TIDMOIAA
Octopus IHT AIM VCT plc
Final Results
30 March 2010
Octopus IHT AIM VCT plc, managed by Octopus Investments Limited, today announces
the final results for the year ended 30 November 2009.
These results were approved by the Board of Directors on 29 March 2010.
Within 14 days of this announcement you will be able to view the Annual Report
in full at www.octopusinvestments.com <http://www.octopusinvestments.com/> by
navigating to Services, Investor Services, Venture Capital Trusts, Octopus IHT
AIM VCT plc. All other statutory information will also be found there.
About Octopus IHT AIM VCT PLC
Octopus IHT AIM VCT PLC (the "Company" or "Fund") is a venture capital trust
("VCT") which aims to provide shareholders with attractive tax-free dividends
and long-term capital growth.
The Investment Manager is Octopus Investments Limited ("Octopus" or "Manager").
The Company was launched as Close IHT AIM VCT PLC in March 2006 and raised GBP25
million through an offer for subscription.
Financial Summary
+----------------------------+------------------------+------------------------+
| |Year to 30 November 2009|Year to 30 November 2008|
+----------------------------+------------------------+------------------------+
+----------------------------+------------------------+------------------------+
|Net assets ( GBP'000s) | 10,783| 16,049|
+----------------------------+------------------------+------------------------+
|Net profit / (loss) after| 1,484| (6,901)|
|tax ( GBP'000s) | | |
+----------------------------+------------------------+------------------------+
|Net asset value per share | 69.5p| 64.6p|
+----------------------------+------------------------+------------------------+
|Dividend per share - paid in| 2.0p| 2.0p|
|year | | |
+----------------------------+------------------------+------------------------+
|Cumulative dividends since| 7.4p| 6.4p|
|paid launch | | |
+----------------------------+------------------------+------------------------+
Since the year end a dividend of 1.0 pence per A Ordinary share has been
declared and will be paid subject to HMRC approval
Shareholder Value since Launch
+----------------------------------------------+-------------------------------+
| |Ordinary shares pence per share|
+----------------------------------------------+-------------------------------+
|Total dividends paid during the period to 30 | 1.4|
|November 2006* | |
+----------------------------------------------+-------------------------------+
|Total dividends paid during the period to 30 | 2.0|
|November 2007 | |
+----------------------------------------------+-------------------------------+
|Total dividends paid during the period to 30 | 2.0|
|November 2008 | |
+----------------------------------------------+-------------------------------+
|Total dividends paid during the period to 30 | 2.0|
|November 2009 | |
+----------------------------------------------+-------------------------------+
|Total dividends | 7.4|
+----------------------------------------------+-------------------------------+
|Net asset value at 30 November 2009 | 69.5|
+----------------------------------------------+-------------------------------+
|Total cumulative return at 30 November 2009 | 76.9|
+----------------------------------------------+-------------------------------+
* Investors subscribing by 17 January 2006 were entitled to this dividend.
Investors subscribing thereafter were not entitled to this first dividend.
Chairman's Statement
Introduction
I have pleasure in presenting your Company's fourth report and accounts. They
cover a dramatic period, the year to 30 November 2009, in which banks have been
nationalised, the Bank of England has bought huge amounts of government debt,
and new issues on AIM have been notably scarce. It has not been an easy period
for investors in general, particularly those investing in smaller companies.
However, as the extent of co-ordinated international government action became
clearer, markets recovered and we all have to hope that the low point of prices,
reached in March last year, is now a distant memory. As a consequence the net
asset value (NAV) of your Company's shares ended the year at 69.5p per share.
Dividend
The Directors have declared a dividend of 1.0 pence per A Ordinary share which
will be recognised in the 2010 accounts. This dividend is subject to HMRC
approval and will be paid to shareholders once approval is obtained.
Performance
Dividends of 2.0 pence in total have been paid in the year to 30 November 2009
and they need to be added back to the year end NAV to provide a figure
comparable to the movement in indices. The adjusted NAV shows a rise of 10.7%,
against a rise in the FTSE AIM All Share Index of 62.4% in the same period. The
disparity between these two numbers is largely explained by the high weighting
of resources and financial stocks in the AIM index, almost all of which do not
qualify for investment by VCTs and which account for a significant movement in
the index. Of course it is also true that the NAV did not fall last year by
anything like the decline in the AIM index, for the same reason, which only
emphasises the poor nature of the comparison. Nevertheless, while the rise in
NAV is welcome, there is clearly more potential to be realised.
Portfolio Activity
In my report with the interim results, I commented on the absence of many
attractive VCT qualifying issues of shares and there being little opportunity to
trade in existing holdings. That situation persisted during the second half of
the year under review, although having passed the important threshold of 70%
investment in qualifying holdings, there has been scope for some trading in the
second half which the managers have taken. There has also been the beginning of
acquisition activity, so for example, the offer from Chime for your Company's
holding in Essentially was accepted, as was the cash offer for Claimar Care. A
few holdings have been sold completely and a number have been partially sold to
realise profits. At all times your Company has remained above the 70% threshold.
VAT Rebate
In last year's accounts I remarked that your Company was hoping to benefit from
a rebate of VAT and had accrued GBP140,000 in anticipation of a rebate. I am
pleased to report that during the year a rebate was received together with
interest, which after costs amounted to just under GBP200,000. The additional
GBP60,000 or so has enhanced the NAV.
Future Strategy
During the summer, the Distribution in Specie for B shareholders whereby B
Ordinary shareholders had the option either to convert their shares to A
Ordinary shares or exit the Fund through the Distribution, full terms of which
were set out in the original prospectus, was completed. This left 16.3 million
shares in issue and a NAV of GBP10.8 million at the year end. I draw your
attention to note 7 in the financial statements for details on the funds
distributed. In January 2010, an announcement was released to the London Stock
Exchange that, following the Distribution in Specie, your Board is proposing to
merge with the Octopus Second AIM VCT PLC, which has also carried out a
Distribution in Specie in the summer and is in consequence, as is the case with
your Company, now smaller than it was originally a few years ago. In order to be
able to continue to buy in shares, while simultaneously maintaining a portfolio
capable of growth and continued recovery in NAV, your Board thinks that it would
be best to merge and to create a VCT of a size not dissimilar to that at
flotation. Mergers, which maintain VCT status, are allowed by HMRC and it is
expected that a circular will be published in a few weeks. Shareholders will be
kept up to date as matters progress and there is no action that they need to
take until then.
To further ensure that the Company can look forward to a successful long-term
future as an AIM VCT and to have the ability to conduct top up share offers to
raise further cash resources, it is important that the Company's life extends
beyond the five year minimum holding period that applies to investors who wish
to obtain upfront income tax relief by participating in a top up share offer.
Therefore, a resolution will be proposed at the Annual General Meeting to extend
the life of the Company until 2016, and the Board anticipates that it will put a
similar resolution to shareholders at subsequent Annual General Meetings to
preserve the ability of the Company to conduct top ups in future years.
Outlook
While the world is quite different in many important respects from this time a
year ago, it is still beset with substantial difficulties, both economic and
financial. However, small companies have in the main shown remarkable
resilience, continuing to trade and taking measures to remain profitable. It has
of course not been easy and many share prices have fallen reflecting the
difficulties they have faced. However, the managers believe that many,
particularly some of those that have hurt the performance of the NAV, have
realistic plans for recovery, and that in due course shareholders' patience will
be rewarded.
Keith Richard Mullins
Chairman
29 March 2010
Investment Manager's Review
The Alternative Investment Market
The year under review has ended on a much firmer note than it started. There
was, by the end of 2009, a better balance between buyers and sellers, and signs
that the new issue market was reviving. However, fundraisings did occur
throughout the year and the portfolio was able to make new investments as
existing AIM companies raised additional capital. We were also able to begin to
make a number of changes to the portfolio, having passed the 70% threshold, so
profits were taken and some holdings disposed of completely.
In the year to 30 November 2009 GBP4,738m was raised on AIM and the number of
companies listed on the market fell from 1,549 to 1,293. Although the reduction
in the number of companies on the market may seem a step backwards, in fact it
was necessary progress as recessionary conditions weeded out weak companies and
many very tiny companies for whom the listing was of questionable value for the
foreseeable future.
In the months since the end of the year under review, there have been a few new
issues attempting to float, but we have not yet participated in any of them.
However, we would hope that the trickle of flotations will increase and that we
will participate in the future.
Performance
The Chairman has commented on the disparity between the rise in NAV and the AIM
index, which remains a far from perfect comparator for the portfolio. However,
it is worth noting that the fall in the index in 2008 of around 60% was largely
attributable to the fall in the valuation of resource sector stocks and the rise
in 2009 by a similar amount has also been attributable to the same sector, which
continues to account for around 30% of AIM's capitalisation. It remains the case
that VCTs are prohibited by their regulations from investing in such companies.
The result of this is that whilst the portfolio outperformed the index in 2008,
it has underperformed in 2009.
That is disappointing. Particular causes of poorer performance than we would
have liked can be identified in Hasgrove and CBG Group, which were fundraisings
by existing AIM companies. Both investments were relatively large within the
portfolio and both companies have issued profit warnings since the shares were
purchased. However, we do believe that substantial remedial measures have been
taken by both companies and, in fact, CBG Group has recently issued a further
statement causing the share price to recover slightly as it suggested profits
would at least meet market expectations.
Performance has also suffered this year as small companies have been derated and
we only expect them to recover their historic rating premium to larger companies
once there is more certainty about the general trends in the economy and more
widely as they display their historically greater rate of growth. However, we
will encourage managements to improve their own companies' trading performances
and we will continue to alter the portfolio to try to improve on recent
performance.
Portfolio Activity
The year under review started with two parallel portfolios for the two classes
of shares, which were then in existence: the 'A' and the 'B' shares. As a result
of the Distribution in Specie which occurred in the summer, whereby B Ordinary
shareholders had the option either to convert their shares to A Ordinary shares
or exit the Fund, see note 7 in the financial statements for details of funds
distributed, we made a number of changes to the 'B' share portfolio once the
assets of the Company had been apportioned between the two sets of investors.
However, those changes did not affect the 'B' shareholders who converted to 'A'
shares. The resulting enlarged 'A' portfolio continued, throughout this process,
to be managed as a VCT portfolio. During the second half of the year, we have
taken advantage of specific high prices to realise profits and to sell some
holdings where we believed that no recovery of value was in sight. For example,
the entire holding in Neuropharm Group was sold in September and we have taken
profits in Animalcare, Advanced Computer Software and IS Pharma.
Since the interim report, when the Chairman described new investments in
Praesepe and Managed Support Services, we have added Innovision Research &
Technology and Clarity Commerce Solutions as new holdings. Innovision Research
and Technology is presently a loss-making mobile telephone application developer
with interesting relationships with both mobile telephone manufacturers and
networks which will enable contactless payment for products and services using a
mobile telephone. Potentially it stands to be a British worldbeater, with the
concept already being pioneered in the UK by Barclaycard. Clarity is a software
provider to a range of international hospitality and entertainment industries.
Since the year end we have made a further investment in Snacktime, a vending
machine operator in predominantly commercial premises.
Also in the second half of the year we saw two companies taken over: Claimar
Care Group and Essentially. Claimar Care Group was sold for cash, unfortunately
at a loss, and Essentially was acquired by Chime Communications plc for shares.
The portfolio continues to hold the Chime shares and to date that has been a
worthwhile investment. Since the year end the entire holding in Research Now has
also been disposed of via a scheme of arrangement. It was bid for by a large US
competitor, and the management felt that the best opportunity for the Company
was no longer as an independent entity. The holding was sold at a GBP0.2m profit.
The table below shows the investee companies that were disposed of in total
during the year:
+----------------+---------------+--------------+--------------+---------------+
| | |Cost of |Proceeds of |Total |
|Realisation |Investment date|investment |investment |gain/(loss) |
| | |( GBP'000) |( GBP'000) |( GBP'000) |
+----------------+---------------+--------------+--------------+---------------+
|B Global plc |April 2007 | 135| 39| (96)|
+----------------+---------------+--------------+--------------+---------------+
|Claimar Care |March 2007 | 335| 123| (212)|
|Group plc | | | | |
+----------------+---------------+--------------+--------------+---------------+
|Neuropharm Group|March 2007 | 268| 65| (203)|
|plc | | | | |
+----------------+---------------+--------------+--------------+---------------+
|Optimisa plc |October 2007 | 511| 58| (453)|
+----------------+---------------+--------------+--------------+---------------+
Despite the loss of investments to acquirers, the portfolio has remained
comfortably above the important 70% threshold for VCT qualifying status and that
also gives us scope for trading shares in order to enhance the return to
shareholders. We will continue to do so, though we would hope that future
take-overs of holdings will be profitable and we will continue to try to argue
for a fair price for our investments in such circumstances.
Investment Portfolio
%
% equity
equity held by
Fair held all
Cost as Value at by IHT funds
AIM-quoted at 30 Cumulative 30 AIM managed
qualifying November change in November Movement VCT by
investments Sector 2009 fair value 2009 in year Plc Octopus
=---------------------------------------------------------------------------------------
Advanced Comp
Soft Plc Software 384 389 773 389 0.60 3.00
Research Now
Plc Media 375 143 518 237 0.80 3.90
IS Pharma Pharmaceuticals 505 88 593 153 2.10 7.50
Melorio Plc Support services 409 110 519 262 1.00 6.20
AnimalCare
Group Plc Food producers 293 211 504 140 2.70 10.10
Brulines Plc Support services 439 36 475 34 1.30 7.60
Chime
Communications
Plc Media 440 (67) 373 119 0.30 0.70
Pressure
Technologies Industrial
Plc engineering 238 127 365 11 1.40 10.70
Managed
Support
Services Plc Building services 367 (34) 333 (34) 2.80 11.40
Tasty Plc Travel & leisure 334 (22) 312 - 2.90 4.40
Vertu Motors
Plc General retailers 502 (192) 310 194 0.40 3.50
Craneware Plc Software 118 185 303 112 0.40 1.50
Praesepe Plc Travel & leisure 367 (73) 294 (73) 1.70 7.80
Clarity
Commerce
Solutions Plc Software 310 (39) 271 (39) 2.00 8.60
CBG Group Plc Financial services 637 (372) 265 (425) 3.40 17.60
Mount
Engineering Industrial
Plc engineering 360 (98) 262 (36) 2.20 8.10
Bond
International
Software Plc Software 244 - 244 - 0.90 6.00
IDOX Plc Software 158 74 232 42 0.60 3.10
Hasgrove Plc Media 436 (228) 208 (251) 2.00 9.70
Colliers CRE
Plc Building services 195 - 195 - 0.70 3.20
Omega
Diagnostics Healthcare
plc equipment 101 71 172 71 2.40 19.20
Lombard
Medical
Technologies Healthcare
Plc equipment 384 (218) 166 20 1.80 6.10
Plastics
Capital Plc Chemicals 357 (211) 146 4 1.30 17.60
Innovision
Research &
Technology plc Software 121 19 140 19 0.73 6.98
Industrial
Optare Plc engineering 568 (454) 114 (114) 0.80 2.50
Telephonetics
Plc Software 305 (213) 92 (23) 1.40 7.40
Adept Telecom
Plc Telecommunications 501 (422) 79 25 1.70 4.40
Work Group Plc Support services 473 (408) 65 6 2.10 6.20
Hexagon Human
Capital Plc Support services 422 (366) 56 (115) 1.20 13.60
Jelf group Plc Financial services 122 (76) 46 (41) 0.20 1.20
Tewenty Plc Media 501 (457) 44 (6) 4.50 15.40
Clerkenwell
Ventures Plc Financial services 63 (38) 25 (38) 1.40 6.80
Individual
Restaurant
Company Plc Restaurants & bars 147 (129) 18 (19) 0.20 1.10
FishWorks Plc Travel & leisure 184 (184) - (38) 2.70 6.80
=---------------------------------------------------------------------------------------
Total qualifying AIM listed
investments 11,360 (2,848) 8,512 586
Total non-qualifying AIM listed
investments 86 34 120 56
Total fixed
asset
investments 11,446 (2,814) 8,632 642
Floating rate
notes 1,842 (4) 1,838 111
Total
investments 13,288 (2,818) 10,470 753
=---------------------------------------------------------------------------------------
Cash at bank 186
Debtors less
creditors 127
=---------------------------------------------------------------------------------------
Total
investments 10,783
Top 10 Holdings
Listed below are the ten largest investments by value as at 30 November 2009
Advanced Computer Software plc
Advanced Computer Software plc was formed to acquire and manage software
businesses in sectors where the Directors believe there are opportunities for
consolidation. It has made one healthcare related acquisition to date.
Initial investment date: July 2008
Cost: GBP384,000
Valuation: GBP773,000
Equity held: 0.6%
Last audited accounts: February 2009 (14 months)
Profit before tax: GBP1.1 million
Net assets: GBP25.4 million
Research Now plc
Research Now plc operates specialist online research panels in the UK, Europe,
the US and Asia. It was acquired by E-Rewards in December 2009.
Initial investment date: December 2007
Cost: GBP461,000
Valuation: GBP638,000
Equity held: 0.8%
Last audited accounts: February 2009
Profit before tax: GBP5.7 million
Net assets: GBP24.8 million
IS Pharma plc
IS Pharma plc is an international pharmaceutical company involved in the
development and commercialisation of niche healthcare products.
Initial investment date: March 2008
Cost: GBP505,000
Valuation: GBP593,000
Equity held: 2.1%
Last audited accounts: March 2009
Profit before tax: GBP2.0 million
Net assets: GBP25.6 million
Melorio plc
Melorio plc was formed to consolidate the UK vocational training market. In
September 2007, it acquired CLW, the UK's largest provider of on-site
construction assessment and training. As well as the construction industry,
Melorio will focus on acquisitions within the utility, logistics and care
sectors.
Initial investment date: October 2007
Cost: GBP409,000
Valuation: GBP519,000
Equity held: 1.0%
Last audited accounts: March 2009
Profit before tax: GBP7.6 million
Net assets: GBP42.7 million
Animalcare Group plc
Animalcare Group plc manufactures and distributes veterinary medicines whilst
identifying chips and other products for pets and livestock.
Initial investment date: December 2007
Cost: GBP293,000
Valuation: GBP504,000
Equity held: 2.7%
Last audited accounts: June 2009
Profit before tax: GBP1.5 million
Net assets: GBP15.4 million
Brulines (Holdings) plc
Brulines (Holdings) plc designs and sells fluid monitoring systems to pubs and
bars. The company is the market leader in its field and manages information from
over 22,000 licensed premises, over one in three pubs in the UK. The system
allows the landlord to reconcile the amount of beer being dispensed against what
is being delivered.
Initial investment date: October 2006
Cost: GBP439,000
Valuation: GBP475,000
Equity held: 1.3%
Last audited accounts: March 2009
Profit before tax: GBP4.6 million
Net assets: GBP20.1 million
Chime Communications plc
Chime Communications plc provide public relations, advertising, market research
and direct marketing, design and event management consultancy.
Initial investment date: April 2008
Cost: GBP440,000
Valuation: GBP373,000
Equity held: 0.3%
Last audited accounts: December 2008
Profit before interest & tax: GBP16.3 million
Net assets: GBP88.5 million
Pressure Technologies plc
Pressure Technologies plc is the holding company for Chesterfield Special
Cylinders ("CSC"). CSC designs, manufactures and offers testing and
refurbishment services for a range of speciality high pressure, seamless steel
gas cylinders for global energy and defence markets.
Initial investment date: June 2007
Cost: GBP238,000
Valuation: GBP365,000
Equity held: 1.4%
Last audited accounts: October 2009
Profit before tax: GBP5.1 million
Net assets: GBP14.1 million
Managed Support Services plc
Managed Support Services plc perform maintenance and installation of heating and
cooling equipment. They are looking to make other acquisitions in the building
services space.
Initial investment date: February 2009
Cost: GBP367,000
Valuation: GBP333,000
Equity held: 2.8%
Last audited accounts: March 2009
Profit before tax: ( GBP0.1) million
Net assets: GBP12.1 million
Tasty plc
Tasty plc is an operator of oriental and pizza restaurants.
Initial investment date: September 2008
Cost: GBP334,000
Valuation: GBP312,000
Equity held: 2.9%
Last audited accounts: December 2008
Profit before tax: ( GBP1.6) million
Net assets: GBP9.4 million
Sector analysis
The graph below shows the sectors the Fund is invested in, and their respective
proportions:
Outlook
The market is in a much more sober frame of mind after its bounce from the lows
in the middle of 2009. So far in 2010 none of the major indices have made any
progress, and, although AIM is up this is largely down to another revival in the
resource stocks. Macro-economic issues are likely to remain a concern for some
time, with worries over the state of government deficits highlighting the fact
that there is a long way for recovery to go. In the UK, we have the added
drawback of being in an election year which will probably hinder market progress
in the first half of 2010.
However, despite all of this caution, we believe that it would be wrong to take
too pessimistic a view of the outlook for your portfolio. Individual companies
are making good progress, and those such as Advanced Computer Software and Vertu
Motors are showing themselves adept at using the prevailing value available in
their markets to make earnings enhancing acquisitions. We have seen the
beginnings of bid activity around the portfolio which is a sure sign of value,
and many of the recent trading statements have indicated that trading is in line
with expectations or better. Even though the pace of recovery in the economy is
expected to remain slow, small companies traditionally do well when the economy
is expanding. We also expect to be able to make some investments at good prices
using the cash from recent sales now that fundraisings are back on the agenda.
If you have any questions on any aspect of your investment, please call one of
the team on 0800 316 2347.
The AIM team
Octopus Investments Limited
29 March 2010
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Directors' Report, the
Directors' Remuneration Report and the financial statements in accordance with
applicable law and regulations. They are also responsible for ensuring that the
annual report includes information required by the Listing Rules of the
Financial Services Authority.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have elected to prepare the
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law).
Under company law the Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Company and of the profit or loss of the Company for that period. In
preparing these financial statements the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and estimates that are reasonable and prudent;
* state whether applicable accounting standards have been followed, subject to
any material departures disclosed and explained in the financial statements;
and
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and enable
them to ensure that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the company and
hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company's website. Legislation in the
United Kingdom governing the preparation and dissemination of the financial
statements and other information included in annual reports may differ from
legislation in other jurisdictions.
The Directors confirm, to the best of their knowledge, that:
* the financial statements, which have been prepared in accordance with UK
Generally Accepted Accounting Practice, and the 2003 Statement of
Recommended Practice, 'Financial Statements of Investments Trust Companies',
revised in 2005, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
* the management report, comprising the Chairman's Statement, Investment
Manager's Review, Investment Portfolio and Directors' Report includes a fair
review of the development and performance of the business and the position
of the Company, together with a description of the principal risks and
uncertainties that it faces.
The names and functions of all the Directors are stated on page <li>.
On Behalf of the Board
Keith Richard Mullins
Chairman
29 March 2010
Income Statement
+---------------------+
| Year to 30 November |
| 2009 |
| |
|Revenue Capital Total|
| |
Notes| GBP'000 GBP'000 GBP'000|
| |
| |
| |
Gain on disposal of fixed asset investments 10 | - 903 903|
| |
Gain on disposal of current asset investments 11 | - 68 68|
| |
| |
| |
Gain on valuation of fixed asset investments 10 | - 642 642|
| |
Gain on valuation of current asset investments 11 | - 111 111|
| |
| |
| |
Investment Income 2 | 195 - 195|
| |
| |
| |
Investment management fees 3 | (65) (196) (261)|
| |
VAT management fee rebate 3 | 12 37 49|
| |
| |
| |
Other expenses 4 | (218) - (218)|
| |
| |
| |
(Loss)/profit on ordinary activities before tax | (76) 1,565 1,489|
| |
| |
| |
Taxation on (loss)/profit on ordinary activities 6 | (5) - (5)|
| |
| |
| |
(Loss)/profit on ordinary activities after tax | (81) 1,565 1,484|
| |
Earnings per share - basic and diluted 8 | (0.4)p 7.8p 7.4p|
+---------------------+
* the 'Total' column of this statement represents the statutory Profit and
Loss account of the Company; the supplementary revenue return and capital
return columns have been prepared in accordance with the AITC Statement of
Recommended Practice
* all revenue and capital items in the above statement derive from
continuing operations
* the accompanying notes are an integral part of the financial statements
* the Company has only one class of business and derives its income from
investments made in shares and securities and from bank and money market
funds
* on 29 May 2009, 8,141,325 B shares exited the Fund through a Distribution
in Specie, the remaining B shares were converted into A Ordinary shares on
a 1 for 1 basis.
The Company has no recognised gains or losses other than the results for the
year as set out above. Accordingly a statement of total recognised gains or
losses is not required.
Other than revaluation movements arising on investments held at fair value
through profit and loss, there were no differences between the (loss)/profit
as stated above and at historical cost.
+------------------------------------------------------------------------------+
|Income Statement |
+------------------------------------------------+-----+-----------------------+
| | | Year to 30 November |
| | | 2008 |
+------------------------------------------------+-----+-------+-------+-------+
| | |Revenue|Capital| Total|
+------------------------------------------------+-----+-------+-------+-------+
| |Notes| GBP'000| GBP'000| GBP'000|
+------------------------------------------------+-----+-------+-------+-------+
+------------------------------------------------+-----+-------+-------+-------+
|Loss on disposal of fixed asset investments | 10 | -| (252)| (252)|
+------------------------------------------------+-----+-------+-------+-------+
|Loss on disposal of current asset investments | 11 | -| (459)| (459)|
+------------------------------------------------+-----+-------+-------+-------+
+------------------------------------------------+-----+-------+-------+-------+
|Loss on valuation of fixed asset investments | 10 | -|(5,904)|(5,904)|
+------------------------------------------------+-----+-------+-------+-------+
|Loss on valuation of current asset investments | 11 | -| (399)| (399)|
+------------------------------------------------+-----+-------+-------+-------+
+------------------------------------------------+-----+-------+-------+-------+
|Investment Income | 2 | 564| -| 564|
+------------------------------------------------+-----+-------+-------+-------+
+------------------------------------------------+-----+-------+-------+-------+
|Investment management fees | 3 | (103)| (310)| (413)|
+------------------------------------------------+-----+-------+-------+-------+
|VAT management fee rebate | 3 | 26| 79| 105|
+------------------------------------------------+-----+-------+-------+-------+
+------------------------------------------------+-----+-------+-------+-------+
|Other expenses | 4 | (134)| -| (134)|
+------------------------------------------------+-----+-------+-------+-------+
+------------------------------------------------+-----+-------+-------+-------+
|Profit/(loss) on ordinary activities before tax | | 353|(7,245)|(6,892)|
+------------------------------------------------+-----+-------+-------+-------+
+------------------------------------------------+-----+-------+-------+-------+
|Taxation on profit/(loss) on ordinary activities| 6 | (59)| 50| (9)|
+------------------------------------------------+-----+-------+-------+-------+
+------------------------------------------------+-----+-------+-------+-------+
|Profit/(loss) on ordinary activities after tax | | 294|(7,195)|(6,901)|
+------------------------------------------------+-----+-------+-------+-------+
|Earnings per share - basic and diluted | 8 | 1.2p|(28.8)p|(27.6)p|
+------------------------------------------------+-----+-------+-------+-------+
* the 'Total' column of this statement represents the statutory Profit and
Loss account of the Company; the supplementary revenue return and capital
return columns have been prepared in accordance with the AITC Statement of
Recommended Practice
* all revenue and capital items in the above statement derive from continuing
operations
* the accompanying notes are an integral part of the financial statements
* the Company has only one class of business and derives its income from
investments made in shares and securities and from bank and money market
funds
The Company has no recognised gains or losses other than the results for the
year as set out above. Accordingly a statement of total recognised gains or
losses is not required.
Other than revaluation movements arising on investments held at fair value
through profit and loss, there were no differences between the profit/(loss) as
stated above and at historical cost.
Balance Sheet
+--------------------+
| As at 30 November|As at 30 November
| 2009|2008
| |
Notes| GBP'000 GBP'000| GBP'000 GBP'000
| |
| |
| |
Fixed asset investments 10 | 8,632| 10,340
| |
Current assets: | |
| |
Investments 11 | 1,838 | 5,049
| |
Debtors 12 | 249 | 293
| |
Cash at bank | 186 | 427
| |
| 2,273 | 5,769
| |
Creditors: amounts falling due | |
within one year 13 | (122) | (60)
| |
Net current assets | 2,151| 5,709
| |
| |
| |
Net assets | 10,783| 16,049
| |
| |
| |
Called up equity share capital 14 | 2 | 3
| |
Special distributable reserve 15 | 14,364 | 22,771
| |
Capital reserve - realised 15 | (305) | 59
| |
- | |
unrealised 15 |(2,814) |(6,884)
| |
Own shares held in Treasury 15 | (467) | (69)
| |
Revenue reserve 15 | 3 | 169
| |
Total equity shareholders' | |
funds | 10,783| 16,049
| |
Net asset value per share - | |
basic and diluted 9 | 69.5p| 64.6p
+--------------------+
The accompanying notes are an integral part of the financial statements.
The statements were approved by the Directors and authorised for issue on 29
March 2010 and are signed on their behalf by:
Keith Richard Mullins
Chairman
+------------------------------------------------------------------------------+
|Reconciliation of Movements in Shareholders' Funds |
+---------------------------------------------------+-------------+------------+
| | Year ended | Year ended |
| | | |
| | 30 November| 30 November|
| | 2009| 2008|
+---------------------------------------------------+-------------+------------+
| Notes| GBP'000| GBP'000|
+---------------------------------------------------+-------------+------------+
|Shareholders' funds at start of year | 16,049| 23,518|
+---------------------------------------------------+-------------+------------+
|Profit/(loss) on ordinary activities after tax | 1,484| (6,901)|
+---------------------------------------------------+-------------+------------+
|Distribution in | (5,644)| -|
|Specie 7 | | |
+---------------------------------------------------+-------------+------------+
|Repurchase of own shares | (703)| (69)|
+---------------------------------------------------+-------------+------------+
|Dividends paid | (403)| (499)|
+---------------------------------------------------+-------------+------------+
|Shareholders' funds at end of year | 10,783| 16,049|
+---------------------------------------------------+-------------+------------+
+---------------------------------------------------+-------------+------------+
+-----------------------------------------------------------------------------++
|Cash Flow Statement ||
| ||
| +--------------------+ ||
| | Year to 30 November| Year to 30 November ||
| | 2009| 2008 ||
| | | ||
| | GBP'000| GBP'000 ||
| | | ||
| | | ||
| | | ||
| Net Cash (outflow) / inflow from | | ||
| operating activities | (125)| (4) ||
| | | ||
| | | ||
| | | ||
| Taxation: UK Corporation | | ||
| tax paid | (9)| (15) ||
| | | ||
| | | ||
| | | ||
| Financial investment | | ||
| | | ||
| Purchase of investments | (2,865)| (7,096) ||
| | | ||
| Disposal of investments | 1,846| 434 ||
| | | ||
| Settlement creditor | -| (810) ||
| | | ||
| | | ||
| | | ||
| Management of liquid | | ||
| resources | | ||
| | | ||
| Purchase of current | | ||
| asset investments | (2,340)| (2,484) ||
| | | ||
| Sale of current asset | | ||
| investments | 4,607| 9,274 ||
| | | ||
| | | ||
|----------------------------------+--------------------+---------------------||
| Net cash inflow / (outflow) from | | ||
| investing activities | 1,114| (701) ||
| | | ||
| | | ||
| | | ||
| Equity dividends paid | | ||
| | | ||
| Distribution in Specie | (249)| - ||
| | | ||
| Other dividends paid | (403)| (499) ||
|----------------------------------+--------------------+---------------------||
| Net cash inflow / (outflow) | | ||
| before financing | 462| (1,200) ||
| | | ||
| | | ||
| | | ||
| Financing | | ||
| | | ||
| Purchase of own shares | (703)| (69) ||
| | | ||
| Overpayment of shares | | ||
| purchased | -| (58) ||
|----------------------------------+--------------------+---------------------||
| Net cash (outflow) / | | ||
| inflow from financing | (703)| (127) ||
| | | ||
| | | ||
| | | ||
| (Decrease) / increase in | | ||
| cash | (241)| (1,327) ||
| +--------------------+ ||
| ||
| ||
| ||
| ||
| ||
+-----------------------------------------------------------------------------++
|Reconciliation of Net Cash Flow to Movement in Liquid Resources |
+-------------------------+-----+----------------------+-----------------------+
| | | Year to 30 November| Year to 30 November|
| | | 2009| 2008|
+-------------------------+-----+----------------------+-----------------------+
| |Notes| GBP'000| GBP'000|
+-------------------------+-----+----------------------+-----------------------+
|Decrease in cash at bank | | (241)| (1,327)|
+-------------------------+-----+----------------------+-----------------------+
|Movement in cash | 11 | | |
|equivalent securities | | (3,211)| (7,648)|
+-------------------------+-----+----------------------+-----------------------+
|Opening net liquid | | | |
|resources | | 5,476| 14,451|
+-------------------------+-----+----------------------+-----------------------+
|Net liquid resources at | | | |
|30 November | | 2,024| 5,476|
+-------------------------+-----+----------------------+-----------------------+
Liquid Resources at 30 November comprised:
+--------------------------------+----------------------+----------------------+
| |As at 30 November 2009|As at 30 November 2008|
+--------------------------------+----------------------+----------------------+
| | GBP'000| GBP'000|
+--------------------------------+----------------------+----------------------+
|Cash at Bank | 176| 427|
+--------------------------------+----------------------+----------------------+
|Money market cash funds | 10| -|
+--------------------------------+----------------------+----------------------+
|Floating Rate Notes | 1,838| 5,049|
+--------------------------------+----------------------+----------------------+
|Net liquid resources at 30 | | |
|November | 2,024| 5,476|
+--------------------------------+----------------------+----------------------+
+-------------------------------------------------+----------------------------+
|Reconciliation of profit / (loss) before Taxation| |
|to Cash Flow from Operating Activities | |
+-------------------------------+----+------------+-------+--------------------+
| | | Year to 30 November| Year to 30 November|
| | | 2009| 2008|
+-------------------------------+----+--------------------+--------------------+
| |Note| GBP'000| GBP'000|
+-------------------------------+----+--------------------+--------------------+
|Profit / (Loss) on ordinary | | | |
|activities before tax | | 1,489| (6,892)|
+-------------------------------+----+--------------------+--------------------+
|Net capital return before tax | | (1,565)| 7,245|
+-------------------------------+----+--------------------+--------------------+
|Investment management fees | | | |
|charged to capital | | (159)| (231)|
+-------------------------------+----+--------------------+--------------------+
|Decrease/(increase) in debtors | | 44| (112)|
+-------------------------------+----+--------------------+--------------------+
|Increase/(decrease) in | | | |
|creditors | | 66| (14)|
+-------------------------------+----+--------------------+--------------------+
|(Outflow)/Inflow from operating| | | |
|activities | | (125)| (4)|
+-------------------------------+----+--------------------+--------------------+
Notes to the Financial Statements
1. Principal Accounting policies
The financial statements have been prepared under the historical cost
convention, except for the revaluation of certain financial instruments, and in
accordance with UK Generally Accepted Accounting Practice (UK GAAP), and the
Statement of Recommended Practice (SORP) 'Financial Statements of Investment
Trust Companies', (revised December 2005).
The principal accounting policies have remained unchanged from those set out in
the Company's 2008 annual report and financial statements. A summary of the
principal accounting policies is set out below.
Investments
Purchases and sales of investments are recognised in the financial statements at
the date of the transaction (trade date).
These investments will be managed and their performance evaluated on a fair
value basis in accordance with a documented investment strategy and information
about them has to be provided internally on that basis to the Board.
Accordingly, as permitted by FRS 26, the investments will be designated as fair
value through profit and loss ("FVTPL") on the basis that they qualify as a
group of assets managed, and whose performance is evaluated, on a fair value
basis in accordance with a documented investment strategy. The Company's
investments are measured at subsequent reporting dates at fair value.
In the case of investments quoted on a recognised stock exchange, fair value is
established by reference to the closing bid price on the relevant date or the
last traded price, depending upon convention of the exchange on which the
investment is quoted. This is consistent with the International Private Equity
and Venture Capital (IPEVC) guidelines. For the avoidance of doubt, the Company
does not hold any unquoted investments.
Gains and losses arising from changes in fair value of investments are
recognised as part of the capital return within the Income Statement and
allocated to the capital reserve-unrealised.
In preparation of the valuations of assets the Directors are required to make
judgements and estimates that are reasonable and incorporate their knowledge of
the performance of the investee companies.
Current asset investments
Current asset investments comprise Floating Rate Notes ("FRN") and are
designated as FVTPL. Gains and losses arising from changes in fair value of
investments are recognised as part of the capital return within the Income
Statement and allocated to the capital reserve unrealised as appropriate. FRNs
are classified as current asset investments as they are investments held for the
short term.
The current asset investments are all invested with the Company's cash manager
and are readily convertible into cash at the choice of the Company. The current
asset investments are held for trading, are actively managed and the performance
is evaluated on a fair value basis in accordance with a documented investment
strategy. Information about them has to be provided internally on that basis to
the Board.
Income
Investment income includes interest earned on bank balances and money market
securities and includes income tax withheld at source. Dividend income is shown
net of any related tax credit.
Dividends receivable are brought into account when the Company's right to
receive payment is established and there is no reasonable doubt that payment
will be received. Fixed returns on debt and money market securities are
recognised on a time apportionment basis so as to reflect the effective yield,
provided there is no reasonable doubt that payment will be received in due
course.
Expenses
All expenses are accounted for on an accruals basis. Expenses are charged wholly
to revenue with the exception of the investment management fee, which has been
charged 25% to the revenue account and 75% to the realised capital reserve to
reflect, in the Directors' opinion, the expected long term split of returns in
the form of income and capital gains respectively from the investment portfolio.
Revenue and capital
The revenue column of the Income Statement includes all income and revenue
expenses of the Company. The capital column includes realised and unrealised
gains and losses on investments. Gains and losses arising from changes in fair
value are considered to be realised only to the extent that they are readily
convertible to cash in full at the balance sheet date.
Upon disposal of investments, gains relating to the assets are transferred from
the unrealised reserve to the realised reserve. Included in current year income
are gains relating to the transfer of assets out of the Fund as a result of the
Distribution in Specie.
Taxation
Corporation tax payable is applied to profits chargeable to corporation tax, if
any, at the current rate. The tax effect of different items of income/gain and
expenditure/loss is allocated between capital and revenue return on the
"marginal" basis as recommended in the SORP.
Deferred tax is recognised on an undiscounted basis in respect of all timing
differences that have originated but not reversed at the balance sheet date
where transactions or events have occurred at that date that will result in an
obligation to pay more, or a right to pay less tax, with the exception that
deferred tax assets are recognised only to the extent that the Directors
consider that it is more likely than not that there will be suitable taxable
profits from which the future reversal of the underlying timing can be deducted.
Cash and liquid resources
Cash, for the purposes of the Cash Flow Statement, comprises cash in hand and
deposits repayable on demand, less overdrafts payable on demand. Liquid
resources are current asset investments which are disposable without curtailing
or disrupting the business and are either readily convertible into known amounts
of cash at or close to their carrying values or traded in an active market.
Liquid resources comprise term deposits of less than one year (other than cash),
government securities, investment grade bonds and investments in money market
managed funds.
Loans and receivables
The Company's loans and receivables are initially recognised at fair value and
subsequently measured at amortised cost.
Financial instruments
The Company's principal financial assets are its investments and the policies in
relation to those assets are set out above. Financial liabilities and equity
instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a
residual interest in the assets of the entity after deducting all of its
financial liabilities. Where the contractual terms of share capital do not have
any terms meeting the definition of a financial liability then this is classed
as an equity instrument. Dividends and distributions relating to equity
instruments are debited direct to equity.
Financing strategy and capital structure
FRS 29 'Financial Instruments: Disclosures' comprises disclosures relating to
financial instruments.
We define capital as shareholders' funds and our financial strategy in the
medium term is to manage a level of
cash that balances the risks of the business with optimising the return on
equity. The Company currently has no
borrowings nor does it anticipate that it will drawdown any borrowing facilities
in the future to fund the acquisition of investments.
Dividends
Dividends payable are recognised as distributions in the financial statements
when the Company's liability to make payment has been established. This
liability is established when the dividends proposed by the Board are approved
by the shareholders.
2. Income
+--------------------------------------------+----------------+----------------+
| |30 November 2009|30 November 2008|
+--------------------------------------------+----------------+----------------+
| | GBP'000| GBP'000|
+--------------------------------------------+----------------+----------------+
|Income on money market securities and bank| | |
|balances | 87| 452|
+--------------------------------------------+----------------+----------------+
|Dividends received (fixed asset investments)| 99 | 77 |
+--------------------------------------------+----------------+----------------+
|Management fee rebates | -| 35|
+--------------------------------------------+----------------+----------------+
|Interest received relating to VAT rebate | 9| -|
+--------------------------------------------+----------------+----------------+
| | 195| 564|
+--------------------------------------------+----------------+----------------+
3. Investment Management Fees
+-------------------------+---------------------+---------------------+
| | 30 November 2009| 30 November 2008|
+-------------------------+-------+-------+-----+-------+-------+-----+
| |Revenue|Capital|Total|Revenue|Capital|Total|
+-------------------------+-------+-------+-----+-------+-------+-----+
| | GBP'000| GBP'000| GBP'000| GBP'000| GBP'000| GBP'000|
+-------------------------+-------+-------+-----+-------+-------+-----+
|Investment management fee| 65| 196| 261| 103| 310| 413|
+-------------------------+-------+-------+-----+-------+-------+-----+
|VAT rebate | (12)| (37)| (49)| (26)| (79)|(105)|
+-------------------------+-------+-------+-----+-------+-------+-----+
| | 53| 159| 212| 77| 231| 308|
+-------------------------+-------+-------+-----+-------+-------+-----+
For the purposes of the revenue and capital columns in the Income Statement, the
management fee (including VAT) has been allocated 25% to revenue and 75% to
capital, in line with the Board's expected long term return in the form of
income and capital gains respectively from the Company's investment portfolio.
Octopus provides investment management and accounting and administration
services to the Company under a management agreement which runs for a period of
five years with effect from 6 October 2005 and may be terminated at any time
thereafter by not less than 12 months' notice given by either party. No
compensation is payable in the event of terminating the agreement by either
party, if the required notice period is given. The fee payable, should
insufficient notice be given, will be equal to the fee that would have been paid
should continuous service be provided, or the required notice period was given.
The basis upon which the management fee is calculated is disclosed within note
19 to the financial statements.
The Chancellor of the Exchequer announced in his budget statement on 12 March
2008 that the Finance Act 2008 would contain draft legislation exempting VCTs
from VAT on management fees with effect from 1 October 2008. This legislation
was passed in July 2008 and as such all VCTs have been made exempt from VAT on
management fees from this date, thus VAT has not been included on management
fees for this year and has been rebated for previous years.
As a result, the Company received a VAT rebate totalling GBP189,263 during the
year relating to the principal amount of VAT previously suffered on management
fees. A further GBP9,000 was received in interest payments. GBP140,000 of this had
been accrued in the year ending 30 November 2008 with the excess being
recognised in the accounts to 30 November 2009.
4. Other Expenses
+--------------------------------------------+----------------+----------------+
| |30 November 2009|30 November 2008|
+--------------------------------------------+----------------+----------------+
| | GBP'000| GBP'000|
+--------------------------------------------+----------------+----------------+
|Directors' remuneration | 42| 42|
+--------------------------------------------+----------------+----------------+
|Fees payable to the Company's auditor for | 22| 22|
|the audit of the financial statements | | |
+--------------------------------------------+----------------+----------------+
|Fees payable to the Company's auditor -| -| 3|
|Other services | | |
+--------------------------------------------+----------------+----------------+
|Bank charges and safe custody fees | (3)| 6|
+--------------------------------------------+----------------+----------------+
|Legal and professional expenses | 69| 12|
+--------------------------------------------+----------------+----------------+
|Other administration expenses | 88| 49|
+--------------------------------------------+----------------+----------------+
| | 218| 134|
+--------------------------------------------+----------------+----------------+
The total expense ratio for the Company for the year to 30 November 2009 was
3.0 per cent based upon average net assets throughout the year (2008: 2.8 per
cent). Total running costs are capped at 3.5 per cent.
5. Directors' Remuneration
+-----------------------------+------------------+------------------+
| | 30 November 2009 | 30 November 2008 |
+-----------------------------+------------------+------------------+
| | GBP'000 | GBP'000 |
+-----------------------------+------------------+------------------+
| Directors' emoluments | | |
+-----------------------------+------------------+------------------+
| Keith Richard Mullins | 16 | 16 |
+-----------------------------+------------------+------------------+
| Christopher Holdsworth Hunt | 13 | 13 |
+-----------------------------+------------------+------------------+
| Andrew Paul Raynor | 13 | 13 |
+-----------------------------+------------------+------------------+
| | 42 | 42 |
+-----------------------------+------------------+------------------+
None of the Directors received any other remuneration or benefit from the
Company during the year. The Company has no employees other than non-executive
Directors. The average number of non-executive Directors in the year was three
(2008: three).
6. Tax on Ordinary Activities
The corporation tax charge for the year was GBP5k (2008: GBP9k).
Factors affecting the tax charge for the current year:
The current tax charge for the year differs from the standard rate of
corporation tax in the UK of 21% (2008: 20.7%). The differences are explained
below.
+--------------------------------------------+----------------+----------------+
|Current tax reconciliation: |30 November 2009|30 November 2008|
+--------------------------------------------+----------------+----------------+
| | GBP'000| GBP'000|
+--------------------------------------------+----------------+----------------+
|Profit/(loss) on ordinary activities before| | |
|tax | 1,489| (6,892)|
+--------------------------------------------+----------------+----------------+
|Current tax at 21% (2007: 20.7%) | 312| (1,427)|
+--------------------------------------------+----------------+----------------+
|Income not liable to tax | 244| (16)|
+--------------------------------------------+----------------+----------------+
|Expenses not deductible for tax purposes | 68| 1,452|
+--------------------------------------------+----------------+----------------+
|Adjustment in respect of prior years | 5| -|
+--------------------------------------------+----------------+----------------+
|Total current tax charge | 5| 9|
+--------------------------------------------+----------------+----------------+
Approved VCTs are exempt from tax on capital gains within the Company. Since the
Directors intend that the Company will continue to conduct its affairs so as to
maintain its approval as a VCT, no current deferred tax has been provided in
respect of any capital gains or losses arising on the revaluation or disposal of
investments.
As at 30 November 2009, there is an unrecognised deferred tax asset of GBP68,000
(2008: nil) in respect of surplus management expenses.
7. Dividends
+--------------------------------------------+----------------+----------------+
| |30 November 2009|30 November 2008|
+--------------------------------------------+----------------+----------------+
| | GBP'000| GBP'000|
+--------------------------------------------+----------------+----------------+
|Recognised as distributions in the financial| | |
|statements for the year | | |
+--------------------------------------------+----------------+----------------+
|Previous year's final dividend | 246| 250|
+--------------------------------------------+----------------+----------------+
|Distribution in Specie | 5,644| -|
+--------------------------------------------+----------------+----------------+
|Current year's interim dividend | 157| 249|
+--------------------------------------------+----------------+----------------+
| | 6,047| 499|
+--------------------------------------------+----------------+----------------+
+--------------------------------------------+----------------+----------------+
| |30 November 2009|30 November 2008|
+--------------------------------------------+----------------+----------------+
| | GBP'000| GBP'000|
+--------------------------------------------+----------------+----------------+
|Paid and proposed in respect of the year | | |
+--------------------------------------------+----------------+----------------+
|Interim dividend paid - 1p per share (2008:| 157| 249|
|1p per share) | | |
+--------------------------------------------+----------------+----------------+
|Distribution in specie | 5,644| -|
+--------------------------------------------+----------------+----------------+
|Final dividend nil (2008: 1p per share) | -| 250|
+--------------------------------------------+----------------+----------------+
| | 5,801| 499|
+--------------------------------------------+----------------+----------------+
During the year to 30 November 2009 a Distribution in Specie resulted in the
above outflow of net assets, paid to those shareholders who chose to leave the
Fund.
Amounts paid in relation to the distribution in specie were as follows:
+------------------------------+-------+
| | GBP'000 |
+------------------------------+-------+
| Fixed asset investments | 4,272 |
+------------------------------+-------+
| Current asset investments | 1,123 |
+------------------------------+-------+
| Cash and Cash equivalents | 249 |
+------------------------------+-------+
| Total distribution in specie | 5,644 |
+------------------------------+-------+
8. Earnings Per Share - basic and diluted
The earnings per share is based on 20,051,665 (2008: 24,967,724) shares, being
the weighted average number of A and B Ordinary shares in issue during the year.
There are no potentially dilutive capital instruments in issue and, as such, the
basic and diluted earnings per share are identical.
9. Net Asset Value Per Share - basic and diluted
The calculation of NAV per share as at 30 November 2009 is based on 15,508,642 A
Ordinary (2008: 24,864,861 A and B Ordinary) shares in issue at that date
(excluding Treasury shares).
10. Fixed asset investments
+-----------------------------+------------------------------------------------+
| | AIM-quoted investments |
+-----------------------------+------------------------+-----------------------+
| | Year ended 30 November| Year ended 30 November|
| | 2008| 2007|
+-----------------------------+------------------------+-----------------------+
| | GBP'000| GBP'000|
+-----------------------------+------------------------+-----------------------+
+-----------------------------+------------------------+-----------------------+
|Book cost as at 30 November | 16,787| 10,196|
+-----------------------------+------------------------+-----------------------+
|Revaluation to 30 November | (6,447)| (363)|
+-----------------------------+------------------------+-----------------------+
|Valuation at 30 November | 10,340| 9,833|
+-----------------------------+------------------------+-----------------------+
+-----------------------------+------------------------+-----------------------+
| | November 2009| November 2008|
+-----------------------------+------------------------+-----------------------+
| | GBP'000| GBP'000|
+-----------------------------+------------------------+-----------------------+
|Opening valuation at 1 | 10,340| 9,833|
|December | | |
+-----------------------------+------------------------+-----------------------+
|Purchases at cost | 2,865| 7,097|
+-----------------------------+------------------------+-----------------------+
|Disposal proceeds | (1,846)| (434)|
+-----------------------------+------------------------+-----------------------+
|Disposals relating to| (4,272)| -|
|Distribution in Specie | | |
+-----------------------------+------------------------+-----------------------+
|Profit/(loss) on realisation | 477| (252)|
|of investments - current year| | |
+-----------------------------+------------------------+-----------------------+
|Profit/(loss) on realisation | | |
|of investments - current year| 426| -|
|in relation to Distribution | | |
|in Specie | | |
+-----------------------------+------------------------+-----------------------+
|Revaluation in year | 642| (5,904)|
+-----------------------------+------------------------+-----------------------+
|Closing valuation at 30 | 8,632| 10,340|
|November | | |
+-----------------------------+------------------------+-----------------------+
+-----------------------------+------------------------+-----------------------+
|Book cost at 30 November: | | |
+-----------------------------+------------------------+-----------------------+
|- Ordinary shares | 11,446| 16,787|
+-----------------------------+------------------------+-----------------------+
+-----------------------------+------------------------+-----------------------+
|Revaluation to 30 November: | | |
+-----------------------------+------------------------+-----------------------+
|- Ordinary shares | (2,814)| (6,447)|
+-----------------------------+------------------------+-----------------------+
+-----------------------------+------------------------+-----------------------+
|Valuation at 30 November | 8,632| 10,340|
+-----------------------------+------------------------+-----------------------+
Further details of the fixed asset investments held by the Company are shown
within the Investment Manager's Review on pages ? to ?.
Transaction costs on the purchase and disposal of investments of GBP11,000 were
incurred in the year.
All investments are designated as fair value through profit or loss from the
time of acquisition, and all capital gains or losses on investments so
designated. Given the nature of the Company's venture capital investments, the
changes in fair value of such investments recognised in these financial
statements are not considered to be readily convertible to cash in full at the
balance sheet date and accordingly these gains are treated as unrealised.
At 30 November 2009 and 30 November 2008 there were no commitments in respect of
investments approved by the Manager but not yet completed.
11. Current Asset Investments
Current asset investments at 30 November 2009 and at 30 November 2008 comprised
floating rate notes (FRNs*) and money market funds (MMFs).
+-------------------------------+-----------------------+----------------------+
| | Year Ended 30 November|Year Ended 30 November|
| | 2008| 2007|
+-------------------------------+-----------------------+----------------------+
| | GBP'000| GBP'000|
+-------------------------------+-----------------------+----------------------+
|Book cost at 30 November: | | |
+-------------------------------+-----------------------+----------------------+
|FRNs | 5,486| 9,005|
+-------------------------------+-----------------------+----------------------+
|Open Ended Investment Companies| -| 3,250|
|(OEICs) | | |
+-------------------------------+-----------------------+----------------------+
| | 5,486| 12,255|
+-------------------------------+-----------------------+----------------------+
|Revaluation to 30 November: | | |
+-------------------------------+-----------------------+----------------------+
|FRNs | (437)| (49)|
+-------------------------------+-----------------------+----------------------+
|OEICs | -| 491|
+-------------------------------+-----------------------+----------------------+
| | (437)| 442|
+-------------------------------+-----------------------+----------------------+
|Valuation as at 30 November | 5,049| 12,697|
+-------------------------------+-----------------------+----------------------+
+-------------------------------+-----------------------+----------------------+
| | November 2009| November 2008|
+-------------------------------+-----------------------+----------------------+
| | GBP'000| GBP'000|
+-------------------------------+-----------------------+----------------------+
+-------------------------------+-----------------------+----------------------+
|Opening valuation at 1 December| 5,049| 12,697|
+-------------------------------+-----------------------+----------------------+
+-------------------------------+-----------------------+----------------------+
|Purchases at Cost: | | |
+-------------------------------+-----------------------+----------------------+
|FRNs | -| 2,484|
+-------------------------------+-----------------------+----------------------+
|MMFs | 2,340| -|
+-------------------------------+-----------------------+----------------------+
| | 2,340| 2,484|
+-------------------------------+-----------------------+----------------------+
|Disposal proceeds: | | |
+-------------------------------+-----------------------+----------------------+
|FRNs | (2,277)| (5,991)|
+-------------------------------+-----------------------+----------------------+
|MMFs | (2,330)| -|
+-------------------------------+-----------------------+----------------------+
|OEICs | -| (3,283)|
+-------------------------------+-----------------------+----------------------+
|Disposals relating to | (1,123)| -|
|Distribution in Specie | | |
+-------------------------------+-----------------------+----------------------+
| | (5,730)| (9,274)|
+-------------------------------+-----------------------+----------------------+
|Profit/(loss) in year on | | |
|realisation of investments: | | |
+-------------------------------+-----------------------+----------------------+
|FRNs - general | 36| (2)|
+-------------------------------+-----------------------+----------------------+
| * payment of Distribution in | 32| -|
| Specie | | |
+-------------------------------+-----------------------+----------------------+
|OEICs | -| (457)|
+-------------------------------+-----------------------+----------------------+
| | 68| (459)|
+-------------------------------+-----------------------+----------------------+
|Revaluation in year: | | |
+-------------------------------+-----------------------+----------------------+
|FRNs | 111| (399)|
+-------------------------------+-----------------------+----------------------+
| | 111| (399)|
+-------------------------------+-----------------------+----------------------+
|Closing valuation as at 30 | 1,838| 5,049|
|November | | |
+-------------------------------+-----------------------+----------------------+
+-------------------------------+-----------------------+----------------------+
|Book cost at 30 November: | | |
+-------------------------------+-----------------------+----------------------+
|FRNs | 1,842| 5,486|
+-------------------------------+-----------------------+----------------------+
| | 1,842| 5,486|
+-------------------------------+-----------------------+----------------------+
|Revaluation to 30 November: | | |
+-------------------------------+-----------------------+----------------------+
|FRNs | (4)| (437)|
+-------------------------------+-----------------------+----------------------+
| | (4)| (437)|
+-------------------------------+-----------------------+----------------------+
|Closing valuation as at 30 | 1,838| 5,049|
|November | | |
+-------------------------------+-----------------------+----------------------+
* FRNs represent money held pending investment and can be accessed with 5
workings days notice.
12. Debtors
+--------------------------------+------------------+------------------+
| | 30 November 2009 | 30 November 2008 |
+--------------------------------+------------------+------------------+
| | GBP'000 | GBP'000 |
+--------------------------------+------------------+------------------+
| Other debtors | 199 | 198 |
+--------------------------------+------------------+------------------+
| Prepayments and accrued income | 50 | 95 |
+--------------------------------+------------------+------------------+
| | 249 | 293 |
+--------------------------------+------------------+------------------+
13. Creditors: Amounts Falling Due Within One Year
+------------------------------+------------------+------------------+
| | 30 November 2009 | 30 November 2008 |
+------------------------------+------------------+------------------+
| | GBP'000 | GBP'000 |
+------------------------------+------------------+------------------+
| Accruals and other creditors | 122 | 60 |
+------------------------------+------------------+------------------+
| | 122 | 60 |
+------------------------------+------------------+------------------+
14. Share Capital
+--------------------------------------------+----------------+----------------+
| |30 November 2009|30 November 2008|
+--------------------------------------------+----------------+----------------+
| | GBP| GBP|
+--------------------------------------------+----------------+----------------+
|Authorised: | | |
+--------------------------------------------+----------------+----------------+
|283,984,075 'A' Ordinary shares of 0.01p | 28,398 | 28,398 |
|each | | |
+--------------------------------------------+----------------+----------------+
|275,000,000 'B' Ordinary shares of 0.01p | - | 26,602 |
|each | | |
+--------------------------------------------+----------------+----------------+
| | 28,398 | 55,000 |
+--------------------------------------------+----------------+----------------+
+--------------------------------------------+----------------+----------------+
|Allotted and fully paid up: | GBP| GBP|
+--------------------------------------------+----------------+----------------+
|16,283,536 'A' Ordinary shares of 0.01p | | |
|(2008: 7,299,461) | 1,628| 730|
+--------------------------------------------+----------------+----------------+
|Nil 'B' Ordinary shares of 0.01p (2008: | | |
|17,680,650) | -| 1,768|
+--------------------------------------------+----------------+----------------+
| | 1,628| 2,498|
+--------------------------------------------+----------------+----------------+
The capital of the Company is managed in accordance with its investment policy
with a view to the achievement of its investment objective as set on page ?. The
Company is not subject to any externally imposed capital requirements.
During the year 8,984,075 (2008: nil) A Ordinary shares were issued as a result
of B Ordinary shareholders converting their B Ordinary shares into A Ordinary
shares on a 1 for 1 basis. The remaining 8,141,325 B Ordinary shares, that
related to those shareholders who chose to exit the Fund as a result of the
distribution in specie, were cancelled during the year.
The Company repurchased the following 'B' Ordinary shares during the year to be
cancelled:
* 6 February 2009: 50,250 'B' Ordinary shares at a price of 54.5p per share
* 27 February 2009: 150,000 'B' Ordinary shares at a price of 53.0p per share
* 3 April 2009: 90,000 'B' Ordinary shares at a price of 53.6p per share
* 17 April 2009: 265,000 'B' Ordinary shares at a price of 55.5p per share
The Company repurchased the following 'A' Ordinary shares during the year to be
held in Treasury:
* 30 January 2009: 30,550 'A' Ordinary shares at a price of 54.0p per share
* 27 March 2009: 5,000 'A' Ordinary shares at a price of 53.5p per share
* 17 April 2009: 10,350 'A' Ordinary shares at a price of 55.5p per share
* 8 May 2009: 30,313 'A' Ordinary shares at a price of 52.5p per share
* 19 June 2009: 16,000 'A' Ordinary shares at a price of 52.5p per share
* 10 July 2009: 144,000 'A' Ordinary shares at a price of 61.5p per share
* 7 August 2009: 150,000 'A' Ordinary shares at a price of 60.0p per share
* 25 September 2009: 105,275 'A' Ordinary shares at a price of 61.0p per share
* 30 October 2009: 65,375 'A' Ordinary shares at a price of 63.5p per share
* 16 November 2009: 102,781 'A' Ordinary shares at a price of 62.5p per share
The total nominal value of the shares repurchased was GBP66 representing 4.06% of
the issued share capital.
15. Reserves
Own
Special Capital Capital shares
distributable reserve reserve held in Revenue
reserve* realised* unrealised* treasury reserve*
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 30
November 2008 22,771 59 (6,884) (69) 169
Repurchase of
own shares (305) - - (398) -
Profit on
ordinary
activities after
tax - - - - (81)
Capitalisation
of management
fees - (159) - - -
Prior period
gains/losses on
disposal - (1,076) 1,076 - -
Distribution in
specie (5,644) - - - -
Transfer between
reserves (2,458) 106 2,352 - -
Gains/losses on
disposal of
investments - 971 - - -
Gains/losses on
revaluation - 111 642 - -
Dividends paid - (317) - - (85)
Balance as at
30 November 2009 14,364 (305) (2,814) (467) 3
* These reserves are considered distributable to shareholders.
When the Company revalues its investments during the period, any gains or losses
arising are credited/charged to the Income Statement. Unrealised gains/losses
are then transferred to the capital reserve - unrealised. When an investment is
sold any balance held on the capital reserve unrealised is transferred to the
capital reserve - realised as a movement in reserves.
The purpose of the special distributable reserve was to create a reserve which
will be capable of being used by the Company to pay dividends and for the
purpose of making repurchases of its own shares in the market with a view to
narrowing the discount at which the Company's shares trade to net asset value.
This reserve is also used to transfer capital losses realised.
16. Financial Instruments and Risk Management
The Company's financial instruments comprise equity investments, FRNs, cash
balances and liquid resources including debtors and creditors. The Company holds
financial assets in accordance with its investment policy of investing mainly in
a portfolio of VCT qualifying unquoted and AIM-quoted securities whilst holding
a proportion of its assets in cash or near-cash investments in order to provide
a reserve of liquidity.
Fixed and current asset investments (see notes 10 and 11) are valued at fair
value. For quoted investments this is either bid price or the latest traded
price, depending on the convention of the exchange on which the investment is
quoted. The fair value of all other financial assets and liabilities is
represented by their carrying value in the balance sheet. The Directors believe
that the fair value of the assets held at the year end is equal to their book
value.
In carrying on its investment activities, the Company is exposed to various
types of risk associated with the financial instruments and markets in which it
invests. The most significant types of financial risk facing the Company are
price risk, interest rate risk, credit risk and liquidity risk. The Company's
approach to managing these risks is set out below together with a description of
the nature and amount of the financial instruments held at the balance sheet
date.
Market risk
The Company's strategy for managing investment risk is determined with regard to
the Company's investment objective, as outlined on page X. The management of
market risk is part of the investment management process and is a central
feature of venture capital investment. The Company's portfolio is managed in
accordance with the policies and procedures described in the Corporate
Governance statement on pages X to X, having regard to the possible effects of
adverse price movements, with the objective of maximising overall returns to
shareholders. Investments in smaller companies, by their nature, usually involve
a higher degree of risk than investments in larger companies quoted on a
recognised stock exchange, though the risk can be mitigated to a certain extent
by diversifying the portfolio across business sectors and asset classes. The
overall disposition of the Company's assets is regularly monitored by the Board.
Details of the Company's investment portfolio at the balance sheet date are set
out on pages ?.
97.1% (30 November 2008: 95.9%) by value of the Company's net assets comprises
equity securities listed on the London Stock Exchange or quoted on AIM. A 30%
increase in the bid price of these securities as at 30 November 2009 would have
increased net assets and the total return for the year by GBP3,138,000 (30
November 2008: GBP4,617,000); a corresponding fall would have reduced net assets
and the total return for the year by the same amount.
Interest rate risk
Some of the Company's financial assets are interest-bearing. As a result, the
Company is exposed to fair value interest rate risk due to fluctuations in the
prevailing levels of market interest rates.
Floating rate
The Company's floating rate investments comprise cash held on interest-bearing
deposit accounts and, where appropriate, within interest bearing money market
securities. The benchmark rate which determines the rate of interest receivable
on such investments is the bank base rate, which was 0.5% at 30 November 2009
(30 November 2008: 3.0%). The amounts held in floating rate investments at the
balance sheet date were as follows:
+--------------------------------------------+----------------+----------------+
|Assets at fair value through profit and loss|30 November 2009|30 November 2008|
+--------------------------------------------+----------------+----------------+
| | GBP000| GBP000|
+--------------------------------------------+----------------+----------------+
|Current investments | 1,838| 5,049|
+--------------------------------------------+----------------+----------------+
|Cash at bank | 186| 427|
+--------------------------------------------+----------------+----------------+
| | 2,024| 5,476|
+--------------------------------------------+----------------+----------------+
A 1% increase in the base rate would increase income receivable from these
investments and the total return for the year by GBP20,240 (30 November 2008:
GBP54,760)
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail
to discharge an obligation or commitment that it has entered into with the
Company. The Investment Manager and the Board carry out a regular review of
counterparty risk. The carrying values of financial assets represent the maximum
credit risk exposure at the balance sheet date.
At 30 November 2009 the Company's financial assets exposed to credit risk
comprised the following:
+--------------------------------------------+----------------+----------------+
|Assets at fair value through profit and loss|30 November 2009|30 November 2008|
+--------------------------------------------+----------------+----------------+
| | GBP000| GBP000|
+--------------------------------------------+----------------+----------------+
|Current investments | 1.838| 5,049|
+--------------------------------------------+----------------+----------------+
|Cash at bank | 186| 427|
+--------------------------------------------+----------------+----------------+
|Loans and receivables | | |
+--------------------------------------------+----------------+----------------+
|Accrued dividends and interest receivable | 44| 82|
+--------------------------------------------+----------------+----------------+
| | 2,068| 5,558|
+--------------------------------------------+----------------+----------------+
Credit risk relating to listed money market securities is mitigated by investing
in money market instruments issued by major companies and institutions with a
minimum Moody's long term debt rating of 'A'.
Those assets of the Company which are traded on recognised stock exchanges are
held on the Company's behalf by third party custodians (BNP Paribas in the case
of listed money market securities and Charles Stanley Limited in the case of
quoted equity securities). Bankruptcy or insolvency of a custodian could cause
the Company's rights with respect to securities held by the custodian to be
delayed or limited.
Credit risk arising on the sale of investments is considered to be small due to
the short settlement and the contracted agreements in place with the settlement
lawyers.
The Company's interest-bearing deposit and current accounts are maintained with
HSBC.
Other than cash or liquid money market funds, there were no significant
concentrations of credit risk to counterparties at 30 November 2009 or 30
November 2008.
Liquidity risk
The Company's financial assets include investments in AIM-quoted companies,
which by their nature involve a higher degree of risk than investments on the
main market. As a result, the Company may not be able to realise some of its
investments in these instruments quickly at an amount close to their fair value
in order to meet its liquidity requirements, or to respond to specific events
such as deterioration in the creditworthiness of any particular issuer.
The Company's listed money market securities are considered to be readily
realisable as they are of high credit quality as outlined above.
The Company's liquidity risk is managed on a continuing basis by the Investment
Manager in accordance with policies and procedures laid down by the Board. The
Company's overall liquidity risks are monitored on a quarterly basis by the
Board.
The Company maintains sufficient investments in cash and readily realisable
securities to pay accounts payable and accrued expenses. At 30 November 2009
these investments were valued at GBP2,024,000 (30 November 2008 GBP5,476,000).
17. Post balance sheet events
Since the year end, the Company has made partial disposals in Advanced Computer
Software, Animalcare Group and Brulines, and fully disposed of its holding in
Research Now. Furthermore, non-qualifying investments of GBP190,400 and GBP104,000
were made into Snacktime and RWS Holdings.
The directors declared an interim dividend post year end. This will be paid
subject to HMRC approval.
18. Contingencies, Guarantees and Financial Commitments
There were no contingencies, guarantees or financial commitments as at 30
November 2009 (2008: GBPnil).
19. Related Party Transactions
Octopus acts as the Investment Manager of the Company. Under the management
agreement, Octopus receives a fee of 2.0% per annum of the net assets of the
Company for the investment management services. During the year 1 December 2008
to 30 November 2009, the Company incurred management fees of GBP260,000 (2008:
GBP112,000) payable to Octopus. At the year end there was GBP54,000 (2008: GBP9,000)
outstanding to Octopus.
For further information please contact:
Celia Whitten, Company Secretary
020 7710 2849
[HUG#1399154]
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