TIDMAQT1 TIDMAQTC
RNS Number : 2121E
Acuity VCT PLC
16 December 2009
?
ACUITY VCT PLC
Final Results for the Year Ended 30 September 2009
In accordance with DTR 6.3.5 the Final Results of Acuity VCT Plc for the year
ended 30 September 2009 are made available below.
The full Annual Report and Accounts can be accessed via the website
www.acuitycapital.co.uk
References in this announcement to Acuity VCT Plc have been abbreviated to "the
Company" or "the Fund". References to the Investment Manager, Acuity Capital
Management Limited, have been abbreviated to "Acuity Capital".
FINANCIAL HIGHLIGHTS
+--------------------------------------------------+--------------+---------------+
| Ordinary Shares | | |
+--------------------------------------------------+--------------+---------------+
| Year ended 30 September | 2009 | 2008 |
+--------------------------------------------------+--------------+---------------+
| Net assets | GBP12.7m | GBP11.9m |
+--------------------------------------------------+--------------+---------------+
| Net asset value per Ordinary Share | 66.0p | 62.2p |
+--------------------------------------------------+--------------+---------------+
| Dividend paid per Ordinary Share | 0.0p | 0.0p |
+--------------------------------------------------+--------------+---------------+
| Cumulative return to shareholders since launch | | |
+--------------------------------------------------+--------------+---------------+
| Dividends paid per Ordinary Share | 12.1p | 12.1p |
+--------------------------------------------------+--------------+---------------+
| Net asset value plus dividends paid per Ordinary | 78.1p | 74.3p |
| Share | | |
+--------------------------------------------------+--------------+---------------+
+--------------------------------------------------+--------------+---------------+
| C Shares | | |
+--------------------------------------------------+--------------+---------------+
| Year ended 30 September | 2009 | 2008 |
+--------------------------------------------------+--------------+---------------+
| Net assets | GBP7.3m | GBP9.3m |
+--------------------------------------------------+--------------+---------------+
| Net asset value per C Share | 80.4p | 102.7p |
+--------------------------------------------------+--------------+---------------+
To date no C Share dividends have been paid.
+--------------------------+-----------------------------------------------+
| Key Dates:- | 16 December 2009 |
| Results Announced | Wednesday 24 February 2010 at 10am |
| Annual General Meeting | Paternoster House, 65 St Paul's Churchyard, |
| Venue | London, EC4M 8AB |
| | |
+--------------------------+-----------------------------------------------+
Chairman's Statement
Overview
During the year ended 30 September 2009, the Net Asset Value (NAV) of the
Ordinary Shares increased by 5% while the NAV of the C Shares fell by 22%. In
the same period the FTSE All Share Index increased by 7% and the AIM market by
3%, with sharp falls in the first half followed by a strong rebound.
Ordinary Shares
On 30 September 2009 the NAV per Ordinary Share was 66.0p. When cumulative
dividends are included (12.1p paid since the Company's inception), the total was
78.1p per Ordinary Share, an increase of 5% over the year.
During the year the composition of the Company's portfolio shifted heavily into
unquoted investments. This was partly due to performance and also because the
Investment Manager sold a large amount of quoted investments, particularly the
holdings in Electra Private Equity Plc. Details of these changes are set out in
the Investment Manager's report. Throughout the year the Company complied with
VCT qualification requirements.
By year end the Portfolio held 18 qualifying investments, with 78% (by value) in
unquoted investments and the rest in unquoted loan stock instruments. The latter
rank ahead of equity, which has helped to reduce the risk in the portfolio.
C Shares
As at 30 September 2009 the NAV per C Share was 80.4p, a decrease of 15% over
the Fund's starting NAV of 94.5p and down by 22% over the year. No dividends
have yet been paid on the C Shares. The cause of the decline was primarily due
to the impact of the recession on the media assets held by the Company and the
business failure of Emote Games.
Almost the entire portfolio (by value) is held in unquoted investments, with
unquoted loan stock instruments representing 50% of the value.
Co-Investment
The Company often co-invested alongside the other two VCTs managed by Acuity
Capital. This arrangement has contributed to the comparative resilience of the
portfolio, since its investments have had greater access to capital at a time
when success or failure has relied more heavily on this factor than any other.
Portfolio Activity
During the year a further GBP1.3m of the Ordinary Share pool of capital was
invested or committed, plus GBP0.1m of the C Share pool. Details of these
transactions are in the Investment Manager's review.
In addition to the qualifying investments, the portfolio held investments in
Electra Private Equity PLC, a fund associated with Acuity Capital. As at 30
September 2009 the Ordinary Share investment was valued at GBP0.1m (30 September
2008: GBP1.8m) while the C Share investment had been reduced to zero (30
September 2008: GBP0.5m). The Ordinary Share holdings of cash stood at GBP1.0m
at year end and the C Share pool at GBP0.1m.
Merger of the Company with Acuity VCT 2 plc
The boards of Acuity VCT Plc and Acuity VCT 2 Plc (which are both managed by the
Investment Manager) are pleased to announce that they have reached agreement in
principle on terms to merge the companies, subject to approval by shareholders
of both companies, to achieve cost savings for the benefit of all shareholders.
The intention is that this proposed merger will be completed pursuant to a s.110
scheme of reconstruction under the Insolvency Act 1986. The assets and
liabilities of the Company would be transferred to Acuity VCT 2 Plc in
consideration for new Acuity VCT 2 Plc Shares which would be issued to the
Company's shareholders on a relative NAV basis.
Formal proposals will be forwarded to shareholders of both VCTs shortly.
The main purpose of the proposed Merger is to create a single larger VCT that
will bring a number of commercial advantages to both sets of shareholders:
* a reduction in the annual running costs of the combined VCT compared with the
total costs of the separate companies;
* the creation of a single VCT with a larger capital base over which to spread
administration, regulatory and management costs;
* participation in a larger VCT with a more diversified portfolio, thereby
spreading the portfolio, risk across a broader range of investments and
businesses;
* increased potential to pay dividends and to reinstate a buy-back programme; and
* greater flexibility in meeting the qualifying VCT requirements.
If the shareholders of both VCTs approve the Merger, it is proposed that the
enlarged Acuity VCT 2 Plc will be renamed Acuity Growth VCT Plc.
Dividend
Although no dividends were paid in the year, total dividends paid to date to
Ordinary Shareholders are 12.1p per Ordinary Share. No dividends have yet been
paid to C Shareholders.
Share buy backs
In the light of market conditions, the Board suspended the buy back programme as
of 1 October 2008. The Board will continue to monitor the position closely and
will restore buy backs as and when conditions allow. In particular, the Board
will pay close attention to available liquidity, which should be enhanced if
shareholders approve the proposed Merger.
To facilitate a share buy back programme and to act as a market maker in the
shares, the Company has appointed Matrix Corporate Capital LLP as corporate
broker. It will take steps to reduce the difference between the price paid under
the buy back programme and the price received by a selling shareholder, as well
as matching buyers and sellers of the shares. The Company is unable to buy
shares directly from shareholders. If an investor wishes to sell shares, please
contact Matrix Corporate Capital on 0203 206 7176.
Top Up Offer in Acuity VCT 2 plc
Subject to shareholder approval for the proposed Merger, shareholders will also
be invited to participate in a Top Up Offer by Acuity VCT 2 plc to improve the
overall liquidity of the enlarged VCT and to take advantage of favourable
investment conditions. We will be writing to shareholders early next year with
details.
Self Invested Pension Plan (SIPP) service
Working with Cavendish Ware, the Investment Manager has arranged for
shareholders to have the opportunity to place their VCT shares in a SIPP, which
offers additional tax benefits. It should be noted that moving VCT shares into a
SIPP is treated as a disposal for tax purposes, and so has implications for
investors sheltering CGT gains or whose VCTs have not yet reached the end of the
minimum holding period for income tax relief.
Details of this service are being sent to shareholders alongside this report.
Shareholder Communication
If shareholders have any general queries, they should contact the Investment
Manager by telephone or email. The Investment Manager's website provides
information on Acuity Capital and the Fund.
As the Investment Manager is keen to increase communication with shareholders,
its website (www.acuitycapital.co.uk) will include regular investment updates.
Shareholders are encouraged to register their email addresses with the
Investment Manager if they have not already done so.
We would encourage shareholders to come to the Annual General Meeting on 24
February 2010, when two of your portfolio companies will make presentations.
Over time, we intend to stage similar occasions for all the Company's principal
investments, giving shareholders a better insight into the potential of the
Company's portfolio.
Risks
Risks associated with the Company are set out in detail in the Report of the
Directors and in Note 20 of the Notes to the Accounts. The Board recognises that
opportunities for selling both quoted and unquoted investments may have been
reduced by recent volatility in the financial markets. In addition, the fair
market value of its unquoted holdings may also suffer by reference to comparable
quoted companies and publicly announced transactions. However, the Board
considers that the portfolio has insignificant exchange risk and minor credit or
interest rate risk.
Outlook
Most commentators expect the UK to start recovering from recession. However,
growth is likely to be sluggish and fragile, so conditions for small companies
will remain difficult. As and when they improve, the portfolio should regain
momentum
Rupert Pennant-Rea
Chairman
15 December 2009
Investment Strategy
Investment Objective
In accordance with the Company's prospectus dated 2 October 2001, the Company's
objective is to achieve capital gains and maximise UK tax-free income to its
shareholders from dividends and capital distributions. It is intended that this
objective is achieved by investing the majority of the Company's funds in a
portfolio of Qualifying Investments as described under "Investment Strategy"
below.
Investment Strategy
The Company offers investors the opportunity to gain access to the venture
capital market.
The investment focus of the Investment Manager has been to seek out established
companies, most of whom are cash positive, in preference to early stage
opportunities.
In addition, where possible, unquoted investments are normally structured using
a mixture of equity and loan stock. Typically, it is intended that loan stock
represents the majority of the finance provided. In addition, in many cases,
funds managed by Acuity Capital own a significant percentage of the equity of
the investee companies.
This investment focus, combined with a diversified sector strategy and the
typical investment structure, will, in the opinion of the Directors, contribute
materially to reducing the overall risk of investing in smaller companies.
As at 30 September 2009, the Ordinary Share pool of capital of the Company was
invested in 18 qualifying and 3 non-qualifying companies, while, at the same
date, the C Share pool of capital of the Company was invested in 9 qualifying
companies.
As at 30 September 2009, the Company had no bank indebtedness.
The Directors do not wish the Company to be restricted by having a fixed limit
on what exposure to gearing it may have, apart from the restriction in the
Company's Articles, which limits borrowing to an amount equal to its adjusted
capital and reserves.
Co-investment
The Company also invests alongside the other Acuity VCTs which enables
shareholders to participate in larger unquoted transactions, which tend to have
a lower risk profile than smaller venture capital investments.
Qualifying Investments
The Company intends to invest in companies that it believes have a high growth
potential. In the Directors' opinion, each of these companies should generally
reflect the following criteria:
* A well defined business plan and ability to demonstrate strong demand for its
products or services;
* Products or services that can be supplied at sustainable high margins and be
cash generative;
* Objectives of management and shareholders to be similarly aligned;
* Adequate capital resources or access to further resources to achieve the targets
set out in the business plan; and
* High calibre management teams.
The Company seeks to invest in a diversified portfolio of unquoted, PLUS traded
and AIM quoted companies and will not specialise unduly in any particular
industry sector. Unquoted investments will typically be in companies where the
Company believes that there are reasonable prospects of an exit through a trade
sale or flotation in the medium term.
As at 30 September 2009, the Ordinary Share pool of capital of Company had
invested more than 77% of its net assets by valuation in qualifying companies.
At the same date, the C Share pool of capital of the Company had invested 100%
of its net assets by valuation in qualifying companies. The average investment
size at cost for both pools of capital is GBP0.7 million.
Non-Qualifying Investments
As at 30 September 2009, 1% of the Ordinary Share net assets by valuation of the
Company was invested in Electra Private Equity Plc. In addition, 10% of the
Ordinary Share net assets by valuation of the Company was invested in 1
non-qualifying company.
Cash Management
In addition to investments held in associated funds, as at 30 September 2009, 5%
of its net funds by valuation of the Company were invested in cash deposits to
provide immediate liquidity, pending suitable qualifying investments being
identified.
Risk Management
Since the Company is flexible with regard to those areas in which it invests, it
aims to achieve a significant degree of diversification and to spread risk by
investing in unquoted, PLUS traded and AIM quoted companies. In addition, there
is no emphasis on any particular industry sector and even the non-qualifying
investments have quite a high level of in-built diversification. The Company is
restricted to investing no more than 15% of the value of its total assets at the
time of investment in any one individual qualifying investment or non-qualifying
investment.
Investment Portfolio
Ordinary Shares
The investment classification by value expressed as a percentage of the net
assets of the Ordinary Share pool as at 30 September 2009 was as follows:
By Sector
+-------------------------+------------+
| Manufacturing | 42% |
+-------------------------+------------+
| Consumer | 26% |
+-------------------------+------------+
| Business Services | 16% |
+-------------------------+------------+
| Media | 16% |
+-------------------------+------------+
By Asset Type
+-------------------------+------------+
| Unquoted - Ordinary and | 51% |
| Preference shares | |
+-------------------------+------------+
| Unquoted - Loan Stock | 23% |
+-------------------------+------------+
| AIM | 12% |
+-------------------------+------------+
| Cash | 8% |
+-------------------------+------------+
| Accrued Income | 4% |
+-------------------------+------------+
| Associated Funds | 1% |
+-------------------------+------------+
| Creditors | 1% |
+-------------------------+------------+
By Time Investments Held
+-------------------------+------------+
| Between 1 and 3 years | 28% |
+-------------------------+------------+
| Between 3 and 5 years | 57% |
+-------------------------+------------+
| More than 5 years | 15% |
+-------------------------+------------+
C Shares
The investment classification by value expressed as a percentage of the net
assets of the C Share pool as at 30 September 2009 was as follows:
By Sector
+-------------------------+------------+
| Manufacturing | 46% |
+-------------------------+------------+
| Media | 40% |
+-------------------------+------------+
| Consumer | 14% |
+-------------------------+------------+
By Asset Type
+-------------------------+------------+
| Unquoted - Loan Stock | 45% |
+-------------------------+------------+
| Unquoted - Ordinary and | 42% |
| Preference shares | |
+-------------------------+------------+
| Accrued Income | 5% |
+-------------------------+------------+
| Creditors | 5% |
+-------------------------+------------+
| AIM | 3% |
+-------------------------+------------+
By Time Investments Held
All the investments held by the C Share pool have been held between 1 and 3
years.
Investment Manager's Review
The year just ended resulted in the Company's portfolio becoming more than ever
before a collection of private equity holdings with the intentional selling of
quoted investments to support unquoted investments and in future to take
advantage, where possible, of distressed pricing.
Ordinary Shares
During the year the main portfolio uplifts were in three unquoted companies. The
largest uplifts were Loseley Dairy Ice Cream and Amber Taverns with an increase
in value of GBP1.1m each respectively and Financial News Publishing with a net
increase in value of GBP0.7m.
You may recall that the Company had invested in Hill Station, the AIM listed
company, which was forced into administration in October 2008. However, we
decided that the business was worth supporting as a private equity investment
and, investing alongside its sister VCTs, the Company invested a total GBP0.9m
to acquire the assets and business from the Administrator, rename the business
Loseley Dairy Ice Cream, and support its development. We are pleased to note
that Loseley is beginning to show substantial traction which has allowed an
increase in its value over the year. We are hopeful that Loseley will attract
considerable levels of new business from the major retailers and a full recovery
of the Company's lost investment in Hill Station.
Over the year, Amber Taverns, memorably described by its chairman as the "Aldi
and Lidl of the pub market", acquired a portfolio of 23 pubs at distressed
prices and so increased the number of pubs under management after the sale of 8
unwanted units to a net 45. The acquisition of the additional pubs has been a
success with the retained units responding well to Amber Tavern's management
with its emphasis on the supply of competitively priced beer and a welcoming
modern décor in depressed or city centre locations. With its original portfolio
matching its budget, the overall performance of the company supported an
increase in value.
During the second half of the year, we also took the decision to support the
restructuring of a long held investment called Sanastro Limited by placing the
business into administration and taking the calculated but successful risk of
backing the management with an offer to the Administrator. As a result, the
Company has increased materially its ownership of the business and seen a
significant reduction in the business' cost basis while the trading performance
of the business has not been damaged but seen an improvement. The new business,
renamed Financial News Publishing, provides newsletters and organises
conferences to the financial sector on such topics as prepaid cards, asset
leasing and accounting issues. After writing off of the holding value of
Sanastro, we have been able to increase the value of the Company's holding in
Financial News Publishing by GBP0.7 million.
In terms of material downward movements in the portfolio, the largest were a
reduction of GBP0.2m in the holding value of Ma Hubbards, a family style
restaurant chain that has not been able to compete effectively against the
carvery offerings of larger chains, and a reduction of GBP0.2m in the holding
value of Defaqto Group, due to the volatility of its financial sector customer
base over the year. In addition, the value of Advanced Medical Solutions
decreased by GBP0.2m due to a fall in the share price by 14% over the year.
As noted in the Chairman's statement, we sold almost the Company's entire
holding in Electra Private Equity plc over the year to provide liquidity and
support the investments made into unquoted companies.
C Shares
The C Share pool of capital declined by 22% over the period. This was entirely
due to the negative impact of the recession on the media investments held by the
Company with the largest decline being the holding value in Target Entertainment
Group of GBP0.9m, a net reduction in the value in Future Noise Music (formerly
Acrobat Music Group) of GBP0.3m, a fall in value of GBP0.3m in Red Reef Media
and the write off of the Company's holding of GBP0.4m in Emote Games. The
reductions were offset in part by an increase of GBP0.5m in Fin Machine Group.
Target Entertainment Group, one of the UK's leading television producers and
distributors, benefited from the production of the 7th season of Foyle's War but
the overall TV industry was weak leading to a lower than expected performance in
Target's distribution division. While expected to generate revenues of over
GBP20m, we reduced its holding value until we can see clearer signs of a rebound
in the TV industry.
Securing the Company's investment with a fixed charge over its music catalogue,
we restructured Acrobat Music Group with the business emerging as Future Noise
Music. As a result, there was a net reduction in value of GBP0.3m in Future
Noise Music. The net reduction reflects a decrease in the business' revenues as
the collapse of Woolworths and Zavvi severely effected its historic UK
distribution channels. The company has worked hard at establishing new channels
and signing new artists, and we are hopeful that much of the lost value in the
business can be recovered.
The full provision against the investment in Emote Games came as a result of its
inability to access additional financing from other investors, despite positive
early data on the acceptance of its online game, The Hunter. Unfortunately the
estimated rates of growth did not materialise in the necessary time frame and an
expected US distribution deal was not secured.
Portfolio Summary
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Investments | Cost | Cost | Valuation | Valuation | Combined | Combined | % of |
| at 30 September | Ordinary | C | Ordinary | C Shares | Total | Valuation | Portfolio |
| 2009 | | Shares | Shares | GBP'000 | GBP'000 | | |
| | Shares | GBP'000 | GBP'000 | | | movement | by |
| | GBP'000 | | | | | in the | Value |
| | | | | | | year | |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Advanced Medical | 381 | - | 1,279 | - | 1,279 | (202) | 7.0 |
| | | | | | | | |
| Solutions | | | | | | | |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Amber Taverns | 750 | - | 2,511 | - | 2,511 | 1,082 | 13.7 |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Brand | 200 | 1,000 | 189 | 989 | 1,178 | (23) | 6.4 |
| Acquisitions | | | | | | | |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Conexion Media | 483 | - | 71 | - | 71 | (185) | 0.4 |
| (MCS) | | | | | | | |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Connect2Media | 234 | 790 | 258 | 869 | 1,127 | 102 | 6.1 |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Defaqto | 1,230 | - | 1,447 | - | 1,447 | (247) | 7.9 |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Electra Private | 75 | - | 135 | - | 135 | (1) | 0.7 |
| Equity | | | | | | | |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Emote Games | - | 491 | - | - | - | (427) | 0.0 |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Financial News | 194 | - | 1,258 | - | 1,258 | 1,064 | 6.9 |
| Publishing | | | | | | | |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| First Dental | 750 | - | 81 | - | 81 | (106) | 0.4 |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Future Noise | - | 281 | - | 271 | 271 | (10) | 1.5 |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Hallmarq | 1,300 | 300 | 752 | 425 | 1,177 | 213 | 6.4 |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Keycom | 1,705 | - | 131 | - | 131 | (46) | 0.7 |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Loseley Dairy | 900 | - | 1,947 | - | 1,947 | 1,046 | 10.6 |
| Ice Cream | | | | | | | |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| MA Hubbards | 800 | - | 186 | - | 186 | (241) | 1.0 |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Media Square | 1,579 | - | 130 | - | 130 | (274) | 0.8 |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Mount Engineering | - | 251 | - | 207 | 207 | (14) | 1.1 |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Red Reef Media | 285 | 588 | 179 | 310 | 489 | (385) | 2.7 |
| Ltd | | | | | | | |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Sport Media | - | 249 | - | 13 | 13 | (39) | 0.1 |
| Group | | | | | | | |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Target | - | 2,000 | - | 1,467 | 1,467 | (923) | 8.0 |
| Entertainment | | | | | | | |
| Group | | | | | | | |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| The Fin Machine | 200 | 1,000 | 541 | 2,704 | 3,245 | 622 | 17.6 |
| Company | | | | | | | |
| | | | | | | | |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Total | 11,066 | 6,950 | 11,095 | 7,255 | 18,350 | 1,006 | 100.0 |
| Investments | | | | | | | |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| | | | | | | | |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Other Assets | | | | | | | |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Cash | | | 987 | 15 | 1,002 | | |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
| Total | | | 12,082 | 7,270 | 19,352 | | |
+-------------------+----------+---------+-----------+-----------+----------+-----------+-----------+
Investment Manager
The Fund's investments are managed by Acuity Capital. Acuity Capital was
established in 1981 and is authorised and regulated by the Financial Services
Authority.
Acuity Capital has considerable expertise in quoted and unquoted investments and
has a well developed deal flow, including unquoted company proposals that
originate from its own contacts and network, pre-float finance opportunities and
broker led AIM flotations.
Acuity Capital is also the Investment Manager of Acuity VCT 2 Plc, Acuity VCT 3
Plc and CF Acuity Real Active Management Fund, the successor fund to Electra
Active Management Plc.
The Investment Manager has established an Investment Committee comprising three
Acuity Capital executives and two independent members. The independent members
of the Investment Committee are Angela Lane and Tony Everett. After 18 years
working in private equity at 3i, Angela's final role was as a partner in 3i's
Growth Capital business managing the UK Portfolio. Tony has a background as an
entrepreneur and business owner and acts as a consultant to Fleming Family and
Partners Private Equity. In addition, the Investment Committee is chaired by
Hugh Mumford, a senior executive of Electra Partners Group. The Investment
Committee meets as required to consider and review investment proposals.
Co-investment Arrangements with other Acuity VCTs
The Directors welcome the fact that the Investment Manager has five VCT pools of
funds, Acuity VCT Plc Ordinary Share pool, Acuity VCT Plc 'C' Share pool, Acuity
VCT 2 Plc Ordinary Share pool, Acuity VCT 2 Plc 'C' Share pool and Acuity VCT 3
Plc (together "the Acuity VCTs"), it can use for co-investment. This allows each
fund to spread its investment risk and gain access to larger investments than it
could do on its own. Where a co-investment opportunity arises between the
Company and one or more of the other funds, the Company will invest in an agreed
and consistent proportion, on the same terms and in the same securities as the
funds with which it co-invests. Costs associated with any such investment will
be borne by each fund pro-rata to its investment.
In more detail, the Board has adopted a set of guidelines on its co-investment
arrangements with the Acuity VCTs and the Investment Manager as follows:-
* Other than as set out below, investments will be allocated between the Company
and the Acuity VCTs by reference to the size of each fund and to each fund's
available cash resources.
* Where an opportunity arises for a second or subsequent round of investment in a
company in which one of the Acuity VCTs has invested at an earlier stage, the
fund holding the existing investment will have a preferential right to take up
any pro-rata entitlement it may have in the new financing round. The amount it
invests on this basis will not be taken into account in determining its
co-investment share thereafter.
* The Company will make an investment in which one or more of the Acuity VCTs have
existing investments only when the Board considers that to be in the best
interests of the Company.
* Any potential conflict of interest in a proposed investment by one or more of
the Acuity VCTs will be referred by the Investment Manager to the Board of the
Company and the other relevant Boards.
* In the event of a possible conflict of interest between the Investment Manager
and the Company, the matter will be decided by those Directors who are
independent of the Investment Manager.
The Board of the Company acknowledges that the Investment Manager may
occasionally recommend an allocation of investments on a different basis from
the one described above. For example, an exception may be made to ensure that
one or more of the Company, Acuity VCT 2 Plc or Acuity VCT 3 Plc maintain their
status as a HMRC approved VCT, or in the interests of balancing their
portfolios. A different basis may also be necessary to meet the requirements of
potential investee companies. In these cases the Directors may use their
judgement.
Largest 10 Investments
The Fin Machine Company
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP1,200,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP3,245,000 | Year Ended 30 | 2008 | 2007 |
| | | September | GBPm | GBPm |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/EBITDA | Sales | 19.5 | 17.0 |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 10.8% | Profit before tax | 2.8 | 1.0 |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Specialist | Retained Profit | 2.1 | 0.7 |
| | Engineering | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT 2, | Net Assets | 4.4 | 2.3 |
| Investing | Acuity VCT 3 | | | |
+-------------------------+----------------+----------------------+--------+--------+
Amber Taverns
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP750,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP2,511,000 | Year Ended 31 | 2009 | 2008 |
| | | January | GBPm | GBPm |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/Sales | Sales | 7.0 | 3.7 |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 16.5% | Profit before tax | 0.1 | 0.0 |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Pub Chain | Retained loss | 0.0 | (0.1) |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT 2, | Net Assets | 0.6 | 0.6 |
| Investing | Acuity VCT 3 | | | |
+-------------------------+----------------+----------------------+--------+--------+
Loseley Dairy Ice Cream
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP900,000 | No Audited Financial | | |
| | | Information yet | | |
| | | produced | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP1,947,000 | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/Sales | | | |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 34.6% | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Fine Ice Cream | | | |
| | Manufacturer | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT 2, | | | |
| Investing | Acuity VCT 3 | | | |
+-------------------------+----------------+----------------------+--------+--------+
Target Entertainment Group
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP2,000,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP1,467,000 | Year Ended 31 | 2007 | 2006 |
| | | December | GBPm | GBPm |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/Sales | Sales | 17.1 | 10.3 |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 13.33% | Loss before tax | (0.5) | (0.3) |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Television | Retained Loss | (0.3) | (0.4) |
| | Media | | | |
| | Distribution | | | |
| | Company | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT 2, | Net Liabilities | (0.5) | (1.8) |
| Investing | Acuity VCT 3 | | | |
+-------------------------+----------------+----------------------+--------+--------+
Defaqto Group
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP1,230,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP1,447,000 | Year Ended 31 March | 2009 | 2008 |
| | | | GBPm | GBPm |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/Sales | Sales | 8.3 | 7.8 |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 9.0% | Loss before tax | (0.4) | (1.8) |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Financial | Loss after tax | (0.5) | (1.7) |
| | product data | | | |
| | provider | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT 2, | Net Liabilities | (8.1) | (7.9) |
| Investing | Acuity VCT 3 | | | |
+-------------------------+----------------+----------------------+--------+--------+
Advanced Medical Solutions
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP381,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP1,279,000 | Year Ended 31 | 2008 | 2007 |
| | | December | GBPm | GBPm |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | Bid Price | Sales | 20.3 | 16.9 |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 4.0% | Profit before tax | 2.9 | 1.9 |
+-------------------------+----------------+----------------------+--------+--------+
| Business | The operation | Profit after tax | 3.3 | 2.2 |
| | of Designing, | | | |
| | Development | | | |
| | and | | | |
| | Manufacture of | | | |
| | Polymers and | | | |
| | Medical | | | |
| | Adhesives | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | N/A | Net assets | 19.9 | 15.7 |
| Investing | | | | |
+-------------------------+----------------+----------------------+--------+--------+
Financial News Publishing
+-------------------------+----------------+----------------------+
| Cost | GBP194,000 | No Audited Financial |
| | | Information yet |
| | | produced |
+-------------------------+----------------+----------------------+
| Valuation | GBP1,258,000 | |
+-------------------------+----------------+----------------------+
| Basis of Valuation | EV/Sales | |
| | Multiple | |
+-------------------------+----------------+----------------------+
| Equity held | 36.1% | |
+-------------------------+----------------+----------------------+
| Business | B2B publishing | |
| | and related | |
| | conferences | |
+-------------------------+----------------+----------------------+
| Other Acuity Funds | Acuity VCT 2 | |
| Investing | | |
+-------------------------+----------------+----------------------+
Brand Acquisitions
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP1,200,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP1,178,000 | Period Ended 31 | Year | 3 |
| | | January | ended | months |
| | | | 2009 | ended |
| | | | GBPm | 2008 |
| | | | | GBPm |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/EBITDA | Sales | 11.3 | 1.1 |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 16.6% | Profit/(loss) before | 0.3 | (0.3) |
| | | tax | | |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Branded | Profit/(loss) after | 0.2 | (0.2) |
| | Menswear | tax | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT 2, | Net | 0.7 | (0.5) |
| Investing | Acuity VCT 3 | Assets/(Liabilities) | | |
+-------------------------+----------------+----------------------+--------+--------+
Hallmarq
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP1,600,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP1,177,000 | Year Ended 31 August | 2008 | 2007 |
| | | | GBPm | GBPm |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/EBITDA | Sales | 1.9 | 2.0 |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 16.7% | Loss before tax | (0.2) | (1.5) |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Design, | Loss after tax | (0.2) | (1.5) |
| | manufacture | | | |
| | and sale of | | | |
| | MRI equipment | | | |
| | to the equine | | | |
| | market | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | N/A | Net Assets | 1.6 | 1.0 |
| Investing | | | | |
+-------------------------+----------------+----------------------+--------+--------+
Connect2Media
+------------------------+------------------+----------------------+--------+
| Cost | GBP1,024,000 | Audited Financial | |
| | | Information | |
+------------------------+------------------+----------------------+--------+
| Valuation | GBP1,127,000 | Period 16 June 2008 | 2008 |
| | | to 31 December 2008 | GBPm |
+------------------------+------------------+----------------------+--------+
| Basis of Valuation | EV/Sales | Sales | 2.4 |
| | Multiple | | |
+------------------------+------------------+----------------------+--------+
| Equity held | 9.0% | Loss before tax | (0.7) |
+------------------------+------------------+----------------------+--------+
| Business | Developer and | Retained Loss | (0.7) |
| | global publisher | | |
| | and distributor | | |
| | for digital | | |
| | entertainment | | |
+------------------------+------------------+----------------------+--------+
| Other Acuity Funds | Acuity VCT 2, | Net Assets | 3.8 |
| Investing | Acuity VCT 3 | | |
+------------------------+------------------+----------------------+--------+
Note:-
In many cases, the qualifying investment is made substantially in the form of
loan notes which both carry a high interest rate and are treated as debt for
statutory purposes. Shareholders should therefore be advised that often the
investee companies report both retained losses and net liabilities as a result.
BOARD OF DIRECTORS
Rupert Pennant-Rea, Chairman
Appointed a Director on 24 September 2001.
He is a former Deputy Governor of the Bank of England and Editor of The
Economist. He is currently Chairman of Henderson and a Director of Go-Ahead and
a number of other companies. He is Chairman of the Nomination Committee.
David Donnelly*
Appointed a Director on 24 September 2001.
He is Chairman of Caithness Petroleum. Previously he was CEO of the Private
Equity business of Fleming Family and Partners. Previous directorships included
Highland Participants (Chairman and Chief Executive), a listed exploration
company and R&W Hawthorn Leslie & Co (Executive Director), a publicly quoted
shipbuilding and repair company. He was formerly a member of the London Stock
Exchange. He is Chairman of the Remuneration Committee.
Catrina Holme*
Appointed a Director on 26 February 2009.
She has had extensive experience in the venture capital and private equity
industry. Initially a private equity lawyer, she has held both Executive,
Non-Executive and Investment roles in the sector. Previously a member of
Cazenove Private Equity and Partner at DFJEsprit, she is currently a Venture
Partner at Fidelity Ventures and runs a consulting business, Investor Inside,
working with technology companies to maximise their investment success.
Nicholas Ross
Appointed a Director on 24 September 2001.
He is a founding member of Acuity Capital LLP. Prior to the Management buy-out
he had been at Electra Quoted Management since1993. Previously he had several
years in investment analysis and fund management. He has been responsible for
the launch of the three Acuity Capital VCT funds. He is a Managing Partner of
Acuity Capital LLP and a Director of Acuity Capital and all three Acuity VCT
funds. He also sits on a number of investee company boards.
David Sebire*
Appointed a Director on 24 September 2001.
He is a Chartered Accountant with extensive industrial and corporate finance
experience. Previous chairmanships have included Bridport, PTS and Clearspeed
Technology. He is Chairman of PegasusBridge Fund Management and a number of
private companies. He has been nominated the Senior Independent Director under
the Combined Code on Corporate Governance and is additionally Chairman of the
Audit Committee.
All Directors are also Directors of Acuity VCT 2.
* Member of the Audit, Remuneration and Nomination Committees
REPORT OF THE DIRECTORS
To the Members of Acuity VCT Plc
The Directors present the audited accounts of the Company for the year ended 30
September 2009 and their Report on its affairs.
Investment Company Status
In February 2005, in order to permit the payment of dividends out of realised
capital gains, the Company revoked its status as an investment company within
the meaning of Section 833 of the Companies Act 2006.
VCT Status
HM Revenue and Customs has granted the Company approval under Section 274 of the
Income Tax Act 2007 (ITA 2007) as a VCT, the approval being effective from the
first day on which the Company's Ordinary Shares were listed on the London Stock
Exchange (being 25 January 2002). The Board continues to direct the affairs of
the Company to enable it to maintain approval as a VCT.
Business Review
Objective and Investment Strategy
A review of the Company's Objective and Investment Strategy is detailed is
detailed above in this announcement.
Current and Future Development
A review of the main features of the year is contained in the Chairman's
Statement and the Investment Manager's Review .
The Board regularly reviews the development and strategic direction of the
Company. The Board's main focus continues to be on the Company's long-term
investment return. Attention is paid to the integrity and success of an
investment process and on factors which may have an impact on this approach. Due
regard is given to the marketing and promotion of the Company, including
effective communication with shareholders and other external parties.
Social, Community, Employee and Environmental Issues
In carrying out its activities and in relationships with the community, the
Company aims to conduct itself responsibly, ethically and fairly. The Company
has no employees and the Board is comprised entirely of Non-Executive Directors.
The Company has no direct impact on the environment, however, the Company
believes that it is in the shareholders interests to consider environmental,
social and ethical factors when selecting and retaining investments. Further
details of how the Company views socially responsible investment is set out
below.
Performance
A detailed review of performance during the year under review is contained in
the Investment Manager's Review.
A number of performance measures are considered by the Board and Investment
Manager in assessing the Company's success in achieving its objectives.
The key performance indicators ('KPIs') used to measure the progress and
performance of the Company are established industry measures and are as
follows:-
* The movement in net asset value per share
* The movement in share price
* The movement of net asset value and share price performance compared to the FTSE
All-Share Index
Details of the KPIs are shown in the Financial Highlights and through a graph
comparing the Company's total return on a share price and net asset value basis
over the five years to 30 September 2009 with the FTSE All-Share Index total
return over the same period as set out in the Directors' Remuneration Report.
The Board recognises that it is in the long term interests of shareholders to
reduce discount volatility and believes that the prime driver of discounts over
the longer term is performance. Depending on the outcome of the proposed Merger
referred to in the Chairman's Statement, as outlined in the Report of the
Directors, the Board intends to seek renewal of its annual share buy-back
authority at the Company's Annual General Meeting in 2010. As noted in the
Chairman's Statement, due to the recent market turbulence, the Board has
temporarily suspended the share buy-back programme but are monitoring the
position closely and will restore share buy-backs when conditions allow.
Risk Management
Since the Company is flexible with regard to those areas in which it invests, it
aims to achieve a significant degree of diversification and to spread risk by
investing in unquoted, PLUS traded and AIM quoted companies. In addition, there
is no emphasis on any particular industry sector and even the non-qualifying
investments have quite a high level of in-built diversification. The Company is
restricted to investing no more than 15% of the value of its total assets at the
time of investment in any one individual qualifying investment or non-qualifying
investment.
The key risks facing the Company include Market Risk, Interest Rate Risk, Credit
Risk and Liquidity Risk as further detailed in Note 20 of the Notes to the
Accounts.
In addition the Company is also focused on the following key risks:
Macroeconomic risks
The performance of the Company's underlying investment portfolio is principally
influenced by a combination of economic growth, interest rates, the availability
of well-priced debt finance, the number of active trade and private equity
buyers and the level of merger and acquisition activity. All of these factors
have an impact on the Company's ability to invest and on the Company's ability
to exit from its underlying portfolio or on the levels of profitability achieved
on exit.
Long-term strategic risk
The Company is subject to the risk that its long-term strategy and its level of
performance fails to meet the expectations of its shareholders. The Company
constantly monitors the level of discount of its Net Asset Value to its share
price and considers the most effective methodologies to keep this at a minimum
including its share buy-back policy.
In addition the Company regularly reviews its Objectives and Investment Strategy
in light of prevailing investor sentiment to ensure the Company remains
attractive to its shareholders.
Government policy and regulation risk
The Company carries on business as a VCT under section 274 of the Income Tax Act
2007 (ITA 2007). Continuation of this status is subject to the Company directing
its affairs in line with the relevant requirements of the legislation.
Anticipated and actual changes in government policy and related tax treatment of
VCTs' are closely monitored, as are other changes which could affect results of
operations or financial position.
Acuity Capital is an authorised person under the Financial Services and Markets
Act 2000 and regulated by the FSA. Changes to the regulatory framework under
which Acuity Capital operates are closely monitored by Acuity Capital and
reported upon as necessary by Acuity Capital to the Company.
Socially Responsible Investment
The Company believes that high standards of corporate social responsibility
('CSR') make good business sense and have the potential to protect and enhance
investment returns. Consequently, the investment process takes social,
environmental and ethical issues into account when, in the Company's view, these
have a material impact on either investment risk or return.
The Company recognises and supports the view that social, environmental and
ethical best practice should be encouraged. It favours investing in companies
committed to high standards of CSR and to the principles of sustainable
development.
The Company does not screen out companies from its investment universe purely on
the grounds of poor social, environmental or ethical performance. Instead, it
adopts a positive engagement approach whereby, if it is appropriate, it
discusses these issues with the management of the companies in which it invests.
The information gathered during these meetings is used both to assist the
Company's investment decisions and also to encourage investee company management
to improve procedures and attitudes. The Company strongly believes that this is
the most effective way to improve the CSR polices of the businesses in which it
invests and the Board endorses this view.
Investment risks
The Company operates in a very competitive market. Changes in the number of
market participants, the availability of funds within the market, the pricing of
assets, or in the ability of Acuity Capital to access deals on a proprietary
basis could have a significant effect on the Company's competitive position and
on the sustainability of returns.
In order to source and execute good quality investments the Company is primarily
dependent on Acuity Capital having the ability to attract and retain people with
the requisite investment experience and whose compensation is in line with the
Company's objectives.
Once invested, the performance of the Company's portfolio is dependent upon a
range of factors. These include but are not limited to: (i) the quality of the
initial investment decision described above; (ii) the ability of the portfolio
company to execute successfully its business strategy; and (iii) actual outcomes
against the key assumptions underlying the portfolio company's financial
projections. Any one of these factors could have an impact on the valuation of a
portfolio company and upon the Company's ability to make a profitable exit from
the investment within the desired timeframe.
A rigorous process is put in place by Acuity Capital for managing the
relationship with each investee company for the period to anticipated
realisation. This includes regular asset reviews and, in many cases, board
representation by one of Acuity Capital's executives.
The Company reviews both the performance of Acuity Capital and its incentive
arrangements on a regular basis to ensure that both are appropriate to the
objectives of the Company.
Operational risks
The Company's investment management, custody of assets and all administrative
systems are provided or arranged for the Company by Acuity Capital. Therefore,
the Company is exposed to a range of operational risks at Acuity Capital which
can arise from inadequate or failed processes, people and systems or from
external factors affecting these.
The Company's system of internal control mainly comprises the monitoring of the
services provided by Acuity Capital, including the operational controls
established by them to ensure they meet the Company's business objectives.
Share Capital
The current authorised share capital of the Company is GBP1,020,000 divided into
80 million Ordinary Shares of 1p each, 20 million C Shares of 1p each and 20
million deferred shares of 0.1p each. The Ordinary Shares and C Shares have
voting rights attached, holders are entitled to receive notice of and attend
shareholder meetings and to receive dividends once declared and approved. The
other rights and obligations attaching to the Ordinary Shares, C Shares and
deferred shares are set out in the Company's Articles of Association.
Authority to make Market Purchases of Shares
At the General Meeting of the Company held on 26 February 2009, authority was
given to make market purchases of up to 1,920,148 of the Company's issued
Ordinary Share capital and up to 909,315 of the Company's C Share capital.
To date, no C Shares have been purchased for cancellation.
The Company does not hold any shares in treasury.
Accordingly, at 30 September 2009, authority remained to purchase a total of
1,920,148 Ordinary Shares and 909,315 C Shares.
At 30 September 2009 a total of 19,201,481 (2008: 19,201,481) Ordinary Shares of
1p each (representing 68% of the total issued share capital) and 9,093,156
(2008: 9,093,156) C Shares of 1p each (representing 32% of the total issued
share capital) were in issue.
Results and Dividend
The loss attributable to shareholders amounted to GBP1,320,000 (2008:
GBP2,316,000). The profit/(loss) on Ordinary Shares amounted to GBP710,000
(2008:GBP(3,265,000)) and C Shares amounted to a loss of GBP2,030,000 (2008:
Profit GBP949,000). The Directors do not recommend the payment of a final
dividend in respect of the year ended 30 September 2009 (2008: GBPnil).
Directors
The current Directors of the Company are listed above in this announcement. Mr
RL Pennant-Rea, Mr DJ Donnelly, Mr NRW Ross and Mr DJ Sebire served as Directors
of the Company throughout the financial year ended 30 September 2009. Mr M Broke
retired on the 26 February 2009. Mrs C Holme was appointed as a director on the
same day. Mr NRW Ross and Mrs C Holme will both retire at the Annual General
Meeting in 2010 and, being eligible, offer themselves for re-election. Short
biographical details of all the Directors are provided above in this
announcement. Following performance appraisals of all of the Directors, details
of which are to be found above in this announcement, the Board considers that
the performance of each Director retiring at the General Meeting and offering
himself for re-election continues to be effective and that each Director
continues to show commitment to his role. Accordingly, the Board recommends that
those Directors retiring at the Annual General Meeting in 2010 and offering
themselves for re-election be re-elected.
Directors' Interests
The beneficial interests of the Directors in the Ordinary Shares of the Company
are shown below. Save as disclosed, no Director had any notifiable interest in
the securities of the Company. No Director bought or sold any Ordinary Shares or
any C Shares of the Company during the year under review. There have been no
changes in the interests of any of the Directors in the Ordinary Shares of the
Company between 1 October 2009 and 15 December 2009. No options over shares in
the capital of the Company have been granted to the Directors.
+-------------+------------+--------------+
| 30 September 2009 | 1 October |
| Ordinary Shares of 1p | 2008 |
| each | Ordinary |
| | Shares of 1p |
| | each |
+--------------------------+--------------+
| RL | 11,080 | 11,080 |
| Pennant-Rea | - | - |
| DJ Donnelly | - | - |
| C Holme | 51,001 | 51,001 |
| NRW Ross | 10,200 | 10,200 |
| DJ Sebire | | |
+-------------+------------+--------------+
No Director holds C Shares in the Company.
Directors' Remuneration Report
An Ordinary Resolution to approve the Directors' Remuneration Report will be put
to the General Meeting in 2010.
Contracts with Directors
No Director has a service contract with the Company. As a result of being a
Managing Partner of Acuity Capital LLP, Mr NRW Ross is deemed to have an
interest in the Management Contract between the Company and Acuity Capital.
Directors' and Officers' Liability Insurance
Directors' and Officers' Liability Insurance is maintained on behalf of the
Directors in respect of their positions as Directors of the Company.
Substantial Shareholders
At 15 December 2009 the Directors had not been notified of any interests of 3%
or more in the Company's issued share capital.
Independent Auditors
A resolution to appoint KPMG Audit Plc as Auditors to the Company will be
proposed at the Annual General Meeting in 2010. A separate resolution will be
proposed at the Annual General Meeting in 2010 authorising the Directors to fix
the remuneration of the Auditors.
The Directors confirm that so far as each Director is aware, there is no
relevant audit information of which the Company's auditors are unaware and that
each Director has taken all the steps that he ought to have taken as a Director
in order to make himself aware of any relevant audit information and to
establish that the Company's auditors are aware of that information.
Creditor Payment Policy
The Company agrees the terms of payment with its suppliers when agreeing the
terms of each agreement. Suppliers are aware of the terms of payment and the
Company abides by the terms of payment. The Company's average creditor payment
period at 30 September 2009 was 1 day.
Management Fees and Arrangements
Acuity Capital was originally appointed as Investment Manager under an agreement
dated 2 October 2001. The agreement was for an initial period of five years and
thereafter could be terminated by either party giving not less than one year's
notice. Fees were paid quarterly in advance, as a percentage of net assets (less
a rebate of fees suffered in investments in funds managed by Acuity Capital), at
2.5% per annum.
Annual running expenses of the Fund are capped at 3.6% of the net asset value as
at 30 September 2009. Any excess will be reduced against the management fee
payable to the Investment Manager.
Incentive Schemes
Ordinary Shares
Certain persons engaged in the business of the Investment Manager will receive a
performance fee based on returns to holders of Ordinary Shares. If the Company's
net asset value per Ordinary Share in a relevant period increases such that it
exceeds GBP1, less the value of any distributions paid from time to time, plus
notional interest thereon at the rate of 7% per annum (compounded annually),
then the Investment Manager will receive 20% of the excess. The first period
expired on 30 September 2004. Subsequent periods are of one year's duration. In
the event that the performance of the Company falls short of the target in any
period the shortfall must be made up before the Investment Manager is entitled
to a performance fee for subsequent periods. At 30 September 2009, there was no
amount due under this Incentive Scheme.
C Shares
Certain persons engaged in the business of the Investment Manager will be
entitled to receive a performance fee based upon returns to holders of C Shares.
If by the end of a financial year, aggregate distributions of 30p per C Share
have been declared and if the Performance Value (sum of the Company's net asset
value per C Share and the aggregate dividends per C Share) at that date exceeds
130p per C Share, then the beneficiaries will receive 20% of the excess of such
Performance Value over 100p per C Share. In the event that the performance of
the Company falls short of the target in any period the shortfall must be made
up before the beneficiaries are entitled to a performance fee for subsequent
periods. At 30 September 2009, there was no amount due under this Incentive
Scheme.
Going Concern
The Directors believe that it is appropriate to continue to adopt the going
concern basis in preparing the Accounts as the Company has adequate resources to
continue in operational existence for the foreseeable future. The board took
into consideration cashflow forecasts and that there was no debt at the year end
when arriving at this conclusion.
Annual General Meeting
The Annual General Meeting of the Company will be held on 24 February 2010. In
addition to the ordinary business, the following special business will be
considered:-
Authority to allot shares: Resolution 7
An Ordinary Resolution will be proposed at the Annual General meeting in 2010 to
grant the Directors authority under section 551 of the Companies Act 2006 to
allot shares up to a maximum aggregate nominal value of GBP94,315.45 being one
third of the nominal value of the issued share capital of the Company at the
date of this Directors' Report. The authority will expire at the conclusion of
the Company's Annual General Meeting in 2011. This Ordinary Resolution will
also remove the concept of an authorised share capital from the Company's
articles of association, in accordance with the provisions of the Companies Act
2006. The Directors have no present intention of exercising this authority. The
Directors recommend that shareholders vote in favour of this Ordinary
Resolution.
Disapplication of pre-emption rights: Resolution 8
A Special Resolution will be proposed at the Annual General Meeting in 2010 to
grant the Directors authority to allot equity securities for cash without first
offering the securities to existing shareholders in connection with the
allotment of up to 10% of the nominal value of the issued Share capital of the
Company shown in the accounts for the year ended 30 September 2009. The
Directors' authority under this resolution will expire at the conclusion of the
Company's Annual General Meeting in 2011. The Directors recommend shareholders
to vote in favour of this Special Resolution.
Authority to Make Market Purchases of Shares: Resolution 9
As set out in the Chairman's Statement, in the interest of all the Company's
shareholders, the Board suspended the Company's buy back programme temporarily
because of the exceptional economic circumstances. Nevertheless the Board wishes
to have in place the authority to purchase the Company's own shares so that the
buy back programme can be re-instated as and when conditions permit.
Accordingly, a Special Resolution will be proposed to renew, for one year, the
Board's authority to make market purchases of Ordinary Shares and/or C Shares
provided that such authority is limited to the purchase of 14.9% of the issued
Ordinary Share capital and/or 14.9%. of the issued C Share capital of the
Company immediately prior to the passing of the resolution subject to the
constraints set out in the Special Resolution. Should any shares be purchased
under this authority, it is the intention of the Board that they be cancelled
and not held as treasury shares.
The Directors do not intend to use this authority to purchase shares unless this
would result in an increase in the net asset value per ordinary and/or C Share
as applicable and would be in the best interests of shareholders generally. The
Directors recommend shareholders to vote in favour of this Special Resolution.
Corporate Governance
Arrangements in respect of corporate governance, appropriate to a venture
capital trust, have been made by the Board. The Board has considered the
principles and recommendations of the Association of Investment Companies' Code
of Corporate Governance issued in March 2009 ('AIC Code') by reference to the
AIC Corporate Governance Guide for Investment Companies ('AIC Guide'). The AIC
Code, as explained by the AIC Guide, addresses all the principles set out in
Section 1 of the Combined Code on Corporate Governance issued by the Financial
Reporting Council ('FRC') ('the Combined Code'), as well as setting out
additional principles and recommendations on issues which are of specific
relevance to the Company. The FRC confirmed in February 2009 that it remained
their view that the AIC Guide was appropriate and that investment companies may
report against the AIC Code.
The Board considers that reporting against the principles and recommendations of
the AIC Code, and by reference to the AIC Guide (which incorporates the Combined
Code) will provide better information to shareholders.
Except as disclosed below, the Company complied throughout the year with the
recommendations of the AIC Code and the relevant provisions of Section 1 of the
Combined Code. Since all the Directors are non-executive the provisions of the
Combined Code in respect of the role of the chief executive are not relevant to
the Company and, likewise, the provisions of the Combined Code relating to
Directors' remuneration are not relevant except in so far as they relate
specifically to non-executive Directors. For the reasons set out in the AIC
Guide, and in the preamble to the Combined Code, the Board considers that these
provisions are not relevant to the Company, being an externally managed venture
capital trust. The Company has therefore not reported further in respect of
these provisions.
The Directors confirm that during the year under review the Company has complied
with Section 1 of the Combined Code on Corporate Governance ("the Code") issued
by the Financial Reporting Council in June 2008.
Directors' Attendance at Scheduled Meetings of the Board and Committees of the
Board
+-------------+------+----------+------+----------+------+----------+------+----------+
| | Board | Audit | AGM/EGM | Nomination |
| | | Committee | | Committee |
+-------------+-----------------+-----------------+-----------------+-----------------+
| |Held |Attended |Held |Attended |Held |Attended |Held |Attended |
+-------------+------+----------+------+----------+------+----------+------+----------+
| Rupert | 4 | 4 | 2 | 2 | 2 | 2 | 1 | 1 |
| Pennant-Rea | | | | | | | | |
+-------------+------+----------+------+----------+------+----------+------+----------+
| Michael | 4 | 2 | 2 | 1 | 2 | 1 | n/a | n/a |
| Broke | | | | | | | | |
+-------------+------+----------+------+----------+------+----------+------+----------+
| David | 4 | 3 | 2 | 2 | 2 | 2 | 1 | 1 |
| Donnelly | | | | | | | | |
+-------------+------+----------+------+----------+------+----------+------+----------+
| Catrina | 4 | 2 | 2 | 1 | 2 | 2 | n/a | n/a |
| Holme | | | | | | | | |
+-------------+------+----------+------+----------+------+----------+------+----------+
| Nick | 4 | 4 | 2 | 2 | 2 | 2 | 1 | 1 |
| Ross | | | | | | | | |
+-------------+------+----------+------+----------+------+----------+------+----------+
| David | 4 | 3 | 2 | 2 | 2 | 2 | 1 | 1 |
| Sebire | | | | | | | | |
+-------------+------+----------+------+----------+------+----------+------+----------+
In addition, a number of Directors attended further Board meetings at short
notice to address specific issues.
The Board of Directors
The Board, which meets regularly, comprised five Directors at 30 September 2009,
all of whom were non-executive. All of the Directors who held office at 30
September 2009, apart from Mr NRW Ross, have been considered by the Board to be
independent from the Investment Manager. The Board has nominated Mr DJ Sebire as
the Senior Independent Director.
All of the Directors of the Company are also Directors of Acuity VCT 2 Plc which
was launched in 2004 and which is also managed by Acuity Capital. The Board has
considered the question of the independence of each Director in light of the
Code's provisions on that subject.
The Board believes that each of the Company's Directors, apart from Mr NRW Ross,
continues to be wholly independent under the Code notwithstanding the
cross-directorships detailed above. Independence is a state of mind and the
character and judgement which accompany this are distinct from and, in the
Board's opinion, are not compromised by having cross directorships with other
Directors.
The Board has agreed a schedule of matters reserved for its specific approval,
which includes a regular review of the Company's Management Agreement with
Acuity Capital, together with the monitoring of the performance thereunder. The
Management Agreement sets out the matters over which Acuity Capital has
authority in accordance with the policies and directions of the Board. The Board
Meetings consider as appropriate such matters as overall strategy, investment
performance, share price performance, share price discount and communication
with shareholders. The Board considers that it meets sufficiently regularly to
discharge its duties effectively. The numbers of scheduled meetings of the Board
and the Audit Committee are shown in the table above. All of the Directors
attended the Annual General Meeting.
The Board receives information that it considers to be sufficient and
appropriate to enable it to discharge its duties. Each Director receives board
papers several days in advance of each scheduled Board meeting and is able to
consider in detail the Company's performance and any issues to be discussed at
the relevant meeting.
The Directors believe that the Board has the balance, skills and experience
which enable it to provide effective strategic leadership and proper governance
of the Company. Information about the Directors, including their relevant
experience, can be found above in this announcement.
Performance Appraisal
The Board carried out a formal appraisal process of its own and of its
Committees' operation and performance during the year under review. This was
implemented by means of questionnaires circulated to the Directors, the results
of which were then reviewed by the Board. Issues covered included board
composition, meeting arrangements and communication. The process was considered
by the Board to be constructive in identifying areas for improving the
functioning and performance of the Board and of its Committees. The Board
concluded that its performance and that of its Committees was satisfactory.
The Chairman carried out a formal appraisal of each of the Directors during the
year under review and the Board, under the leadership of the Senior Independent
Director, similarly appraised the Chairman. Relevant matters considered included
the attendance and participation at Board and Committee meetings, commitment to
Board activities and the effectiveness of the contribution made by the relevant
Director. As a result of this process the Chairman has confirmed that the
performance of each of the Directors being proposed for re-election continues to
be effective and that each of them continues to show commitment to his role. The
Senior Independent Director has also confirmed the continuing effectiveness and
commitment of the Chairman.
Re-election of Directors
In accordance with the Code's provisions and the Company's Articles, Ms C Holme,
and Mr NRW Ross will retire at the Annual General Meeting to be held in 2010 and
offer themselves for re-election. Mr MHA Broke has retired.
Independent Professional Advice
Individual Directors may seek independent professional advice in furtherance of
their duties at the Company's expense within certain parameters. All Directors
have access to the advice and services of the Company Secretary. Any appointment
or removal of the Company Secretary would be a matter for consideration by the
entire Board.
The Audit Committee
The Board has an Audit Committee established in compliance with the Code. It
comprises all the Directors other than the Chairman of the Board and Mr NRW
Ross, with Mr DJ Sebire as Chairman of the Committee. The Board has taken note
of the suggestion that at least one member of the Committee should have recent
and relevant experience and is satisfied that the Committee is properly
constituted in this respect. Its authority and duties are clearly defined in its
written terms of reference which are available on Acuity Capital's website.
The Committee's Responsibilities include:
* monitoring and reviewing the integrity of the financial statements, the internal
financial controls and the independence, objectivity and effectiveness of the
external auditors;
* making recommendations to the Board in relation to the appointment of the
external auditors and approving the remuneration and terms of their engagement;
* developing and implementing the Company's policy on the provision of non-audit
services by the external auditors;
* reviewing the arrangements in place within Acuity Capital whereby their staff
may, in confidence, raise concerns about possible improprieties in matters of
financial reporting or other matters insofar as they may affect the Company and
* considering annually whether there is a need for the Company to have its own
internal audit function.
The Committee has reviewed the provision of non-audit services provided by the
external auditors and believes them to be cost effective and not an impediment
to the external auditors' objectivity and independence. It has been agreed that
all non-audit work to be carried out by the external auditors, must be approved
by the Audit Committee and that any special projects must be approved in
advance.
The Committee annually reviews the performance of KPMG Audit Plc, the Company's
external auditor. In doing so, the Committee considers a range of factors
including the quality of service, the auditor's specialist expertise and the
level of audit fees. There are no contractual obligations restricting the choice
of external auditor. Under Company Law the reappointment of the external auditor
is subject to shareholder approval at the AGM.
Internal Audit
Following the review carried out by the Audit Committee as to whether there is a
need for the Company to have its own internal audit function, the Board has
considered and continues to believe that the internal control systems in place
within Acuity Capital provide sufficient assurance that a sound system of
internal control, which safeguards shareholders' investment and the Company's
assets is maintained. An internal audit function, specific to the Company, is
therefore considered unnecessary.
The Remuneration Committee
During the year under review the Remuneration Committee comprised all the
Directors of the Company other than the Chairman of the Board and Mr NRW Ross,
with Mr DJ Donnelly as Chairman of the Committee. There were no meetings of the
Remuneration Committee during the year. The Committee has written terms of
reference which are available on Acuity Capital's website. Full details of its
role are set out in the Directors' Remuneration Report. The standard directors'
fees were unchanged during the year and therefore no meeting was held.
The Nomination Committee
The Nomination Committee meets on an ad hoc basis to consider suitable
candidates for appointment as Director. It comprises all the Directors apart
from Mr NRW Ross, with Mr RL Pennant-Rea as Chairman of the Committee. The board
considered several candidates and after conducting interviews, the Nomination
Committee unanimously agreed to appoint Ms C Holme as a director on the 26
February 2009. The Committee has written terms of reference which are available
on Acuity Capital's website. The Committee is responsible for identifying and
nominating, for the approval of the Board, candidates to fill board vacancies to
maintain a balanced Board.
Letters of appointment, which specify the terms of appointment, are issued to
new Directors.
The current Directors of the Company were appointed with regard to their
independence, suitability for the position and their experience in related
business areas.
Induction and Training
New Directors are provided with an induction programme which is tailored to the
particular circumstances of the appointee and which includes being briefed fully
about the Company by the Chairman and senior executives of Acuity Capital.
Following appointment, Directors continue to receive other relevant training and
advice as necessary to enable them to discharge their duties.
The Company's Relationship with its Shareholders
The Company places great importance on communication with the Company's
shareholders. In addition to the Annual and Half-Yearly Reports shareholders
will be sent regular newsletters from the Investment Manager.
At the Annual General Meeting all shareholders are welcome to attend and have
the opportunity to put questions to the Board.
The notice of the Annual General Meeting and related papers are sent to
shareholders at least 14 working days before the meeting. A separate resolution
is proposed on each substantially separate issue including the annual report and
accounts.
All proxy votes are counted and, except where a poll is called, the level of
proxies lodged for each resolution is announced at the Meeting and is published
on Acuity Capital's website. The chairman and the Senior Independent Director
can always be contacted either through the Company Secretary or care of the
Company's registered office at Paternoster House, 65 St Paul's Churchyard,
London EC4M 8AB.
Internal Control
The Code requires the Directors to review the effectiveness of the Company's
system of internal control and report to shareholders that they have done so.
The Code extended the earlier reporting requirements and now includes financial,
operational and compliance controls and risk management.
The Board confirms that it has an ongoing process for identifying, evaluating
and managing the significant risks faced by the Company. This process has been
in place throughout the year and has continued since the year end and up to the
date of this report. It is reviewed at regular intervals by the Board and
accords with the Financial Reporting Council's 'Internal Control : Revised
Guidance for Directors on the Combined Code'.
The Board is responsible for the Company's system of internal control and it has
reviewed its effectiveness for the year ended 30 September 2009. The system of
internal control is designed to manage, rather than eliminate, the risk of
failure to achieve business objectives and can only provide reasonable and not
absolute assurance against material misstatement or loss.
Since investment management, custody of assets and all administrative services
are provided or arranged for the Company by Acuity Capital, the Company's system
of internal control mainly comprises the monitoring of services provided by
Acuity Capital, including the operating controls established by them, to ensure
they meet the Company's business objectives. The key elements designed to
provide effective internal control for the Company are as follows:
* Financial Reporting - Regular and comprehensive review by the Board of key
investment and financial data including management accounts, revenue
projections, analyses of transactions and performance comparisons.
* Investment Strategy - Agreement by the Board of the Company's investment
strategy and monitoring of all large investments.
* Management Agreements - The Board regularly monitors the performance of Acuity
Capital to ensure that the Company's assets and affairs are managed in
accordance with the guidelines determined by the Board.
* Investment Performance - The investment transactions and performance of the
Company's assets and affairs are managed in accordance with the guidelines
determined by the Board.
* Management Systems - Acuity Capital's system of internal control includes clear
lines of responsibility, delegated authority, control procedures and systems.
Acuity Capital's compliance department monitors compliance with the Financial
Services Authority rules.
The Board keeps under review the effectiveness of the Company's system of
internal control by monitoring the operation of key controls of Acuity Capital
as follows:
* The Board reviews the terms of the Management Agreement and receives regular
reports from Acuity Capital executives.
* The Board reviews the certificates provided by Acuity Capital on a six monthly
basis, verifying compliance with documented controls.
* Custodians are required to produce on a regular basis a report (available for
review by the Directors) on their internal controls and their operations,
including a report by an independent firm of accountants.
Voting Policy
The Company's investee companies are principally a mixture of quoted and
unquoted companies in which the Company is a significant shareholder and the
Company is usually a party to all issues requiring shareholder approval. The
Company has given discretionary voting power to Acuity Capital to vote on its
behalf.
Acuity Capital's voting policy as agent for the Company has been adopted. It
applies the Statement of Principles drawn up by the Institutional Shareholders
Committee, when it considers these in its reasonable judgement to best serve the
financial interests of the Company's shareholders. Acuity Capital's voting
policy has been reviewed and endorsed by the Board.
Acuity Capital Management Limited
Secretary
Registered Office:
Paternoster House
65 St Paul's Churchyard
London EC4M 8AB
15 December 2009
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT, THE
DIRECTORS' REMUNERATION 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 and applicable law (UK
Generally Accepted Accounting Practice).
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 judgements and estimates that are reasonable and prudent;
* state whether applicable UK Accounting Standards have been followed, subject to
any material departures disclosed and explained in the financial statements; and
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping 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 and Directors' Remuneration Report that complies
with that law and those regulations.
The accounts of the Company are published on www.acuitycapital.co.uk which is a
website maintained by the Company's Investment Manager, Acuity Capital.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Management Company's website.
Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
In accordance with the FSA's Disclosure and Transparency Rules, the Directors
confirm to the best of their knowledge that:-
(a) the accounts,
prepared in accordance with applicable accounting standards, give a true and
fair view of the assets,
liabilities, financial position and
profit or loss of the Company; and
(b) the Report of the
Directors includes a fair review of the development and performance of the
business and position of the
Company together with a
description of the principal risks and uncertainties that it faces.
By order of the Board of Directors
Rupert Pennant-Rea,
Chairman
Registered Office:
Paternoster House
65 St Paul's Churchyard
London EC4M 8AB
15 December 2009
DIRECTORS' REMUNERATION REPORT
The Directors submit this report in accordance with the requirements of Schedule
3 of the Small Companies and Groups (Accounts and Directors' report) Regulations
2008. An Ordinary Resolution for the approval of this report will be put to
members at the forthcoming Annual General Meeting. The law requires the
Company's Auditors to audit certain of the disclosures provided. Where
disclosures have been audited they are indicated as such.
Remuneration Committee
During the year under review the Remuneration Committee comprised all the
Directors of the Company other than the Chairman of the Board and Mr NRW Ross.
Mr DJ Donnelly was Chairman of the Remuneration Committee throughout the year.
It was not necessary to hold any meetings of the Committee during the year.
There was no change to the remuneration of the Directors during the year. The
current annual fee rates are GBP20,000 for the Chairman and GBP15,000 for each
of the Directors, apart from Mr DJ Sebire who is paid an additional GBP5,000 per
annum in respect of further duties undertaken in relation to the production of
the Company's Report and Accounts, and Mr NRW Ross who receives no remuneration
from the Company. The Company has not been provided with advice or services by
any person in respect of Directors' remuneration during the year.
Policy on Directors' Remuneration
Subject to the overall limit of the aggregate remuneration of the Directors set
out in the Articles of Association of the Company as may from time to time be
determined by an Ordinary Resolution of the Company, the Remuneration
Committee's policy is that remuneration of non-executive Directors should be
sufficient to attract and retain the Directors needed to oversee the Company and
reflect the specific circumstances of the Company, the duties and
responsibilities of the Directors and the value and amount of time committed to
the Company's affairs. Non-executive Directors are not eligible to receive
bonuses, pension benefits, share options and other benefits.
Directors' Service Contracts
None of the Directors has a service contract with the Company. No arrangements
have been entered into between the Company and the Directors to entitle any of
the Directors for compensation for loss of office.
Performance Graph
Pursuant to the Directors' Remuneration Report Regulations 2002, the Company is
required to show a graph of total shareholder return against a suitable
benchmark index in its Directors' Remuneration Report for the last five
financial years.
The table below shows the Company's performance being measured in terms of its
Total Shareholder Return and its net asset value per share (with dividends
reinvested) over the five financial years to 30 September 2009 against the Total
Shareholder Return of the FTSE All-Share Index.
The table has incorporated the change in net asset value per share because
changes in net asset value per share relative to the FTSE All-Share Index are an
important indicator of the performance of the Company's assets.
The Directors consider that since the Company invests in a broad range of
commercial sectors, the FTSE All-Share Index is the most appropriate index
against which to compare the Company's performance.
Acuity VCT Share Price Total Return v Acuity VCT Net Asset Value v FTSE All
Share Index (Total Return) - Ordinary and C Shares
+-------------------+-------------------+-------------------+-------------------+
| Date | NAV Total Return | FTSE All-Share | Share Price |
| | (gross dividend | Index | |
| | re-invested) | Total Return | |
+-------------------+-------------------+-------------------+-------------------+
| 31/03/2005 | 115.05 | 99.32 | 96.65 |
+-------------------+-------------------+-------------------+-------------------+
| 30/09/2005 | 113.65 | 110.40 | 103.15 |
+-------------------+-------------------+-------------------+-------------------+
| 31/03/2006 | 110.59 | 127.38 | 105.15 |
+-------------------+-------------------+-------------------+-------------------+
| 30/09/2006 | 112.62 | 130.12 | 102.65 |
+-------------------+-------------------+-------------------+-------------------+
| 31/03/2007 | 110.74 | 139.03 | 101.65 |
+-------------------+-------------------+-------------------+-------------------+
| 30/09/2007 | 90.84 | 143.12 | 100.65 |
+-------------------+-------------------+-------------------+-------------------+
| 31/03/2008 | 76.60 | 128.44 | 72.00 |
+-------------------+-------------------+-------------------+-------------------+
| 30/09/2008 | 74.90 | 87.55 | 52.00 |
+-------------------+-------------------+-------------------+-------------------+
| 31/03/2009 | 52.60 | 84.61 | 61.70 |
+-------------------+-------------------+-------------------+-------------------+
| 30/09/2009 | 70.35 | 112.35 | 65.63 |
+-------------------+-------------------+-------------------+-------------------+
Directors' Remuneration for the Year (audited)
The Directors who served during the year received the following emoluments in
the form of fees:
+---------------------+---------+---------------------------+-----------------------+
| For the year ended | For the year ended |
| 30 September 2009 | 30 September 2008 |
| GBP'000 | GBP'000 |
+-----------------------------------------------------------+-----------------------+
| RL Pennant-Rea | 20 | 20 |
| (Chairman & joint | 8 | 15 |
| highest paid | 15 | 15 |
| Director) | 7 | - |
| M Broke (resigned | - | - |
| 26 February 2009) | 20 | 20 |
| DJ Donnelly | | |
| Catrina Holme | | |
| (appointed 26 | | |
| February 2009) | | |
| NRW Ross | | |
| DJ Sebire | | |
| (Joint highest paid | | |
| Director) | | |
| | | |
+---------------------+---------+---------------------------------------------------+
| Total | 70 | 70 |
+---------------------+---------+---------------------------+-----------------------+
As a former executive of the Electra Partners Group and as a current executive
of Acuity Capital, NRW Ross has an interest in the Management Contract between
the Company and Acuity Capital (formerly Electra Quoted Management). NRW Ross
has waived his right to receive director's fees from the Company.
By order of the Board of Directors
Mr DJ Donnelly,
Chairman of the Remuneration Committee,
Registered Office:
Paternoster House,
65 St Paul's Churchyard,
London, EC4M 8AB
15 December 2009
INCOME STATEMENT
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| | For the year ended 30 | For the year ended 30 | For the year ended 30 |
| | September | September 2009 | September 2009 |
| | 2009 | | |
+----------------+-------------------------------------+--------------------------------+--------------------------------+
| | | Ordinary Shares | | C Shares | | Total |
+----------------+-------+-----------------------------+--+-----------------------------+--+-----------------------------+
| | Notes | 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 |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Realised | 9 | - | (930) | (930) | | - | (652) | (652) | | - | (1,582) | (1,582) |
| (losses) on | 9 | - | 1,986 | 1,986 | | - | (1,204) | (1,204) | | - | 782 | 782 |
| investments | 1 | 115 | - | 115 | | 86 | - | 86 | | 201 | - | 201 |
| sold | 2 | 19 | 57 | 76 | | - | - | - | | 19 | 57 | 76 |
| Investment | | | | | | | | | | | | |
| holding | | | | | | | | | | | | |
| gains/(losses) | | | | | | | | | | | | |
| Investment | | | | | | | | | | | | |
| income | | | | | | | | | | | | |
| Recoverable | | | | | | | | | | | | |
| VAT | | | | | | | | | | | | |
| | | | | | | | | | | | | |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Investment | 2 | 134 | 1,113 | 1,247 | | 86 | (1,856) | (1,770) | | 220 | (743) | (523) |
| management | 3 | (84) | (253) | (337) | | (48) | (140) | (188) | | (132) | (393) | (525) |
| fees | | (197) | 4 | (193) | | (114) | 55 | (59) | | (311) | 59 | (252) |
| Other | | | | | | | | | | | | |
| expenses | | | | | | | | | | | | |
| | | | | | | | | | | | | |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| | | (281) | (249) | (530) | | (162) | (85) | (247) | | (443) | (334) | (777) |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Return on | | (147) | 864 | 717 | | (76) | (1,941) | (2,017) | | (223) | (1,077) | (1,300) |
| Ordinary | | | | | | | | | | | | |
| Activities | | | | | | | | | | | | |
| before | | | | | | | | | | | | |
| Interest and | | | | | | | | | | | | |
| Taxation | | | | | | | | | | | | |
| | | | | | | | | | | | | |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Finance Cost | 4 | (7) | - | (7) | | (13) | - | (13) | | (20) | - | (20) |
| | | | | | | | | | | | | |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Return on | | (154) | 864 | 710 | | (89) | (1,941) | (2,030) | | (243) | (1,077) | (1,320) |
| Ordinary | | | | | | | | | | | | |
| Activities | | | | | | | | | | | | |
| before | | | | | | | | | | | | |
| Taxation | | | | | | | | | | | | |
| | | | | | | | | | | | | |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Tax on | 6 | - | - | - | | - | - | - | | - | - | - |
| ordinary | | | | | | | | | | | | |
| activities | | | | | | | | | | | | |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| (Loss)/Profit | | (154) | 864 | 710 | | (89) | (1,941) | (2,030) | | (243) | (1,077) | (1,320) |
| for the | | | | | | | | | | | | |
| Financial | | | | | | | | | | | | |
| Year | | | | | | | | | | | | |
| | | | | | | | | | | | | |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Return/(loss) | 8 | (0.8)p | 4.5p | 3.7p | | (1.0)p | (21.3)p | (22.3)p | | (1.8)p | (16.8)p | (18.6)p |
| per Share | | | | | | | | | | | | |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
The amounts dealt with in the Income Statement are all derived from continuing
activities. No operations were acquired or discontinued in the period. There are
no recognised gains or losses other than those included in the Income Statement,
and accordingly no Statement of Total Recognised Gains or Losses has been
presented.
INCOME STATEMENT
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| | For the year ended | For the year ended 30 | For the year ended 30 |
| | 30 September 2008 | September 2008 | September 2008 |
+----------------+-------------------------------------+--------------------------------+--------------------------------+
| | | Ordinary Shares | | C Shares | | Total |
+----------------+-------+-----------------------------+--+-----------------------------+--+-----------------------------+
| | Notes | 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 |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Loss on | 1 | - | (376) | (376) | | - | (14) | (14) | | - | (390) | (390) |
| realisation | | - | (2,482) | (2,482) | | - | 809 | 809 | | - | (1,673) | (1,673) |
| of | | 181 | - | 181 | | 457 | - | 457 | | 638 | - | 638 |
| investments | | | | | | | | | | | | |
| Investment | | | | | | | | | | | | |
| holding | | | | | | | | | | | | |
| gains/(losses) | | | | | | | | | | | | |
| Investment | | | | | | | | | | | | |
| income | | | | | | | | | | | | |
| | | | | | | | | | | | | |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Investment | 2 | 181 | (2,858) | (2,677) | | 457 | 795 | 1,252 | | 638 | (2,063) | (1,425) |
| management | 3 | (83) | (248) | (331) | | (45) | (134) | (179) | | (128) | (382) | (510) |
| fees | | (289) | 44 | (245) | | (102) | (9) | (111) | | (391) | 35 | (356) |
| Other | | | | | | | | | | | | |
| expenses | | | | | | | | | | | | |
| | | | | | | | | | | | | |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| | | (372) | (204) | (576) | | (147) | (143) | (290) | | (519) | (347) | (866) |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Return on | | (191) | (3,062) | (3,253) | | 310 | 652 | 962 | | 119 | (2,410) | (2,291) |
| Ordinary | | | | | | | | | | | | |
| Activities | | | | | | | | | | | | |
| before | | | | | | | | | | | | |
| Interest and | | | | | | | | | | | | |
| Taxation | | | | | | | | | | | | |
| | | | | | | | | | | | | |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Finance Cost | 4 | (12) | - | (12) | | (13) | - | (13) | | (25) | - | (25) |
| | | | | | | | | | | | | |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Return on | | (203) | (3,062) | (3,265) | | 297 | 652 | 949 | | 94 | (2,410) | (2,316) |
| Ordinary | | | | | | | | | | | | |
| Activities | | | | | | | | | | | | |
| before | | | | | | | | | | | | |
| Taxation | | | | | | | | | | | | |
| | | | | | | | | | | | | |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Tax on | 6 | - | - | - | | - | - | - | | - | - | - |
| ordinary | | | | | | | | | | | | |
| activities | | | | | | | | | | | | |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| (Loss)/Profit | | (203) | (3,062) | (3,265) | | 297 | 652 | 949 | | 94 | (2,410) | (2,316) |
| for the | | | | | | | | | | | | |
| Financial | | | | | | | | | | | | |
| Year | | | | | | | | | | | | |
| | | | | | | | | | | | | |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Return/(loss) | 8 | (1.0)p | (16.0)p | (17.0)p | | 3.3p | 7.1p | 10.4p | | 2.3p | (8.9)p | (6.6)p |
| per Share | | | | | | | | | | | | |
+----------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
BALANCE SHEET
+---------------+--------+------------+-----------+---------+------------+-----------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
| | | | |
+---------------+--------+----------------------------------+----------------------------------+
| | Notes | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+---------------+--------+------------+-----------+---------+------------+-----------+---------+
| Fixed | 9 | 11,095 | 7,255 | 18,350 | 10,797 | 8,919 | 19,716 |
| Assets | | | | | | | |
| Investments | | | | | | | |
| held at | | | | | | | |
| fair value | | | | | | | |
+---------------+--------+------------+-----------+---------+------------+-----------+---------+
| Current | 10 | 798 | 410 | 1,208 | 598 | 615 | 1,213 |
| Assets | 11 | - | - | - | 96 | - | 96 |
| Debtors | | 987 | 15 | 1,002 | 591 | 83 | 674 |
| Other | | | | | | | |
| investments | | | | | | | |
| Cash at | | | | | | | |
| Bank | | | | | | | |
| | | | | | | | |
+---------------+--------+------------+-----------+---------+------------+-----------+---------+
| | | 1,785 | 425 | 2,210 | 1,285 | 698 | 1,983 |
+---------------+--------+------------+-----------+---------+------------+-----------+---------+
| Current | 12 | 169 | 264 | 433 | 54 | 108 | 162 |
| Liabilities | | | | | | | |
| Creditors: | | | | | | | |
| amounts | | | | | | | |
| falling due | | | | | | | |
| within one | | | | | | | |
| year | | | | | | | |
| | | | | | | | |
+---------------+--------+------------+-----------+---------+------------+-----------+---------+
| Net | | 1,616 | 161 | 1,777 | 1,231 | 590 | 1,821 |
| Current | | | | | | | |
| Assets | | | | | | | |
+---------------+--------+------------+-----------+---------+------------+-----------+---------+
| Total | 13 | 12,711 | 7,416 | 20,127 | 12,028 | 9,509 | 21,537 |
| assets | | 57 | 105 | 162 | 84 | 168 | 252 |
| less | | | | | | | |
| current | | | | | | | |
| liabilities | | | | | | | |
| Creditors: | | | | | | | |
| amounts | | | | | | | |
| falling due | | | | | | | |
| after more | | | | | | | |
| than one | | | | | | | |
| year | | | | | | | |
| | | | | | | | |
+---------------+--------+------------+-----------+---------+------------+-----------+---------+
| Net | | 12,654 | 7,311 | 19,965 | 11,944 | 9,341 | 21,285 |
| Assets | | | | | | | |
+---------------+--------+------------+-----------+---------+------------+-----------+---------+
| Capital | 15 | 193 | 91 | 284 | 193 | 91 | 284 |
| and | 16 | 13,580 | 8,313 | 21,893 | 13,580 | 8,313 | 21,893 |
| Reserves | 16 | 28 | - | 28 | 28 | - | 28 |
| Called-up | 16 | 4,624 | - | 4,624 | 4,624 | - | 4,624 |
| share | 16 | - | - | - | (7,182) | 973 | (6,209) |
| capital | 16 | (5,257) | (1,346) | (6,603) | - | - | - |
| Share | 16 | (514) | 253 | (261) | 701 | (36) | 665 |
| Premium | | | | | | | |
| Capital | | | | | | | |
| redemption | | | | | | | |
| reserve | | | | | | | |
| Special | | | | | | | |
| Reserve | | | | | | | |
| Revaluation | | | | | | | |
| Reserve | | | | | | | |
| Capital | | | | | | | |
| Reserve | | | | | | | |
| Revenue | | | | | | | |
| reserve | | | | | | | |
+---------------+--------+------------+-----------+---------+------------+-----------+---------+
| Total | | 12,654 | 7,311 | 19,965 | 11,944 | 9,341 | 21,285 |
| Equity | | | | | | | |
| Shareholders' | | | | | | | |
| Funds | | | | | | | |
+---------------+--------+------------+-----------+---------+------------+-----------+---------+
| Net | 17 | 66.0 | 80.4 | | 62.2 | 102.7 | |
| Asset | | | | | | | |
| Value | | | | | | | |
| per | | | | | | | |
| Share | | | | | | | |
| | | | | | | | |
+---------------+--------+------------+-----------+---------+------------+-----------+---------+
| Number of | 19,201,481 | 9,093,156 | | 19,201,481 | 9,093,156 | |
| Shares in issue | | | | | | |
| at | | | | | | |
| end of year | | | | | | |
| | | | | | | |
+---------------+--------+------------+-----------+---------+------------+-----------+---------+
The Financial Statements on were approved and authorised for issue by the Board
of Directors on 15 December 2009 and were signed on their behalf by:
Rupert Pennant-Rea
Chairman
CASH FLOW STATEMENT
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+--------------------------+-------+------------------------------+------------------------------+
| | Notes | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| Operating Activities | | 8 | 3 | 11 | 199 | 110 | 309 |
| Investment income | | - | 1 | 1 | 7 | 32 | 39 |
| received | | (255) | (122) | (377) | (349) | (186) | (535) |
| Bank deposit interest | | (269) | (37) | (306) | (238) | (15) | (253) |
| received | | 81 | - | 81 | - | - | - |
| Investment management | | | | | | | |
| fees paid | | | | | | | |
| Other cash payments | | | | | | | |
| Other Income | | | | | | | |
| | | | | | | | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| Net Cash (Outflow) from | 18 | (435) | (155) | (590) | (381) | (59) | (440) |
| Operating Activities | | (1,310) | (465) | (1,775) | (1,332) | (4,801) | (6,133) |
| Capital Expenditure and | | 2,045 | 274 | 2,319 | 2,747 | 104 | 2,851 |
| Financial Investment | | - | 278 | 278 | - | (278) | (278) |
| Investing Activities | | | | | | | |
| Purchase of investments | | | | | | | |
| Sale of investments | | | | | | | |
| (Payment)/Receipt of | | | | | | | |
| funds from related | | | | | | | |
| parties for | | | | | | | |
| co-investment | | | | | | | |
| | | | | | | | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| Net Cash | | 735 | 87 | 822 | 1,415 | (4,975) | (3,560) |
| Inflow/(Outflow) from | | - | - | - | - | - | - |
| Investing Activities | | | | | | | |
| Equity Dividends Paid | | | | | | | |
| | | | | | | | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| Cash Inflow/(Outflow) | | 300 | (68) | 232 | 1,034 | (5,034) | (4,000) |
| before Financing and | | | | | | | |
| Management of Liquid | | | | | | | |
| Resources | | | | | | | |
| | | | | | | | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| Management of Liquid | | 96 | - | 96 | (95) | 4,050 | 3,955 |
| Resources | | | | | | | |
| Purchases/(sales) of | | | | | | | |
| current asset | | | | | | | |
| investments | | | | | | | |
| | | | | | | | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| Net Cash Inflow / | | 96 | - | 96 | (95) | 4,050 | 3,955 |
| (Outflow) from | | - | - | - | (475) | - | (475) |
| Management of Liquid | | | | | | | |
| Resources | | | | | | | |
| Financing | | | | | | | |
| Repurchase of Ordinary | | | | | | | |
| Shares | | | | | | | |
| | | | | | | | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| Net Cash (Outflow) from | | - | - | - | (475) | - | (475) |
| Financing | | | | | | | |
| | | | | | | | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| (Decrease)/Increase in | 19 | 396 | (68) | 328 | 464 | (984) | (520) |
| Cash for the Year | | | | | | | |
| | | | | | | | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
+-----------------------------+----------+---------+---------+----------+---------+---------+
| | For the year ended | For the year ended |
| | 30 September 2009 | 30 September 2008 |
+-----------------------------+------------------------------+------------------------------+
| | Ordinary | C | Total | Ordinary | C | Total |
| | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+-----------------------------+----------+---------+---------+----------+---------+---------+
| Loss/Profit for the | 710 | (2,030) | (1,320) | (3,265) | 949 | (2,316) |
| financial year | - | - | - | (446) | - | (446) |
| Repurchase of Ordinary | | | | | | |
| Shares | | | | | | |
| | | | | | | |
+-----------------------------+----------+---------+---------+----------+---------+---------+
| Movements in Total | 710 | (2,030) | (1,320) | (3,711) | 949 | (2,762) |
| Shareholders' Funds | 11,944 | 9,341 | 21,285 | 15,655 | 8,392 | 24,047 |
| Shareholders' Funds at | | | | | | |
| start of Year | | | | | | |
+-----------------------------+----------+---------+---------+----------+---------+---------+
| Shareholders' Funds at end | 12,654 | 7,311 | 19,965 | 11,944 | 9,341 | 21,285 |
| of Year | | | | | | |
| | | | | | | |
+-----------------------------+----------+---------+---------+----------+---------+---------+
STATEMENT OF ACCOUNTING POLICIES
Basis of Accounting
The accounts are prepared on a going concern basis and on the historical cost
basis of accounting, modified to include the revaluation of fixed asset
investments, in accordance with the Companies Act 2006, United Kingdom Generally
Accepted Accounting Practice (UK GAAP) and the Statement of Recommended Practice
for Investment Trust Companies and Venture Capital Trusts issued by the
Association of Investment Companies in December 2005 and revised in January 2009
(the "SORP").
In order to reflect the activities of an investment company, supplementary
information which analyses the financial statements between items of a revenue
and capital nature has been presented alongside the financial statements. In
analysing total income between capital and revenue returns, the Directors have
followed the guidance contained in the SORP.
The management fee is allocated between revenue and capital in accordance with
the Board's expected long term split of returns, and other expenses are charged
to capital only to the extent that a clear connection with the maintenance or
enhancement of the value of investments can be demonstrated.
A summary of the principal accounting policies, all of which have been applied
consistently throughout the current year, follows:
Investments
Purchases and sales of quoted investments are recognised on the trade date where
a contract exists whose terms require delivery within a timeframe determined by
the relevant market. Purchases and sales of unlisted investments are recognised
when the contract for acquisition or sale becomes unconditional. Investments are
designated at fair value through profit and loss on investments recognised
(described in the Accounts as investments held at fair value) and are
subsequently measured at reporting dates at fair value. The fair value of direct
unquoted investments is calculated in accordance with the Principles of
Valuation of Investments below. Changes in the fair value of investments are
recognised in the income statement through the capital account.
Quoted Investments
Quoted investments are stated at the bid market prices on the balance sheet date
without discount.
Unquoted Investments
Unquoted investments are held at fair value through profit or loss. The fair
value is calculated in accordance with International Private Equity and Venture
Capital Valuation Guidelines issued in September 2009 following the methodology
outlined below.
Principles of Valuation of Investments
General
In valuing investments, the Directors follow the principles recommended in the
International Private Equity and Venture Capital Valuation Guidelines issued in
September 2009. Investments are valued at fair value at the reporting date.
Fair value represents the amount for which an asset could be exchanged between
knowledgeable, willing parties in an arm's length transaction. In estimating
fair value, the Directors use a methodology which is appropriate in light of the
nature, facts and circumstances of the investment. Methodologies are applied
consistently from one period to another except where a change results in a
better estimate of fair value. Because of the inherent uncertainties in
estimating the value of private equity investments, the Directors exercise
appropriate prudence in applying the various methodologies.
As part of the valuation process, the proposed valuations are reviewed by the
independent members of the Investment Committee before being examined by the
auditors and then approved by the Directors.
Unquoted Investments
The principal methodologies applied in valuing unquoted investments, including
PLUS investments (a UK market focussed on small and medium companies which the
Directors do not regard as an active market with sufficient liquidity), include
the following:
- Earnings multiple
- Price of recent investment
- Net assets
In applying the Earnings Multiple methodology, the Directors apply a market
based multiple that is appropriate and reasonable to the maintainable earnings
of the company. In the majority of cases the Enterprise Value of the underlying
business is derived by the use of an Earnings Before Interest, Tax and
Depreciation multiple applied to current year's earnings where these can be
forecast with a reasonable degree of certainty and are deemed to represent the
best estimate of maintainable earnings. Where this is not the case, historic
earnings will generally be used in their place. In the case of unquoted
investments, fair value is established by using measurements of value such as
price of recent transaction, earnings multiple and net assets; where no reliable
fair value can be estimated using such techniques.
Where a recent investment has been made, either by the Company or by a third
party in one of Company's investments, this price will be used as the estimate
of fair value from the date on which the investment was made. One of the
principal methodologies, as above, may be used at any time if this is deemed to
provide a better assessment of the fair value of the investment. Unquoted
investments may be subject to an impairment adjustment to valuation where
necessary.
The fair value of an investment in a company will be arrived at through the
following process:
* The Enterprise Value of the underlying business will be calculated using one of
the above methodologies;
* The Enterprise Value of the underlying business will then be adjusted for
surplus assets or excess liabilities to arrive at an Enterprise Value for the
company; and
* The valuation of the Company's investment will be calculated from the Enterprise
Value for the company after deduction of prior ranking debt and other financial
instruments and an appropriate discount.
In terms of the discount, this will normally be in the range of 10-30% (in steps
of 5%) applied to the comparable multiple of the company.
The amount of the discount is a question of judgement and will reflect several
factors including the ability of the Company to influence the timing and nature
of any realisation. Where the Company has the ability to influence an exit, or
is part of a syndicate of like-minded investors who initiate the exit, a smaller
discount will be applied. This may vary according to market and investee company
circumstances. Where the likelihood of an exit is high, the discount is likely
to be lower. Where there is no ability to initiate an exit and exit is not under
discussion, the discount is likely to be higher. In cases where no exit is
contemplated by controlling shareholders, the investment may be valued by
discounting the cash flow from the investment itself.
Although the Company holds more than 20% of the equity of certain companies, it
is considered that the investments are held as part of the investment portfolio.
Accordingly, and as permitted by FRS 9 'Associates and joint ventures', their
value to the Company lies in their marketable value as part of that portfolio.
It is not considered that any of the holdings represent investments in
associated undertakings.
Under FRS 2 'Accounting for subsidiary undertakings' control is presumed to
exist when the parent owns, directly or indirectly more than half of the voting
power by a number of means. The Company does not hold more than 50% of the
equity of any of the companies within the portfolio. In addition, it does not
control any of the companies held as part of the investment portfolio. It is not
considered that any of the holdings represent investments in subsidiary
undertakings.
Income
Dividends receivable from equity investments are brought into account on the
ex-dividend date or, where no ex-dividend date is quoted, are brought into
account when the Company's right to receive payment is established. Fixed
returns on non-equity investments and on debt securities are recognised on an
effective interest rate basis. Where there is reasonable doubt that a return,
which falls within the accounting period, will actually be received by the
Company, the recognition of the return is deferred until the reasonable doubt
has been removed.
Interest receivable on cash deposits is accounted for on an accruals basis.
Expenses
All expenses are accounted for on an accruals basis. Expenses are charged
through the revenue account except for expenses in connection with the disposal
of fixed asset investments, which are deducted from the disposal proceeds of the
investment and investment management and incentive fees which are dealt with
below. A split of expenses is made between Ordinary and C Shares in proportion
to the Net Asset Value.
Investment Management and Incentive Fees
The investment management fees for the Investment Manager's services are charged
25% to the revenue account and 75% to the capital account. This is in line with
the Board's long-term expected split of returns from the investment portfolio of
the Company. Incentive fees are fully charged to the capital account. The
incentive fee on realisations in the period is charged to the realised capital
reserve and the incentive fee provision in respect of unrealised value growth in
the portfolio is charged to the unrealised capital reserve.
Revenue and Capital Reserves
The revenue return in the Income Statement is taken to the revenue reserve.
Gains and losses on the realisation of investments are taken to the realised
capital reserve. Gains and losses arising from changes in fair value are
considered to be realised only to the extent that they are readily convertible
to cash in full at the balance sheet date. Otherwise Gains and Losses are
treated as unrealised.
Taxation
The tax effects of different items in the Income Statement are allocated between
capital and revenue on the same basis as the particular item to which they
relate using the Company's effective rate of tax for the accounting period.
Due to the Company's status as a venture capital trust and the continued
intention to meet the conditions required to comply with Section 274 of the
Income Tax Act 2007 (ITA 2007), no provision for taxation is required in respect
of any realised or unrealised appreciation of the Company's investments.
Deferred tax is provided on all timing differences that have originated but not
reversed by the balance sheet date. Deferred tax assets are only recognised to
the extent that they are recoverable.
Dividends Payable
Dividend distributions to shareholders are recognised as a liability in the
period in which they are paid in respect of interim dividends or when approved
by members in respect of final dividends.
Foreign Currency
The Company does not hold any assets or liabilities denominated in foreign
currencies at the year end.
Trail Commission
The fair value of trail commission payable on new share issues is estimated on
the date the new shares are issued based on the net asset value of the trust at
that time, an estimate of annualised growth in NAV over the life of the contract
and an appropriate discount rate. Subsequent to initial recognition, changes in
the value of the creditor arising through the unwinding of the discount rate are
recognised in the revenue column of the Income Statement and movements in the
value of the creditor resulting from changes in assumptions are recognised in
the capital column of the Income Statement.
C Shares
Unless and until C Shares are converted into Ordinary Shares, all investments
and returns attributable to this class of share will be accounted separately for
Ordinary Shares identifiable from the existing Ordinary Shares. All residual
expenses will be allocated on the basis of total funds raised for each class of
share.
NOTES TO THE ACCOUNTS
1 Income
+------------------------+---+----------+---------+---------+--------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+---+------------------------------+----------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+---+----------+---------+---------+--------------+---------+---------+
| Franked investment | | 23 | - | 23 | 107 | 52 | 159 |
| income* | | - | - | - | 12 | 89 | 101 |
| Income from liquidity | | 87 | 85 | 172 | 55 | 284 | 339 |
| funds# | | - | 1 | 1 | 7 | 32 | 39 |
| Unfranked investment | | 5 | - | 5 | - | - | - |
| income* | | | | | | | |
| Interest from bank | | | | | | | |
| deposits# | | | | | | | |
| Recoverable VAT - | | | | | | | |
| Interest# | | | | | | | |
| | | | | | | | |
+------------------------+---+----------+---------+---------+--------------+---------+---------+
| | | 115 | 86 | 201 | 181 | 457 | 638 |
+------------------------+---+----------+---------+---------+--------------+---------+---------+
# Denotes income arising on financial assets not designated as fair value
through profit of loss.
* Denotes income arising from investments designated as fair value through
profit or loss on initial recognition.
2 Investment Manager's Fees
+------------------------+---+---------+---------+---------+--------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+---+-----------------------------+----------------------------------+
| | | Revenue | Capital | Total | Revenue | Capital | Total |
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+---+---------+---------+---------+--------------+---------+---------+
| Ordinary Shares | | | | | | | |
+------------------------+---+---------+---------+---------+--------------+---------+---------+
| Acuity Capital | | 84 | 253 | 337 | 83 | 248 | 331 |
| | | | | | | | |
+------------------------+---+---------+---------+---------+--------------+---------+---------+
| C Shares | | | | | | | |
+------------------------+---+---------+---------+---------+--------------+---------+---------+
| Acuity Capital | | 48 | 140 | 188 | 45 | 134 | 179 |
| | | | | | | | |
+------------------------+---+---------+---------+---------+--------------+---------+---------+
| Total | | 132 | 393 | 525 | 128 | 382 | 510 |
| | | | | | | | |
+------------------------+---+---------+---------+---------+--------------+---------+---------+
The Management Fee includes irrecoverable VAT of GBPnil (2008: GBP80,000).
Acuity Capital also received an administration fee of GBP75,000 (2008:
GBP72,000), net of VAT, which increases each year in line with RPI. The
administration fee is included in the administration expenses of GBP197,000 in
Note 3.
HM Revenue & Customs has accepted that under European Union VAT law the
exemption of VCT management fees from VAT should have applied from January 1990
onwards and has indicated that claims may be made for repayment of VAT
previously paid by VCTs on management fees, subject to such claims being limited
to a period of three years prior to the date of claim. During the year ended 30
September 2009 the company received a repayment of GBP76,000 notional and
GBP5,000 interest, in respect of VAT previously suffered on management fees and
this amount has been recognised as a separate credit in the income statement.
The repayment has been allocated between revenue and capital in the same
proportion as that in which the irrecoverable VAT was originally charged. The
directors also agreed that the Investment Manager would be refunded for the
reduction in Management fees paid during the same period as disclosed in above.
Management Fees and Arrangements
Acuity Capital was appointed as Investment Manager under an agreement dated 2
October 2001, later superseded by a management agreement dated 1 February 2007.
The agreement was for an initial period of five years and thereafter until
terminated by not less than one year's notice to expire at any time after the
initial period. Fees for Ordinary and C Shares are paid quarterly in advance as
a percentage of net assets (less a rebate of fees suffered in the investment in
funds managed by Acuity Capital at 2.5% per annum).
Neither the Company nor the Investment Manager has issued a notice to terminate.
Annual running expenses of the Ordinary Share Fund and the C Share Fund are
capped at 3.6% of the Net Asset Value as at 30 September 2009. Any excess of
Annual Running Costs will be reduced against the management fee payable to the
Investment Manager. An exceptional payment of GBP81,000 was made to the
Investment Manager in respect of unpaid Management Fees for past periods on
receipt of the VAT repayment referred to in Note 2.
Incentive Schemes
Ordinary Shares
The Investment Manager will receive a performance fee based on returns to
Ordinary Shareholders. If the Company's net asset value per share in a relevant
calculation period increases so that it exceeds GBP1, less the value of
distributions per share plus notional interest at 7% per annum compounded
annually, the Investment Manager will receive 20% of the excess. For Ordinary
Shares the first period expired on 30 September 2004. Subsequent periods are of
one year's duration. In the event that the performance of the Company falls
short of the target in any period the shortfall must be made up before the
Investment Manager is entitled to a performance fee for subsequent periods.
C Shares
Certain employees of, and persons engaged in, the business of the Investment
Manager, will be entitled to receive a performance fee based upon returns to
shareholders. The incentives are designed to encourage significant dividend
payments to shareholders and a NAV performance that would equate to a historic
top decile industry ranking, before any performance fee payment is made.
Therefore, if by the end of a financial year, aggregate distributions of 30p per
share have been declared and if the Performance Value, which is equal to the Net
Asset Value plus distributions, at that date exceeds 130p per share, then the
beneficiaries will be entitled to an incentive equal to 20% of the excess of
such Performance Value over 100p per share. If, on a subsequent financial year
end, the performance of the Company falls short of the performance of the
Company on the previous financial year end, the beneficiaries will not be
entitled to any incentive. If, on a subsequent financial year end, the
performance of the Company exceeds the previous performance of the Company, the
beneficiaries will be entitled to 20% of such excess.
At 30 September 2009 there was no amount due under the Incentive Schemes.
3 Other Expenses
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+--+------------------------------+----------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| Directors' | | 45 | 25 | 70 | 47 | 23 | 70 |
| remuneration | | 7 | 4 | 11 | 5 | - | 5 |
| Employer's NIC | | 12 | 9 | 21 | 20 | 9 | 29 |
| Auditors' fees | | - | - | - | 2 | - | 2 |
| Audit :- | | 6 | 4 | 10 | 5 | 3 | 8 |
| KPMG | | 1 | 1 | 2 | 1 | - | 1 |
| PwC | | - | - | - | 133 | - | 133 |
| Non audit :- | | (4) | (55) | (59) | (44) | 9 | (35) |
| PwC - Tax Services | | 126 | 71 | 197 | 76 | 67 | 143 |
| KPMG - Other services | | | | | | | |
| Bad debt (write-off of | | | | | | | |
| account interest) | | | | | | | |
| Re-estimation of trail | | | | | | | |
| commission creditor | | | | | | | |
| Administration | | | | | | | |
| expenses | | | | | | | |
| | | | | | | | |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| | | 193 | 59 | 252 | 245 | 111 | 356 |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
In addition to the audit fees above, an amount of GBP8,000 was settled by Acuity
Capital in relation to the period to 30 September 2008.
4 Finance Cost
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+--+------------------------------+----------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| Deferred trail | | 7 | 13 | 20 | 12 | 13 | 25 |
| commission expense | | | | | | | |
| amortisation | | | | | | | |
| | | | | | | | |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| | | 7 | 13 | 20 | 12 | 13 | 25 |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
5 Directors' Remuneration
Details of Directors' remuneration are shown in the table in the "Directors
Remuneration for the Year" section of the Directors' Remuneration Report.
The Company had no employees or employee costs in 2009 (2008: GBPnil).
6 Taxation of Ordinary Activities
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+--+------------------------------+----------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| Analysis of charge in | | - | - | - | - | - | - |
| the period | | | | | | | |
| Current tax: | | | | | | | |
| UK Corporation tax at | | | | | | | |
| 21% (2008: 20.5%) | | | | | | | |
| | | | | | | | |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| Total Current Tax | | - | - | - | - | - | - |
| Factors affecting tax | | 710 | (2,030) | (1,320) | (3,265) | 949 | (2,316) |
| charge for the period | | | | | | | |
| (Loss)/profit on | | | | | | | |
| ordinary activities | | | | | | | |
| before tax | | | | | | | |
| | | | | | | | |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| (Loss)/profit on | | 149 | (427) | (278) | (669) | 194 | (475) |
| ordinary activities | | (23) | (18) | (41) | (22) | (11) | (33) |
| before tax at | | (1) | (1) | (2) | (2) | (1) | (3) |
| corporate tax rate | | (429) | 206 | (223) | 496 | (162) | 334 |
| Effects of: | | - | - | - | 20 | (20) | - |
| Dividend income not | | 304 | 240 | 544 | 177 | - | 177 |
| subject to tax | | | | | | | |
| Expenses not | | | | | | | |
| deductable for tax | | | | | | | |
| purposes | | | | | | | |
| Realised and | | | | | | | |
| unrealised | | | | | | | |
| (losses)/gains on | | | | | | | |
| investments | | | | | | | |
| Other adjustments | | | | | | | |
| Unutilised tax losses | | | | | | | |
| arising in the year | | | | | | | |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| Total Current Tax | | - | - | - | - | - | - |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
In light of the Company's status as a venture capital trust and the Directors'
intention to continue to meet the conditions necessary to obtain such approval
in the foreseeable future, the Company has not provided for deferred tax on any
capital gains and losses arising on the revaluation or disposal of investments.
There is no unprovided deferred tax liability at 30 September 2009.
There has been no recognition of a deferred tax asset of GBP1,057,000
(2008:GBP513,000) for tax losses as the Directors do not anticipate them being
used.
7 Dividend
+------------------------+--+---------+---------+---------+--------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+--+-----------------------------+----------------------------------+
| | | Revenue | Capital | Total | Revenue | Capital | Total |
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+--+---------+---------+---------+--------------+---------+---------+
| Ordinary Shares | | | | | | | |
| | | | | | | | |
+------------------------+--+---------+---------+---------+--------------+---------+---------+
| Recognised as | | - | - | - | - | - | - |
| distribution in the | | | | | | | |
| financial statements | | | | | | | |
| for the year | | | | | | | |
| First interim paid - | | | | | | | |
| nil (2008 GBPnil) per | | | | | | | |
| share | | | | | | | |
| | | | | | | | |
+------------------------+--+---------+---------+---------+--------------+---------+---------+
| C Shares | | | | | | | |
| | | | | | | | |
+------------------------+--+---------+---------+---------+--------------+---------+---------+
| Recognised as | | - | - | - | - | - | - |
| distribution in the | | | | | | | |
| financial statements | | | | | | | |
| for the year | | | | | | | |
| First interim paid - | | | | | | | |
| nil (2008 GBPnil) per | | | | | | | |
| share | | | | | | | |
| | | | | | | | |
+------------------------+--+---------+---------+---------+--------------+---------+---------+
| Total | | - | - | - | - | - | - |
| | | | | | | | |
+------------------------+--+---------+---------+---------+--------------+---------+---------+
+------------------------+--+---------+---------+---------+--------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+--+-----------------------------+----------------------------------+
| | | Revenue | Capital | Total | Revenue | Capital | Total |
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+--+---------+---------+---------+--------------+---------+---------+
| Ordinary Shares | | | | | | | |
| | | | | | | | |
+------------------------+--+---------+---------+---------+--------------+---------+---------+
| Paid and proposed in | | - | - | - | - | - | - |
| respect for the period | | | | | | | |
| First interim paid - | | | | | | | |
| nil (2008 GBPnil) per | | | | | | | |
| share | | | | | | | |
+------------------------+--+---------+---------+---------+--------------+---------+---------+
| C Shares | | | | | | | |
| | | | | | | | |
+------------------------+--+---------+---------+---------+--------------+---------+---------+
| Paid and proposed in | | - | - | - | - | - | - |
| respect for the period | | | | | | | |
| First interim paid - | | | | | | | |
| nil (2008 GBPnil) per | | | | | | | |
| share | | | | | | | |
| | | | | | | | |
+------------------------+--+---------+---------+---------+--------------+---------+---------+
| Total | | - | - | - | - | - | - |
| | | | | | | | |
+------------------------+--+---------+---------+---------+--------------+---------+---------+
8 Return per Ordinary Share
Ordinary Shares
Returns/(losses) per Ordinary Share is based on the net profit/(loss) from
ordinary activities after taxation attributable to the Ordinary Shareholders of
GBP710,000, (2008: GBP(3,265,000)) and on 19,201,481 (2008: 19,530,826),
Ordinary Shares, being the weighted average number of Ordinary Shares in issue
during the year.
C Shares
Returns/(losses) per C Share is based on the net profit/(loss) from ordinary
activities after taxation attributable to the C Shareholders of GBP(2,030,000)
(2008: GBP949,000) and on 9,093,156 (2008: 9,093,156), C Shares, being the
weighted average number of C Shares in issue during the year.
9 Investments
+---------------------+---------+---------+----------+--------------+----------+---------+
| | Qualifying Investments | Non-qualifying | |
| | | Investments | |
+---------------------+------------------------------+-------------------------+---------+
| Ordinary Shares | Traded | Traded | Unquoted | Closed-ended | Traded | Total |
| | on | on | GBP'000 | Investment | on AIM | GBP'000 |
| | AIM | PLUS | | Company | GBP'000 | |
| | GBP'000 | GBP'000 | | GBP'000 | | |
+---------------------+---------+---------+----------+--------------+----------+---------+
| Costs at 1 October | 6,692 | 1,705 | 6,934 | 960 | 888 | 17,179 |
| 2008 | (3,464) | (1,528) | (1,391) | 800 | (799) | (6,382) |
| Investment holding | | | | | | |
| gains/(losses) at 1 | | | | | | |
| October 2008 | | | | | | |
| | | | | | | |
+---------------------+---------+---------+----------+--------------+----------+---------+
| Valuation at 1 | 3,228 | 177 | 5,543 | 1,760 | 89 | 10,797 |
| October 2008 | | | | | | |
| | | | | | | |
+---------------------+---------+---------+----------+--------------+----------+---------+
| Purchases at cost | - | - | 1,310 | - | - | 1,310 |
| Proceeds | (1,095) | - | - | (973) | - | (2,068) |
| Realised | 105 | - | (385) | (650) | - | (930) |
| gains/(losses) in | (2,966) | - | (1,765) | 738 | (432) | (4,425) |
| year | 2,260 | (46) | 4,565 | (740) | 372 | 6,411 |
| Unrealised | | | | | | |
| (losses)/gains | | | | | | |
| realised during the | | | | | | |
| year | | | | | | |
| Increase/(Decrease) | | | | | | |
| in holding gains | | | | | | |
| | | | | | | |
+---------------------+---------+---------+----------+--------------+----------+---------+
| Valuation at 30 | 1,532 | 131 | 9,268 | 135 | 29 | 11,095 |
| September 2009 | | | | | | |
| | | | | | | |
+---------------------+---------+---------+----------+--------------+----------+---------+
| Cost at 30 | 2,736 | 1,705 | 6,094 | 75 | 456 | 11,066 |
| September 2009 | (1,204) | (1,574) | 3,174 | 60 | (427) | 29 |
| Investment holdings | | | | | | |
| gains/(losses) at | | | | | | |
| 30 September 2009 | | | | | | |
| | | | | | | |
+---------------------+---------+---------+----------+--------------+----------+---------+
| Valuation at 30 | 1,532 | 131 | 9,268 | 135 | 29 | 11,095 |
| September 2009 | | | | | | |
| | | | | | | |
+---------------------+---------+---------+----------+--------------+----------+---------+
+------------------------------+----------+----------+----------------+----------+
| | Qualifying |Non-qualifying | |
| | Investments | Investments | |
+------------------------------+---------------------+----------------+----------+
| C Shares | Traded | Unquoted | Closed-ended | Total |
| | on AIM | GBP'000 | Investment | GBP'000 |
| | GBP'000 | | Company | |
| | | | GBP'000 | |
+------------------------------+----------+----------+----------------+----------+
| Costs at 1 October 2008 | 500 | 6,915 | 705 | 8,120 |
| Investment holdings | (225) | 1,198 | (174) | 799 |
| gains/(losses) at 1 October | | | | |
| 2008 | | | | |
| | | | | |
+------------------------------+----------+----------+----------------+----------+
| Valuation at 1 October 2008 | 275 | 8,113 | 531 | 8,919 |
| | | | | |
+------------------------------+----------+----------+----------------+----------+
| Purchases at cost | - | 735 | - | 735 |
| Proceeds | - | (270) | (273) | (543) |
| Realised losses in year | - | (394) | (258) | (652) |
| Unrealised losses realised | - | (536) | (174) | (710) |
| during the year | (55) | (613) | 174 | (494) |
| (Decrease)/Increase in | | | | |
| holding gains | | | | |
| | | | | |
+------------------------------+----------+----------+----------------+----------+
| Valuation at 30 September | 220 | 7,035 | - | 7,255 |
| 2009 | | | | |
| | | | | |
+------------------------------+----------+----------+----------------+----------+
| Cost at 30 September 2009 | 500 | 6,450 | - | 6,950 |
| Fair Value gains/(losses) at | (280) | 585 | - | 305 |
| 30 September 2009 | | | | |
| | | | | |
+------------------------------+----------+----------+----------------+----------+
| Valuation at 30 September | 220 | 7,035 | - | 7,255 |
| 2009 | | | | |
| | | | | |
+------------------------------+----------+----------+----------------+----------+
Further details of investments are provided in the Portfolio Summary and
significant interests in the investee companies are disclosed in Note 14 of the
Notes to the Accounts.
The purchases and sales proceeds figures above include transaction costs of
GBPnil (2008: GBPnil) and GBP6,000 (2008: GBP4,000) respectively.
All investments are designated as fair value through profit or loss on initial
recognition; therefore all gains and losses arise on investments designated as
fair value through profit or loss. The changes in fair value of the unquoted,
AIM listed, Open-ended Investment Company, investments recognised in these
financial statements are not considered to be readily convertible to cash in
full at the balance sheet date and accordingly these gains are treated as
unrealised. Changes in fair value of closed-ended investments are treated as
realised as these holdings are considered to be readily convertible into cash.
10 Debtors
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+--+------------------------------+----------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| Amounts due within one | | 192 | - | 192 | 119 | 9 | 128 |
| year: | | - | - | - | - | 278 | 278 |
| Other debtors | | 17 | - | 17 | - | - | - |
| Related party asset | | 23 | - | 23 | - | - | - |
| Acuity Capital | | 566 | 410 | 976 | 479 | 328 | 807 |
| Management | | | | | | | |
| Outstanding | | | | | | | |
| settlements | | | | | | | |
| Amount due in greater | | | | | | | |
| than one year: | | | | | | | |
| Accrued Interest | | | | | | | |
| | | | | | | | |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| | | 798 | 410 | 1,208 | 598 | 615 | 1,213 |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
The related party asset related to a co-investment with Acuity VCT 3 as at 30
September 2008.
11 Other Investments
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+--+------------------------------+----------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| Liquidity Funds | | - | - | - | 96 | - | 96 |
| | | | | | | | |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| | | - | - | - | 96 | - | 96 |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
The fair value of the Liquidity Funds is GBPNil (2008: GBP96,000).
12 Creditors: amounts falling due within one year
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+--+------------------------------+----------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| Deferred trail | | 29 | 17 | 46 | 29 | 23 | 52 |
| commission expenses | | 140 | 247 | 387 | 25 | 23 | 48 |
| payable | | - | - | - | - | 62 | 62 |
| Expense accrual | | | | | | | |
| Other creditors | | | | | | | |
| | | | | | | | |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| | | 169 | 264 | 433 | 54 | 108 | 162 |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
13 Creditors: amounts falling due after one year
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
| | | | |
+------------------------+--+------------------------------+----------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| Deferred trail | | 57 | 105 | 162 | 84 | 168 | 252 |
| commission expenses | | | | | | | |
| payable | | | | | | | |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
| | | 57 | 105 | 162 | 84 | 168 | 252 |
| | | | | | | | |
+------------------------+--+----------+---------+---------+--------------+---------+---------+
14 Significant Interests
At 30 September 2009 the Company held significant investments, amounting to 3%
or more of the equity capital in the following companies:-
+---------------------+------------+------------+-------------+-------------+-------------+------------+
| | Equity | Equity | Investments | Investments | Total | Percentage |
| | Investment | Investment | Loan Stock | Loan Stock | Investments | Of |
| | (Ordinary | (C Shares) | And | And | GBP'000 | Investee |
| | Shares) | GBP'000 | Preference | Preference | | Company's |
| | GBP'000 | | (Ordinary | (C Shares) | | Total |
| | | | Shares) | GBP'000 | | Equity |
| | | | GBP'000 | | | % |
+---------------------+------------+------------+-------------+-------------+-------------+------------+
| Loseley Dairy Ice | 75 | - | 675 | - | 750 | 39.0 |
| Cream | 225 | - | 575 | - | 800 | 25.0 |
| Ma Hubbards | 124 | 309 | 112 | 279 | 824 | 20.2 |
| Red Reef Media Ltd | 1,100 | - | 200 | 300 | 1,600 | 16.7 |
| Hallmarq | 100 | 100 | 100 | 900 | 1,200 | 16.6 |
| Brand Acquisitions | 750 | - | - | - | 750 | 16.5 |
| Amber Taverns | - | 281 | - | - | 281 | 15.0 |
| Future Noise | - | 533 | - | 1,467 | 2,000 | 13.3 |
| Target Group | 100 | 500 | 100 | 500 | 1,200 | 10.8 |
| The Fin Machine | 123 | - | 1,107 | - | 1,230 | 9.0 |
| Company | 234 | 790 | - | - | 1,024 | 9.0 |
| Defaqto | - | 114 | - | 377 | 491 | 6.9 |
| Connect 2 Play | 381 | - | - | - | 381 | 4.1 |
| Emote Games | | | | | | |
| Advanced Medical | | | | | | |
| Solutions | | | | | | |
| | | | | | | |
+---------------------+------------+------------+-------------+-------------+-------------+------------+
It is considered that, as permitted by FRS 9 "Associates and Joint Ventures",
the above investments are held as part of an investment portfolio and that,
accordingly, their value to the Company lies in their marketable value as part
of its portfolio. The percentages shown are the undiluted holdings of each
investee company.
In view of this, it is not considered that the above represent investments in
associated undertakings. The above companies are incorporated in the United
Kingdom.
15 Called up Share Capital
+----------------------------+------------+----------+----------------+----------+
| | | 2009 | | 2008 |
+----------------------------+------------+----------+----------------+----------+
| | Number | GBP'000 | Number | GBP'000 |
+----------------------------+------------+----------+----------------+----------+
| Authorised: | 80,000,000 | 800 | 80,000,000 | 800 |
| Ordinary Shares of 1p each | | | | |
+----------------------------+------------+----------+----------------+----------+
| | 80,000,000 | 800 | 80,000,000 | 800 |
+----------------------------+------------+----------+----------------+----------+
+----------------------------+------------+----------+----------------+----------+
| | | 2009 | | 2008 |
+----------------------------+------------+----------+----------------+----------+
| | Number | GBP'000 | Number | GBP'000 |
+----------------------------+------------+----------+----------------+----------+
| Authorised: | 20,000,000 | 200 | 20,000,000 | 200 |
| C Shares of 1p each | | | | |
+----------------------------+------------+----------+----------------+----------+
| | 20,000,000 | 200 | 20,000,000 | 200 |
+----------------------------+------------+----------+----------------+----------+
+----------------------------+------------+----------+----------------+----------+
| | | 2009 | | 2008 |
+----------------------------+------------+----------+----------------+----------+
| | Number | GBP'000 | Number | GBP'000 |
+----------------------------+------------+----------+----------------+----------+
| Authorised: | 20,000,000 | 20 | 20,000,000 | 20 |
| Deferred Shares of 0.1p | | | | |
| each | | | | |
+----------------------------+------------+----------+----------------+----------+
| | 20,000,000 | 20 | 20,000,000 | 20 |
+----------------------------+------------+----------+----------------+----------+
+----------------------------+------------+----------+----------------+----------+
| Issued Ordinary Shares: | 19,201,481 | 193 | 19,879,331 | 199 |
| At 1 October | - | - | (677,850) | (6) |
| Ordinary Shares of 1p each | | | | |
| repurchased during the | | | | |
| year | | | | |
+----------------------------+------------+----------+----------------+----------+
| At 30 September | 19,201,481 | 193 | 19,201,481 | 193 |
+----------------------------+------------+----------+----------------+----------+
+----------------------------+------------+----------+----------------+----------+
| Issued C Shares: | 9,093,156 | 91 | 9,093,156 | 91 |
| At 1 October (restated) | - | - | - | - |
| C Shares of 1p each issued | | | | |
| during the year | | | | |
+----------------------------+------------+----------+----------------+----------+
| At 30 September | 9,093,156 | 91 | 9,093,156 | 91 |
+----------------------------+------------+----------+----------------+----------+
+----------------------------+------------+----------+----------------+----------+
| | Number | 2009 | Number | 2008 |
| | | GBP'000 | | GBP'000 |
+----------------------------+------------+----------+----------------+----------+
| Deferred Shares | - | - | - | - |
| Issued: | - | - | - | - |
| At 1 October | | | | |
| Deferred Shares of 0.1p | | | | |
| each issued during the | | | | |
| year | | | | |
+----------------------------+------------+----------+----------------+----------+
| At 30 September 2009 | - | - | - | - |
+----------------------------+------------+----------+----------------+----------+
C Shares
C Share issues are used for fund raisings by the Company in order to enable
shares to be issued at a consistent price to all applicants, rather than by
reference to a net asset value per share which may fluctuate over the period of
the offer; and ensure that existing Ordinary Shareholders are not disadvantaged
by the dilution of a mature investment portfolio through a large injection of
cash and near cash assets.
Management of Capital
The Capital of the Company is managed in accordance with the Company's
investment objective, detailed in the Investment Strategy.
The Company does not have any externally imposed capital requirements.
During the year under review, the Company made no purchases of its own Ordinary
Shares in the market under the authority granted by shareholders at the Annual
General Meeting held in March 2009.
The Company does not hold any shares in treasury.
At 30 September 2009, a total of 19,201,481 (2008: 19,201,481) Ordinary Shares
of 1p each and 9,093,156 (2008: 9,093,156) C Shares of 1p each of the Company
were in issue.
16 Reserves
+------------------+----------------+----------------+-----------------+----------------+----------------+-----------------+
| Ordinary | Share | Capital | *Special | Revaluation | Capital | Revenue |
| Shares | Premium | Redemption | Reserve | Reserve | Reserve | Reserve |
| | Account | Reserve | (Distributable) | (Non | (Non | (Distributable) |
| | (Non | (Non | GBP'000 | distributable) | distributable) | GBP'000 |
| | distributable) | distributable) | | GBP'000 | GBP'000 | |
| | GBP'000 | GBP'000 | | | | |
+------------------+----------------+----------------+-----------------+----------------+----------------+-----------------+
| At 1 October | 13,580 | 28 | 4,624 | (7,182) | - | 701 |
| 2008 | - | - | - | 7,182 | (6,121) | (1,061) |
| Reclassification | | | | | | |
+------------------+----------------+----------------+-----------------+----------------+----------------+-----------------+
| Total | 13,580 | 28 | 4,624 | - | (6,121) | (360) |
| Profit/(loss) | - | - | - | - | 864 | (154) |
| for the year | | | | | | |
+------------------+----------------+----------------+-----------------+----------------+----------------+-----------------+
| At 30 | 13,580 | 28 | 4,624 | - | (5,257) | (514) |
| September | | | | | | |
| 2009 | | | | | | |
+------------------+----------------+----------------+-----------------+----------------+----------------+-----------------+
+------------------+----------------+----------------+-----------------+----------------+----------------+-----------------+
| C Shares | Share | Capital | *Special | Revaluation | Capital | Revenue |
| | Premium | Redemption | Reserve | Reserve | Reserve | Reserve |
| | Account | Reserve | (Distributable) | (Non | (Non | (Distributable) |
| | (Non | (Non | GBP'000 | distributable) | distributable) | GBP'000 |
| | distributable) | distributable) | | GBP'000 | GBP'000 | |
| | GBP'000 | GBP'000 | | | | |
+------------------+----------------+----------------+-----------------+----------------+----------------+-----------------+
| At 1 October | 8,313 | - | - | 973 | - | (36) |
| 2008 | - | - | - | (973) | 595 | 378 |
| Reclassification | | | | | | |
+------------------+----------------+----------------+-----------------+----------------+----------------+-----------------+
| Total | 8,313 | - | - | - | 595 | 342 |
| Loss for the | - | - | - | - | (1,941) | (89) |
| financial | | | | | | |
| year | | | | | | |
+------------------+----------------+----------------+-----------------+----------------+----------------+-----------------+
| At 30 | 8,313 | - | - | - | (1,346) | 253 |
| September | | | | | | |
| 2009 | | | | | | |
+------------------+----------------+----------------+-----------------+----------------+----------------+-----------------+
In order to better reflect the activities of the Company, and in accordance with
the revised SORP, the reserves had been reclassified between revenue and capital
reserves.
The amounts available for distribution by way of a dividend are GBPnil (2008:
GBPnil) for the Ordinary share pool and GBPnil (2008: GBPnil) for the C share
pool.
+------------------+----------------+----------------+-----------------+----------------+-----------------+
| Ordinary Shares | Share | Capital | *Special | Revaluation | Revenue |
| | Premium | Redemption | Reserve | Reserve | Reserve |
| | Account | Reserve | (Distributable) | (Non | (Distributable) |
| | (Non | (Non | GBP'000 | distributable) | GBP'000 |
| | distributable) | distributable) | | GBP'000 | |
| | GBP\'000 | GBP'000 | | | |
+------------------+----------------+----------------+-----------------+----------------+-----------------+
| At 1 October | 13,580 | 22 | 5,070 | (4,103) | 887 |
| 2007 | - | - | - | (2,380) | 2,380 |
| Transfer between | - | - | - | (1,848) | 1,848 |
| Reserves# | - | - | - | 1,149 | (1,149) |
| Decrease in | - | 6 | (446) | - | - |
| unrealised | - | - | - | - | - |
| appreciation | - | - | - | - | (3,265) |
| Transfer of | | | | | |
| prior years | | | | | |
| revaluation to | | | | | |
| revenue reserve | | | | | |
| Shares | | | | | |
| repurchased in | | | | | |
| year | | | | | |
| Dividends | | | | | |
| Retained loss | | | | | |
| for the year | | | | | |
+------------------+----------------+----------------+-----------------+----------------+-----------------+
| At 30 September | 13,580 | 28 | 4,624 | (7,182) | 701 |
| 2008 | | | | | |
+------------------+----------------+----------------+-----------------+----------------+-----------------+
* The Special Reserve was created by a Court Order in 2003 upon the reduction of
the Share Premium Account. It is treated as a distributable reserve out of which
repurchases of Ordinary Shares can be made and can also be used to eliminate
realised losses on the Income Statement.
+------------------+----------------+----------------+-----------------+----------------+-----------------+
| C Shares | Share | Capital | Special | Revaluation | Revenue |
| | Premium | Redemption | Reserve | Reserve | Reserve |
| | Account | Reserve | (Distributable) | (Non | (Distributable) |
| | (Non | (Non | GBP'000 | distributable) | GBP'000 |
| | distributable) | distributable) | | GBP'000 | |
| | GBP'000 | GBP'000 | | | |
+------------------+----------------+----------------+-----------------+----------------+-----------------+
| At 1 October | 8,313 | - | - | (6) | (6) |
| 2007 (Restated) | - | - | - | (22) | 22 |
| Transfer between | - | - | - | 1,001 | (1,001) |
| Reserves# | - | - | - | - | 949 |
| Increase in | | | | | |
| unrealised | | | | | |
| appreciation | | | | | |
| Retained profit | | | | | |
| for the year | | | | | |
+------------------+----------------+----------------+-----------------+----------------+-----------------+
| At 30 September | 8,313 | - | - | 973 | (36) |
| 2008 | | | | | |
+------------------+----------------+----------------+-----------------+----------------+-----------------+
# With effect from 1 October 2007, changes in the fair value of investments
which are readily convertible to cash in full at the balance sheet date are
included in the revenue reserve, rather than the revaluation reserve. The
balances on both reserves at 1 October 2007 have been amended by a reserve
transfer to reflect this change.
17 Net Asset Value per Ordinary Share and C Shares
The basic net asset value per Ordinary Share is based on net assets of
GBP12,654,000 and on 19,201,481 Ordinary Shares, being the number of Ordinary
Shares in issue.
The basic net asset value per C Share is based on net assets of GBP7,311,000 and
on 9,093,156 C Shares, being the number of C Shares in issue at the end of the
period.
+------------------------+-------------+------------+--------------+--------------+
| | As at 30 | As at 30 | As at 30 | As at 30 |
| | September | September | September | September |
| | 2009 | 2009 | 2008 | 2008 |
| | Ordinary | C Shares | Ordinary | C Shares |
| | Shares | Pence | Shares | Pence |
| | Pence | | Pence | |
+------------------------+-------------+------------+--------------+--------------+
| Ordinary Shares of 1p | 66.0 | 80.4 | 62.2 | 102.7 |
| and C Shares of 1p | | | | |
+------------------------+-------------+------------+--------------+--------------+
18 Reconciliation of Net Profit/(Loss) on Ordinary Activities Before Taxation to
Net Cash Inflow from Operating Activities
+----------------------+---+----------+---------+---------+--------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+----------------------+---+------------------------------+----------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+----------------------+---+----------+---------+---------+--------------+---------+---------+
| Return on ordinary | | 717 | (2,017) | (1,300) | (3,253) | 962 | (2,291) |
| activities before | | (1,056) | 1,856 | 800 | 2,858 | (795) | 2,063 |
| finance costs and | | (4) | (55) | (59) | - | (22) | (22) |
| taxation | | (177) | (72) | (249) | 1 | (291) | (290) |
| (Losses)/gains in | | 85 | 133 | 218 | 13 | 65 | 78 |
| investments | | | | | | | |
| Non cash movements | | | | | | | |
| (Increase)/decrease | | | | | | | |
| in debtors | | | | | | | |
| Increase/(decrease) | | | | | | | |
| in creditors and | | | | | | | |
| accruals | | | | | | | |
| | | | | | | | |
+----------------------+---+----------+---------+---------+--------------+---------+---------+
| Net cash outflow | | (435) | (155) | (590) | (381) | (59) | (440) |
| from operating | | | | | | | |
| activities | | | | | | | |
+----------------------+---+----------+---------+---------+--------------+---------+---------+
19 Analysis of Changes in Cash
+----------------------+---+----------+---------+---------+--------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+----------------------+---+------------------------------+----------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+----------------------+---+----------+---------+---------+--------------+---------+---------+
| At beginning of | | 591 | 83 | 674 | 127 | 1,067 | 1,194 |
| period | | 396 | (68) | 328 | 464 | (984) | (520) |
| Net cash | | | | | | | |
| (outflow)/inflow | | | | | | | |
| | | | | | | | |
+----------------------+---+----------+---------+---------+--------------+---------+---------+
| At 30 September | | 987 | 15 | 1,002 | 591 | 83 | 674 |
+----------------------+---+----------+---------+---------+--------------+---------+---------+
20 Financial Instruments
Market Risk: Market Risk incorporates the possibility for losses and gains from
investments and encompasses interest rate risk and price risk.
Investment risk management is governed by the Investment Strategy of these
accounts and Market Risk is within that process. On a regular basis the
Investment Manager monitors the Company's market risk, in accordance with
policies and procedures documented in the Report of the Directors. The Board
meets regularly to review the Fund's market position.
Details of the nature of the Company's investment portfolio at the balance sheet
date can be found on within the Portfolio Summary. The constituent parts of
those investments can be found in the table below.
The investment note, Note 9, details the split between listed and unlisted
investments, which shows that at the balance sheet date 31% was invested in
quoted stocks (2008: 31%). A 5% increase in the bid price of the quoted stocks
as at the Balance Sheet date would have increased net assets and the total
return for the year by GBP1,668,000 (2008: GBP303,000); an equivalent change in
the opposite direction would have reduced net assets and the total return for
the year by the same amount. A 5% increase in the value of unquoted investments
held at the Balance Sheet date would have increased net assets and the total
return for the year by GBP264,000 (2008:GBP682,000); an equivalent change in the
opposite direction would have reduced net asset and the total return for the
year by the same amount.
Interest Rate Risk: A proportion of the Company's financial assets are interest
bearing, earning a fixed or a variable rate. Therefore, the Company has exposure
to fair value Interest Rate risk due to fluctuations in the market interest
rates.
The interest rate risk profile of the Company's financial assets at 30 September
2009 was:
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| | Financial | Fixed | Variable | Total | Weighted | Weighted |
| | Assets on | Rate | Rate | GBP'000 | Average | Average |
| | which no | Financial | Financial | | Interest | Period |
| | Interest | Assets | Assets | | Rates | for |
| | Paid | GBP'000 | GBP'000 | | % | which |
| | GBP'000 | | | | | rate is |
| | | | | | | fixed |
| | | | | | | (Years) |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| Ordinary Shares | 5,881 | - | - | 5,881 | - | - |
| Equity shares | - | 2,347 | - | 2,347 | 8.0 | - |
| Non-Equity Shares | - | 2,867 | - | 2,867 | 5.7 | 2.3 |
| Loan stock | - | - | 987 | 987 | - | - |
| Cash | 798 | - | - | 798 | - | - |
| Debtors | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| C Shares | 3,564 | - | - | 3,564 | - | - |
| Equity shares | - | 400 | - | 400 | 8.0 | - |
| Non equity shares | - | 3,291 | - | 3,291 | 8.3 | 3.0 |
| Loan stock | - | - | 15 | 15 | - | - |
| Cash | 410 | - | - | 410 | - | - |
| Debtors | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| Total | 10,653 | 8,905 | 1,002 | 20,560 | - | - |
| | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
The only financial liabilities are the deferred trail commission expenses of
GBP208,000 (2008: GBP304,000).
The interest rate risk profile of the Company's financial assets at 30 September
2008 was:
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| | Financial | Fixed | Variable | Total | Weighted | Weighted |
| | Assets on | Rate | Rate | GBP'000 | Average | Average |
| | which no | Financial | Financial | | Interest | Period |
| | Interest | Assets | Assets | | Rates | for |
| | Paid | GBP'000 | GBP'000 | | % | which |
| | GBP'000 | | | | | rate is |
| | | | | | | fixed |
| | | | | | | (Years) |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| Ordinary Shares | 8,147 | - | - | 8,147 | - | - |
| Equity shares | - | 605 | - | 605 | 8.0 | - |
| Non-Equity Shares | - | 2,045 | - | 2,045 | 8.4 | 3.9 |
| Loan stock | - | - | 96 | 96 | 5.5 | - |
| Liquidity Funds | - | - | 591 | 591 | 4.9 | - |
| Cash | 598 | - | | 598 | - | - |
| Debtors | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| C Shares | 4,214 | - | - | 4,214 | - | - |
| Equity shares | - | 450 | - | 450 | 8.0 | - |
| Non equity shares | - | 4,255 | - | 4,255 | 8.4 | 4.4 |
| Loan stock | - | - | 83 | 83 | 4.9 | - |
| Cash | 615 | - | - | 615 | - | - |
| Debtors | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| Total | 13,574 | 7,355 | 770 | 21,699 | - | - |
| | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
Fixed Rate Assets: Represent investments with predetermined yield targets. The
fixed rate investments are held for the medium term and have a predetermined
interest rate, in-line with their risk profile. Therefore a change of 25 basis
points in the interest rate at the balance sheet date would not have a
significant impact on the company's net assets.
Variable Rate Assets: Represent investments with interest rates linked, by
formula, to utilisation of company by investee companies and cash held on
interest-bearing deposit accounts.
Credit Risk: Credit risk is the risk that a counterparty to a financial
instrument is unable to discharge an obligation or commitment entered into with
the Company. The Investment Manager has in place a monitoring procedure in
respect of counterparty risk which is monitored on an ongoing basis. The
carrying amounts of financial assets best represent the maximum credit risk
exposure at the balance sheet date.
At the reporting date, the Company's financial assets exposed to credit risk
amounted to the following:
+------------------------------------------+--------------------+---------------+
| Credit Risk | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+------------------------------------------+--------------------+---------------+
| Investments in fixed interest | 8,905 | 7,355 |
| instruments | | |
+------------------------------------------+--------------------+---------------+
| Investments in variable interest | 1,002 | 770 |
| instruments (including cash) | | |
+------------------------------------------+--------------------+---------------+
| Interest, dividends and other | 1,208 | 1,213 |
| receivables | | |
+------------------------------------------+--------------------+---------------+
Credit risk on fixed interest instruments which are solely comprised of loan
stock is part of the company's venture capital procedures and are managed within
the main investment management procedures.
Credit risk arising on floating rate instruments is mitigated by investing in
money market company's managed by JP Morgan and Scottish Widows. The board
regularly reviews this strategy and in accordance with that review has decided
to transfer those funds to HSBC Bank Plc post year end.
All the assets of the Company which are traded on a recognised exchange are held
in a secured facility on site. This mitigates the risk of a third party
custodian going into liquidation or becoming bankrupt.
The cash of the Company was held by Natwest for much of the year. However, upon
review of Natwest's risk profile as a subsidiary of RBS Plc, the Board decided
to transfer the funds to HSBC Bank Plc post year end.
Liquidity risk: The liquidity risk is the risk that the Company might encounter
difficulty in meeting its obligations arising from holding financial
instruments.
The Company's financial instruments also include investments in unlisted equity
investments which are not traded in an organised public Market and which
generally may be illiquid. As a result, the Company may not be able to liquidate
quickly some of its investments in these instruments at an amount close to their
value in order to meet its liquidity requirements, or to respond to specific
events such as deterioration in the creditworthiness of any particular issuer.
The Company's liquidity risk is managed on an ongoing basis by the Investment
Manager as presented in the Report of the Directors.
The Company maintains sufficient investments in cash to pay all accounts payable
and accrued expenses as they become due.
21 Geographical Analysis
The operations of the Company are wholly in the United Kingdom.
22 Transactions with the Investment Manager
During the period ended 30 September 2009 fees payable to Acuity Capital, the
Investment Manager, totalled GBP600,000 (2008:GBP566,000). At 30 September 2009,
the Company owed GBP181,000 (2008:GBPnil) to the Investment Manager. Details of
the Investment Manager's fee arrangements are included in Note 2.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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