TIDMBNS
Baronsmead VCT 4 plc
Annual Financial Report Announcement
18 February 2010
Investment Objective
Baronsmead VCT 4 is a tax efficient listed company which aims to achieve
long-term investment returns for private investors.
Audited Annual Financial Report Announcement -
Year ended 31 December 2009
Baronsmead VCT 4 plc
Financial Headlines
7.7% NAV per ordinary share increased 7.7% to 97.63p before deduction of dividends.
7.0p Dividends for the year totalled 7p per share comprising two interim dividends of
3p and 4p paid during the year, tax free for qualifying shareholders.
137.1p NAV total return to ordinary shareholders for every 100p invested since launch.
8.7% Dividend yield of 8.7% tax free to qualifying shareholders (gross equivalent
yield for a higher rate taxpayer is 12.9%). This is based on a total annual
dividend of 7.0p divided by the mid ordinary share price of 80.25p at 31
December 2009.
Chairman's Statement
The year to 31 December 2009 has seen a resumption of positive investment
returns amounting to a 7.7 per cent increase in Net Asset Value per share. Our
unquoted investee companies have shown good resilience while there has been a
strong recovery in many of the share prices of our AIM portfolio.
The investment approach has allowed the company to weather the challenging
economic environment relatively well so that the present portfolio provides a
good platform for the future. The unchanged 7p dividend per share paid in the
year has been largely paid out of capital profits generated during this
period.
INVESTMENT PERFORMANCE
Results to 31 December 2009
In the twelve months to 31 December 2009, the Net Asset Value (NAV) per share
increased 7.7 per cent from 90.68p to 97.63p before the dividend payments.
These dividends comprised 0.9p revenue and 6.1p capital and the position can
be summarised as follows:
NAV at 1 January 2009 90.68
Valuation uplift 6.95
97.63
Interim dividend paid on 7 September 2009 (3.00)
Interim dividend paid on 30 December 2009 (4.00)
NAV at 31 December 2009 90.63
The 7.7 per cent growth in NAV per share over the year was generated by a 6
per cent increase in the value of the unquoted portfolio and an increase in
the value of the AIM portfolio of 35 per cent. The FTSE All-Share Index
increased 30.1 per cent over the same 12 month period. The positive direction
of NAV per share started in February 2009 and has steadily increased since
then.
At the period end, the Company comfortably met the VCT compliance test
requiring that 70 per cent of the ordinary capital raised prior to 31 December
2007 is invested in VCT qualifying investments and the five other VCT
qualifying tests have also been met throughout the year.
Longer term performance
The Company's Investment Objective and Policy focus on the delivery of long
term performance. The Board reviews the long term performance of the Company
using a number of different metrics, but takes particular account of total
dividends paid to shareholders as well as NAV and Share Price total returns.
The second interim dividend took the cumulative dividends paid (tax free to
qualifying shareholders) to founder shareholders to 38p per share. This is an
average annual dividend throughout the life of the Company of 4.8p per year.
The average annual dividend over the last five years has been 6.3p per
Ordinary share.
There have been two prospectus fund raisings by Baronsmead VCT 4 since its
launch (excluding the current Joint Offer with Baronsmead VCT 3 which has not
yet allotted any shares). Both the prior offerings have generated absolute
positive NAV returns for investors. The performance since launch to December
2009 shows Baronsmead VCT 4 to be top quartile of other Generalist VCTs
launched in the same tax year. Fuller comparisons have recently been
facilitated by the Association of Investment Companies (AIC) who publish
monthly data on their website, www.theaic.co.uk.
The returns to shareholders are significantly enhanced by the tax benefits
available to VCT investors. At a time of lower and sometimes negative
investment returns, the proportional benefit from these taxation reliefs is
greater.
PORTFOLIO
The valuation guidelines for unquoted companies have been revised by the
International Private Equity and Venture Capital Valuation Board to facilitate
compliance with International, US and UK accounting standards. The Board has
applied the new guidelines having been satisfied that they provide an improved
framework for estimating market value. In valuing the unquoted investments the
Board has available a significant amount of information for comparison
purposes including earnings multiples of similar recent transactions and of
comparable quoted companies and FTSE sectors, all suitably adjusted for size,
liquidity, gearing, growth prospects and business mix. AIM investments
continue to be valued at bid price.
The Board's assessment of the unquoted valuations benefits from the detailed
information provided by the Manager due to their close involvement with each
of these companies and their knowledge about the sectors in which they
operate. As I outlined last year the strategy relating to AIM investments has
been refined so that the Manager's sector expertise and a closer involvement
with investee companies (from taking more influential stakes in a smaller
number of investments) is being increasingly utilised on these investments as
well.
ScriptSwitch was sold in October 2009 at almost four times the initial cost of
the investment made in May 2007 while the unquoted investment in Green Issues
was realised at zero value. Six AIM investments were realised (but shares
retained in two of the purchasers) and another six written off. Since the last
year end, the net investment gains on realisations were GBP1.4 million, split
almost equally between ScriptSwitch and those realised from the AIM portfolio.
Three new AIM investments were made so that the overall portfolio reduced in
number to 59 companies by the end of the year.
53 per cent of the net asset value of GBP47.2 million was invested in unquoted
companies, 21 per cent in AIM and other listed investees and the balance of 26
per cent remained in liquid assets or government securities. The largest
unquoted investment (Reed & Mackay) and the largest AIM investment (Advanced
Computer Software) represented 6.7 and 2.3 per cent of Net Asset Value
respectively.
Unquoted portfolio
The performance of the unquoted portfolio has been robust and its collective
valuation has moved forward 6 per cent. This validates the quality of the
portfolio and the effectiveness of close cooperation and active Manager
involvement with the investee companies.
On average, the current portfolio of 17 unquoted investments is valued at some
27 per cent higher than original cost. 13 companies are valued at higher than
cost and 4 are valued below cost.
AIM-traded portfolio
The AIM portion of the portfolio has bounced back 35 per cent over the last 12
months recovering a good part of the previous year's falls. In the second half
of the year five of the investee companies were sold confirming that acquirers
could still appreciate the good value that resided in these relatively lowly
rated situations. This also supports the longer term strategy of taking more
influential stakes in a smaller number of AIM investments, where a likely exit
strategy to a trade buyer can be envisaged.
UK economic impact from VCT investment
VCT tax reliefs encourage private investors to invest in UK growth companies
that mainly require GBP2 million to GBP10 million of risk capital.
The return on this investment in tax reliefs can be gauged by the growth of
the investee companies, many of which have grown successfully during our
period of ownership. The number of employees across the investee companies
acquired since April 2004 within the unquoted portfolio of the Baronsmead VCTs
increased from 1,995 at the date of initial investment to 3,077 as stated in
their latest audited accounts.
The growth in employment in these companies which have benefited from VCT
capital has also been achieved with relatively low levels of external debt as
described in more detail in the Manager's Review.
PROSPECTS FOR NEW INVESTMENT
The market for investing in new transactions has been depressed over the last
12 months with overall M&A volumes down significantly although seven follow on
investments were completed during the year under review. The quality of new
unquoted proposals is improving as confidence begins to return to the market.
Additionally the Manager has an active programme of directly approaching
prospective investee companies in selected sectors, and this is building a
strong pipeline of entrepreneurs who would like to work with the Manager when
the timing is right. This continues to be a significant investment for the
future.
The volume of qualifying AIM opportunities has increased markedly although
conversion rates have, so far, remained low as the Manager continues to
maintain a high quality threshold for new investments. Prospects for the AIM
market generally have been at low ebb but are now improving as recent research
is increasingly recognising that the AIM market plays an important role for
venture backed companies as they transition into more mature companies through
a quotation on public markets.
SHAREHOLDER ISSUES
Joint offer prospectus launched in January 2010
Shareholders gave the Board authority at the annual general meeting held on 26
March 2009 to issue up to 14 million ordinary shares. The Securities Note for
a Joint Offer in conjunction with Baronsmead VCT 3 was sent to all
Shareholders in January 2010 and aims to raise up to GBP8 million for each of
Baronsmead VCT 3 and Baronsmead VCT 4. The final closing date is 1 April 2010
but the Directors reserve the right to extend the Joint Offer beyond this
date.
One of the key messages in the Securities Note is that "the Directors and
Manager believe that it is an advantageous time in the economic cycle, when
prices of assets are expected to be attractive, to raise capital to enable the
VCTs to continue making investments in accordance with their investment
strategies".
The Directors of Baronsmead VCT 4 already hold over half a million shares in
the Company and have agreed to subscribe another GBP28,000 for further shares as
part of the Joint Offer with Baronsmead VCT 3 plc.
Company brokers
Following a review of brokers the Board agreed to appoint Matrix Corporate
Capital as the new broker to the Company from the beginning of August 2009.
Their specialist knowledge of the VCT sector enables the bid - offer spread to
remain narrow at some 2p to 3p per share rather than the much wider spreads
typical for similarly sized quoted public companies.
The Company's shares have three market makers, namely Matrix Corporate
Capital, Winterflood and Singer Capital Markets.
Buy backs and market discounts
During the 12 months to 31 December 2009, 1.35 million shares were bought
back. All the buybacks occurred between March and May 2009 because this was a
peak time as the 20.6m ordinary shares, issued originally as C shares in the
first quarter of 2006, reached their third year anniversary. Since then most
of the shares that have come up for sale have been acquired as part of the
Dividend Reinvestment Plan, totalling 465,000 shares in the second half of the
year. The average market price discount to NAV was 10 per cent over the year
which compares favourably to the rest of the VCT sector where discounts to NAV
were generally higher.
Finance Act 2009 and Pre-Budget Report 2009
Following the changes announced in the 2009 Budget and implemented in the
Finance Act 2009, for those individuals earning in excess of GBP150,000
annually, restrictions have been introduced which curb both the level of
contributions and the amount of tax relief available on those contributions
made into a pension scheme with effect from 6 April 2011. Further restrictions
have been introduced for this tax year and next, known as "anti-forestalling
measures" which prevent many individuals investing large sums into their
pension schemes ahead of the changes coming into force.
As a result, VCTs now arguably represent an attractive supplement to
traditional pension planning for people affected by these changes and others
seeking to implement their retirement planning options and tax efficient
investing generally. Investors should consult their financial advisers about
how these changes might affect them and whether or not investing in VCTs is
suitable for them, taking into account their personal circumstances.
The Pre-Budget Report announced a consultation process on a number of changes
to conclude the EU's State Aid approval conditions and refine the targeting of
tax relief. The Manager is actively engaged with industry bodies in the
consultation process.
BOARD SUCCESSION
I have informed the Board that if re-elected as a Member of Parliament, in the
event of a Conservative government following the next general election and my
being invited to take a position in Government, I would be obliged to resign
as a Director. Accordingly the Board's nomination committee is taking
appropriate steps to manage Board succession should this prove necessary. The
company has recently recruited a new company secretary and I would like to
welcome Barry Lawson to the position.
ANNUAL GENERAL MEETING
I look forward to meeting as many shareholders as possible at our Annual
General Meeting at 11 am on Thursday 20 May 2010 to be held at the London
Stock Exchange, 10 Paternoster Square near St Paul's Cathedral. The AGM will
be followed by presentations from the Manager and an investee company, a light
lunch and shareholder workshop.
OUTLOOK
Equity markets rallied in 2009 anticipating that the pace of decline in the UK
economy over the past 18 months has slowed and perhaps stabilised. While
remaining cautious about the economy, the Board and Manager share the belief
that once greater stability has returned to UK financial and industrial
markets your Company is well placed to capitalise on a more favourable
investment environment.
The Directors believe that the new capital being raised in this quarter is an
attractive opportunity for both existing and new shareholders, providing
further balance sheet strength and flexibility for Baronsmead VCT 4 to sustain
investment in smaller UK growth companies.
We continue to monitor developments in relation to the proposed EU Directive
on Alternative Investment Fund Managers (AIFM) which may impose restrictions
on the Manager and/or the Company over the manner in which investments are
made and funds raised. The Directive is currently in a consultation phase that
encompasses both the EU Council and Parliament and the Company and Manager are
supporting the AIC and BVCA in their representations to this process.
Philip Dunne
Chairman
18 February 2010
Manager's Review
We have worked closely with the companies in the unquoted portfolio to ensure
their stability and to position them advantageously as the economic climate
improves. Trading across the portfolio has generally improved.
As signs of stability return to the economy investment opportunities that meet
our criteria are emerging and we believe that we are well placed to take
advantage of these opportunities. Management teams are also gaining confidence
to partner with us in fulfilling their growth ambitions.
PORTFOLIO REVIEW
The total portfolio comprised 59 investee companies at the year end after
seven realisations, profitable in terms of year on year value growth, and
seven write offs. For those AIM-traded companies that have been written off,
they had largely been revalued at low share prices in prior years and so the
decrease in value this year was limited to GBP0.3 million, approximately 0.6p
impact on the NAV per share. Proceeds from all realisations totalled GBP5.9
million, including GBP3.5 million from the sale of Scriptswitch.
Three new investments were made in Clarity Commerce Solutions, Green
Compliance and Marwyn Value Investors, all AIM-traded companies. Further
investments were made in existing investees amounting to GBP0.8 million. The
shareholding in Inverness Medical, a NYSE listed company, was taken in
exchange for selling our holding in Concateno and we also received shares in
Chime Communications for our holding in Essentially Group.
All new investment and realisations are scheduled below.
Portfolio companies are reviewed quarterly in terms of their financial health
and in the last two quarters, those exhibiting steady or better trading
progress have improved to 84 per cent from 73 per cent last year. In part this
has come from focusing on robust business models where growth strategies are
less dependent on overall economic growth and more on the competitive
advantage in delivering superior value to their end customers.
ScriptSwitch was sold to a US trade buyer in the healthcare market resulting
in a return, including expected escrow payments, approaching four times the
cost of the initial investment made in May 2007. It had grown rapidly due to
the demand for its unique prescribing software in reducing cost within Primary
Care Trusts' drug budgets. More than 115 NHS Primary Care Organisations have
benefited from their prescribing decision support which is estimated to be
saving the NHS GBP1.2 million per month overall. The CEO, Mike Washburn, became
the BVCA `Venture Capital backed CEO of the year' in October 2009.
Unquoted portfolio management
ScriptSwitch and three other case studies of unquoted companies across
different sectors within the portfolio are set out on pages 14 and 15 of the
Annual Report. These are the same four companies that were profiled last year
and the intention this year has been to show how the Manager has worked with
the management teams of each business in the more difficult trading conditions
that have developed.
For example, the financial structures adopted in the unquoted portfolio have
been designed to be prudent wherever possible with relatively low levels of
external debt. There are several ways of measuring borrowings but the most
common relates to the level of net borrowings divided by annual operating
profits defined as EBITDA - earnings before interest, tax, depreciation and
amortisation. This ratio is an indicator of the ability of the investee
company to repay debt from internally generated reserves. At an average ratio
of 1.7 times across the unquoted portfolio, the level of debt within the
portfolio as a whole is relatively low and considerably less than those
typically used in larger private equity transactions.
The Manager is also actively involved in assisting investee companies maintain
tight control of overheads, focusing on efficient working capital management
and ensuring early communication with each investee company's banks to help
manage risk and minimise issues. Presentations by investee companies at each
AGM have illustrated the close relationship between the executive management
of unquoted companies and the Manager.
Nexus is a good example of a growth company operating in the relatively mature
UK car and van rental market. After the initial investment in early 2008, we
encouraged the acquisition of a competitor partly financed by further
investment from the Baronsmead VCTs late in 2008. As a broker, Nexus provides
a comprehensive procurement service for corporate users, which delivers access
to a huge range of rental suppliers and vehicles from a single ordering point.
At the heart of the business is an innovative internet based system that
offers these extensive capabilities cost effectively.
The two rounds of investment in Nexus cost GBP1.868 million and have been valued
at GBP2.511 million as at 31 December 2009.
AIM investment
The sentiment towards the AIM market has materially improved during the year
and this confidence can be seen in several ways. A series of trade sales
occurred in the second half of the year as well as trade buyers taking
strategic stakes in a number of investees as they perceive greater value.
There is also greater demand currently for potential AIM floats (IPOs) where
the companies believe that capital raised from AIM can satisfy their growth
aspirations.
During the year, further investment was made in six AIM companies where we
perceived good value and wished to be supportive of their growth plans. Most
of these companies endeavour to dominate their specialist market niche and we
believe can then become attractive takeover targets with greater critical
mass. The portfolio as a whole was 35 per cent higher over the year.
Our strategy for investing in AIM-traded companies is to use private equity
disciplines where possible and focus on holdings where the Manager can be an
influential shareholder. This approach means that the portfolio will become
more concentrated and already the tail of smaller investments has been
shortened with a number of write offs and sales.
OUTLOOK
The last year has been a time for entrepreneurial companies to be focused on
running a tight operation and ensuring they can control their destiny despite
the difficulties of the banking market. This has largely been achieved across
the portfolio. There are some signs of an improving economic climate for these
companies to grow both market share and profits. It will be the continued
innovation and drive of these companies aided by the support of experienced
and active investors like ISIS that can create value for the shareholders in
Baronsmead VCT 4.
ISIS EP LLP
Investment Manager
18 February 2010
NEW INVESTMENTS IN THE YEAR TO 31 DECEMBER 2009
Investment
Company Location Sector Activity cost
(GBP'000)
AIM-traded and listed
investments
New
Clarity Commerce Basingstoke IT & Media Software for 50
Solutions plc leisure industry
Green Compliance plc Cirencester Business Blue collar 250
Services compliance
Marwyn Value Investors London Financial Investment fund 64
plc Services
Follow on
Adventis Group plc London IT & Media Marketing services 81
agency
Electric Word plc London IT & Media Business to 236
business publisher
Ffastfill plc Sevenoaks IT & Media Trading platform 140
software provider
IDOX plc London IT & Media Public sector 118
software and
services
Kiotech International Surrey Healthcare Animal feed 75
plc & additives
education
WIN plc High Wycombe IT & Media Text messaging 150
services
Paper consideration
Inverness Medical Inc* USA Healthcare Developer of health 180
& management
Education programmes
Chime Communications London IT & Media Marketing services 369
Group plc| agency
Total AIM-traded and 1,713
listed investments
Unquoted investments
Follow on
Occam DM Ltd Bath IT & Media Integrated data 6
services
Total Unquoted 6
investments
Total Investments in the 1,719
period
* Paper consideration from sale of Concateno plc and listed on the New York
Stock Exchange
| Paper consideration from sale of Essentially Ltd
REALISATIONS IN THE YEAR TO 31 DECEMBER 2009
Value at Realised
First 31 profit/(loss) Overall
December
investment 2008 this period Multiple
Company date GBP'000 GBP'000 return*
AIM-traded realisations
Claimar Care Group plc Trade sale Jan 06 59 212 0.5
Concateno plc Trade sale Oct 06 394 132 1.3
Craneware plc Part sale Sep 07 174 11 1.7
Essentially Group Ltd Trade sale Jun 07 189 180 0.7
Ffastfill plc Part sale Jun 07 178 224 1.6
MBL Group plc Market Jan 03 136 131 0.7
sale
Research Now plc Market Dec 07 228 148 1.4
sale
Silverdell plc Market May 08 2 (1) 0.1
sale
1,360 1,037
Written off
EBTM plc May 07 51 (51) -
Fishworks plc Jun 05 15 (15) -
IPT Holdings plc Nov 04 4 (4) 0.9
MKM Group plc May 04 4 (4) -
Optimisa plc Oct 07 28 (28) -
Relax Group plc Feb 08 198 (198) -
300 (300)
Total AIM-traded realisations 1,660 737
Unquoted realisations
Green Issues Written Dec 05 - - -
off
ScriptSwitch Trade sale May 07 2,806 703 3.7
Total Unquoted realisations 2,806 703^
Total Realisations 4,466 1,440
*Includes interest/dividends received, loan note redemptions and partial
realisations accounted for in prior periods.
^Before deferred proceeds of GBP16,000 received for Language Line.
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 its business 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. Appropriate incentives are in place to ensure retention of such
personnel.
The Board seeks to mitigate the internal risks by setting policies, regular
reviews 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 2006. 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 Review 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.
On behalf of the Board,
Philip Dunne
Chairman
18 February 2010
Income Statement
For the Year ended 31 December 2009
2009
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Unrealised gains on investments - 2,460 2,460
Realised gains on investments - 1,339 1,339
Income 1,322 - 1,322
Recoverable VAT 1 (3) (2)
Investment management fee (301) (903) (1,204)
Other expenses (393) - (393)
Profit on ordinary activities before taxation 629 2,893 3,522
Taxation on ordinary activities (123) 123 -
Profit on ordinary activities after taxation 506 3,016 3,522
Return per ordinary share:
Basic 0.97p 5.77p 6.74p
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.
Reconciliation of Movements in Shareholders' Funds
For the Year ended 31 December 2009
2009
Ordinary
shares
GBP'000
Opening shareholders' funds 47,896
Profit for the period 3,522
Issue of shares 602
Expenses of share issue/C share conversion (48)
Purchase of shares for Treasury/cancellation including (1,109)
expense of purchase
Dividends paid (3,647)
Closing shareholders' funds 47,216
Income Statement
For the Year ended 31 December 2008
Ordinary C Shares Total
Shares
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Unrealised losses - (6,996) (6,996) - (323) (323) - (7,319) (7,319)
on investments
Realised - (277) (277) - 18 18 - (259) (259)
(losses)/gains
on investments
Income 1,071 - 1,071 691 - 691 1,762 - 1,762
Recoverable VAT 165 641 806 33 108 141 198 749 947
Investment (218) (654) (872) (112) (335) (447) (330) (989) (1,319)
management
fee
Other expenses (243) - (243) (184) - (184) (427) - (427)
Profit/(loss) on 775 (7,286) (6,511) 428 (532) (104) 1,203 (7,818) (6,615)
ordinary
activities before
taxation
Taxation on (184) 240 56 (122) 66 (56) (306) 306 -
ordinary
activities
Profit/(loss) on 591 (7,046) (6,455) 306 (466) (160) 897 (7,512) (6,615)
ordinary
activities after
taxation
Return per
ordinary
share:
Basic 1.89p (22.58p) (20.69p) 1.46p (2.22p) (0.76p) - - -
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
Balance Sheet
As at 31 December 2009
2009 2008
Ordinary
Total Shares C Shares Total
GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Investments 45,134 25,739 18,638 44,377
Current assets
Debtors 342 1,121 572 1,693
Cash at bank and on deposit 2,169 1,368 984 2,352
2,511 2,489 1,556 4,045
Creditors (amounts falling due within (429) (264) (241) (505)
one year)
Net current assets 2,082 2,225 1,315 3,540
Total assets less current liabilities 47,216 27,964 19,953 47,917
Creditors (amounts falling due after - - (21) (21)
one year)
Net assets 47,216 27,964 19,932 47,896
Capital and reserves
Called-up share capital 5,589 3,328 10,595 13,923
Share premium account 14,318 13,151 675 13,826
Capital redemption reserve 8,622 116 108 224
Revaluation reserve 3,156 (400) 531 131
Capital reserve 15,759 11,954 8,102 20,056
Revenue reserve (228) (185) (79) (264)
Equity shareholders' funds 47,216 27,964 19,932 47,896
Net asset value per share
Number of Shares (excluding those 52,099,126 30,837,886 21,191,442 -
held in treasury)
- Basic 90.63p 90.68p 94.06p -
Number of Shares (including those 55,892,719 33,279,339 21,191,442 -
held in treasury)
- Treasury 89.92p 90.19p 94.06p -
Cash Flow Statement
As at 31 December 2009
2009 2008
Ordinary
Total Shares C Shares Total
GBP'000 GBP'000 GBP'000 GBP'000
Operating activities
Investment income received 1,125 1,398 810 2,208
Recoverable VAT 944 - - -
Deposit interest received 90 119 90 209
Investment management fees (1,219) (957) (452) (1,409)
Other cash payments (413) (255) (140) (395)
Net cash inflow from operating activities 527 305 308 613
Taxation
Tax - 58 (58) -
Capital expenditure and financial investment
Purchases of investments (45,175) (19,692) (24,492) (44,184)
Disposals of investments 48,681 19,902 23,421 43,323
Net cash inflow/(outflow) from capital expenditure
and financial investment 3,506 210 (1,071) (861)
Dividends
Equity dividends paid (3,647) (3,429) (1,149) (4,578)
Net cash inflow/(outflow) before financing 386 (2,856) (1,970) (4,826)
Financing
Issue of shares 596 708 849 1,557
Buy-back of ordinary shares (1,111) (1,001) (1) (1,002)
Expenses of issue of shares (54) (44) (21) (65)
Net cash (outflow)/inflow from financing (569) (337) 827 490
(Decrease) in cash (183) (3,193) (1,143) (4,336)
Reconciliation of net cash flow to movement in
net cash
Decrease in cash in the year (183) (3,193) (1,143) (4,336)
Opening cash position 2,352 4,561 2,127 6,688
Closing cash position 2,169 1,368 984 2,352
Notes
1. The audited results which cover the year ended 31 December 2009 have been prepared
under UK Generally Accepted Accounting Practice (UK GAAP) and in accordance with the
Statement of Recommended Practice ("SORP") for investment trust companies and venture
capital trusts issued by the Association of Investment Companies ("AIC") in January
2003, revised January 2009 and on the assumption that the company maintains VCT status.
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. Profit/(loss) on
ordinary activities after taxation 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 55,892,719 ordinary shares listed at 31 December 2009. The Company holds
3,793,593 ordinary shares in Treasury as at 31 December 2009. The total number of shares
with voting rights at 31 December 2009 was 52,099,126
3. Revenue and capital returns for the ordinary shares for the year to 31 December 2009
are based on a weighted average of 52,305,453 (2008: 31,200,831 ordinary shares)
ordinary shares in issue during the year.
4. Income for the year is derived from:
2009 2008
Total GBP'000 Ordinary C Shares Total
Shares GBP'000 GBP'000
GBP'000
UK franked 150 136 26 162
UK unfranked 917 777 540 1,317
Redemption premium 168 38 34 72
Deposit interest 87 120 91 211
1,322 1,071 691 1,762
5. HM Revenue and Customs (HMRC) confirmed in October 2007, following the European
Court of Justice decision in the JPMorgan Claverhouse case, that the provision of
management services to investment trusts is exempt from VAT. Accordingly ISIS EP LLP
ceased to charge VAT on management fees payable by the Company with effect from 30
June 2008. Following recognition in the income statement last year of GBP947,000 and
subsequent recovery this year of GBP944,000 the Company does not foresee any further
future repayment of VAT.
6. Related party transactions include Management, 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,
detailed 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 434 of the Companies Act 2006.
Full audited accounts for the year ending 31 December 2008 have been lodged with the
Registrar of Companies. The annual report for the year ended 31 December 2009 will
be sent to shareholders shortly and will then be available for inspection at 100
Wood Street, London, EC2V 7AN the registered office of the Company. The audited accounts for
the year ended 31 December 2009 contains an unqualified audit report.
8. The Annual General Meeting will be held on 20 May 2010 at 11:00 am at the London
Stock Exchange, 10 Paternoster Square, London EC4M 7LS.
END
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