TIDMBNS
RNS Number : 4028M
Baronsmead VCT 4 PLC
28 January 2009
Baronsmead VCT 4 plc
Annual Financial Report Announcement
28 January 2009
Investment Objective
To achieve long-term capital growth and generate tax-free dividends for private
investors.
Audited Annual Financial Report Announcement - Year ended 31 December 2008
Baronsmead VCT 4 plc
FINANCIAL HEADLINES
- 17.3% Net Asset Value (NAV) per ordinary share decreased to 97.68p before
deduction of dividends. After dividends per ordinary share of 7.0p, the NAV was
90.68p. The FTSE All-Share Index fell 32.78% over the same period.
-0.8% NAV per C share decreased to 97.56p before deduction of dividends. After
dividends totalling 3.5p in the year, the NAV was 94.06p
127p NAV total return for ordinary shares since launch in December 2001 per 100p
invested
108p NAV total return for C shares since first allotment in March 2006 per 100p
invested
Both these NAV total returns are stated before any form of VCT tax relief for
qualifying shareholders.
8.3% Dividend yield, tax-free to qualifying ordinary shareholders (gross
equivalent yield for a higher rate taxpayer is 12.3 per cent) based on 7p
dividends paid divided by the mid ordinary share price of 84p at the year end.
CHAIRMAN'S STATEMENT - for the year ended 31 December 2008
The impact of the credit crunch has had severe implications, initially for
equity and property asset values, subsequently for consumer spending and now the
UK economy as a whole is officially in recession. The resulting fall in Net
Asset Value per ordinary share for Baronsmead VCT 4 during the period is less
than for most UK Stock Exchange Indices while the NAV per C share has remained
firm.
Despite a good level of new investment in the first half of the year under
review, the Company retains a high enough level of cash both to take advantage
of future investment opportunities as they arise and to support the existing
portfolio if needed.
INVESTMENT PERFORMANCE
Results to 31 December 2008 | In the year to 31 December 2008, the Net Asset
Value (NAV) per ordinary share decreased by 17.3 per cent from 118.06p to 97.68p
before deduction of dividends. Two interim dividends were paid in September (3p)
and December 2008 (4p) per ordinary share, mainly out of realised capital
profits.
The C share capital was converted into ordinary shares on 28 January 2009 at a
NAV of 94.06p which resulted in 10,372 new ordinary shares being issued for
every 10,000 C shares held. Two interim dividends were paid in September (1.5p)
and December 2008 (2p) per C share. Since their launch in March 2006, the NAV
total return for the C shares to 31 December 2008 was 8 per cent. These returns
are free of tax for qualifying shareholders.
Over the same period the FTSE All-Share index fell by 32.78% while the FTSE
indices for UK smaller companies fell further.
The difference between the proportional fall in the ordinary and C shares is due
partly to the latter having a higher proportion of assets held in cash. Cash
represented 68% of the C share portfolio at 31 December 2007 falling to 31% by
the year end. The ordinary share portfolio also contained a number of unquoted
investments held for several years which declined in value both due to more
level trading and applying lower earnings multiples. The revaluation of
investments in both Scriptswitch and Carnell in the C share pool also had a
proportionally more significant positive impact than for the ordinary shares.
The six VCT tests relating to the management of Baronsmead VCT 4 were met
throughout the year. At the period end 75% of the ordinary share capital raised
prior to 31 December 2006 was invested in qualifying investments, which is well
above the 70% minimum level.
The values of the unquoted investments have held up relatively well despite the
market turmoil. Much management effort is focussed on coping with the difficult
economic environment in 2009. However, along with the exceptional falls in
quoted markets during the second half of 2008, the value of our AiM portfolio
has decreased dramatically and this has been the main contributor to the decline
in NAV this year. The continuing relevance of the AiM element of the portfolio
and the future strategy to improve returns is discussed below in the Portfolio
section of this statement.
Longer term performance | Dividends paid to founder shareholders now total 31p
per ordinary share. The average annual dividend throughout the seven year period
is 4.4p per ordinary share since December 2001. C share subscribers will have
received 8.5p of dividends and up to 40p income tax relief for every GBP1
subscribed (provided these shares are retained for more than three years).
The table on page 2 of the Annual report and accounts shows the total returns
generated over 1, 3 and 5 years since launch compared against the FTSE All-Share
Total Return index. The share price total return of Baronsmead VCT 4 is the
direct comparator which has performed better than this FTSE index over each of
these periods.
These total returns are stated before the inclusion of VCT tax reliefs, which
are designed to redress the VCT constraints and the requirement to invest in a
limited range of smaller companies, which for reasons of size can be higher
risk. At a time of lower and indeed negative investment returns, the
proportional benefits from these reliefs are greater. Quantification of the
scale of these gains depends on the individual circumstances of each shareholder
but the table at the bottom of page 2 of the Annual report and accounts
indicates the range of yields achievable for the original subscribers and those
in 2006.
The initial income tax reliefs have also varied between 20%, 40% and 30% over
the years and so any adjusted performance measure including this relief will
vary depending on the date of subscription. There is the additional benefit of
receiving dividends tax free, which has been worth the equivalent of a further
14.9p per share for a higher rate founder shareholder.
ANALYSIS OF THE PORTFOLIO
Portfolio valuations | Investments are valued at fair value, which for quoted
securities is either bid price or the last traded price, depending on the
convention of the exchange on which the investment is quoted. Unquoted
investments are fair valued by the Directors in accordance with the
International Private Equity and Venture Capital Valuation Guidelines developed
by the British Venture Capital Association (BVCA) in conjunction with the
European Venture Capital Association (EVCA) and the Association Francaise des
Investisseuses en Capital (AFIC).
Despite the fall in the ratings of smaller quoted companies, the 19 unquoted
portfolio investments have declined in value by only 3% in aggregate due to
improving profitability across much of the portfolio.
The AiM market has suffered a severe drop in value. At the year end, the
portfolio of 49 AiM investees had fallen in value by 50% and 39% for the
ordinary and C share portions respectively over the 12 month period. The FTSE
AiM All Share Index has fallen by 62% over the same period.
Baronsmead VCT 4 was launched as a generalist VCT with the unquoted investments
complemented by AiM-traded stocks to provide a more diversified element to the
portfolio. The AiM investments have performed well in the past and the Manager
believes that the current lower valuations reflect the poor liquidity currently
experienced on AiM as well as the difficult economic outlook affecting most UK
companies.
The strategy relating to AiM investments has been refined to incorporate more of
the private equity investment process. In particular, we are focussing on taking
more influential stakes in a smaller number of investments where a likely exit
strategy can be envisaged, while looking to sell the long tail of older
investments as and when the constraints of the VCT legislation allow. As
explained further in the Manager's report the AiM team utilise the knowledge and
skills of the wider private equity team to provide input to the selection of new
investments and during their ongoing development. It is expected that these
refinements to the investment strategy for AiM investments together with the
current lower valuations will have a positive impact on returns over the coming
years.
Realisations and New Investments | The private equity disciplines developed by
ISIS in recent years have generated a series of successful exits for unquoted
investments taking advantage of the timing of the investment cycle. The oldest
unquoted investment is now one that was made in 2004. Total sale and income
proceeds of unquoted investments realised GBP3.6m during the year.
A number of AiM investments were sold resulting in overall proceeds representing
some 56% of their GBP0.7m aggregate cost. These included further top slicing of
the shares held in Begbies Traynor, the insolvency specialists as well as the
sale of some less successful investments. Write offs from three AiM-traded
investments totalled GBP0.9m. New investment totalled GBP8.0m across eight
unquoted companies and GBP2.75m in 13 AiM-traded companies. Details are set out
in the Manager's Report below.
Asset allocation | At the year end, the percentage of unquoted investments
comprised 57% of the combined NAVs. The percentage of private equity investments
held in the portfolio is expected to continue to increase gradually as
realisation opportunities at premium prices are likely to be lower in the near
term. With this higher level of retention, the Manager will be able to manage
more actively the AiM portfolio as opportunities arise.
We continue to have a large pool of GBP12m capital resources most of which was
raised prior to April 2006 so can be invested in larger qualifying companies
with gross assets up to GBP15m pre investment.
SHAREHOLDER ISSUES
Risk Management | The Board manages the risks associated with the Company in
accordance with the framework established within the Combined Code for all fully
listed public companies. Through quarterly Board meetings all key performance
indicators are reviewed, as well as wider topics which are spread annually
across these meetings. In the current difficult conditions we have paid
particular attention to the security of the uninvested funds, which have been
moved into Government securities, and to the diverse challenges facing the
portfolio companies. The Manager's experience in navigating through a downturn
is of substantial value to our unquoted companies but the Manager has less
influence over our AiM investments.
VAT reclaim | It was announced in March 2008 that VAT is no longer to be charged
on management fees from 1 October 2008. Subsequently HMRC announced that VAT
paid from a number of previous years could also be reclaimed. Where VAT
recoverable can be quantified with a degree of certainty, the reclaim can be
recognised in the financial statements. At 31 December 2008, GBP947,000 was
accrued representing VAT reclaimed by ISIS and a further claim by F&C (the
former parent company of the Manager). The ordinary and C shares have benefited
by some 2.6p and 0.7p per share respectively.
Future running costs are also reduced by around 0.4% p.a. based on VAT no longer
being applicable.
Shareholder liquidity | An important risk that the Board monitors relates to
those few shareholders who have wished to realise their shareholding, normally
achieved by share buy backs. The policy of buying back shares from the market
makers at an approximate price of 10% less than NAV per share was established at
launch so that shareholders have been able to sell on this basis since then. The
main market maker, Landsbanki, ceased trading in October but Teathers were
appointed two months later who restored the previously adopted discount level.
During the year, 1m shares were bought back by the company and separately
another 0.46m ordinary shares were acquired in the secondary market to satisfy
the Dividend Reinvestment Plan (DRIP). Shares acquired through the DRIP are
bought at the prevailing market prices at the time dividends are paid. In
September and December 2008 DRIP shares were bought at an average discount to
NAV of 9.5%.
Fund Raising | As reported at the interim stage, the top up offers in February
2008 resulted in applications from 187 existing shareholders totaling GBP1.57
million with GBP0.69 million and GBP0.88 million raised from Ordinary and C
shareholders respectively.
A top up offer to raise up to the Sterling equivalent of 2.5 million euros will
be sent to shareholders in February 2009 to coincide with the publication of the
Annual Report.
ANNUAL GENERAL MEETING
We have approximately 2,700 shareholders and our task as a Board is to ensure
that we meet and understand your requirements. I look forward to welcoming as
many shareholders as possible to the seventh AGM on 26 March 2009 at 11 a.m.
followed by an investee presentation, a buffet lunch and a shareholder workshop
finishing by 2.00 p.m.
OUTLOOK
The UK economy is officially in recession and this will pose challenges for all
our portfolio companies. This is also likely to reduce the level of realisations
in the near term. Most of our portfolio companies have a relatively low level
of bank debt leverage, which should provide some protection from financing
pressures faced by many companies.
The Manager is taking an active role working with our unquoted portfolio
companies to help them through these conditions. The strategy with respect to
AiM investments is evolving so that larger, more influential investments can be
made in companies where a clear exit strategy can be envisaged, thereby
utilising much of the private equity skill and experience of the Manager.
Our priority for our portfolio companies is therefore to help them face any
recessionary pressures in a measured way and be strong enough not to be diverted
from longer term growth. The Manager will remain focussed on these investment
fundamentals.
Baronsmead VCT 4 has a strong balance sheet. We therefore have the capacity both
to protect the existing portfolio and to take advantage of potentially
significant investment opportunities at lower prices than in recent years.
Philip Dunne,
Chairman
28 January 2009
MANAGER'S REPORT
Following a high level of investment in the first half of 2008, the priority now
is to work closely with portfolio companies to ensure their stability and that
they can then thrive once we move out of the current economic downturn. The
unquoted portfolio is showing good resilience currently although the valuation
of AiM investees has been adversely affected in line with market falls. This
allows the dedicated origination team at ISIS to seek out new attractive
investment opportunities and invest the cash resources available for this
purpose.
PORTFOLIO REVIEW
The total portfolio comprised 68 investee companies at the year end. There were
15 new investments and six full exits plus three write offs. Including further
rounds of capital raising, GBP10.7m was invested, split GBP7.95m into eight
unquoted investments and GBP2.75m into 13 AiM-traded investments. Sale proceeds
from all realisations totalled GBP4.0m. All new investment and the exits are
scheduled on page 9 of the Annual report and accounts.
Interest bearing securities and cash amounted to GBP23m at the start of the year
and by 31 December 2008 totalled GBP12m. During October 2008 the holdings in
money market OEICS were switched into Gilts and Treasury Bills leaving cash
deposits of over GBP2m for immediate operational requirements. This structure
will be reviewed regularly and some reversion back to higher yielding OEICs will
be considered once financial markets are exhibiting more conventional behaviour.
Portfolio companies are reviewed quarterly in terms of their financial health
and there has been a fall in those companies reporting steady or better trading
progress from 83% to 73% at the year end. In addition, financial gearing is
measured regularly both as a ratio of debt to current enterprise value as well
as the debt divided by operating profits. The ratios for the unquoted portfolio
are currently at reasonably prudent levels both historically and against
industry standards.
Over the last few years, we have endeavoured to build a portfolio that can
perform relatively well even in challenging circumstances. There has been a
focus on investing in more robust business models and away from more cyclical
sectors where growth strategies are less dependent on overall economic growth. A
good example of this is Scriptswitch where the demand driver for its unique
prescribing software is reducing cost within Primary Care Trusts' drug budgets.
This and three other case studies of unquoted companies across a number of
different market sectors within the portfolio are set out on pages 12 and 13 of
the Annual report and accounts.
A proportion of the unquoted portfolio has been affected by the economic
downturn and this has been reflected in the unquoted valuations. A full
provision and partial provision have been made in Green Issues and TVC
respectively where, in each case their main customers reduced demand. We are
active in challenging and supporting the management of all investees, especially
where there is any degree of underperformance.
During early 2008 the climate still allowed good assets to be sold at attractive
valuations. SLR and Hawksmere were sold at 6.0 times and 2.5 times original
cost. However the sale of the business within The Art Group recouped only 15% of
cost. This company had struggled with declining profitability in recent years
and then a sharp drop off in demand in the first half of 2008 proved impossible
to reverse.
The severe AiM market de-rating has adversely affected the NAV performance over
the last year which has also seen price/earnings multiples more than halved for
both the AiM All Share and the FTSE Small Cap indices (source: Blue Oar
Securities). This de-rating was partially offset by earnings growth within the
majority of portfolio companies although there was an impact with a number of
portfolio companies issuing negative trading statements in the final quarter.
THE ROLE OF THE MANAGER IN A DOWN TURN
Trading conditions for companies during an economic recession are more volatile
making forecasts difficult to believe. These greater uncertainties can be
translated into new investment opportunities. Whilst bank finance is scarce your
Company has adequate cash resources and is therefore relatively well placed to
take advantage of opportunities that arise.
As an example of the Manager's involvement with unquoted portfolio companies the
appointment of an external chairman and one or more non-executive directors
typically instils good standards of governance and key decision-making. This is
normally reinforced by the alignment between all the shareholders including the
executive directors who are incentivised to grow the business prior to exit.
Active portfolio management | The Manager constantly strives to achieve greater
consistency through all stages of the investment process. The present focus is
on financial control and managing the relationship with the company's bankers.
Regular monthly meetings enable a constant challenge and refinement of the value
strategy, development of the executive team and formulation of an exit strategy
to deliver the investment return.
AiM investing | The intent is to apply private equity disciplines when possible
in AiM investees. These inputs range from use of sector knowledge, prior contact
before float as an unquoted company, board appointment introductions and
experience of exits for similar unquoted companies. 57% of the value of the
listed and AiM traded portion of the portfolio is within 10 stocks and this will
be where the focus will be while the tail of investments is slowly reduced as
market conditions allow.
Getting ready for the upswing | The Manager has an experienced Private Equity
team a number of whom lived through the last significant recession in the early
1990s. Currently asset prices are on the decline, accelerated by lack of credit
and corporate distress. These circumstances will create attractive opportunities
in the future, both for well managed portfolio companies to take advantage of
weaker competitors and for new investments at lower entry prices.
The investment strategy is also driven by the considerable sector knowledge that
has been built up over the years and understanding what industry factors are the
key growth drivers within specific sub-sectors. This has been supported by a
programme of proactively contacting interesting companies to build relationships
well ahead of a transaction being triggered. This historic knowledge of targets
reduces the investment risk when an opportunity eventually arises. For example,
the investment team knew the management of Playforce for two years prior to the
investment completing in January 2008.
In January 2009 the Manager added Energy and Environmental as an additional
sector as the volume of investment opportunities in this area has grown.
OUTLOOK
It will take some time for the turbulence in financial markets to settle down
but our role will be to stick to our investment principles during the current
period of uncertainty whether seeking to protect the existing portfolio or
investing afresh. We are confident that new opportunities will arise that
exhibit sound economic reasons behind the anticipated growth and at keener
pricing than for some time.
ISIS EP LLP,
Investment Manager
28 January 2008
New Investments
+-----------------+------------------+------------+---------------------+--+-------------+
| AiM-traded investments | | | |
+-------------------------------------------------+---------------------+--+-------------+
| Company | Location | Sector | Activity | Investment |
| | | | |Cost (GBP'000) |
+-----------------+------------------+------------+---------------------+----------------+
| Advanced | London | IT | Healthcare IT | | 525 |
| Computer | | | business | | |
| Software | | | | | |
+-----------------+------------------+------------+---------------------+--+-------------+
| Brulines* | Stockton-On-Tees | Business | Pub management | | 299 |
| | | Services | systems | | |
+-----------------+------------------+------------+---------------------+--+-------------+
| Character Group | New Malden | Media | Toy design and | | 144 |
| | | | distribution | | |
+-----------------+------------------+------------+---------------------+--+-------------+
| Electric Word | London | Media | B2B publishing | | 17 |
+-----------------+------------------+------------+---------------------+--+-------------+
| Essentially | Jersey | Media | Sports marketing | | 240 |
| Group* | | | | | |
+-----------------+------------------+------------+---------------------+--+-------------+
| Ffastfill* | London | IT | Trading platform | | 206 |
| | | | software provider | | |
+-----------------+------------------+------------+---------------------+--+-------------+
| Independent | London | IT | Digital media | | 15 |
| Media | | | distribution | | |
| Distribution | | | | | |
+-----------------+------------------+------------+---------------------+--+-------------+
| IS Pharma | Chester | Healthcare | Specialist | | 246 |
| | | | pharmaceuticals | | |
+-----------------+------------------+------------+---------------------+--+-------------+
| Praesepe | London | Consumer | Gaming | | 525 |
+-----------------+------------------+------------+---------------------+--+-------------+
| Relax Group | Chesterfield | Consumer | Debt management | | 262 |
| | | | group | | |
+-----------------+------------------+------------+---------------------+--+-------------+
| Silverdell | Barking | Business | Asbestos | | 14 |
| | | Services | specialists | | |
+-----------------+------------------+------------+---------------------+--+-------------+
| STM | Gibraltar | Business | Off shore Trust | | 140 |
| | | Services | administration | | |
+-----------------+------------------+------------+---------------------+--+-------------+
| Tasty* | London | Consumer | Restaurant chain | | 116 |
+-----------------+------------------+------------+---------------------+--+-------------+
| | | | | | |
+-----------------+------------------+------------+---------------------+--+-------------+
| Total AiM-traded Investments | | 2,749 |
+-----------------------------------------------------------------------+--+-------------+
| * Follow on investment | | |
+-----------------+------------------+------------+---------------------+--+-------------+
+------------------+------------+------------+--------------------+--+-------------+
| Unquoted investments | |
+-----------------------------------------------------------------+----------------+
| Company | Location | Sector | Activity | Investment |
| | | | | Cost (GBP'000) |
+------------------+------------+------------+--------------------+----------------+
| Active | Sevenoaks | Healthcare | Specialist live in | | 679 |
| Assistance | | | care | | |
+------------------+------------+------------+--------------------+--+-------------+
| Carnell | Penkridge, | Business | Highway agency | | 1,499 |
| Contractors | Staffs | Services | services | | |
+------------------+------------+------------+--------------------+--+-------------+
| CSC (World) | Pudsey | IT | 3D structural | | 1,606 |
| | | | steel software | | |
+------------------+------------+------------+--------------------+--+-------------+
| | | | | | |
+------------------+------------+------------+--------------------+--+-------------+
| Nexus | Leeds | Business | Vehicle rental | | 1,868 |
| | | Services | broker | | |
+------------------+------------+------------+--------------------+--+-------------+
| Occam * | Bath | Business | Data Services | | 35 |
| | | Services | | | |
+------------------+------------+------------+--------------------+--+-------------+
| Playforce | Wiltshire | Business | Playground | | 1,033 |
| | | Services | equipment | | |
+------------------+------------+------------+--------------------+--+-------------+
| TVC Group | London | Media | Broadcast public | | 1,233 |
| | | | relations firm | | |
+------------------+------------+------------+--------------------+--+-------------+
| Kafevend* | Crawley | Consumer | Into SME hot | | 6 |
| | | | drinks vending | | |
+------------------+------------+------------+--------------------+--+-------------+
| | | | | | |
+------------------+------------+------------+--------------------+--+-------------+
| Total Unquoted Investments | | 7,959 |
+-----------------------------------------------------------------+--+-------------+
| Total Investments | | 10,708 |
+-----------------------------------------------------------------+--+-------------+
| * Follow on investment | | |
+------------------+------------+------------+--------------------+--+-------------+
Realisations in the year to 31 December 2008
+----------------------------------+----------------+----------+-----------+----------+
| | First | Original | Total | Multiple |
| | investment | Cost | Proceeds | return* |
| | date | GBP'000 | GBP'000 | |
+----------------------------------+----------------+----------+-----------+----------+
| Unquoted Investments | | | | |
+----------------------------------+----------------+----------+-----------+----------+
| Hawksmere Group Limited | December 2003 | 453 | 1,152 | 2.54 |
+----------------------------------+----------------+----------+-----------+----------+
| SLR Group Limited | September 2004 | 371 | 2,214 | 5.97 |
+----------------------------------+----------------+----------+-----------+----------+
| The Art Group | October 2003 | 758 | 117 | 0.15 |
+----------------------------------+----------------+----------+-----------+----------+
| Scriptswitch^ | May 2007 | 84 | 104 | 1.24 |
+----------------------------------+----------------+----------+-----------+----------+
| | | | | |
+----------------------------------+----------------+----------+-----------+----------+
| Total Unquoted realisations | | 1,666 | 3,587 | |
+----------------------------------+----------------+----------+-----------+----------+
| | | | | |
+----------------------------------+----------------+----------+-----------+----------+
| AiM-traded investments | | | | |
+----------------------------------+----------------+----------+-----------+----------+
| Begbies Traynor Group plc | September 2004 | 49 | 204 | 4.20 |
+----------------------------------+----------------+----------+-----------+----------+
| Cantono plc | April 2005 | 375 | 19 | 0.05 |
+----------------------------------+----------------+----------+-----------+----------+
| Universe Group plc | May 2003 | 94 | 22 | 0.23 |
+----------------------------------+----------------+----------+-----------+----------+
| Xpertise Group plc | November 2002 | 207 | 158 | 0.76 |
+----------------------------------+----------------+----------+-----------+----------+
| Appian Technology plc | January 2006 | 302 | - | - |
+----------------------------------+----------------+----------+-----------+----------+
| Business Direct Group plc | August 2004 | 416 | - | - |
+----------------------------------+----------------+----------+-----------+----------+
| Loanmakers (Holdings) plc | June 2005 | 164 | - | - |
+----------------------------------+----------------+----------+-----------+----------+
| Total AiM-traded realisations | | 1,607 | 403 | |
+----------------------------------+----------------+----------+-----------+----------+
| Total realisations | | 3,273 | 3,990 | |
+----------------------------------+----------------+----------+-----------+----------+
* Includes interest received and some earlier loan redemptions
^ In addition
C shareholders received total proceeds of GBP419,000 on an original cost of
GBP338,000
In addition deferred proceeds were received of GBP45,000 Boldon James and
GBP61,000 RLA Media
The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority
require certain disclosures in relation to the annual financial report, as
follows:
Principal risks, risk management and regulatory environment
The Board believes that the principal risks faced by the Company are:
- Economic risk - events such as an economic recession and movement in
interest rates could affect smaller companies valuations.
- Loss of approval as a Venture Capital Trust - the Company must comply with
Section 274 of the Income Tax Act 2007 which allows it to be exempted from
capital gains tax on investment gains. Any breach of these rules may lead to the
Company losing its approval as a VCT, qualifying shareholders who have not held
their shares for the designated holding period having to repay the income tax
relief they obtained and future dividends paid by the Company becoming subject
to tax. The Company would also lose its exemption from corporation tax on
capital gains.
- Investment and strategic - inappropriate strategy, poor asset allocation or
consistent weak stock selection might lead to under performance and poor returns
to shareholders.
- Regulatory - the Company is required to comply with the Companies Act, the
rules of the UK Listing Authority and United Kingdom Accounting Standards.
Breach of any of these might lead to suspension of the Company's Stock Exchange
listing, financial penalties or a qualified audit report.
- Reputational - inadequate or failed controls might result in breaches of
regulations or loss of shareholder trust.
- Operational - failure of the Manager's or administrator's accounting
systems or disruption to their businesses might lead to an inability to provide
accurate reporting and monitoring.
- Financial - inadequate controls might lead to misappropriation of assets.
Inappropriate accounting policies might lead to misreporting or breaches of
regulations.
- Market Risk - Investment in AiM-traded, PLUS-traded and unquoted companies,
by its nature, involves a higher degree of risk than investment in companies
traded on the main market. In particular, smaller companies often have limited
product lines, markets or financial resources and may be dependent for their
management on a smaller number of key individuals. In addition, the market for
stock in smaller companies is often less liquid than that for stock in larger
companies, bringing with it potential difficulties in acquiring, valuing and
disposing of such stock.
- Liquidity Risk - The Company's investments may be difficult to realise. The
fact that a share is traded on AiM does not guarantee its liquidity. The spread
between the buying and selling price of such shares may be wide and thus the
price used for valuation may not be achievable.
- Competitive Risk - Retention of key personnel is vital to the success of
the Company. Incentives to the manager's key staff were recently strengthened.
The Board seeks to mitigate the internal risks by setting policy, regular review
of performance, enforcement of contractual obligations and monitoring progress
and compliance. In the mitigation and management of these risks, the Board
applies rigorously the principles detailed in the Turnbull guidance.
Statement of Directors' Responsibilities in respect of the Annual Report and the
Financial Statements
The Directors are responsible for preparing the Annual Report and the Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law they have elected to prepare the financial
statements in accordance with UK Accounting Standards (UK GAAP).
The financial statements are required by law to 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 judgments and estimates that are reasonable and prudent;
- state whether applicable UK Accounting Standards (UK GAAP) 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 proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that its financial statements comply with the
Companies Act 1985. They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the Company and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Directors' Report (including Business Review), Directors'
Remuneration Report and Corporate Governance Statement that comply with that law
and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information included on the company's website. Visitors to the
website should be aware that legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Responsibility statement of the Directors in respect of
the annual
financial report
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
- the Directors' Report includes a fair review of the development and
performance of the business and the position of the issuer together with a
description of the principal risks and uncertainties that they face.
Audited Income Statement
For the Year ended 31 December 2008
+----------------------------------------+----------+----------+-----------+
| | Ordinary Shares |
+----------------------------------------+---------------------------------+
| | | | |
+----------------------------------------+----------+----------+-----------+
| | Revenue | Capital | Total |
+----------------------------------------+----------+----------+-----------+
| | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------------+----------+----------+-----------+
| | | | |
+----------------------------------------+----------+----------+-----------+
| Unrealised losses on investments | - | (6,996) | (6,996) |
+----------------------------------------+----------+----------+-----------+
| Realised (losses)/gains on | - | (277) | (277) |
| investments | | | |
+----------------------------------------+----------+----------+-----------+
| Income | 1,071 | - | 1,071 |
+----------------------------------------+----------+----------+-----------+
| Recoverable VAT | 165 | 641 | 806 |
+----------------------------------------+----------+----------+-----------+
| Investment management fee | (218) | (654) | (872) |
+----------------------------------------+----------+----------+-----------+
| Other expenses | (243) | - | (243) |
+----------------------------------------+----------+----------+-----------+
| | | | |
+----------------------------------------+----------+----------+-----------+
| Profit/(loss) on ordinary activities | 775 | (7,286) | (6,511) |
| before taxation | | | |
+----------------------------------------+----------+----------+-----------+
| Taxation on ordinary activities | (184) | 240 | 56 |
+----------------------------------------+----------+----------+-----------+
| | | | |
+----------------------------------------+----------+----------+-----------+
| Profit/(loss) on ordinary activities | 591 | (7,046) | (6,455) |
| after taxation | | | |
+----------------------------------------+----------+----------+-----------+
| | | | |
+----------------------------------------+----------+----------+-----------+
| Return per ordinary share: | | | |
+----------------------------------------+----------+----------+-----------+
| Basic | 1.89p | (22.58p) | (20.69p) |
+----------------------------------------+----------+----------+-----------+
+----------------------------------------+----------+---------+-----------+
| | C Shares |
+----------------------------------------+--------------------------------+
| | | | |
+----------------------------------------+----------+---------+-----------+
| | Revenue | Capital | Total |
+----------------------------------------+----------+---------+-----------+
| | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------+----------+---------+-----------+
| Unrealised losses on investments | - | (323) | (323) |
+----------------------------------------+----------+---------+-----------+
| Realised (losses)/gains on | - | 18 | 18 |
| investments | | | |
+----------------------------------------+----------+---------+-----------+
| Income | 691 | - | 691 |
+----------------------------------------+----------+---------+-----------+
| Recoverable VAT | 33 | 108 | 141 |
+----------------------------------------+----------+---------+-----------+
| Investment management fee | (112) | (335) | (447) |
+----------------------------------------+----------+---------+-----------+
| Other expenses | (184) | - | (184) |
+----------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------+----------+---------+-----------+
| Profit/(loss) on ordinary activities | 428 | (532) | (104) |
| before taxation | | | |
+----------------------------------------+----------+---------+-----------+
| Taxation on ordinary activities | (122) | 66 | (56) |
+----------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------+----------+---------+-----------+
| Profit/(loss) on ordinary activities | 306 | (466) | (160) |
| after taxation | | | |
+----------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------+----------+---------+-----------+
| Return per C share: | | | |
+----------------------------------------+----------+---------+-----------+
| Basic | 1.46p | (2.22p) | (0.76p) |
+----------------------------------------+----------+---------+-----------+
+----------------------------------------+----------+---------+-----------+
| | Total |
+----------------------------------------+--------------------------------+
| | | | |
+----------------------------------------+----------+---------+-----------+
| | Revenue | Capital | Total |
+----------------------------------------+----------+---------+-----------+
| | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------+----------+---------+-----------+
| Unrealised losses on investments | - | (7,319) | (7,319) |
+----------------------------------------+----------+---------+-----------+
| Realised (losses)/gains on | - | (259) | (259) |
| investments | | | |
+----------------------------------------+----------+---------+-----------+
| Income | 1,762 | - | 1,762 |
+----------------------------------------+----------+---------+-----------+
| Recoverable VAT | 198 | 749 | 947 |
+----------------------------------------+----------+---------+-----------+
| Investment management fee | (330) | (989) | (1,319) |
+----------------------------------------+----------+---------+-----------+
| Other expenses | (427) | - | (427) |
+----------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------+----------+---------+-----------+
| Profit/(loss) on ordinary activities | 1,203 | (7,818) | (6,615) |
| before taxation | | | |
+----------------------------------------+----------+---------+-----------+
| Taxation on ordinary activities | (306) | 306 | - |
+----------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------+----------+---------+-----------+
| Profit/(loss) on ordinary activities | 897 | (7,512) | (6,615) |
| after taxation | | | |
+----------------------------------------+----------+---------+-----------+
| | | | |
+----------------------------------------+----------+---------+-----------+
The 'Total' column of this statement is the profit and loss account of the
Company.
All revenue and capital items in this statement derive from continuing
operations.
No operations were acquired or discontinued in the year.
Audited Reconciliation of Movements in Shareholders' Funds
For the Year ended 31 December 2008
+----------------------------------+-----------+-----------+-----------+
| | | | |
+----------------------------------+-----------+-----------+-----------+
| | 2008 | 2008 | 2008 |
+----------------------------------+-----------+-----------+-----------+
| | Ordinary | C | |
+----------------------------------+-----------+-----------+-----------+
| | shares | shares | Total |
+----------------------------------+-----------+-----------+-----------+
| | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------+-----------+-----------+-----------+
| | | | |
+----------------------------------+-----------+-----------+-----------+
| Opening shareholders' funds | 38,186 | 20,413 | 58,599 |
+----------------------------------+-----------+-----------+-----------+
| Loss for the period | (6,455) | (160) | (6,615) |
+----------------------------------+-----------+-----------+-----------+
| Issue of shares | 676 | 850 | 1,526 |
+----------------------------------+-----------+-----------+-----------+
| Expenses of share issue | (13) | (21) | (34) |
+----------------------------------+-----------+-----------+-----------+
| Purchase of shares for | (1,001) | (1) | (1,002) |
| Treasury/cancellation | | | |
+----------------------------------+-----------+-----------+-----------+
| Dividends paid | (3,429) | (1,149) | (4,578) |
+----------------------------------+-----------+-----------+-----------+
| | | | |
+----------------------------------+-----------+-----------+-----------+
| Closing shareholders' funds | 27,964 | 19,932 | 47,896 |
+----------------------------------+-----------+-----------+-----------+
Audited Income Statement
For the Year ended 31 December 2007
+-----------------------------------+------------+---------+---------+
| | Ordinary Shares |
+-----------------------------------+--------------------------------+
| | | | |
+-----------------------------------+------------+---------+---------+
| | Revenue | Capital | Total |
+-----------------------------------+------------+---------+---------+
| | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------------+------------+---------+---------+
| | | | |
+-----------------------------------+------------+---------+---------+
| Unrealised gains on investments | - | 1,134 | 1,134 |
+-----------------------------------+------------+---------+---------+
| Realised gains on investments | - | 273 | 273 |
+-----------------------------------+------------+---------+---------+
| Income | 1,535 | - | 1,535 |
+-----------------------------------+------------+---------+---------+
| Investment management fee | (290) | (871) | (1,161) |
+-----------------------------------+------------+---------+---------+
| Other expenses | (265) | - | (265) |
+-----------------------------------+------------+---------+---------+
| | | | |
+-----------------------------------+------------+---------+---------+
| Profit on ordinary activities | 980 | 536 | 1,516 |
| before taxation | | | |
+-----------------------------------+------------+---------+---------+
| Taxation on ordinary activities | (218) | 249 | 31 |
+-----------------------------------+------------+---------+---------+
| | | | |
+-----------------------------------+------------+---------+---------+
| Profit on ordinary activities | 762 | 785 | 1,547 |
| after taxation | | | |
+-----------------------------------+------------+---------+---------+
| | | | |
+-----------------------------------+------------+---------+---------+
| Return per ordinary share: | | | |
+-----------------------------------+------------+---------+---------+
| Basic | 2.41p | 2.49p | 4.90p |
+-----------------------------------+------------+---------+---------+
+-----------------------------------+------------+---------+---------+
| | C Shares |
+-----------------------------------+--------------------------------+
| | | | |
+-----------------------------------+------------+---------+---------+
| | Revenue | Capital | Total |
+-----------------------------------+------------+---------+---------+
| | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------------+------------+---------+---------+
| | | | |
+-----------------------------------+------------+---------+---------+
| Unrealised gains on investments | - | 717 | 717 |
+-----------------------------------+------------+---------+---------+
| Realised gains on investments | - | 178 | 178 |
+-----------------------------------+------------+---------+---------+
| Income | 876 | - | 876 |
+-----------------------------------+------------+---------+---------+
| Investment management fee | (117) | (352) | (469) |
+-----------------------------------+------------+---------+---------+
| Other expenses | (140) | - | (140) |
+-----------------------------------+------------+---------+---------+
| | | | |
+-----------------------------------+------------+---------+---------+
| Profit on ordinary activities | 619 | 543 | 1,162 |
| before taxation | | | |
+-----------------------------------+------------+---------+---------+
| Taxation on ordinary activities | (182) | 151 | (31) |
+-----------------------------------+------------+---------+---------+
| | | | |
+-----------------------------------+------------+---------+---------+
| Profit on ordinary activities | 437 | 694 | 1,131 |
| after taxation | | | |
+-----------------------------------+------------+---------+---------+
| | | | |
+-----------------------------------+------------+---------+---------+
| Return per C share: | | | |
+-----------------------------------+------------+---------+---------+
| Basic | 2.17p | 3.44p | 5.61p |
+-----------------------------------+------------+---------+---------+
+-----------------------------------+-----------+---------+---------+
| | Total |
+-----------------------------------+-------------------------------+
| | | | |
+-----------------------------------+-----------+---------+---------+
| | Revenue | Capital | Total |
+-----------------------------------+-----------+---------+---------+
| | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------------+-----------+---------+---------+
| | | | |
+-----------------------------------+-----------+---------+---------+
| Unrealised gains on investments | - | 1,851 | 1,851 |
+-----------------------------------+-----------+---------+---------+
| Realised gains on investments | - | 451 | 451 |
+-----------------------------------+-----------+---------+---------+
| Income | 2,411 | - | 2,411 |
+-----------------------------------+-----------+---------+---------+
| Investment management fee | (407) | (1,223) | (1,630) |
+-----------------------------------+-----------+---------+---------+
| Other expenses | (405) | - | (405) |
+-----------------------------------+-----------+---------+---------+
| | | | |
+-----------------------------------+-----------+---------+---------+
| Profit on ordinary activities | 1,599 | 1,079 | 2,678 |
| before taxation | | | |
+-----------------------------------+-----------+---------+---------+
| Taxation on ordinary activities | (400) | 400 | - |
+-----------------------------------+-----------+---------+---------+
| | | | |
+-----------------------------------+-----------+---------+---------+
| Profit on ordinary activities | 1,199 | 1,479 | 2,678 |
| after taxation | | | |
+-----------------------------------+-----------+---------+---------+
| | | | |
+-----------------------------------+-----------+---------+---------+
The 'Total' column of this statement is the profit and loss account of the
Company.
All revenue and capital items in this statement derive from continuing
operations.
No operations were acquired or discontinued in the year.
Audited Reconciliation of Movements in Shareholders' Funds
For the Year ended 31 December 2007
+--------------------------+----------+-----------+-----------+
| | | | |
+--------------------------+----------+-----------+-----------+
| | Ordinary | C | |
+--------------------------+----------+-----------+-----------+
| | shares | shares | Total |
+--------------------------+----------+-----------+-----------+
| | GBP'000 | GBP'000 | GBP'000 |
+--------------------------+----------+-----------+-----------+
| | | | |
+--------------------------+----------+-----------+-----------+
| Opening shareholders' | 39,361 | 19,421 | 58,782 |
| funds | | | |
+--------------------------+----------+-----------+-----------+
| Profit for the year | 1,547 | 1,131 | 2,678 |
+--------------------------+----------+-----------+-----------+
| Increase in share | 708 | 550 | 1,258 |
| capital | | | |
+--------------------------+----------+-----------+-----------+
| Purchase of shares | (1,381) | (189) | (1,570) |
+--------------------------+----------+-----------+-----------+
| Dividends paid | (2,049) | (500) | (2,549) |
+--------------------------+----------+-----------+-----------+
| | | | |
+--------------------------+----------+-----------+-----------+
| Closing shareholders' | 38,186 | 20,413 | 58,599 |
| funds | | | |
+--------------------------+----------+-----------+-----------+
Audited Balance Sheet
As at 31 December 2008
+-------------------------------------------+------------+------------+-----------+
| | 2008 |
+-------------------------------------------+-------------------------------------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| | Ordinary | | |
+-------------------------------------------+------------+------------+-----------+
| | Shares | C Shares | Total |
+-------------------------------------------+------------+------------+-----------+
| | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------------------+------------+------------+-----------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| Fixed assets | | | |
+-------------------------------------------+------------+------------+-----------+
| Investments | 25,739 | 18,638 | 44,377 |
+-------------------------------------------+------------+------------+-----------+
| Current assets | | | |
+-------------------------------------------+------------+------------+-----------+
| Debtors | 1,121 | 572 | 1,693 |
+-------------------------------------------+------------+------------+-----------+
| Cash at bank and on deposit | 1,368 | 984 | 2,352 |
+-------------------------------------------+------------+------------+-----------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| | 2,489 | 1,556 | 4,045 |
+-------------------------------------------+------------+------------+-----------+
| Creditors (amounts falling due within | (264) | (241) | (505) |
| one year) | | | |
+-------------------------------------------+------------+------------+-----------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| Net current assets | 2,225 | 1,315 | 3,540 |
+-------------------------------------------+------------+------------+-----------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| Total assets less current liabilities | 27,964 | 19,953 | 47,917 |
+-------------------------------------------+------------+------------+-----------+
| Creditors (amounts falling due after one | - | (21) | (21) |
| year) | | | |
+-------------------------------------------+------------+------------+-----------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| Net assets | 27,964 | 19,932 | 47,896 |
+-------------------------------------------+------------+------------+-----------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| Capital and reserves | | | |
+-------------------------------------------+------------+------------+-----------+
| Called-up share capital | 3,328 | 10,595 | 13,923 |
+-------------------------------------------+------------+------------+-----------+
| Share premium account | 13,151 | 675 | 13,826 |
+-------------------------------------------+------------+------------+-----------+
| Capital redemption reserve | 116 | 108 | 224 |
+-------------------------------------------+------------+------------+-----------+
| Revaluation reserve | (400) | 531 | 131 |
+-------------------------------------------+------------+------------+-----------+
| Profit and loss account | 11,769 | 8,023 | 19,792 |
+-------------------------------------------+------------+------------+-----------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| Equity shareholders' funds | 27,964 | 19,932 | 47,896 |
+-------------------------------------------+------------+------------+-----------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| Net asset value per share | | | |
+-------------------------------------------+------------+------------+-----------+
| Number of Shares (excluding those held | 30,837,886 | 21,191,442 | - |
| in treasury) | | | |
+-------------------------------------------+------------+------------+-----------+
| - Basic | 90.68p | 94.06p | - |
+-------------------------------------------+------------+------------+-----------+
| Number of Shares (including those held | 33,279,339 | 21,191,442 | - |
| in treasury) | | | |
+-------------------------------------------+------------+------------+-----------+
| - Treasury | 90.19p | 94.06p | - |
+-------------------------------------------+------------+------------+-----------+
+-------------------------------------------+------------+------------+-----------+
| | 2007 |
+-------------------------------------------+-------------------------------------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| | Ordinary | | |
+-------------------------------------------+------------+------------+-----------+
| | Shares | C Shares | Total |
+-------------------------------------------+------------+------------+-----------+
| | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------------------+------------+------------+-----------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| Fixed assets | | | |
+-------------------------------------------+------------+------------+-----------+
| Investments | 33,670 | 18,503 | 52,173 |
+-------------------------------------------+------------+------------+-----------+
| Current assets | | | |
+-------------------------------------------+------------+------------+-----------+
| Debtors | 680 | 304 | 984 |
+-------------------------------------------+------------+------------+-----------+
| Cash at bank and on deposit | 4,561 | 2,127 | 6,688 |
+-------------------------------------------+------------+------------+-----------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| | 5,241 | 2,431 | 7,672 |
+-------------------------------------------+------------+------------+-----------+
| Creditors (amounts falling due within | (725) | (521) | (1,246) |
| one year) | | | |
+-------------------------------------------+------------+------------+-----------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| Net current assets | 4,516 | 1,910 | 6,426 |
+-------------------------------------------+------------+------------+-----------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| Total assets less current liabilities | - | - | - |
+-------------------------------------------+------------+------------+-----------+
| Creditors (amounts falling due after one | - | - | - |
| year) | | | |
+-------------------------------------------+------------+------------+-----------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| Net assets | 38,186 | 20,413 | 58,599 |
+-------------------------------------------+------------+------------+-----------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| Capital and reserves | | | |
+-------------------------------------------+------------+------------+-----------+
| Called-up share capital | 3,272 | 10,172 | 13,444 |
+-------------------------------------------+------------+------------+-----------+
| Share premium account | 12,543 | 270 | 12,813 |
+-------------------------------------------+------------+------------+-----------+
| Capital redemption reserve | 116 | 108 | 224 |
+-------------------------------------------+------------+------------+-----------+
| Revaluation reserve | 7,199 | 854 | 8,053 |
+-------------------------------------------+------------+------------+-----------+
| Profit and loss account | 15,056 | 9,009 | 24,065 |
+-------------------------------------------+------------+------------+-----------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| Equity shareholders' funds | 38,186 | 20,413 | 58,599 |
+-------------------------------------------+------------+------------+-----------+
| | | | |
+-------------------------------------------+------------+------------+-----------+
| Net asset value per share | | | |
+-------------------------------------------+------------+------------+-----------+
| Number of Shares (excluding those held | 31,285,827 | 20,344,440 | - |
| in treasury) | | | |
+-------------------------------------------+------------+------------+-----------+
| - Basic | 122.06p | 100.34p | - |
+-------------------------------------------+------------+------------+-----------+
| Number of Shares (including those held | 32,715,827 | 20,344,440 | - |
| in treasury) | | | |
+-------------------------------------------+------------+------------+-----------+
| - Treasury | 121.68p | 100.34p | - |
+-------------------------------------------+------------+------------+-----------+
Audited Cash Flow Statement
For the year ended 31 December 2008
+-----------------------------------------+----------+----------+----------+
| | 2008 |
+-----------------------------------------+--------------------------------+
| | | | |
+-----------------------------------------+----------+----------+----------+
| | Ordinary | | |
+-----------------------------------------+----------+----------+----------+
| | Shares | C Shares | Total |
+-----------------------------------------+----------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------------------+----------+----------+----------+
| | | | |
+-----------------------------------------+----------+----------+----------+
| Operating activities | | | |
+-----------------------------------------+----------+----------+----------+
| Investment income received | 1,398 | 810 | 2,208 |
+-----------------------------------------+----------+----------+----------+
| Deposit interest received | 119 | 90 | 209 |
+-----------------------------------------+----------+----------+----------+
| Investment management fees | (957) | (452) | (1,409) |
+-----------------------------------------+----------+----------+----------+
| Other cash payments | (255) | (140) | (395) |
+-----------------------------------------+----------+----------+----------+
| | | | |
+-----------------------------------------+----------+----------+----------+
| Net cash (outflow)/inflow from | | | |
+-----------------------------------------+----------+----------+----------+
| operating activities | 305 | 308 | 613 |
+-----------------------------------------+----------+----------+----------+
| | | | |
+-----------------------------------------+----------+----------+----------+
| Taxation | | | |
+-----------------------------------------+----------+----------+----------+
| Tax | 58 | (58) | - |
+-----------------------------------------+----------+----------+----------+
| Capital expenditure and financial | | | |
| investment | | | |
+-----------------------------------------+----------+----------+----------+
| Purchases of investments | (19,328) | (24,492) | (43,820) |
+-----------------------------------------+----------+----------+----------+
| Disposals of investments | 19,538 | 23,421 | 42,959 |
+-----------------------------------------+----------+----------+----------+
| | | | |
+-----------------------------------------+----------+----------+----------+
| Net cash inflow/(outflow) from capital | | | |
| expenditure | | | |
+-----------------------------------------+----------+----------+----------+
| and financial investment | 210 | (1,071) | (861) |
+-----------------------------------------+----------+----------+----------+
| | | | |
+-----------------------------------------+----------+----------+----------+
| Dividends | | | |
+-----------------------------------------+----------+----------+----------+
| Equity dividends paid | (3,429) | (1,149) | (4,578) |
+-----------------------------------------+----------+----------+----------+
| | | | |
+-----------------------------------------+----------+----------+----------+
| Net cash inflow/(outflow) before | (2,856) | (1,970) | (4,826) |
| financing | | | |
+-----------------------------------------+----------+----------+----------+
| | | | |
+-----------------------------------------+----------+----------+----------+
| Financing | | | |
+-----------------------------------------+----------+----------+----------+
| Issue of shares | 708 | 849 | 1,557 |
+-----------------------------------------+----------+----------+----------+
| Buy-back of ordinary shares | (1,001) | (1) | (1,002) |
+-----------------------------------------+----------+----------+----------+
| Expenses of issue of shares | (44) | (21) | (65) |
+-----------------------------------------+----------+----------+----------+
| | | | |
+-----------------------------------------+----------+----------+----------+
| Net cash (outflow)/inflow from | (337) | 827 | 490 |
| financing | | | |
+-----------------------------------------+----------+----------+----------+
| | | | |
+-----------------------------------------+----------+----------+----------+
| Increase/(decrease) in cash | (3,193) | (1,143) | (4,336) |
+-----------------------------------------+----------+----------+----------+
| | | | |
+-----------------------------------------+----------+----------+----------+
| Reconciliation of net cash flow to | | | |
| movement in | | | |
+-----------------------------------------+----------+----------+----------+
| net cash | | | |
+-----------------------------------------+----------+----------+----------+
| Increase/(decrease) in cash in the | (3,193) | (1,143) | (4,336) |
| year | | | |
+-----------------------------------------+----------+----------+----------+
| Opening cash position | 4,561 | 2,127 | 6,688 |
+-----------------------------------------+----------+----------+----------+
| | | | |
+-----------------------------------------+----------+----------+----------+
| Closing cash position | 1,368 | 984 | 2,352 |
+-----------------------------------------+----------+----------+----------+
| | | | |
+-----------------------------------------+----------+----------+----------+
+-----------------------------------------+----------+-----------+----------+
| | 2007 |
+-----------------------------------------+---------------------------------+
| | | | |
+-----------------------------------------+----------+-----------+----------+
| | Ordinary | | |
+-----------------------------------------+----------+-----------+----------+
| | Shares | C Shares | Total |
+-----------------------------------------+----------+-----------+----------+
| | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------------------+----------+-----------+----------+
| | | | |
+-----------------------------------------+----------+-----------+----------+
| Operating activities | | | |
+-----------------------------------------+----------+-----------+----------+
| Investment income received | 1,195 | 783 | 1,978 |
+-----------------------------------------+----------+-----------+----------+
| Deposit interest received | 86 | 71 | 157 |
+-----------------------------------------+----------+-----------+----------+
| Investment management fees | (2,273) | (530) | (2,803) |
+-----------------------------------------+----------+-----------+----------+
| Other cash payments | (261) | (141) | (402) |
+-----------------------------------------+----------+-----------+----------+
| | | | |
+-----------------------------------------+----------+-----------+----------+
| Net cash (outflow)/inflow from | | | |
+-----------------------------------------+----------+-----------+----------+
| operating activities | (1,253) | 183 | (1,070) |
+-----------------------------------------+----------+-----------+----------+
| | | | |
+-----------------------------------------+----------+-----------+----------+
| Taxation | | | |
+-----------------------------------------+----------+-----------+----------+
| Tax | - | - | - |
+-----------------------------------------+----------+-----------+----------+
| Capital expenditure and financial | | | |
| investment | | | |
+-----------------------------------------+----------+-----------+----------+
| Purchases of investments | (8,106) | (18,231) | (26,337) |
+-----------------------------------------+----------+-----------+----------+
| Disposals of investments | 13,938 | 19,094 | 33,032 |
+-----------------------------------------+----------+-----------+----------+
| | | | |
+-----------------------------------------+----------+-----------+----------+
| Net cash inflow/(outflow) from capital | | | |
| expenditure | | | |
+-----------------------------------------+----------+-----------+----------+
| and financial investment | 5,832 | 863 | 6,695 |
+-----------------------------------------+----------+-----------+----------+
| | | | |
+-----------------------------------------+----------+-----------+----------+
| Dividends | | | |
+-----------------------------------------+----------+-----------+----------+
| Equity dividends paid | (2,049) | (500) | (2,549) |
+-----------------------------------------+----------+-----------+----------+
| | | | |
+-----------------------------------------+----------+-----------+----------+
| Net cash inflow/(outflow) before | 2,530 | 546 | 3,076 |
| financing | | | |
+-----------------------------------------+----------+-----------+----------+
| | | | |
+-----------------------------------------+----------+-----------+----------+
| Financing | | | |
+-----------------------------------------+----------+-----------+----------+
| Issue of shares | 735 | 577 | 1,312 |
+-----------------------------------------+----------+-----------+----------+
| Buy-back of ordinary shares | (1,042) | - | (1,042) |
+-----------------------------------------+----------+-----------+----------+
| Expenses of issue of shares | (27) | (27) | (54) |
+-----------------------------------------+----------+-----------+----------+
| | | | |
+-----------------------------------------+----------+-----------+----------+
| Net cash (outflow)/inflow from | (334) | 550 | 216 |
| financing | | | |
+-----------------------------------------+----------+-----------+----------+
| | | | |
+-----------------------------------------+----------+-----------+----------+
| Increase/(decrease) in cash | 2,196 | 1,096 | 3,292 |
+-----------------------------------------+----------+-----------+----------+
| | | | |
+-----------------------------------------+----------+-----------+----------+
| Reconciliation of net cash flow to | | | |
| movement in | | | |
+-----------------------------------------+----------+-----------+----------+
| net cash | | | |
+-----------------------------------------+----------+-----------+----------+
| Increase/(decrease) in cash in the | 2,196 | 1,096 | 3,292 |
| year | | | |
+-----------------------------------------+----------+-----------+----------+
| Opening cash position | 2,365 | 1,031 | 3,396 |
+-----------------------------------------+----------+-----------+----------+
| | | | |
+-----------------------------------------+----------+-----------+----------+
| Closing cash position | 4,561 | 2,127 | 6,688 |
+-----------------------------------------+----------+-----------+----------+
| | | | |
+-----------------------------------------+----------+-----------+----------+
Notes
+----+-------------------------------------------------------------------------------+
| 1. | The audited results which cover the year ended 31 December 2008 have been |
| | prepared under UK Generally Accepted Accounting Practice (UK GAAP). |
| | 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. Net Revenue is the measure the Directors believe appropriate in |
| | assessing the Company's compliance with certain requirements set out in |
| | Section 274 of the Income Tax Act 2007. |
+----+-------------------------------------------------------------------------------+
+----------+--------------+
| 2. | There |
| | were |
| | 33,279,339 |
| | ordinary |
| | shares and |
| | 21,191,442 |
| | C shares |
| | listed at |
| | 31 |
| | December |
| | 2008 (31 |
| | December |
| | 2007: |
| | ordinary |
| | shares |
| | 32,715,827 |
| | and |
| | 20,344,440 |
| | C shares). |
| | During the |
| | period the |
| | Company |
| | bought |
| | back |
| | 1,011,453 |
| | ordinary |
| | shares to |
| | be held in |
| | Treasury, |
| | at a cost |
| | of |
| | GBP996,638. |
| | No C shares |
| | were |
| | repurchased |
| | during the |
| | year. These |
| | shares will |
| | not be sold |
| | at a |
| | discount |
| | wider than |
| | the |
| | discount |
| | prevailing |
| | at the time |
| | the shares |
| | were |
| | initially |
| | bought back |
| | by the |
| | Company. |
| | The Company |
| | holds |
| | 2,441,453 |
| | ordinary |
| | shares in |
| | Treasury |
| | representing |
| | 4.6 per cent |
| | of the |
| | issued share |
| | capital as |
| | at 28 |
| | January |
| | 2009. The |
| | total number |
| | of ordinary |
| | shares in |
| | issue at 31 |
| | December |
| | 2008 was |
| | 30,837,886 |
| | (30 |
| | September |
| | 2007: |
| | 31,285,827). |
+----------+--------------+
+----------+------------+
| 3. | Revenue |
| | and |
| | capital |
| | returns |
| | for the |
| | ordinary |
| | and C |
| | shares |
| | for the |
| | period |
| | to 31 |
| | December |
| | 2008 are |
| | based on |
| | a |
| | weighted |
| | average |
| | of |
| | 31,200,831 |
| | ordinary |
| | shares and |
| | 21,007,453 |
| | C shares |
| | (2007: |
| | 31,558,217 |
| | ordinary |
| | shares and |
| | 20,146,505 |
| | C shares) |
| | ordinary |
| | shares in |
| | issue |
| | during the |
| | period. |
+----------+------------+
+----------+----------+
| 4. | Income |
| | for the |
| | year is |
| | derived |
| | from: |
+----------+----------+
+---------------+-----------+--------------+---------------+-----------+-----------+-----------+
| | 2008 | 2007 |
+---------------+------------------------------------------+-----------------------------------+
| | Ordinary | C shares | Total | Ordinary | C shares | Total |
| | shares | (GBP'000) | (GBP'000) | shares | (GBP'000) | (GBP'000) |
| | (GBP'000) | | | (GBP'000) | | |
+---------------+-----------+--------------+---------------+-----------+-----------+-----------+
| UK franked | 136 | 26 | 162 | 284 | 4 | 288 |
+---------------+-----------+--------------+---------------+-----------+-----------+-----------+
| UK unfranked | 815 | 574 | 1,389 | 1,165 | 801 | 1,966 |
+---------------+-----------+--------------+---------------+-----------+-----------+-----------+
| Deposit | 120 | 91 | 211 | 86 | 71 | 157 |
| interest | | | | | | |
+---------------+-----------+--------------+---------------+-----------+-----------+-----------+
| | 1,071 | 691 | 1,762 | 1,535 | 876 | 2,411 |
+---------------+-----------+--------------+---------------+-----------+-----------+-----------+
+----------+-------------+
| 5. | The |
| | exceptional |
| | income |
| | derived |
| | during the |
| | year |
| | relates to |
| | a recovery |
| | of VAT of |
| | management |
| | fees. The |
| | Director's |
| | consider it |
| | reasonably |
| | certain |
| | that the |
| | Company in |
| | the |
| | foreseeable |
| | future will |
| | obtain a |
| | repayment |
| | of VAT of |
| | not less |
| | than |
| | GBP947,000. |
| | This has |
| | been |
| | recognised |
| | in the |
| | Income |
| | Statement |
| | in the same |
| | portions as |
| | the |
| | original |
| | VAT was |
| | expensed |
| | between |
| | revenue and |
| | capital. |
+----------+-------------+
+----------+---------------+
| 6. | Related |
| | party |
| | transactions |
| | include |
| | Management, |
| | Company |
| | Secretarial, |
| | Accounting |
| | and |
| | Performance |
| | fees payable |
| | to the |
| | Manager, |
| | ISIS EP LLP, |
| | as disclosed |
| | in the notes |
| | to the full |
| | accounts. In |
| | addition, |
| | the Manager |
| | operates a |
| | Co Investment |
| | scheme, |
| | detail in the |
| | Report of the |
| | Directors |
| | within the |
| | full |
| | accounts, |
| | whereby |
| | employees of |
| | the Manager |
| | are entitled |
| | to |
| | participate |
| | in certain |
| | unquoted |
| | investments |
| | alongside the |
| | Company. |
+----------+---------------+
+----------+--------------+
| 7. | These |
| | are not |
| | full |
| | accounts |
| | in terms |
| | of |
| | Section |
| | 240 of |
| | the |
| | Companies |
| | Act 1985. |
| | Full |
| | audited |
| | accounts |
| | for the |
| | period |
| | ending 31 |
| | December |
| | 2007 have |
| | been |
| | lodged |
| | with the |
| | Registrar |
| | of |
| | Companies. |
| | The annual |
| | report for |
| | the year |
| | ended 31 |
| | December |
| | 2008 will |
| | be sent to |
| | shareholders |
| | shortly and |
| | will then be |
| | available |
| | for |
| | inspection |
| | at 100 Wood |
| | Street, |
| | London, the |
| | registered |
| | office of |
| | the Company. |
| | The audited |
| | accounts for |
| | the year |
| | ended 31 |
| | December |
| | 2008 |
| | contains an |
| | unqualified |
| | audit |
| | report. |
+----------+--------------+
+----------+----------+
| 8. | The |
| | Annual |
| | General |
| | Meeting |
| | will be |
| | held on |
| | 26 March |
| | 2009 |
+----------+----------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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