RNS Number:6317X
Baronsmead VCT 4 PLC
30 January 2006
To: RNS
From: Baronsmead VCT 4 plc
Date: 30 January 2006
Investment Objective
To achieve long-term capital growth and generate tax free dividends for private
investors.
Audited Preliminary Results - Year Ended 31 December 2005
* Net asset value increased by 13.0 per cent to 114.41p per share before
deduction of annual dividends.
* After dividends totaling 4.5p per share, for the year, the NAV is
109.91p at 31 December 2005.
* An interim dividend of 2p per share was paid on 28 September 2005 and
a final dividend of 2.5p per share will be paid on 13 March 2006, subject to
shareholder approval.
* Since launch in 2001, the total return to ordinary shareholders is
30.0 per cent (based on quoted investments valued at mid-market price).
The Chairman, Philip Dunne said:
"RESULTS In the year to 31 December 2005, the Net Asset Value (NAV) per
ordinary share increased by 13.0% from 101.2p to 114.4p, before dividends. The
2p interim dividend was paid in September 2005 and the proposed final dividend
of 2.5p is payable on 13 March 2006.
This level of dividends is possible through the successful realisation of
profits from across the portfolio. AssA was sold outright to a third party and
the refinancing of Americana also generated a sizeable gain over original cost.
LONG TERM PERFORMANCE The overall performance compares well against other VCTs
and is similar to the FTSE All-Share index, which increased by 31% in the same
period from December 2001.
Since launch the total return (based on quoted investments being valued a
mid-market price) for founder shareholders is 30%, net of all costs. This level
of return is calculated by combining the growth in NAV with reinvested dividends
per ordinary share of 11p.
THE PORTFOLIO In the year under review, 16 new investments were made and the
unquoted investment in AssA was sold taking the net portfolio to 48 companies.
There were six new unquoted and ten AiM investments totalling #8.0 million. The
average size of each unquoted investment was #880,000, significantly larger than
the AiM investments of #270,000.
Six VCT tests relating to the running of Baronsmead VCT 4 have to be, and were,
met for each day of the year to 31 December 2005. The most visible of these
tests is that more than 70% of the portfolio has been invested in qualifying
investments beyond the first three accounting periods from when new share
capital was subscribed. Following an increase in investment rate in the second
half of the year, the Board is pleased to report that at the year end, over 85%
of the capital raised (net of launch costs) prior to 30 November 2003 was
invested in VCT qualifying investments.
The relative health of portfolio companies is measured quarterly in terms of
profitability as well as other non-financial benchmarks. At the year end, 4 out
of 5 of the portfolio companies were reporting higher or steady profits. In the
last quarter there has been some softening in the trading of investee companies.
The sale of the investment in AssA was reported in the autumn factsheet and
generated a return of 2.5x cost over the two year period that the investment was
held prior to the sale to Carter & Carter. Since the year-end, Language Line
has also been sold at 2.1x cost to a similar US company and generated a profit
of #430,000 over the period held. However, the largest gain came from the
refinancing of Americana, which returned a profit of #1.7 million in November
2005. The Managing Director of this company presented to the AGM in March 2005
and shared how the company's fast growth had been achieved in recent years.
CHANGE IN FUND MANAGER OWNERSHIP On 1 July 2005, a recently formed Limited
Liability Partnership (ISIS EP LLP) assumed the existing business and operations
of ISIS Equity Partners plc, managing over #500 million of private equity
assets, including the management contract of the Company. The relationship
between F&C Asset Management plc and ISIS EP LLP remains strong as the status
moves from being a subsidiary to that of partnership. The Board was very
supportive regarding this change and was consulted. The Board retains its
confidence in the management team which remains in place and now enjoys the
added motivation provided by this change of ownership.
The Investment Managers role as active investor with unquoted portfolios was
recognised by an award in 2005 (EVCA/Real Deals) for the best growth capital
transaction in Europe made by ISIS Equity Partners relating to a 2000 investment
in Fat Face. This investment held between 2000 to 2005 predated the Company but
did involve the first two Baronsmead VCTs.
MEETING SHAREHOLDER NEEDS
Forthcoming C Share Fundraising Shareholders approved the C share fund in
November 2005 and a Securities Note to raise gross proceeds of #20 million will
shortly be available. This offer is for the current tax year and will close on
4 April 2006, unless fully subscribed beforehand.
The use of the C share mechanism allows the Board to fix the price of the shares
throughout the offer period and also ensures that there is no initial dilution
of existing ordinary shareholders' interests in the Company's current portfolio
of investments.
Financial Promotion The Financial Services Authority (FSA) has reservations
regarding the financial promotions of VCTs. The FSA is concerned that these
funds are being promoted to people for whom they are not appropriate, that there
may not be sufficient balance in the promotional material identifying the risks
associated with an investment in a VCT.
The Investment Managers have undertaken a full review of the procedure for
marketing the forthcoming C share fundraising to ensure that all documentation
contains adequate risk warnings, that the marketing material used by the IFA
community is sufficiently balanced and that the sales team within F&C Asset
Management plc, who are marketing the fundraising, are adequately trained. ISIS
EP LLP has also consulted with its own lawyers to ensure that the procedures
being put in place are of the appropriate standard.
Extension to the Life of the Company The Board offers shareholders the
opportunity to top up their investment through the Dividend Reinvestment Scheme
as well as invest further through the #20 million C share fundraising. The
current rate of income tax relief of 40 per cent is available, on the issue of
new shares, until 5 April 2006 and can only be retained if these shares are held
for 3 years. This requires the life of the Company to be extended beyond 2008.
A resolution will be put to shareholders at the Company's AGM to extend the life
of the Company to the AGM in 2013.
Tax Reliefs The current rate of income tax relief is 40 per cent and is
available until 5 April 2006. The Government remains committed to ensuring the
long term sustainability and success of the VCT market and will announce the
future level of VCT reliefs at Budget 2006. The intervening period will allow
further analysis of trends in the VCT market and continued dialogue with key
stakeholders.
Dividend Policy The Board has agreed that it wishes to sustain an annual
dividend policy of 4p per ordinary share. This takes into account the Board's
aim to maintain an NAV at 100p or more per ordinary share. The ability to meet
these twin objectives will depend significantly on the level and timing of
profitable realisations and the underlying value of the portfolio.
The total dividends paid and proposed for 2005 are 4.5p per share and are in
excess of this stated policy. To date, the average paid to founder shareholders
has been 2.75p per year. For those qualifying shareholders who obtained an
income tax relief of 20% on subscription, the net annual yield is 3.4%. For a
higher rate tax payer the equivalent yield rises to 5.0%.
The Board wishes to build a buffer of reserves, which will enable this policy to
be pursued, once the current C shares are converted into ordinary shares in
early 2009.
Existing shareholders subscribed for 334,850 new shares at an average price of
105p per ordinary share under the dividend reinvestment scheme and 751,960
shares were bought back within the last year at an average price of 95p,
representing a discount of approximately 10% to NAV per share.
CO-INVESTMENT SCHEME The co-investment scheme for executive members of the
Managers to invest in unquoted transactions was announced to shareholders in
November 2004 and was explained in more detail in the fact sheet issued after
the 30 September 2005 quarter end. The rationale remains to expand the existing
skills and capacity of the Managers team. In its first year of this scheme
coming into force, 21 members of ISIS EP LLP have invested #74,950 in all the
six unquoted investments where the Manager was the lead investor.
OUTLOOK The Company has reached a stage of maturity where the Board has
confidence that realisations should generate capital profits, whereby capital
dividends can be paid and has therefore set an explicit dividend policy. The
priority in the coming years is to sustain this progress and build the portfolio
as new capital is raised.
The Company's AGM will be held on 9 March 2006 at 10.30 am at the offices of F&C
Asset Management plc, Exchange House, Primrose Street, London EC2A 2NY. There
will be a number of presentations followed by a light buffet lunch and a
shareholder workshop finishing by 2.00 pm."
Enquiries: David Thorp 0207 506 1100 ISIS EP LLP
Rhonda Nicoll 0131 465 1000 F&C Asset Management plc
Baronsmead VCT 4 plc
Audited Income Statement
Year to 31 December 2005
Revenue Capital Total
#'000 #'000 #'000
Increase in fair value of investments held - 3,217 3,217
Gain on disposal of investments - 948 948
Income 1,369 - 1,369
Investment management fee (258) (774) (1,032)
Other expenses (296) - (296)
Profit on ordinary activities before taxation 815 3,391 4,206
Tax on ordinary activities (186) 189 3
Profit on ordinary activities after taxation 629 3,580 4,209
Return per ordinary share: 1.93p 10.96p 12.89p
Dividends paid/proposed
Revenue Capital Total
#'000 #'000 #'000
Interim dividend for the period ended 31 December 2005 of 2.0p
per share 158 489 647
Final dividend for the period ended 31 December 2005 of 2.5p per
share 453 356 809
611 845 1,456
Audited Reconciliation of Movements in Shareholders' Funds
2005
#'000
Opening shareholders' funds (as previously reported) 33,454
Less investments held at fair value changed from mid to bid basis (279)
Add dividends accrued 754
Opening shareholders' funds (as restated) 33,929
Profit for the year 4,209
Decrease in share capital (369)
Dividends paid (1,402)
Closing shareholders' funds 36,367
Baronsmead VCT 4 plc
Audited Income Statement
13 months to 31 December 2004
Revenue Capital Total
(as restated) (as restated) (as restated)
#'000 #'000 #'000
Increase in fair value of investments held - 2,260 2,260
Gain on disposal of investments - 157 157
Income 1,492 - 1,492
Investment management fee (192) (575) (767)
Other expenses (294) - (294)
Profit on ordinary activities before taxation 1,006 1,842 2,848
Tax on ordinary activities (261) 182 (79)
Profit on ordinary activities after taxation 745 2,024 2,769
Return per ordinary share: 2.52p 6.84p 9.36p
Dividends paid/proposed
Revenue Capital Total
#'000 #'000 #'000
Interim dividend for the period ended 31 December 2004 of
1.0p per share 299 - 299
Second interim dividend for the period ended 31 December
2004 of 1.0p per share - 328 328
Final dividend for the period ended 31 December 2004 of
1.3p per share 427 - 427
726 328 1,054
Audited Reconciliation of Movements in Shareholders' Funds
Total
#'000
Opening shareholders' funds(as previously reported) 20,634
Less investments held at fair value changed from mid to bid basis (135)
Add dividends accrued 277
Opening shareholders' funds (as restated) 20,776
Profit for the year 2,769
Increase in share capital 10,960
Dividends paid (576)
Closing shareholders' funds 33,929
Baronsmead VCT 4 plc
Audited Balance Sheet
As at
As at 31 December
31 December 2004
2005 (as restated)
#'000 #'000
Fixed assets held at fair value
Quoted on AiM 9,509 6,620
Fixed interest securities 11,706 15,524
Unquoted investments 12,598 6,750
33,813 28,894
Net current assets 2,554 5,035
Net assets 36,367 33,929
Financed by:
Shareholders' funds 36,367 33,929
Net asset value per ordinary share: 112.41p 103.54p
Ordinary shares in issue 32,353,238 32,770,348
Baronsmead VCT 4 plc
Summarised Audited Statement of Cash Flows
Year to 13 months to
31 December 2005 31 December 2004
(restated)
#'000 #'000
Net cash (outflow)/inflow from operating activities (14) 540
Taxation paid (73) (46)
Capital expenditure and financial investment (629) (8,671)
Equity dividends paid (1,402) (576)
Net cash outflow before financing (2,118) (8,753)
Financing (369) 11,345
(Decrease)/increase in cash (2,487) 2,592
Reconciliation of net cash flow to movement in net cash
(Decrease)/increase in cash (2,487) 2,592
Opening cash position 5,132 2,540
Closing cash position 2,645 5,132
Reconciliation of net revenue before taxation to net cash (outflow)/
inflow from operating activities
Year to 13 months to
31 December 2005 31 December 2004
(as restated)
#'000 #'000
Profit on ordinary activities before taxation 4,206 2,848
Profit on realisation of investments (4,165) (2,417)
(Increase) in accrued income (66) (51)
Increase in creditors 11 160
Net cash (outflow)/inflow from operating activities (14) 540
Notes
1. The audited results which cover the year to 31 December 2005 have been
prepared under UK Generally Accepted Accounting Practice (UK GAAP). A number of
new UK financial Reporting Standards have been introduced as apart of the UK
convergence programme with International Accounting Standards. These changes
affecting the Company relate to FRS 26 Financial Instruments: Measurement and
FRS 21 Events after the Balance Sheet Date. A reconciliation of these changes is
set out in Notes 7 and 8 below.
Where presentational guidance set out in the Statement of Recommended Practice
("SORP"), revised December 2005, for investment trusts issued by the Association
of Investment Trust ("AITC") in January 2003 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.
In order to better reflect the activities of a VCT and in accordance with the
SORP, 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 AA Income and Corporation Taxes Act 1988.
2. There were 32,353,238 ordinary shares in issue at 31 December 2005 (31
December 2004: 32,770,348). During the year the Company issued 334,850 ordinary
shares raising net proceeds of #333,000 and bought back for cancellation 751,960
ordinary shares at a cost of #702,000.
3. Revenue and capital returns for the year to 31 December 2005 are based
on a weighted average of 32,659,774 (2004: 29,552,544) ordinary shares in issue
during the year.
4. Income for the year to 31 December (2004: 13 months to 31 December) is
derived from:
2005 2004
#'000 #'000
Dividend Income 147 122
Fixed interest investment 1,162 1,231
Deposit interest 60 139
1,369 1,492
5. The final proposed dividend of 2.50 pence per ordinary share will
be paid on 13 March 2006, subject to shareholder approval, to eligible
shareholders on the register on 10 February 2006.
6. These are not full accounts in terms of Section 240 of the Companies
Act 1985. Full audited accounts for the 13 month period to 31 December 2004
have been lodged with the Registrar of Companies. The annual report for the
year to 31 December 2005 will be sent to shareholders shortly and will then be
available for inspection at Exchange House, Primrose Street, London, the
registered office of the Company. Both the audited accounts for the year to 31
December 2005 and period to 31 December 2004 contain unqualified audit reports.
7. (a) Restatement of balances as at and for the period ended 31 December
2004
There have been a number of changes to financial reporting standards that have
come into effect from 1 January 2005. The principal ones affecting the Company
are the requirement to value quoted investments at fair value and only reflect
dividends to shareholders when paid.
Investments are designated as held at fair value under revised UK GAAP and are
carried at bid prices which total their fair value of #28,894,000. Previously
under UK GAAP, they were carried at mid prices. The aggregate differences, being
a revaluation downwards of #279,000 also decreases Revaluation reserve.
No provision has been made for the second interim and final dividend on the
ordinary shares for the period ended 31 December 2004 of #754,000. Under revised
UK GAAP, dividend are not recognised until paid.
(b) Reconciliation of the Profit and Loss Account to the Income Statement for
the period ended 31 December 2004
Under revised UK GAAP the Income Statement is the equivalent of the Profit and
Loss Account reported previously.
2004
Notes #'000
Total transfer from reserves per the Profit and Loss Account (as
previously reported) (544)
Add unrealised gains on revaluation of investments 1 2,404
Add back dividends paid and proposed 2 1,053
Investments held at fair value changed from mid to bid basis at 31
December 2003 3 135
Investments held at fair value changed from mid to bid basis at 31
December 2004 3 (279)
Net profit per the Income Statement 2,769
1) Unrealised gains on revaluation of investments are reflected in the Income
Statement under revised UK GAAP.
2) Ordinary dividend declared and paid during the period are dealt with through
Movements in Shareholders' Funds.
3) The portfolio valuations at 30 November 2003 and 31 December 2004 are
required to be valued at fair value under revised UK GAAP. These differ from the
previous valuations by #135,000 and #279,999 respectively.
8. (a) Restatement of opening balances as at 30 November 2003
Investments are designated as held at fair value under revised UK GAAP and are
carried at bid prices which total their fair value of #18,039,000. Previously
under UK GAAP, they were carried at mid prices. The aggregate differences, being
a revaluation downwards of #135,000 also decreases Revaluation reserve.
No provision has been made for the final dividend on the ordinary shares for the
year ended 30 November 2003 of #277,000. Under revised UK GAAP, dividends are
not recognised until paid.
9. The Annual General Meeting will be held on 9 March 2006 at 10:30 am.
This information is provided by RNS
The company news service from the London Stock Exchange
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