mr Phil Norman, Mr Peter Wright and Mr Don Cowie were appointed to the Board of Strathmore.

The new directors announced plans to focus on technology investments, targeting Internet, e-commerce and information technology companies with potential to deliver accelerated growth in shareholder value by competing in global markets.

As at the date of the annual report, Strathmore had sold the residual shares it held in Wellington Drive, as detailed in note 15. The Company now has 16,658,026 shares on issue. There is approximately $2.1m in the bank account and it holds 8.3% of Commsoft.

Directors

Dr R. J. Thomson, Dr G. A. Thomson and Mr R. N. Jackson acted as directors of the company throughout the financial year ended 31 July 1999 and up to 3 September 1999, on which date all three directors resigned.

Mr J. A. Sorensen and Mr K. D. Wikeley were appointed directors of the Company on 3 September 1999 and also resigned as directors later that day.

Mr P. J. Norman, Mr P. K. Wright and Mr D. G. Cowie were appointed directors of the Company on 3 September 1999. In accordance with the Constitution of the Company all three directors retire and will be proposed for re-election.

Remuneration of Directors

During the year the Board approved the following remuneration for the Directors of the Company:

*Amounts calculated from date of appointment or period CES Communications was a subsidiary, whatsoever applies.

Remuneration of Employees

No employees received remuneration in excess of $100,000, as is required to be disclosed in accordance with section 211(1)(g) of the Companies Act 1993.

Auditors

In accordance with section 200 of the Companies Act 1993, the auditors, PricewaterhouseCoopers continue in office.

Interests Register

The following are transactions recorded in the Interests Register of the Company and its subsidiaries during the year:

• Directors’ Remuneration

Details of the Directors’ remuneration are provided above.

• Directors’ Share Purchases & Sales

On 31 March 1999 Dr R. J. Thomson & Dr G. A. Thomson advised that Steele Trust (in which they are both Trustees & beneficiaries) purchased 1,000 shares at 21 cents and 60,000 shares at 22 cents.

On 1 April 1999 Dr R. J. Thomson & Dr G. A. Thomson advised that Waikiwi Trust (in which they are both Trustees & beneficiaries) purchased 1,179,400 shares at 20 cents.

On 9 June 1999 Dr R. J. Thomson & Dr G. A. Thomson advised that they had entered into a sale agreement in respect of 4,272,127 shares held by Gurkha Trust (in which Dr R. J. Thomson is both a Trustee & beneficiary), 2,855,900 shares held by Lorrianes Trust (in Dr R. J. Thomson is both Trustee and beneficiary), 5,029,000 shares held by Waikiwi Trust (in which they are both Trustees & beneficiaries), 2,511,000 shares held by Steele Trust (in which they are both Trustees & beneficiaries), and 758,849 shares held by Dr G. A. Thomson. The agreement was such that Saree Holdings Limited or nominee would purchase all shares not sold pursuant to the share buyback offer. Those shares remaining after the buyback offer were sold on 3 September 1999 for an average price of 17.9 cents per share.

On 30 June 1999 Mr R. N. Jackson advised he sold 10,000 shares at 39 cents and on 1 July 1999 39,730 shares at 40 cents.

A summary of the shareholding interests of directors is disclosed in the additional information section attached to this report.

• Directors’ Loans

There were no loans to Directors.

• Directors’ Insurance

Strathmore has no Directors’ Liability Insurance.

• Other Transactions

On 28 July 1999 Dr R. J. Thomson & Dr G. A. Thomson advised that Steele Trust (in which they are both Trustees & beneficiaries) agreed to buy certain assets from Strathmore namely units in Strada Entertainment Trust for $14,082 and a mortgage advance due by Mr Ken Stokes for $35,000.

 

For and on behalf of the Board

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