TIDMVICT
RNS Number : 5638M
Victory VCT PLC
26 May 2010
ViCTory VCT PLC REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31st JANUARY 2010
The Report and Financial Statements for the year ended 31 January 2010 and the
Notice of Annual General Meeting have been posted to shareholders and is
available in electronic format for download on Amati Global Investors website
www.amatiglobal.com.
Copies of the Report and Financial Statements will shortly be submitted to the
UK Listing Authority and subsequently be available for inspection at the UK
Listing Authority's Document Viewing Facility, which is situated at:
The Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS
+-------------------------------------+---------------+---------------+
| Key data | 31 | 31 |
| | January | January |
| | 2010 | 2009 |
+-------------------------------------+---------------+---------------+
| Total net assets | GBP17,802,541 | GBP19,198,113 |
+-------------------------------------+---------------+---------------+
| Net asset value per share ("NAV") | 42.43p | 44.46p |
+-------------------------------------+---------------+---------------+
| Share price | 32.75p | 28.25p |
+-------------------------------------+---------------+---------------+
| Market capitalisation | GBP13.74m | GBP12.20m |
+-------------------------------------+---------------+---------------+
| Share price discount to NAV | 22.81% | 36.46% |
+-------------------------------------+---------------+---------------+
| NAV per share plus cumulative | 52.18p | 54.21p |
| dividends paid to date | | |
+-------------------------------------+---------------+---------------+
| Total return for year | -4.56% | -39.98% |
+-------------------------------------+---------------+---------------+
| Return on FTSE AIM All-Share Total | 67.02% | -57.61% |
| Return Index during the year | | |
+-------------------------------------+---------------+---------------+
| Total return since inception | -50.03% | -47.64% |
+-------------------------------------+---------------+---------------+
| Return on FTSE AIM All-Share Total | -49.60% | -69.82% |
| Return Index since inception | | |
+-------------------------------------+---------------+---------------+
| Total dividends for the year | GBPnil | GBP1,117,166 |
+-------------------------------------+---------------+---------------+
| Dividend per ordinary share (paid | nil | 2.50p |
| in the year) | | |
+-------------------------------------+---------------+---------------+
| Qualifying investments of the | 83.06% | 80.23% |
| current investment portfolio | | |
+-------------------------------------+---------------+---------------+
| Total dividends paid to date | 9.75p | 9.75p |
+-------------------------------------+---------------+---------------+
Highlights
- Very disappointing result for the year.
- Name change to ViCTory VCT PLC.
- Appointment of Amati Global Investors as fund manager after year end.
- Recommendation to introduce more active non-qualifying investment strategy.
Chairman's Statement
Introduction
As at the date of the Company's Annual Report, the Board is considerably more
optimistic than it was when the financial year ended 31 January 2010 closed. At
the end of January, we were aware that the year had seen further disappointing
performance for our shareholders and we had taken the decision to seek a new
fund manager; as I write, the Board has appointed Amati Global Investors
("Amati") having been both impressed and encouraged by their proposals for the
management of the Company's funds. Amati has written an Investment Portfolio
commentary which immediately follows this Statement and the Board has asked
Amati to write to our shareholders outlining its proposed investment strategy.
Regrettably, there is no "quick fix" but the Directors believe a significant
step has been taken towards securing improved performance.
The Board has also asked Amati to undertake a thorough review of the Company's
costs and to prepare, for the Board's consideration, proposals for much improved
communication with ViCTory's shareholders. As early evidence of this intent,
Amati will be making a presentation at the forthcoming annual general meeting on
the future investment strategy for ViCTory.
Financial Performance & Dividends
The total loss for the year was GBP972,414 or 2.27 pence per share (2009: loss
of GBP14,067,134 or 31.92 pence per share). Shareholders' funds reduced to
GBP17,802,541 (2009: GBP19,198,113) as a result of a combination of the loss for
the year and the effect of the Company's buy back programme.
ViCTory will continue to repurchase its own shares from time to time as
appropriate and within the powers granted at the annual general meeting.
The Board are not recommending the payment of a final dividend.
Investment Performance
In the year ended 31 January 2010, global stock markets rose sharply as
governments bailed out financial institutions and central banks pumped liquidity
into the system on an unprecedented scale. Having fallen less fast than the
FTSE AIM All-Share Total Return Index in the year to 31 January 2009, I am sorry
to report that the net asset value ("NAV") of the Company did not participate in
the bounce of the wider market during the year to 31 January 2010. This was due
in no small part to a number of our largest positions being wiped out
completely, including one of our long standing qualifying investments with a
large market capitalisation and supposedly substantial profitability, Aero
Inventory, as well as our largest unquoted investment, U4EA. Recognising the
serious disappointment that this overall result would be to shareholders, and
with the ambition of improving the long term performance of the Company, the
Board determined in October 2009 that a new fund manager should be appointed.
Agreement has also been reached with the then investment manager, Williams de
Broë, that it would waive its notice period. The Board is grateful to Williams
de Broë for this decision.
After a formal selection process, Amati Global Investors ("Amati") was appointed
in March 2010. Dr Paul Jourdan and Douglas Lawson, the two founders of Amati,
have extensive experience of managing AIM VCTs. Dr Jourdan founded the First
State AIM VCT in 2005, which has gone through difficult markets to establish one
of the best track records amongst AIM VCTs, as well as being one of the most
shareholder friendly. When he moved to Noble Fund Managers in 2007 the name was
changed to Noble AIM VCT. In January of this year Dr Jourdan and Mr Lawson led
the acquisition of Noble Fund Managers and re-named it Amati Global Investors.
One of the reasons for the appointment of Amati by the Board is the active and
extensive non-qualifying investment policy exemplified by Noble AIM VCT. This
allows the fund manager to invest in small and mid-sized company shares quoted
in London on both the main market and on AIM with a view to complementing the
qualifying portfolio. For example, it is often cited by AIM VCT managers that
they have no investments in the resources sector, and hence cannot match the
performance of the FTSE AIM All-Share Index in this regard, where resources are
heavily represented. Noble AIM VCT has been able to invest widely in the
resources sector over the past five years from the non-qualifying portfolio,
albeit not with the same level of weighting as the FTSE AIM All-Share Index.
Similarly, it has been able to direct a portion of the portfolio at the higher
growth economies in the Far East.
For this reason the Board is proposing a change to the investment mandate of
ViCTory VCT for approval by shareholders at the AGM to allow it to be run along
similar lines to Noble AIM VCT in respect of its non-qualifying investments in
equity and debt instruments.
The Board also believes that Amati have a good understanding of what has gone
wrong for many AIM VCTs and have a credible strategy for making qualifying
investments which will avoid many of the pitfalls experienced by ViCTory over
the past year.
Corporate Developments
Dominic Wheatley resigned as a Director of the Company during September 2009 as
a result of relocating to the United States for business reasons. The Board
would like to thank him for his contribution to the running of the Company.
As a consequence of the appointment of Amati, the Board also appointed a new
company secretary, The City Partnership (UK) Limited ("City"). City acts for a
number of other VCTs and is independent of any fund manager.
The annual general meeting will be held at 120 Old Broad Street at 3pm on
Tuesday 15 June 2010. The new Manager will be making a presentation to
shareholders at the AGM and the Board would welcome the opportunity given by
both the meeting and the presentation for discussion with, and comments from,
shareholders.
Outlook
Amati has settled into its role quickly and the Board will be working closely
with Paul Jourdan and Douglas Lawson to improve the Company's investment
performance, formalise a dividend policy, reduce ViCTory's cost base and improve
shareholder communication. As one of the steps towards this goal, the Board
recommends that the Company's shareholders vote in favour of the revised
investment policy which is being put to the annual general meeting.
Should you have any questions about your investment in ViCTory, please do not
hesitate to contact City in the first instance either by telephone (0131 243
7210) or email (VCT-enquiries@amatiglobal.com).
CLJ Moorsom
Chairman
ViCTory VCT PLC
19 May 2010
Investment Portfolio - Commentary and Outlook
Performance
During the year under review the Company saw a NAV total return of -4.6% whilst
the FTSE AIM All-Share Total Return Index showed a rise of 67.0%. During the
second half of the year the NAV fell by 5.9%, whilst the FTSE AIM All-Share
Total Return Index rose by 23.8%. Shareholders who invested in any of the
original share issues can track their returns to date on the table given on page
3 of the Report and Financial Statements.
There were three principal reasons for the under-performance during the year.
The first and most damaging was the failure or writing off of seven material
investments, including the largest quoted investment and the two largest
unquoted investments. The quoted stocks written off (in order of size of impact)
were Aero Inventory, Relax Group, Smallbone and Pubs 'N' Bars. The unquoted
stocks written off were U4EA, Lilestone Holdings, and Imagesound. On the
unquoted side this was largely the catch up effect of the credit crunch which
impacts quoted stocks more immediately because the prices are transparent and
tend to reflect the changing climate much faster. On the quoted side, Smallbone
and Pubs 'N' Bars had already been hit hard last year. Aero Inventory and Relax
Group, however, both involved accounting irregularities and, in the former case,
gave rise to allegations of fraud. The scale of these write downs neutralised
the successes elsewhere in the portfolio. The five largest made a negative
contribution roughly equal to the top nineteen gainers in the portfolio.
Aero Inventory was the single largest equity investment held by the Company a
year ago, representing over 6% of the portfolio. In September it announced it
was preparing to move to the Official List, and delayed its results to the last
possible date, 28 October, as a result. However, on 26 October 2009, the company
announced the suspension of its shares, having been unable to publish its annual
accounts for 30 June 2009. The company blamed new systems which picked up
problems with the valuation of inventory acquired during their financial year
2008. It foresaw a material impact on the 2008 and 2009 accounts. By not
publishing results the company also put itself in breach of its loan covenants.
On 3 November the company announced that the issues went wider than first
thought. The following day the finance director resigned. A week later the
banks had lost confidence in the company, refused to provide any short term
financing, and an administrator was appointed. The details of this rapid demise
of a company which was supposedly one of AIM's success stories, are not yet
clear. At the end of February 2010 the Serious Fraud Office began an
investigation into the affairs of the company. Whilst the company reported a net
profit of $51.6m for the year to June 2008 talking about 'record results' and
being 'excellently positioned', there was an operating cash outflow of $223.4m,
and a massive increase in debt which received less attention. In the interims
the company reported net profit of $22.7m and an operating cash outflow of
$50.2m, together with another big jump in net debt. Such mismatches tend not to
end prettily. Whilst often beguiling with their apparently low
price-to-earnings ratios, companies where the reported profits are completely
divorced from cash flow will not form part of the portfolio
going forwards.
Relax Group, although a very different type of business to Aero Inventory,
shared with it the same feature of reporting cashless profits. In this case the
profits derived from an aggressive revenue recognition policy, which in some
cases would book profits 3-4 years before the cash payments were likely to be
received. This rapidly created a large and problematic debtor book. Meanwhile,
when the company reported positive operating cash flow in December 2008 it was
more than wiped out by a mysterious cash outflow for 'acquisition of intangible
assets'. It emerged in the interims that these intangibles were in fact data
purchases from specialist lead providers, which were used by Relax Group to
contact potential customers. The group had no exclusivity arrangements for this
data or any ownership of these prospective customers. The company therefore had
little control over future economic benefits from this data and these costs
should, in our view, have been expensed as incurred, instead of capitalised.
Prior to the collapse of the company a new CEO was appointed, but unfortunately
too late to salvage the situation.
The two most significant unquoted holdings which have been written down to zero
are U4EA (2.5% of the portfolio a year ago) and Lilestone Holdings (4.1% of the
portfolio a year ago, which has been written down following a review by Amati
resulting in an adjustment to the initially reported year end NAV from 44.02p to
42.43p.) ViCTory VCT had not offered further funding to U4EA over the last two
years, and following the withdrawal of support from its major shareholder,
the company was forced to appoint an administrator. Lilestone Holdings, which
manufacturers a range of lingerie products has been consistently losing money
and is in need of yet another round of financing. Amati does not propose to
offer any follow on funding and has taken the view that the existing holding is
of questionable value until the nature of the next financing round becomes
clear. Imagesound, a much smaller holding, has also been written down following
a review by
Amati. The company de-listed in 2008 after borrowing heavily to fund
acquisitions. Amati have taken the view that the de-listing, coupled with a
broader cost cutting exercise, is unlikely to give the company adequate cash
flows to service its debts. It is nonetheless possible that some value can be
retrieved from both Lilestone Holdings and Imagesound in the future, and Amati
will look for all possible ways to achieve this.
The second contributor to underperformance during the year was the high level of
cash and fixed interest balances held by the Company during a period of
ultra-low interest rates. Yields on short and medium term UK government bonds
moved little during the year, staying close to the 1% level. The Board is
looking to address this issue going forwards with the proposed changes to the
non-qualifying investment mandate outlined in the Chairman's Statement above.
The third main contributor to underperformance was both the lack of exposure to
the strongest performing sector on AIM during 2009, namely natural resources,
and more generally a dearth of clear winners in the qualifying portfolio.
Natural resources accounts for over 30% of the FTSE AIM All-Share Index, and
according to the RBS Hoare Govett Index 2010 study, this sector accounted for
almost all of the difference in performance in 2009 between the FTSE AIM
All-Share Total Return Index which gained 67.0%, and the FTSE All-Share Total
Return Index which gained 33.2%. The biggest positive contribution during the
year came from Green Compliance, a share issue subscribed for only in December,
which rapidly rose to a 100% premium. Other positive contributors, in order of
magnitude, were Synergy Health, a large and long-standing position, which
rebounded strongly; Lo-Q, which sells a queue-busting device to theme park
visitors in Europe and the US and has recently seen trading pick up sharply and
has managed to expand its customer base significantly; Zytronic, the touch
screen technology company, which has been making good trading progress; Symphony
Environmental Technologies, the manufacturer of degradable plastic, which
finally turned profitable in 2008 and saw good growth in 2009; and AssetCo, the
provider of fire engines and fire backup services, which entered into a new ten
year joint venture with the Abu Dhabi government for the construction of a new
fire training facility.
Portfolio Activity
Nine new qualifying investments were made during the year. The largest were
Green Compliance, a newly formed company headed by a senior manager from
Connaught, for acquiring support services companies in the fields of water and
fire safety equipment and inspection, and pest control; Kiotech International,
which supplies high performance natural feed additives to enhance health, growth
and sustainability in agriculture and aquaculture internationally; and Savile
Group, a small outplacement business. Other significant new holdings were
Synchronica, Hightex Group, Lipoxen, Omega Diagnostics Group, Freshwater UK and
LiDCO Group. Descriptions of each of these are given later in the report.
Outlook
The past two years have taught investors the virtues of caution, and many missed
much of last year's rally by being reluctant to re-enter the stock market. For
these investors the relentless rise in markets is inexplicable and unjustified.
However, in the absence of contagion from the Greek crisis it looks as if the
exceptionally loose monetary conditions will continue to drive growth and some
further progress from stock markets, albeit far less rapidly than last year.
From the perspective of the UK it is easy to feel gloomy. The recession here
lasted for 18 months, longer than any other country in the G7. Government
spending has run way ahead of GDP, rising from 44% of GDP in 2006 to 52% in 2009
according to the OECD. In February, IMF forecasts suggest that 2010 will see UK
government borrowing as a percentage of GDP running at the highest level of any
country in the G20. On the plus side, however, we have an open and flexible
economy, and have come through many crises before. We also have the benefit of
our own currency, which helps act as a safety valve. The new coalition
government looks set to make deficit reduction a high priority. In doing so it
will have extraordinary demands of leadership placed upon it. In the meantime
we will be seeking out strong and well financed niche businesses in the UK. We
like those that can offer real efficiency savings to the public sector. In
addition we would also like to include exposure to earnings streams outside the
UK, especially in the Far East, with a focus on the fast growing domestic
economies of China and India. These are very under-represented in the ViCTory
portfolio at present.
Dr Paul Jourdan
CEO & Founder
Amati Global Investors
19 May 2010
Statement of Directors' Responsibilities
Company law requires the Directors to prepare Financial Statements for each
financial year which 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 year. In preparing
those financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and estimates that are reasonable and prudent;
· state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the Financial Statements;
and
· prepare the Financial Statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and to enable them to ensure that the Financial Statements comply with
the Companies Act 2006. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company's
website. Legislation in the United Kingdom governing the preparation and
dissemination of Financial Statements may differ from legislation in other
jurisdictions.
The Directors are responsible for ensuring that the Report of the Directors and
other information included in the Report and Financial Statements are prepared
in accordance with Company law in the United Kingdom. They are also responsible
for ensuring that the Report and Financial Statements include information
required by the Listing Rules of the Financial Services Authority.
Statement under DTR 4.1.12
The Directors certify that to the best of their knowledge the Financial
Statements have been prepared in accordance with the applicable accounting
standards and give a true and fair view of the assets, liabilities, financial
positions and profit and loss of the Company. The Directors further certify that
the Annual Report includes a fair review of the development and performance of
the business together with the principal risks and uncertainties facing the
Company.
Income Statement for the year ended 31 January 2010
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| | | | | Year | | | Year |
| | | | | ended | | | ended |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| | | | 31 January | | 31 January |
| | | | 2010 | | 2009 |
+-------------------+-------+-----------+-----------------------+-----------+-----------------------------+
| | | Revenue | Capital | Total | Revenue | Capital | Total |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| | Notes | GBP | GBP | GBP | GBP | GBP | GBP |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| Net losses on | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| investments at | 10 | - | (724,347) | (724,347) | - | (14,685,951) | (14,685,951) |
| fair value | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| Income | 2 | 342,429 | - | 342,429 | 589,510 | - | 589,510 |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| Administrative | | | | | | | |
| expenses | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| Investment | 3 | (72,075) | (216,224) | (288,299) | 80,919 | 242,758 | 323,677 |
| management fees | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| Decrease in share | 4 | - | - | - | 8,469 | 25,406 | 33,875 |
| option provision | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| Other expenses | 5 | (302,197) | - | (302,197) | (328,245) | - | (328,245) |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| Total | | (374,272) | (216,224) | (590,496) | (238,857) | 268,164 | 29,307 |
| administrative | | | | | | | |
| (expenses)/income | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| (Loss)/return on | | | | | | | |
| ordinary | | | | | | | |
| activities | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| before taxation | | (31,843) | (940,571) | (972,414) | 350,653 | (14,417,787) | (14,067,134) |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| Taxation on | 7 | - | - | - | - | - | - |
| ordinary | | | | | | | |
| activities | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| (Loss)/return on | | | | | | | |
| ordinary | | | | | | | |
| activities | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| after taxation | | (31,843) | (940,571) | (972,414) | 350,653 | (14,417,787) | (14,067,134) |
| for the financial | | | | | | | |
| year | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
| (Loss)/return per | 9 | (0.07)p | (2.20)p | (2.27)p | 0.79p | (32.71)p | (31.92)p |
| ordinary share | | | | | | | |
+-------------------+-------+-----------+-----------+-----------+-----------+--------------+--------------+
The total column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations.
There are no gains or losses other than shown in the income statement.
The notes form part of these financial statements.
Reconciliation of Movements in Shareholders' Funds for the year ended 31 January
2010
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| | | Called | Share | | | Capital | Share | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| | | up | premium | Merger | Special | redemption | options | Capital | Revenue | |
| | | share | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| | | capital | account | reserve | reserve | reserve | reserve | reserve | reserve | Total |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| | Notes | GBP | GBP | GBP | GBP | GBP | GBP | GBP | GBP | GBP |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| Year | | | | | | | | | | |
| ended | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| 31 | | 2,248,449 | 2,954,794 | 16,492,539 | 19,112,927 | 487,979 | 33,875 | (5,931,126) | 16,867 | 35,416,304 |
| January | | | | | | | | | | |
| 2008 | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| Re-purchase | | | | | | | | | | |
| and | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| cancellation | | | | | | | | | | |
| of | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| ordinary | | (89,502) | - | - | (1,000,016) | 89,502 | - | - | - | (1,000,016) |
| shares | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| Decrease | | | | | | | | | | |
| in share | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| option | 4 | - | - | - | - | - | (33,875) | - | - | (33,875) |
| provision | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| Net | | | | | | | | | | |
| (loss)/return | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| after | | | | | | | | | | |
| taxation | | | | | | | | | | |
| for | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| the | | - | - | - | - | - | - | (14,417,787) | 350,653 | (14,067,134) |
| year | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| Dividends | 8 | - | - | - | - | - | - | (1,014,191) | (102,975) | (1,117,166) |
| paid | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| Year | | | | | | | | | | |
| ended | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| 31 | | 2,158,947 | 2,954,794 | 16,492,539 | 18,112,911 | 577,481 | - | (21,363,104) | 264,545 | 19,198,113 |
| January | | | | | | | | | | |
| 2009 | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| Re-purchase | | | | | | | | | | |
| and | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| cancellation | | | | | | | | | | |
| of | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| ordinary | | (61,025) | - | - | (423,158) | 61,025 | - | - | - | (423,158) |
| shares | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| Net | | | | | | | | | | |
| loss | | | | | | | | | | |
| after | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| taxation | | | | | | | | | | |
| for | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| the | | - | - | - | - | - | - | (940,571) | (31,843) | (972,414) |
| year | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| Year | | | | | | | | | | |
| ended | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
| 31 | | 2,097,922 | 2,954,794 | 16,492,539 | 17,689,753 | 638,506 | - | (22,303,675) | 232,702 | 17,802,541 |
| January | | | | | | | | | | |
| 2010 | | | | | | | | | | |
+---------------+-------+------------+-----------+------------+-------------+------------+----------+--------------+-----------+--------------+
The notes form part of these financial statements.
Balance Sheet as at 31 January 2010
+--------------------------+-------+--------------+--------------+
| | Notes | As at | As at |
+--------------------------+-------+--------------+--------------+
| | | 31 | 31 |
| | | January | January |
| | | 2010 | 2009 |
+--------------------------+-------+--------------+--------------+
| | | GBP | GBP |
+--------------------------+-------+--------------+--------------+
| Fixed assets | | | |
+--------------------------+-------+--------------+--------------+
| Investments at fair | | | |
| value | | | |
+--------------------------+-------+--------------+--------------+
| Qualifying investments | | 12,646,657 | 11,321,027 |
+--------------------------+-------+--------------+--------------+
| Non-qualifying | | 5,248,088 | 5,953,242 |
| investments | | | |
+--------------------------+-------+--------------+--------------+
| | 10 | 17,894,745 | 17,274,269 |
+--------------------------+-------+--------------+--------------+
| Current assets | | | |
+--------------------------+-------+--------------+--------------+
| Debtors | 11 | 67,789 | 80,769 |
+--------------------------+-------+--------------+--------------+
| Cash at bank | | 1,338 | 2,000,041 |
+--------------------------+-------+--------------+--------------+
| | | 69,127 | 2,080,810 |
+--------------------------+-------+--------------+--------------+
| Creditors: amounts | | | |
| falling | | | |
+--------------------------+-------+--------------+--------------+
| due within one year | | | |
+--------------------------+-------+--------------+--------------+
| Bank overdraft | | (25,299) | - |
+--------------------------+-------+--------------+--------------+
| Other creditors and | 12 | (136,032) | (156,966) |
| accruals | | | |
+--------------------------+-------+--------------+--------------+
| | | (161,331) | (156,966) |
+--------------------------+-------+--------------+--------------+
| | | | |
+--------------------------+-------+--------------+--------------+
| Net current | | (92,204) | 1,923,844 |
| (liabilities)/assets | | | |
+--------------------------+-------+--------------+--------------+
| | | | |
+--------------------------+-------+--------------+--------------+
| Net assets | | 17,802,541 | 19,198,113 |
+--------------------------+-------+--------------+--------------+
| | | | |
+--------------------------+-------+--------------+--------------+
| Capital and reserves | | | |
+--------------------------+-------+--------------+--------------+
| Called up share capital | 14 | 2,097,922 | 2,158,947 |
+--------------------------+-------+--------------+--------------+
| Share premium account | 15 | 2,954,794 | 2,954,794 |
+--------------------------+-------+--------------+--------------+
| Merger reserve | 15 | 16,492,539 | 16,492,539 |
+--------------------------+-------+--------------+--------------+
| Special reserve | 15 | 17,689,753 | 18,112,911 |
+--------------------------+-------+--------------+--------------+
| Capital redemption | 15 | 638,506 | 577,481 |
| reserve | | | |
+--------------------------+-------+--------------+--------------+
| Share options reserve | 15 | - | - |
+--------------------------+-------+--------------+--------------+
| Capital reserve | 15 | (22,303,675) | (21,363,104) |
+--------------------------+-------+--------------+--------------+
| Revenue reserve | 15 | 232,702 | 264,545 |
+--------------------------+-------+--------------+--------------+
| | | | |
+--------------------------+-------+--------------+--------------+
| Total shareholders' | | 17,802,541 | 19,198,113 |
| funds | | | |
+--------------------------+-------+--------------+--------------+
| | | | |
+--------------------------+-------+--------------+--------------+
| Net asset value per | 16 | 42.43p | 44.46p |
| ordinary share | | | |
+--------------------------+-------+--------------+--------------+
The financial statements were approved by the Board of Directors on 19 May 2010
and signed on their behalf by:
C J L Moorsom
Chairman
The notes form part of these financial statements.
Cash Flow Statement for the year ended 31 January 2010
+--------------------------------+-------+-------------+-------------+
| | Notes | Year | Year |
| | | ended | ended |
+--------------------------------+-------+-------------+-------------+
| | | 31 | 31 |
| | | January | January |
| | | 2010 | 2009 |
+--------------------------------+-------+-------------+-------------+
| | | GBP | GBP |
+--------------------------------+-------+-------------+-------------+
| Operating activities | | | |
+--------------------------------+-------+-------------+-------------+
| Investment income received | | 338,769 | 504,812 |
+--------------------------------+-------+-------------+-------------+
| Deposit interest received | | 1,134 | 67,892 |
+--------------------------------+-------+-------------+-------------+
| Investment management fees | | (289,608) | 127,122 |
| (paid)/received | | | |
+--------------------------------+-------+-------------+-------------+
| Other expenses paid | | (331,070) | (325,762) |
+--------------------------------+-------+-------------+-------------+
| Bank interest paid | | (11) | - |
+--------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------+-------+-------------+-------------+
| Net cash (outflow)/inflow from | | | |
| operating | | | |
+--------------------------------+-------+-------------+-------------+
| activities | 17 | (280,786) | 374,064 |
+--------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------+-------+-------------+-------------+
| Capital expenditure and | | | |
| financial investment | | | |
+--------------------------------+-------+-------------+-------------+
| Purchases of investments | | (7,835,770) | (714,000) |
+--------------------------------+-------+-------------+-------------+
| Disposals of investments | | 6,516,042 | 2,512,566 |
+--------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------+-------+-------------+-------------+
| Net cash (outflow)/inflow from | | | |
| capital | | | |
+--------------------------------+-------+-------------+-------------+
| expenditure and financial | | (1,319,728) | 1,798,566 |
| investment | | | |
+--------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------+-------+-------------+-------------+
| Equity dividends paid | | - | (1,117,166) |
+--------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------+-------+-------------+-------------+
| Net cash (outflow)/inflow | | (1,600,514) | 1,055,464 |
| before financing | | | |
+--------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------+-------+-------------+-------------+
| Financing | | | |
+--------------------------------+-------+-------------+-------------+
| Cost of ordinary shares | | | |
| purchased | | | |
+--------------------------------+-------+-------------+-------------+
| for cancellation | | (423,488) | (1,072,526) |
+--------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------+-------+-------------+-------------+
| Net cash outflow from | | (423,488) | (1,072,526) |
| financing | | | |
+--------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------+-------+-------------+-------------+
| Decrease in cash for the year | 18 | (2,024,002) | (17,062) |
+--------------------------------+-------+-------------+-------------+
The notes form part of these financial statements.
Notes to the Financial Statements
1 ACCOUNTING POLICIES
A summary of the principal accounting policies is set out below.
a) Basis of accounting
The financial statements have been prepared under the historical cost
convention, modified to include the revaluation of fixed asset investments. The
financial statements have been prepared in accordance with applicable accounting
standards and law in the United Kingdom, and are in compliance with the revised
January 2009 Statement of Recommended Practice 'Financial Statements of
Investment Trust Companies and Venture Capital Trusts' (the "SORP").
b) Investments
All investments held by the Company are classified "at fair value through profit
or loss". Investments are initially recognised at cost, being the fair value of
consideration given. Interest accrued on fixed interest rate securities at the
date of purchase or sale is accounted for separately as accrued income, so that
the value or purchase price or sale proceeds is shown net of such items.
After initial recognition, investments are measured at fair value, with
unrealised gains and losses on investments and impairment of investments
recognised in the income statement and allocated to capital. Realised gains and
losses on investments sold are calculated as the difference between sales
proceeds and cost.
For investments actively traded in organised financial markets, fair value is
generally determined by reference to Stock Exchange quoted market bid prices at
the close of business on the balance sheet date, without adjustment for
transaction costs necessary to realise the asset.
Where trading in the securities of an investee company is suspended, the
investment is valued at the Board's estimate of its net realisable value.
Unquoted investments are stated at the fair value with reference to the
International Private Equity and Venture Capital Valuation ("IPEV") guidelines
issued in October 2006, updated in September 2009, where appropriate.
Capital gains and losses on investments, whether realised or unrealised, are
dealt with in the capital reserve.
c) Income
Dividends receivable on listed and quoted equity shares are brought into account
on the ex-dividend date. Dividends receivable on unquoted equity shares are
brought into account when the Company's right to receive payment is established
and there is no reasonable doubt that payment will be received. Fixed returns on
non-equity shares and debt securities are recognised on a time apportionment
basis so as to reflect the effective yield, provided there is no reasonable
doubt that payment will be received in due course. Interest receivable is
included in the accounts on an accruals basis.
d) Expenses
All expenses are recognised on an accruals basis. Expenses are charged through
revenue in the income statement except as follows:
· expenses which are incidental to the acquisition of an investment are
included within the cost of the investment, where permitted by the relevant
accounting standards;
· expenses which are incidental to the disposal of an investment are
deducted from the disposal proceeds on an investment; and
· expenses are charged to capital where a connection with the maintenance
or enhancement of the value of the investments can be demonstrated. In this
respect the investment management fee has been allocated 75% to capital and 25%
to revenue, in line with the Board's expected long-term split of returns, in the
form of capital gains and income respectively, from the investment portfolio of
the Company.
e) Trail commission
Trail commission is paid to Independent Financial Advisors ("IFAs") annually at
a rate of 0.375% of the investors original holding multiplied by the previous
year end NAV. It is recognised on an accruals basis. Trail commission that has
not been cashed for an extended period of time can be written off at the
discretion of the Company.
f) Financial instruments
Cash at bank and in hand may comprise cash and demand deposits which are readily
convertible to a known amount of cash and are subject to insignificant risk of
changes in value.
All other current assets do not carry any interest, are short term in nature and
are accordingly stated at nominal value as reduced by appropriate allowances for
estimated irrecoverable amounts.
g) Taxation
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax in the future have occurred
at the balance sheet date. This is subject to deferred tax assets only being
recognised if it is considered more likely than not that there will be suitable
profits from which the future reversals of the underlying timing differences can
be deducted. Timing differences are differences between the Company's taxable
profits and its results as stated in the financial statements.
Deferred tax is measured at the average tax rates that are expected to apply in
the periods in which the timing differences are expected to reverse based on tax
rates and laws that have been enacted or substantially enacted by the balance
sheet date. Deferred tax is measured on a non-discounted basis.
Any tax relief obtained in respect of management fees allocated to capital is
reflected in the capital reserve and a corresponding amount is charged against
revenue. The tax relief is the amount by which corporation tax payable is
reduced as a result of these capital expenses.
h) Capital reserve
Capital reserves: relating to gains and losses on sales of investments
The following are accounted for as realised returns:
· Gains and losses on sale of investments;
· realised exchange differences of a capital nature;
· expenses and finance costs, together with the related tax effect to this
reserve in accordance with the policies; and
· realised gains and losses on transactions undertaken to hedge an exposure
of a capital nature.
Capital reserves: relating to investment holding gains and losses
The following are accounted for as unrealised returns:
· Increases and decreases in the valuation of investments held at the year
end;
· unrealised exchange differences of a capital nature; and
· unrealised gains and losses on transactions undertaken to hedge an
exposure of a capital nature.
i) Share based payments
In accordance with FRS 20: Share Based Payments, an expense is recognised in the
financial statements relating to the value of the share options awarded to
Singer & Friedlander Investment Management Limited under the arrangements agreed
on the merger of the Company with AIM and AIM 2.
The accounting charge is based on the fair value of each grant. The fair value
of Singer & Friedlander Investment Management Limited's option is determined at
the date of grant and is expensed on a straightline basis over the vesting
period based on the Company's estimate of shares that will eventually vest. In
the case of the options granted, fair value is measured by a Black-Scholes
pricing model, further details of which are set out in note 4. The deemed
movement in provision is transferred to the share options reserve.
j) Dividends payable to shareholders
Interim dividends are not accounted for until paid. Final dividends are
accounted for when approved by the members in the general meeting.
2 INCOME
+---------------------+---------------+---------------+
| | Year ended | Year ended |
+---------------------+---------------+---------------+
| | 31 January | 31 January |
| | 2010 | 2009 |
+---------------------+---------------+---------------+
| | GBP | GBP |
+---------------------+---------------+---------------+
| Income from | | |
| investments | | |
+---------------------+---------------+---------------+
| UK equities | 150,979 | 264,812 |
+---------------------+---------------+---------------+
| Fixed interest | 189,457 | 261,228 |
| securities | | |
+---------------------+---------------+---------------+
| Fixed interest | - | 1,480 |
| securities | | |
| reinvested | | |
+---------------------+---------------+---------------+
| | 340,436 | 527,520 |
+---------------------+---------------+---------------+
| Other income | | |
+---------------------+---------------+---------------+
| Deposit interest | 1,993 | 61,633 |
+---------------------+---------------+---------------+
| Other interest | - | 357 |
+---------------------+---------------+---------------+
| | 1,993 | 61,990 |
+---------------------+---------------+---------------+
| | | |
+---------------------+---------------+---------------+
| Total income | 342,429 | 589,510 |
+---------------------+---------------+---------------+
+--------------------------+----------+----------+
| | Year | Year |
| | ended | ended |
+--------------------------+----------+----------+
| | 31 | 31 |
| | January | January |
| | 2010 | 2009 |
+--------------------------+----------+----------+
| | GBP | GBP |
+--------------------------+----------+----------+
| Total income comprises: | | |
+--------------------------+----------+----------+
| Dividends | 150,979 | 264,812 |
+--------------------------+----------+----------+
| Interest | 191,450 | 324,698 |
+--------------------------+----------+----------+
| | 342,429 | 589,510 |
+--------------------------+----------+----------+
| Income from investments | | |
| comprises: | | |
+--------------------------+----------+----------+
| Quoted UK securities | 340,436 | 526,040 |
+--------------------------+----------+----------+
| Unquoted UK securities | - | 1,480 |
+--------------------------+----------+----------+
| | 340,436 | 527,520 |
+--------------------------+----------+----------+
3 INVESTMENT MANAGEMENT FEES
+----------------------+---------+---------+---------+-----------+-----------+-----------+
| | | | Year | | | Year |
| | | | ended | | | ended |
+----------------------+---------+---------+---------+-----------+-----------+-----------+
| | | 31 January | | 31 January |
| | | 2010 | | 2009 |
+----------------------+---------+-------------------+-----------+-----------------------+
| | Revenue | Capital | Total | Revenue | Capital | Total |
| | | | | | | |
+----------------------+---------+---------+---------+-----------+-----------+-----------+
| | GBP | GBP | GBP | GBP | GBP | GBP |
+----------------------+---------+---------+---------+-----------+-----------+-----------+
| Investment | 72,075 | 216,224 | 288,299 | 96,528 | 289,584 | 386,112 |
| management fee | | | | | | |
+----------------------+---------+---------+---------+-----------+-----------+-----------+
| Irrecoverable VAT | - | - | - | 8,553 | 25,658 | 34,211 |
| thereon | | | | | | |
+----------------------+---------+---------+---------+-----------+-----------+-----------+
| Recovered VAT from | - | - | - | (186,000) | (558,000) | (744,000) |
| previous periods | | | | | | |
+----------------------+---------+---------+---------+-----------+-----------+-----------+
| | 72,075 | 216,224 | 288,299 | (80,919) | (242,758) | (323,677) |
+----------------------+---------+---------+---------+-----------+-----------+-----------+
Recovered VAT on Investment management fee
Management fees are now exempt from VAT, the 2009 figures include the amount of
GBP744,000 of VAT that was recovered for the period 1 July 2001 to 30 June 2008
when VAT was charged.
Following the purchase on 21 October 2008 of the business of Singer &
Friedlander Investment Management Limited by
Williams de Broë Limited, the management of the assets of the Company were
migrated to Williams de Broë Limited on 12 January 2009.
Williams de Broë Limited and the Company signed an Investment Management
Agreement on 28 April 2009.
Williams de Broë Limited received an annual management fee of 1.5% of the net
asset value of the Company. The annual management fee was calculated based on
the quarter end net asset value and was payable calendar quarterly in arrears.
At 31 January 2010, GBP22,721 (31 January 2009: GBP24,030) was owed to the
Manager.
On 22 March 2010, Amati Global Investors Limited ("Amati") were appointed as
Investment Manager of the Company.
4 MANAGERS' OPTION
In accordance with the arrangements agreed on the merger of the Company with AIM
and AIM 2, Singer & Friedlander Investment Management Limited were granted an
option which provides that if by the date of payment of the final dividend in
respect of the ordinary shares for the Company's accounting year ending 31
January 2013 cumulative dividends declared and paid on each ordinary share (by
reference to a record date after the merger) exceed a return of 8 per cent
(compounded annually) of the net asset value per ordinary share they will be
entitled to subscribe at par for such number of additional ordinary shares as
shall in aggregate be equal to 15 per cent of ordinary shares in the enlarged
Company as enlarged by such subscriptions.
This right is a share based payment under FRS 20. This right or option has been
valued on the date that it was granted to Singer & Friedlander Investment
Management Limited and this cost is being charged to the income statement as
part of the management fee evenly over the period over which it vests. These
options currently have a nil value (2009: a decrease in the provision of
GBP33,875 to nil). This is shown as a separate reserve in the balance sheet.
The option pricing model (Black-Scholes) has measured the fair value of the
option using the following information:
+---------------------+---------------------+---------------------+
| | 31 January 2010 | 31 January 2009 |
+---------------------+---------------------+---------------------+
| Share price at | 87.95p | 87.95p |
| grant date | | |
+---------------------+---------------------+---------------------+
| Exercise price | 5.00p | 5.00p |
+---------------------+---------------------+---------------------+
| Option life in | 3 years | 4 years |
| years | | |
+---------------------+---------------------+---------------------+
| Risk free rate | 2.12% | 2.76% |
+---------------------+---------------------+---------------------+
| Expected volatility | 12.87% | 12.55% |
+---------------------+---------------------+---------------------+
| Value | - | - |
+---------------------+---------------------+---------------------+
The Managers' Option was not transferred to Williams de Broë Limited with the
purchase of the business of Singer & Friedlander Investment Management Limited.
The Board is looking to open discussions with Singer & Friedlander Investment
Management Limited to have the agreement set aside.
5 OTHER EXPENSES
+--------------------------------+-----------+-----------+
| | Year | Year |
| | ended | ended |
+--------------------------------+-----------+-----------+
| | 31 | 31 |
| | January | January |
| | 2010 | 2009 |
+--------------------------------+-----------+-----------+
| | GBP | GBP |
+--------------------------------+-----------+-----------+
| Directors' emoluments (note 6) | 72,375 | 78,000 |
+--------------------------------+-----------+-----------+
| Auditor's fee - annual audit | 35,263 | 39,905 |
| (current period) | | |
+--------------------------------+-----------+-----------+
| Auditor's fee - taxation | 10,285 | 30,717 |
| services | | |
+--------------------------------+-----------+-----------+
| Registrar's fee | 13,434 | 20,062 |
+--------------------------------+-----------+-----------+
| Secretarial fee | 18,073 | 17,250 |
+--------------------------------+-----------+-----------+
| Administration fee | 60,983 | 58,315 |
+--------------------------------+-----------+-----------+
| Printing | 16,506 | 11,540 |
+--------------------------------+-----------+-----------+
| Insurance | 26,647 | 26,737 |
+--------------------------------+-----------+-----------+
| Trail commission | 17,613 | 8,183 |
+--------------------------------+-----------+-----------+
| Bank interest | 36 | - |
+--------------------------------+-----------+-----------+
| Other | 30,982 | 37,536 |
+--------------------------------+-----------+-----------+
| | 302,197 | 328,245 |
+--------------------------------+-----------+-----------+
The auditor's fees disclosed above include VAT.
Evolution Group Services Limited performed company secretarial services for an
annual fee of GBP18,500 including VAT of GBP2,413 (under previous contract with
Singer & Friedlander Secretaries Limited - 2009: GBP17,250 including VAT of
GBP2,250). At 31 January 2010, GBP17,942 including VAT of GBP2,672 was owed to
Evolution Group Services Limited (amount owed under previous contract with
Singer & Friedlander Secretaries Limited - 2009: GBP25,875 including VAT of
GBP3,375).
With effect from 1 April 2010, The City Partnership (UK) Limited was appointed
to provide company secretarial services to the Company.
Capita Sinclair Henderson Limited provided book keeping and accounting services
for an annual fee of 0.1% of the gross amounts raised under the original Offer
for Subscription of the Company's ordinary share capital, subject to annual
review in line with the RPI. The agreement can be terminated by not less than
one year's notice in writing. At 31 January 2010, GBP4,419 excluding VAT (2009:
GBP5,082 including VAT of GBP663) was owed to Capita Sinclair Henderson Limited.
6 DIRECTORS' EMOLUMENTS
+----------------------------+-----------+----------+
| | Year | Year |
| | ended | ended |
+----------------------------+-----------+----------+
| | 31 | 31 |
| | January | January |
| | 2010 | 2009 |
+----------------------------+-----------+----------+
| | GBP | GBP |
+----------------------------+-----------+----------+
| C J L Moorsom | 18,000 | 18,000 |
+----------------------------+-----------+----------+
| J D Hambro* | 15,000 | 15,000 |
+----------------------------+-----------+----------+
| M S Killingley | 15,000 | 15,000 |
+----------------------------+-----------+----------+
| D M Page | 15,000 | 15,000 |
+----------------------------+-----------+----------+
| D M D A Wheatley (resigned | 9,375 | 15,000 |
| 15 September 2009) | | |
+----------------------------+-----------+----------+
| | 72,375 | 78,000 |
+----------------------------+-----------+----------+
* The fees in respect of James Hambro are paid to charity.
No pension scheme contributions or retirement contributions were paid. There are
no share option contracts held by the Directors.
7 TAXATION ON ORDINARY ACTIVITIES
+-----------------+---------+---------+---------+---------+---------+---------+
| | | | Year | | | Year |
| | | | ended | | | ended |
+-----------------+---------+---------+---------+---------+---------+---------+
| | | | 31 | | | 31 |
| | | | January | | | January |
| | | | 2010 | | | 2009 |
+-----------------+---------+---------+---------+---------+---------+---------+
| | Revenue | Capital | Total | Revenue | Capital | Total |
| | | | | | | |
| | | | | | | |
+-----------------+---------+---------+---------+---------+---------+---------+
| | GBP | GBP | GBP | GBP | GBP | GBP |
+-----------------+---------+---------+---------+---------+---------+---------+
| Based on the | | | | | | |
| profits | | | | | | |
+-----------------+---------+---------+---------+---------+---------+---------+
| for the period: | | | | | | |
+-----------------+---------+---------+---------+---------+---------+---------+
| UK corporation | - | - | - | - | - | - |
| tax charge/ | | | | | | |
+-----------------+---------+---------+---------+---------+---------+---------+
| (credit) at 28% | - | - | - | - | - | - |
| (2009: 28.3%) | | | | | | |
+-----------------+---------+---------+---------+---------+---------+---------+
As a Venture Capital Trust, the Company is not liable to taxation on its
realised capital gains.
Current taxation
The current taxation for the year is lower than the standard rate of corporation
tax in the UK 28% (2009: 28.3%). The differences are explained below:
Reconciliation of tax charge
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| | | | Year | | | Year |
| | | | ended | | | ended |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| | | | 31 | | | 31 |
| | | | January | | | January |
| | | | 2010 | | | 2009 |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| | Revenue | Capital | Total | Revenue | Capital | Total |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| | GBP | GBP | GBP | GBP | GBP | GBP |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| (Deficit)/return | | | | | | |
| on ordinary | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| activities | (31,843) | (940,571) | (972,414) | 350,653 | (14,417,787) | (14,067,134) |
| before | | | | | | |
| taxation | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| Theoretical | | | | | | |
| tax at UK | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| corporation | | | | | | |
| tax charge of | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| 28% (2009: | (8,916) | (263,360) | (272,276) | 99,235 | (4,080,234) | (3,980,999) |
| 28.3%) | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| Effects of: | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| - UK dividends | | | | | | |
| which are | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| not taxable | (42,274) | - | (42,274) | (74,942) | - | (74,942) |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| - Non-taxable | | | | | | |
| losses | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| on | - | 202,817 | 202,817 | - | 4,156,124 | 4,156,124 |
| investments | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| - Expenses | | | | | | |
| which are not | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| allowable | | | | | | |
| for | | | | | | |
| corporation | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| tax | 4,932 | - | 4,932 | (81) | (7,190) | (7,271) |
| purposes | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| - Excess | | | | | | |
| expenses of | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| current | 46,258 | 60,543 | 106,801 | - | - | - |
| year carried | | | | | | |
| forward | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| - Excess | | | | | | |
| expenses of | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| previous | - | - | - | (24,212) | (68,700) | (92,912) |
| year utilised | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| Actual current | - | - | - | - | - | - |
| tax charge | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
| | | | | | | |
+------------------+----------+-----------+-----------+----------+--------------+--------------+
Deferred taxation
There is no potential liability to deferred tax (2009: GBPnil). There is an
unrecognised deferred tax asset of GBP779,417 (2009: GBP679,823). The deferred
tax asset relates to unutilised expenses. It is considered more likely than not
that there will be insufficient taxable profits in the future against which the
deferred tax assets can be offset and, therefore, in accordance with FRS 19, the
asset has not been recognised.
8 DIVIDENDS IN RESPECT OF EQUITY SHARES
+--------------------------------+----------+-----------+
| | Year | Year |
| | ended | ended |
+--------------------------------+----------+-----------+
| | 31 | 31 |
| | January | January |
| | 2010 | 2009 |
+--------------------------------+----------+-----------+
| | GBP | GBP |
+--------------------------------+----------+-----------+
| Declared and paid | | |
+--------------------------------+----------+-----------+
| Relating to prior year: | | |
+--------------------------------+----------+-----------+
| Final dividend of nil (2009: | - | 899,379 |
| 2.0p) per ordinary share | | |
+--------------------------------+----------+-----------+
| | | |
+--------------------------------+----------+-----------+
| Relating to current year: | | |
+--------------------------------+----------+-----------+
| Interim dividend of nil (2009: | - | 217,787 |
| 0.5p) per ordinary share | | |
+--------------------------------+----------+-----------+
| Total | - | |
+--------------------------------+----------+-----------+
| | | 1,117,166 |
+--------------------------------+----------+-----------+
| Proposed | | |
+--------------------------------+----------+-----------+
| Final dividend of nil (2009: | - | - |
| nil) per ordinary share | | |
+--------------------------------+----------+-----------+
| Total | - | - |
+--------------------------------+----------+-----------+
9 (LOSS)/RETURN PER ORDINARY SHARE
Basic revenue return per ordinary share is based on the net loss on ordinary
activities after taxation of GBP31,843 (2009: return of GBP350,653) and on
42,764,055 (2009: 44,075,233) ordinary shares, being the weighted average number
of ordinary shares in issue during the year.
Basic capital return per ordinary share is based on net capital loss for the
year of GBP940,571 (2009: GBP14,417,787) and 42,764,055 (2009: 44,075,233)
ordinary shares, being the weighted average number of ordinary shares in issue
during the year.
10 INVESTMENTS
+---------------------+------------+------------+
| | 31 | 31 January |
| | January | 2009 |
| | 2010 | |
+---------------------+------------+------------+
| | GBP | GBP |
+---------------------+------------+------------+
| Valuation | | |
+---------------------+------------+------------+
| Listed investments | 5,786,002 | 7,216,168 |
+---------------------+------------+------------+
| Quoted investments | 11,773,228 | 8,401,661 |
+---------------------+------------+------------+
| Unquoted | 335,515 | 1,656,440 |
| investments | | |
+---------------------+------------+------------+
| Total | 17,894,745 | 17,274,269 |
+---------------------+------------+------------+
Movements in investments during the year ended 31 January 2010 are summarised as
follows:
+------------------------+--------------+--------------+-----------+-------------+--------------+
| | Unquoted | AIM | PLUS | Listed | |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| | investments* | quoted | markets | securities | Total |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| | GBP | GBP | GBP | GBP | GBP |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| Opening book cost | 15,620,098 | 19,873,527 | 209,990 | 6,115,537 | 41,819,152 |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| Opening unrealised | (13,963,658) | (11,472,076) | (209,780) | 1,050,594 | (24,594,920) |
| (losses)/gains | | | | | |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| Amortisation of | | | | | |
| discount on fixed | | | | | |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| interest securities** | - | - | - | 50,037 | 50,037 |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| Opening valuation | 1,656,440 | 8,401,451 | 210 | 7,216,168 | 17,274,269 |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| Transfers between | 3,286,831 | (3,442,683) | - | 155,852 | - |
| categories | | | | | |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| Purchases | 160,000 | 3,785,950 | - | 3,889,820 | 7,835,770 |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| Sale proceeds | - | (721,640) | - | (5,794,402) | (6,516,042) |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| Realised | (2,914,370) | (29,591) | - | 388,022 | (2,555,939) |
| (losses)/gains on | | | | | |
| sales | | | | | |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| (Increase)/decrease in | (1,853,386) | 3,779,531 | - | (69,458) | 1,856,687 |
| unrealised losses | | | | | |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| Closing valuation as | 335,515 | 11,773,018 | 210 | 5,786,002 | 17,894,745 |
| at 31 January 2010 | | | | | |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| | | | | | |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| Closing book cost as | 16,152,559 | 19,465,563 | 209,990 | 4,754,829 | 40,582,941 |
| at 31 January 2010 | | | | | |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| Closing unrealised | (15,817,044) | (7,692,545) | (209,780) | 956,041 | (22,763,328) |
| (losses)/gains | | | | | |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| Amortisation of | | | | | |
| discount on fixed | | | | | |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| interest securities** | - | - | - | 75,132 | 75,132 |
+------------------------+--------------+--------------+-----------+-------------+--------------+
| Closing valuation as | 335,515 | 11,773,018 | 210 | 5,786,002 | 17,894,745 |
| at 31 January 2010 | | | | | |
+------------------------+--------------+--------------+-----------+-------------+--------------+
* Included within unquoted investments are fixed income securities representing
GBP260,000 (2009: GBP100,000) by book cost and GBPnil (2009: GBP100,000) by
market value, this stock has been written off.
** The income recognised from the debt securities on an effective yield basis
taking account of the discounts on issue.
+---------------------------------------------+------------+
| | 31 |
| | January |
| | 2010 |
+---------------------------------------------+------------+
| | GBP |
+---------------------------------------------+------------+
| Qualifying investments | 12,646,657 |
+---------------------------------------------+------------+
| Non-qualifying investments | 5,248,088 |
+---------------------------------------------+------------+
| | 17,894,745 |
+---------------------------------------------+------------+
| Qualifying investments are made up of: | |
+---------------------------------------------+------------+
| AIM quoted companies (excluding | 10,551,570 |
| non-qualifying investments) | |
+---------------------------------------------+------------+
| Fully listed companies | 1,759,362 |
+---------------------------------------------+------------+
| PLUS Markets traded companies | 210 |
+---------------------------------------------+------------+
| Unquoted companies | 335,515 |
+---------------------------------------------+------------+
| | 12,646,657 |
+---------------------------------------------+------------+
| Non-qualifying investments are made up of: | |
+---------------------------------------------+------------+
| AIM quoted companies (non-qualifying | 1,221,448 |
| investments) | |
+---------------------------------------------+------------+
| Loan stock in AIM quoted companies | 100,000 |
+---------------------------------------------+------------+
| UK Government loans | 4,026,640 |
+---------------------------------------------+------------+
| | 5,248,088 |
+---------------------------------------------+------------+
All qualifying investments within the portfolio are based in the UK. An analysis
of the investment portfolio by broad industrial or commercial sector, and a list
of investments, is contained within the Investment Portfolio Summary section of
the Report and Financial Statements.
+-------------------------------+-------------+--------------+
| | Year | Year |
| | ended | ended |
+-------------------------------+-------------+--------------+
| | 31 | 31 |
| | January | January |
| | 2010 | 2009 |
+-------------------------------+-------------+--------------+
| | GBP | GBP |
+-------------------------------+-------------+--------------+
| Realised losses on sales of | (2,555,939) | (1,485,954) |
| investments | | |
+-------------------------------+-------------+--------------+
| Movement in unrealised losses | 1,856,687) | (13,179,463) |
+-------------------------------+-------------+--------------+
| Movement in amortisation of | | |
| discount on fixed | | |
+-------------------------------+-------------+--------------+
| interest securities | (25,095) | (20,534) |
+-------------------------------+-------------+--------------+
| Total losses on investments | (724,347) | (14,685,951) |
+-------------------------------+-------------+--------------+
Transaction costs - during the year the Company incurred transaction costs of
GBP3,137 (2009: GBPnil) and GBP23 (2009: GBP56) on purchases and sales of
investments respectively. These amounts are included in losses on investments at
fair value as disclosed in the income statement.
11 DEBTORS
+--------------------------+----------+-----------+
| | 31 | 31 |
| | January | January |
| | 2010 | 2009 |
+--------------------------+----------+-----------+
| | GBP | GBP |
+--------------------------+----------+-----------+
| Prepayments and accrued | 67,789 | 80,769 |
| income | | |
+--------------------------+----------+-----------+
12 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
+----------------------------+-----------+-----------+
| | 31 | 31 |
| | January | January |
| | 2010 | 2009 |
+----------------------------+-----------+-----------+
| | GBP | GBP |
+----------------------------+-----------+-----------+
| Other tax and social | 1,085 | 832 |
| security | | |
+----------------------------+-----------+-----------+
| Stamp duty on buy backs | 185 | 515 |
+----------------------------+-----------+-----------+
| Accrued expenses | 134,762 | 155,619 |
+----------------------------+-----------+-----------+
| | 136,032 | 156,966 |
+----------------------------+-----------+-----------+
13 SIGNIFICANT INTERESTS
The Company has a holding of 3% or more that is material in the context of the
financial statements in the following investments. No consolidation is required
because the Company does not exercise or hold significant influence over
operating and financial policies of these investee companies.
+----------------------+----------------+
| Name of undertaking | Percentage of |
| | ordinary |
+----------------------+----------------+
| | shares held by |
+----------------------+----------------+
| | Company |
+----------------------+----------------+
| | % |
+----------------------+----------------+
| Sportsweb.com | 11.4 |
+----------------------+----------------+
| Mediwatch | 8.4 |
+----------------------+----------------+
| Bright Things | 6.2 |
+----------------------+----------------+
| ID Data | 6.0 |
+----------------------+----------------+
| RTC Group | 6.0 |
+----------------------+----------------+
| Lilestone | 5.8 |
+----------------------+----------------+
| Arcontech | 5.4 |
+----------------------+----------------+
| Coolabi | 5.4 |
+----------------------+----------------+
| First Artist | 5.3 |
| Corporation | |
+----------------------+----------------+
| Infonic | 5.2 |
+----------------------+----------------+
| Omega Diagnostics | 4.8 |
| Group | |
+----------------------+----------------+
| Lo-Q | 4.7 |
+----------------------+----------------+
| ILX Group | 4.2 |
+----------------------+----------------+
| 1st Dental | 4.1 |
| Laboratories | |
+----------------------+----------------+
| Green Compliance | 3.9 |
+----------------------+----------------+
| Savile Group | 3.8 |
+----------------------+----------------+
| Freshwater UK | 3.5 |
+----------------------+----------------+
| Kiotech | 3.2 |
| International | |
+----------------------+----------------+
| Intelligent | 3.0 |
| Environments Group | |
+----------------------+----------------+
14 CALLED UP SHARE CAPITAL
+-----------------+------------+-------------+-----------+-------------+
| | | Number | Issued | Number |
| | | of | and | of |
+-----------------+------------+-------------+-----------+-------------+
| | Authorised | shares | fully | shares |
| | | | paid | |
+-----------------+------------+-------------+-----------+-------------+
| | GBP | | GBP | |
+-----------------+------------+-------------+-----------+-------------+
| As at 31 | 5,000,000 | 100,000,000 | 2,158,947 | 43,178,940 |
| January 2009 | | | | |
+-----------------+------------+-------------+-----------+-------------+
| Ordinary shares | | | | |
| of 5p bought | | | | |
+-----------------+------------+-------------+-----------+-------------+
| for | - | - | (61,025) | (1,220,503) |
| cancellation | | | | |
+-----------------+------------+-------------+-----------+-------------+
| As at 31 | 5,000,000 | 100,000,000 | 2,097,922 | 41,958,437 |
| January 2010 | | | | |
+-----------------+------------+-------------+-----------+-------------+
15 RESERVES
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| | | | | | | Capital | |
| | | | | | | reserve | |
+--------------+-----------+------------+------------+------------+---------+----------------------------+----------+
| | | | | | | Gains | | |
| | | | | | | and | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| | Share | | | Capital | Share | losses | Investment | |
| | | | | | | on | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| | premium | Merger | Special | redemption | options | sales | holding | Revenue |
| | | | | | | of | gains | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| | account | reserve | reserve | reserve | reserve | investments | and | reserve |
| | | | | | | | losses | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| | GBP | GBP | GBP | GBP | GBP | GBP | GBP | GBP |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| 31 January | 2,954,794 | 16,492,539 | 18,112,911 | 577,481 | - | 3,231,816 | (24,594,920) | 264,545 |
| 2009 | | | | | | | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| Re-purchase | | | | | | | | |
| and | | | | | | | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| cancellation | | | | | | | | |
| of | | | | | | | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| ordinary | - | - | (423,158) | 61,025 | - | - | - | - |
| shares | | | | | | | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| Net gain | | | | | | | | |
| on the | | | | | | | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| realisation | | | | | | | | |
| of | | | | | | | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| investments | - | - | - | - | - | 48,762 | - | - |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| Increase | | | | | | | | |
| in | | | | | | | | |
| unrealised | | | | | | | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| depreciation | - | - | - | - | - | - | (748,014) | - |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| Amortisation | | | | | | | | |
| of | | | | | | | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| discount | | | | | | | | |
| on fixed | | | | | | | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| interest | - | - | - | - | - | - | (25,095) | - |
| securities | | | | | | | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| Transfer | | | | | | | | |
| on | | | | | | | | |
| disposal | | | | | | | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| of | - | - | - | - | - | (2,604,701) | 2,604,701 | - |
| investments | | | | | | | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| Costs | | | | | | (216,224) | | |
| charged | | | | | | | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| to capital | | | | | | | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| Retained | | | | | | | | |
| net loss | | | | | | | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| for the | | | | | | | | (31,843) |
| year | | | | | | | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
| 31 January | 2,954,794 | 16,492,539 | 17,689,753 | 638,506 | - | 459,653 | (22,763,328) | 232,702 |
| 2010 | | | | | | | | |
+--------------+-----------+------------+------------+------------+---------+-------------+--------------+----------+
The special reserve was created out of the cancellation of the share premium
account on 15 March 2002.
The special reserve, capital reserve and revenue reserve are distributable
reserves.
The changes in the special reserve arise from the repurchase of 1,220,503 of the
Company's ordinary shares for cancellation at a total consideration of
GBP423,158.
The merger reserve was created from the merger with Singer & Friedlander AIM VCT
and Singer & Friedlander AIM 2 VCT in February 2006. The merger reserve is a
non-distributable reserve.
16 NET ASSET VALUE PER ORDINARY SHARE
The net asset value per ordinary share at 31 January 2010 has been calculated by
reference to net assets of GBP17,802,541 (2009: GBP19,198,113) and 41,958,437
(2009: 43,178,940) ordinary shares, being the number of ordinary shares in issue
at the year end.
17 RECONCILIATION OF NET DEFICIT BEFORE TAXATION TO NET CASH (OUTFLOW)/INFLOW
FROM OPERATING ACTIVITIES
+-------------------------------+-----------+--------------+
| | Year | Year |
| | ended | ended |
+-------------------------------+-----------+--------------+
| | 31 | 31 |
| | January | January |
| | 2010 | 2009 |
+-------------------------------+-----------+--------------+
| | GBP | GBP |
+-------------------------------+-----------+--------------+
| Net deficit before taxation | (972,414) | (14,067,134) |
+-------------------------------+-----------+--------------+
| Net losses on investments at | 724,347 | 14,685,951 |
| fair value | | |
+-------------------------------+-----------+--------------+
| Decrease in share option | - | (33,875) |
| provision | | |
+-------------------------------+-----------+--------------+
| Decrease in debtors | 12,980 | 7,017 |
+-------------------------------+-----------+--------------+
| Decrease in creditors and | (20,604) | (195,881) |
| accruals | | |
+-------------------------------+-----------+--------------+
| Interest reinvested | - | (1,480) |
+-------------------------------+-----------+--------------+
| Amortisation of discount on | (25,095) | (20,534) |
| fixed interest securities | | |
+-------------------------------+-----------+--------------+
| Net cash (outflow)/inflow | (280,786) | 374,064 |
| from operating activities | | |
+-------------------------------+-----------+--------------+
18 RECONCILIATION OF NET CASH FLOW TO NET FUNDS
+----------------+------------+-------------+------------+
| | Opening | | Closing |
+----------------+------------+-------------+------------+
| | net funds | Movement | net funds |
+----------------+------------+-------------+------------+
| | At 1 | in year | At 31 |
| | February | | January |
| | 2009 | | 2010 |
+----------------+------------+-------------+------------+
| | GBP | GBP | GBP |
+----------------+------------+-------------+------------+
| Cash at bank | 2,000,041 | (1,998,703) | 1,338 |
+----------------+------------+-------------+------------+
| Bank overdraft | - | (25,299) | (25,299) |
+----------------+------------+-------------+------------+
| | 2,000,041 | (2,024,002) | (23,961) |
+----------------+------------+-------------+------------+
19 COMMITMENTS AND CONTINGENCIES
At 31 January 2010, there were no commitments or contingent liabilities (2009:
none).
20 USE OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company's financial instruments comprise securities, cash balances and
debtors and creditors that arise from its operations, for example, in respect of
sales and purchases awaiting settlement and debtors for accrued income.
The principal risks arising from the Company's financial instruments are, market
risk (comprising interest rate risk and other price risk) and liquidity risk.
The Company has little exposure to credit risk and has no exposure to foreign
currency risk.
The risk management policies of the Company have not changed since the previous
year and are discussed below.
a) Market risk
Market risk arises from uncertainty about the future prices of financial
instruments held in accordance with the Company's investment objectives. It
represents the potential loss that the Company might suffer through holding
market positions in the face of market movements.
The Board, through the nominated Director, considers each investment purchase to
ensure that any acquisition allows the Company to maintain an appropriate spread
of market risk. In addition it considers each investment to ensure that it falls
within the VCT qualifying criteria at the time of purchase. It also considers
the associated business risks of investing in each individual company. These
include, but are not restricted to, the industry sector, management expertise
and financial stability of each company.
The Company does not use derivative instruments to hedge against market risk.
b) Market price risk
Market price risks (i.e. changes in market price other than those arising from
interest rate risk or currency risk) may affect the value of the portfolio.
Management of the risk
The Board of Directors manages the risks inherent in the investment portfolios
by ensuring full and timely reporting of relevant information from the
Investment Manager. Investment performance is reviewed at each Board meeting.
The Board monitors the Investment Manager's compliance with the Company's
objectives, and is directly responsible for investment strategy and asset
allocation.
The Company's exposure to other changes in market prices at 31 January on its
investments is as follows:
+---------------------+------------+------------+
| | 31 | 31 |
| | January | January |
| | 2010 | 2009 |
+---------------------+------------+------------+
| | GBP | GBP |
+---------------------+------------+------------+
| Investments at fair | 17,894,745 | 17,274,269 |
| value | | |
+---------------------+------------+------------+
Other price risk sensitivity
If the investment portfolio valuation fell by 10% at 31 January 2010 the impact
on net assets and the return/(loss) for the year would have been negative
GBP1,789,000 (2009: GBP1,727,000), the management fee accrual would have reduced
by GBP3,000 (2009: GBP3,000). If the investment portfolio valuation rose by 10%
the impact on net assets and the return/(loss) for the year would have been
positive GBP1,789,000 (2009: GBP1,727,000), the management fee accrual would
also have increased by GBP3,000 (2009: GBP3,000).
In order to provide further information on the valuation techniques used to
measure assets carried at fair value, the measurement basis has been categorised
into a "fair value hierarchy" as follows:
- Quoted market prices in active markets - "Level 1"
Inputs to Level 1 fair values are quoted prices in active markets for identical
assets. An active market is one in which transactions occur with sufficient
frequency and volume to provide pricing information on an ongoing basis. The
Company's investments classified within this category are AIM quoted companies,
fully listed companies, PLUS market traded companies and UK Government loans.
- Valued using models with significant observable market parameters - "Level 2"
Inputs to Level 2 fair values are inputs other than quoted prices included
within Level 1 that are observable for the asset, either directly or indirectly.
The Company has one bond investment classified within this category.
- Valued using models with significant unobservable market parameters - "Level
3"
Inputs to Level 3 fair values are unobservable inputs for the asset.
Unobservable inputs may have been used to measure fair value to the extent that
observable inputs are not available, thereby allowing for situations in which
there is little, if any, market activity for the asset at the measurement date
(or market information for the inputs to any valuation models). As such,
unobservable inputs reflect the assumptions the Company considers that market
participants would use in pricing the asset. The Company's unquoted equities and
loan stock are classified within this category. As explained in note 1, unquoted
investments are valued in accordance with the International Private Equity and
Venture Capital Association ("IPEV") guidelines.
Financial assets at fair value through profit or loss
+--------------+------------+---------+---------+------------+
| As at 31 | Level | Level | Level | Total |
| January 2010 | 1 | 2 | 3 | |
+--------------+------------+---------+---------+------------+
| | GBP | GBP | GBP | GBP |
+--------------+------------+---------+---------+------------+
| Equity | 13,432,590 | - | 335,515 | 13,768,105 |
| shares | | | | |
+--------------+------------+---------+---------+------------+
| Bonds | 4,026,640 | 100,000 | - | 4,126,640 |
+--------------+------------+---------+---------+------------+
| | 17,459,230 | 100,000 | 335,515 | 17,894,745 |
+--------------+------------+---------+---------+------------+
The table below shows movements in the assets measured at fair value based on
Level 3 valuation techniques for which any significant input is not based on
observable market data.
Level 3 financial assets at fair value through profit or loss
+----------------------------+-------------+-----------+-------------+
| As at 31 January 2010 | Equity | | |
+----------------------------+-------------+-----------+-------------+
| | shares | Bonds | Total |
+----------------------------+-------------+-----------+-------------+
| | GBP | GBP | GBP |
+----------------------------+-------------+-----------+-------------+
| Opening balance at 1 | 1,556,440 | 100,000 | 1,656,440 |
| February 2009 | | | |
+----------------------------+-------------+-----------+-------------+
| Transfers to Level 3 (see | 3,286,831 | - | 3,286,831 |
| details below) | | | |
+----------------------------+-------------+-----------+-------------+
| Purchases | - | 160,000 | 160,000 |
+----------------------------+-------------+-----------+-------------+
| Total net losses | (4,507,756) | (260,000) | (4,767,756) |
| recognised in the income | | | |
| statement | | | |
+----------------------------+-------------+-----------+-------------+
| Closing balance at 31 | 335,515 | - | 335,515 |
| January 2010 | | | |
+----------------------------+-------------+-----------+-------------+
The following stocks delisted during the financial year and moved from Level 1
to Level 3 - Aero Inventory,
Chromogenex, Optimisa, Playgolf Holdings, Pubs 'N' Bars, Relax Group &
Smallbone.
The bond's value was written down to zero during the year.
c) Currency risk
All of the Company's assets, liabilities and income are denominated in Sterling
(the Company's functional currency and presentational currency). As a result,
the Company does not have any exposure to currency risk.
d) Interest rate risk
The exposure to interest rate risk arises due to the short time to maturity of
the fixed rate financial assets, as it may not be possible to reinvest in assets
which provide the same rates of those currently held. Interest is earned on cash
balances at banks at variable rates.
Management of the risk
The majority of the Company's financial assets are non-interest bearing. As a
result, the Company's financial assets are not subject to significant amounts of
risk due to fluctuations in the prevailing levels of market interest rates.
Derivative contracts are not used to hedge against the exposure to interest rate
risk.
The interest rate profile of the Company's financial assets at 31 January 2010
was:
+---------+------------+-----------+-----------+------------+----------+----------+
| | Financial | Fixed | Variable | | Weighted | Average |
| | | rate | rate | | | |
+---------+------------+-----------+-----------+------------+----------+----------+
| | assets | financial | financial | | average | period |
| | on which | | | | | to |
+---------+------------+-----------+-----------+------------+----------+----------+
| | no | assets | assets | Total | interest | maturity |
| | interest | | | | rate | |
| | paid | | | | | |
+---------+------------+-----------+-----------+------------+----------+----------+
| | GBP | GBP | GBP | GBP | % | (years) |
+---------+------------+-----------+-----------+------------+----------+----------+
| Equity | 13,768,105 | - | - | 13,768,105 | | |
| shares | | | | | | |
+---------+------------+-----------+-----------+------------+----------+----------+
| Bonds | - | 4,126,640 | - | 4,126,640 | 2.209 | 2.97 |
+---------+------------+-----------+-----------+------------+----------+----------+
| Cash | - | - | (23,961) | (23,961) | | |
+---------+------------+-----------+-----------+------------+----------+----------+
| Debtors | 67,789 | - | - | 67,789 | | |
+---------+------------+-----------+-----------+------------+----------+----------+
| Total | 13,835,894 | 4,126,640 | (23,961) | 17,938,573 | | |
+---------+------------+-----------+-----------+------------+----------+----------+
| | | | | | | |
+---------+------------+-----------+-----------+------------+----------+----------+
The interest rate profile of the Company's financial assets at 31 January 2009
was:
+---------+------------+-----------+-----------+------------+----------+----------+
| | Financial | Fixed | Variable | | Weighted | Average |
| | | rate | rate | | | |
+---------+------------+-----------+-----------+------------+----------+----------+
| | assets | financial | financial | | average | period |
| | on | | | | | to |
| | which | | | | | |
+---------+------------+-----------+-----------+------------+----------+----------+
| | no | assets | assets | Total | interest | maturity |
| | interest | | | | rate | |
| | paid | | | | | |
+---------+------------+-----------+-----------+------------+----------+----------+
| | GBP | GBP | GBP | GBP | % | (years) |
+---------+------------+-----------+-----------+------------+----------+----------+
| Equity | 11,459,601 | - | - | 11,459,601 | | |
| shares | | | | | | |
+---------+------------+-----------+-----------+------------+----------+----------+
| Bonds | - | 5,814,668 | - | 5,814,668 | 3.678 | 1.14 |
+---------+------------+-----------+-----------+------------+----------+----------+
| Cash | - | - | 2,000,041 | 2,000,041 | | |
+---------+------------+-----------+-----------+------------+----------+----------+
| Debtors | 80,769 | - | - | 80,769 | | |
+---------+------------+-----------+-----------+------------+----------+----------+
| Total | 11,540,370 | 5,814,668 | 2,000,041 | 19,355,079 | | |
+---------+------------+-----------+-----------+------------+----------+----------+
The variable rate is based on the banks' deposit rate which at 31 January 2010
was 0.05% (2009: 0.20%).
It is, and has been throughout the year under review, the Company's policy that
no trading in derivative financial instruments shall be undertaken.
The Company's investments in equity shares and similar instruments have been
excluded from the interest rate risk profile as they have no maturity date and
would thus distort the weighted average period information.
Financial liabilities are creditors which are due within one year as disclosed
in note 12 and a bank overdraft of GBP25,299. No interest is paid on the
creditors and the overdraft is subject to a variable rate of interest of 1.50%.
The Company finances its operations through its issued share capital and
existing reserves.
Interest rate sensitivity
If the bank base rate had increased by 1%, the impact on the return/(loss) would
have been negative GBP240 (2009: positive GBP20,000). If the bank base rate had
decreased by 1%, the impact on the return/(loss) would have been positive GBP240
(2009: negative GBP20,000). The calculations are based on the cash balances as
at the respective balance sheet dates and are not representative of the year as
a whole.
e) Liquidity risk
This is the risk that the Company will encounter difficulty in meeting
obligations associated with financial liabilities.
Details of the Company's investment portfolio at the balance sheet date are
disclosed in the Investment Portfolio Summary. The investments the Company holds
are primarily quoted on AIM where the liquidity is generally below that of
securities quoted in the main market. The ability of the Company to realise
positions may therefore be restricted when there are no willing purchasers.
The Company also holds unquoted equity investments which are not traded on a
recognised exchange and which generally could be considered to be illiquid. As a
result the Company may not be able to liquidate quickly some of these
investments in order to meet its liquidity requirements. The list of the
unquoted investments are disclosed in the Investment Portfolio Summary.
Management of the risk
The Board mitigates this risk by seeking to ensure that an appropriate
proportion of the Company's investment portfolio is invested in cash and quoted
securities that are readily realisable, which are sufficient to pay creditors
and accrued expenses and to meet any funding commitments that may arise.
Liquidity risk exposure
Financial liabilities are creditors which are due within one year as disclosed
in note 12.
f) Credit risk
The failure of the counterparty to a transaction to discharge its obligations
under that transaction could result in the Company suffering a loss.
Management of the risk
Credit risk is managed as follows:
· investment transactions are carried out with a large number of approved
brokers, whose credit-standard is reviewed periodically by the investment
manager, and limits are set on the amount that may be due from any one broker.
· cash at bank is held only with reputable banks and is subject to
continual review.
None of the Company's financial assets or liabilities are secured by collateral
or other credit enhancements.
In summary, compared to the amounts included in the balance sheet, the maximum
exposure to credit risk at 31 January was as follows:
+--------------------------+---------+----------+-----------+-----------+
| | | 31 | | 31 |
| | | January | | January |
| | | 2010 | | 2009 |
+--------------------------+---------+----------+-----------+-----------+
| | Balance | Maximum | Balance | Maximum |
| | | | | |
+--------------------------+---------+----------+-----------+-----------+
| | sheet | exposure | sheet | exposure |
+--------------------------+---------+----------+-----------+-----------+
| | GBP | GBP | GBP | GBP |
+--------------------------+---------+----------+-----------+-----------+
| Current assets: | | | | |
+--------------------------+---------+----------+-----------+-----------+
| Other debtors (amounts | | | | |
| due from brokers, | | | | |
+--------------------------+---------+----------+-----------+-----------+
| dividends and interest | 67,789 | 67,789 | 80,769 | 80,769 |
| receivable) | | | | |
+--------------------------+---------+----------+-----------+-----------+
| Cash at bank | 1,338 | 1,338 | 2,000,041 | 2,000,041 |
+--------------------------+---------+----------+-----------+-----------+
None of the Company's financial liabilities are past due or impaired.
g) Fair values of financial instruments
The balances in respect of debtors and creditors represent the fair values as
determined by the Board of Directors in accordance with the Company's accounting
policies. These balances are the carrying amounts as stated in the balance
sheet. There is no material difference between the fair value of debtors and
cash as debtors are short term in nature. The Company's equity and preference
shares are valued at fair value.
Unquoted investments are stated at the fair value with reference to the
International Private Equity and Venture Capital Valuation ("IPEV") guidelines
where appropriate.
There are no committed undrawn facilities as at year end.
h) Derecognition of financial assets and liabilities
Financial assets are derecognised when the right to receive cash flows from the
financial assets have expired or where the Company commits to transfer
substantially all risks and rewards of ownership.
Financial liabilities are derecognised when the obligation of the Company
specified in the contract is discharged, cancelled or expired.
i) Capital management policies and procedures
The Company's capital management objectives are:
· to ensure that it will be able to continue as a going concern; and
· to maximise the income and capital return to its equity shareholders.
The Board with the assistance from the investment manager monitors and reviews
the broad structure of the Company's capital on an ongoing basis. This review
includes:
· the need to buy back equity shares for cancellation, which takes account
of the difference between the net asset value per share and the share price
(i.e. share premium or discount)
· the need for new issue of equity shares; and
· the extent to which revenue in excess of that which is required to be
distributed should be retained.
The Company's objectives, policies and procedures for managing capital are
unchanged from the previous year.
21 RELATED PARTY TRANSACTIONS
On 21 October 2008, Williams de Broë Limited acquired an economic interest in
the business operations of Singer & Friedlander Investment Management Limited
and the investment management staff of Singer & Friedlander Investment
Management Limited transferred to the employment of Williams de Broë Limited.
Williams de Broë Limited were appointed formally as investment manager and
Evolution Group Services Limited as the company secretary on 28 April 2009. The
fee arrangements for these services and the fees payable are set out in notes 3
and 5. Accrued balances at the year end were GBP22,721 (2009: GBP24,030) and
GBP17,942 including VAT (2009: GBP25,875 including VAT), respectively.
22 INVESTMENT IN SUBSIDIARY
During the year, the Company created the subsidiary, Singer & Friedlander AIM 3
VCT Limited, for the purpose of keeping the Singer & Friedlander AIM 3 VCT PLC
name. The issued share capital is 1 share with the nominal value of GBP1 and is
owned 100% by ViCTory VCT PLC. There have been no transactions in this company
during the year.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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