Annual Financial Report
Baronsmead VCT 2 plc
Annual Financial Report Announcement
30 September 2009
Investment Objective
Baronsmead VCT 2 is a tax efficient listed company which aims to achieve
long-term investment returns for private investors, including tax-free
dividends.
Audited Annual Financial Report Announcement -
Year ended 30 September 2009
Baronsmead VCT 2 plc
Financial Headlines
5.5p Dividends for the year total 5.5p per share tax free, including the
proposed final dividend of 3.0p per share payable on 30 December 2009.
-0.1% NAV per share for the year to 30 September 2009 decreased by 0.1%
before payment of dividends. This is a creditable performance in a
turbulent year for the UK's economy and the financial markets.
73.40p Cumulative tax free dividends total 73.40p per share for founder
shareholders since 1998, equivalent to an annual average tax free
dividend of 6.4p per share. For higher rate tax payers this equates to
9.5p.
79% Share Price total return since launch in 1998, compared to the increase
in the FTSE All-Share return of 35% over the same period. When taking
the VCT tax reliefs into account, the positive differential is higher
still.
84% NAV total return since launch in 1998, representing an annualised total
return of 5.4% (on original subscription at launch) and 6.8% after
allowing for initial income tax relief of 20%
Chairman's Statement - for the year ended 30 September 2009
The year to 30 September 2009 has been a year of two halves. The value of the
unquoted portfolio has remained broadly steady. However, even without
significant trading problems at investees, the market value of the AIM
portfolio fell sharply in the first half of the year then the decline was
almost exactly reversed in the second half. In a year of such extreme
volatility in financial markets it is pleasing to report that the end result is
of little change to NAV per share which does demonstrate the benefits of good
diversity across the portfolio and the active management style of the Managers.
INVESTMENT PERFORMANCE
Results to 30 September 2009
In the twelve months to 30 September 2009, the Net Asset Value (NAV) per share
decreased by 0.12p from 91.68p to 91.56p before the impact of dividends. The
position can be summarised as follows:
NAV at 1 October 2008 91.68
Movement over the year (0.12)
91.56
Interim dividend paid on 26 June 2009 (2.50)
NAV at 30 September 2009 89.06
Final dividend payable on 30 December 2009 (3.00)
Pro-forma NAV retained after dividends 86.06
Dividend analysis
From revenue 0.7
From realised profits retained 4.8
5.5
The small change in NAV per share over the year includes a 1.5 per cent
increase in the value of the unquoted portfolio and a fall in the value of the
AIM portfolio of 1.3 per cent. The change in the value of our AIM portfolio
masks a fall of 25 per cent to 31 March 2009, offset by a gain of 33 per cent
in the second six months. The FTSE All-Share Index increased 6.1 per cent over
the same 12 month period.
At the period end, over 70 per cent of the ordinary capital raised (net of
launch costs) prior to 30 September 2007 was invested in VCT qualifying
investments and the 5 other VCT qualifying tests had also been met throughout
the year.
Longer term performance
The Company's Investment Objective emphasises the longer term performance of
the Company. This is also consistent with shareholders actual and stated
investment horizons. The Board reviews the long term performance of the Company
using a number of different metrics, but takes particular account of total
dividends paid to shareholders as well as Share Price and NAV total returns.
The proposed final dividend will take the cumulative dividends paid (tax free
to qualifying shareholders) to founder shareholders to 73.40p per share. This
is an average annual dividend throughout the life of the Company of 6.4p per
year.
There have been six prospectus fund raisings by Baronsmead VCT 2. All
shareholders from these prior offers have to date achieved positive absolute
NAV total returns. The ten year performance up to 30 September 2009 shows
Baronsmead VCT 2 to be one of the top performing generalist VCTs. Fuller
comparisons have recently been facilitated by the Association of Investment
Companies (AIC) who publish monthly data on their website, www.theaic.co.uk.
The returns to shareholders are significantly enhanced by the tax benefits
available to VCT investors. At a time of lower and sometimes negative
investment returns, it is noteworthy that the proportional benefit from these
taxation reliefs is greater.
Portfolio valuation
The valuation guidelines for unquoted companies have been revised by the
International Private Equity and Venture Capital Valuation Board to facilitate
compliance with International, US and UK accounting standards. The Board has
applied the new guidelines having been satisfied that these provide an improved
framework for estimating market value. In valuing the unquoted investments the
Board has available a significant amount of information for comparison purposes
including earnings multiples of recent transactions, P/Es of comparable quoted
companies and FTSE sectors, all suitably adjusted for size, liquidity, gearing,
growth prospects and business mix. AIM investments continue to be valued at bid
price.
Following the sale of four AIM investments, the transfer of two small AIM
holdings and the write off of another nine investments the total portfolio
comprises 74 companies. 44 per cent of the net asset value of £61.2m was
invested in unquoted companies, 22 per cent in AIM investees and the balance of
34 per cent remained in cash or government securities. The largest two
investments in Reed & Mackay and ScriptSwitch represented 4.9 per cent and 4.8
per cent of Net Asset Value respectively.
I am delighted to say ScriptSwitch, an investment made in May 2007, was subject
to a bid by UnitedHealth UK that completed shortly after the year end resulting
in a return, including expected future payments, approaching four times cost.
Unquoted portfolio
The performance of the unquoted portfolio has been robust and its collective
valuation has been sustained. This validates the quality of the portfolio and
the effectiveness of close cooperation and active Manager involvement with the
investee companies.
On average, the current portfolio of unquoted investments is valued at some 32
per cent higher than original cost. 15 companies are valued at a level greater
than cost and 6 are valued below cost, with four of these having a provision
against cost of more than 25 per cent.
AIM-traded portfolio
The AIM portion of the portfolio has bounced back 33 per cent since 31 March
2009 almost recovering the loss in the first six months of the financial year.
In the second half of the year two of the investee companies were sold outright
confirming that acquirers could still appreciate the good value that resided in
these relatively lowly rated situations. This also supports the longer term
strategy of taking more influential stakes in a smaller number of AIM
investments, where a likely exit strategy to a trade buyer can be envisaged.
Collective Investment Vehicle
During the year the Manager set up a collective investment vehicle to enable
the Baronsmead funds to take advantage of opportunities expected to arise in UK
non-qualifying AIM and SmallCap companies. As an open ended investment company
(OEIC) it will provide a means of earning better returns than can be achieved
on cash while offering liquidity. £525,000 of cash and small shareholdings in
two AIM-traded companies were transferred into the Wood Street Microcap
Investment fund in June 2009. The Board believes that the use of this fund will
improve shareholder returns while ensuring that adequate liquid funds remain
available to support the unquoted portfolio when necessary or opportune.
Prospects for new investment
The market for investing in new transactions has been somewhat depressed over
the last 12 months with overall M&A volumes down significantly although ten
follow on investments were completed during the year under review. The quality
of new proposals is improving as confidence begins to return to the market and
asset pricing is becoming more advantageous which is helping clearer
decision-making. Additionally the Manager has an active programme of directly
approaching prospective investee companies in selected sectors, and this is
building a strong pipeline of entrepreneurs who would like to work with the
Manager when timing is right. This continues to be a significant investment for
the future.
The poor stock market conditions in 2008 and in early 2009 were particularly
difficult for companies in our AIM portfolio and the flow of qualifying AIM
opportunities was limited. These conditions have now improved substantially.
Recent research recognises the importance of AIM as a funding stage for venture
backed and entrepreneurial companies, particularly in an environment with lower
debt availability. AIM companies typically have no or low levels of gearing and
we expect improving prospects in this part of the portfolio.
BOARD CHANGES
Nick Timpson retires from the Board at this AGM after eleven years. He had
originally founded Furniture Holdings, an earlier investee company of ISIS from
1985 to 1997 when it was successfully sold. As an industrialist, he has given
the Board valuable insights about the working of our entrepreneurially run
companies and provided wise counsel for the benefit of shareholders, in part
due to his understanding as a shareholder in Baronsmead VCT 2. We thank him for
his dedicated service.
I am delighted to welcome Howard Goldring to the Board, which he joined on the
11 November 2009. He has wide experience of Asset Management and is founder
chairman of Delmore Asset Management. Previously he was a non-executive
director of Liverpool Victoria Asset Management, undertaking the role of global
strategist.
SHAREHOLDER ISSUES
Fund raising
The joint offer with Baronsmead VCT raised net proceeds of £8.4m for each VCT.
After the proposed final dividend is paid the cash resources remain at a good
level for investing into the anticipated upswing and yet retain sufficient
flexibility to meet any requirements for the existing portfolio, buy backs and
future dividends. To enhance the return on cash held, the Manager has formed
the Wood Street Microcap Investment Fund and some of our liquid resources have
been invested in this OEIC (see above).
Buy backs and market discounts
During the 12 months to 30 September 2009, 0.75 million shares were bought
back.
The average market price discount to NAV was 10 per cent over the year which
compares favourably to the rest of the VCT sector where discounts to NAV were
generally much higher.
VAT reclaim on management fees
Following the successful reclaim of VAT as detailed in my statement last year
total VAT recovered together with interest amounted to £1.2m of which £0.5m,
including interest, is recognised in this period.
Company brokers
The Company's former broker, Teathers, ceased to operate as a market maker
during March 2009. However, several other firms became market makers during
that month thereby minimising the impact this could have had on the discount to
NAV at which the Company's shares were traded. Currently the Company's shares
have three market makers, namely Matrix Corporate Capital, Winterflood and
Singer Capital Markets. Following a review of brokers the Board agreed to
appoint Matrix Corporate Capital as the new broker to the Company from the
beginning of August 2009.
Finance Act 2009
In the April 2009 Budget there were only minor changes to the VCT rules and
regulations. However, the Finance Act 2009 set out the proposed 50 per cent
income tax rate and restriction of tax relief on pension contributions. The
proposed changes will make tax-free dividends more valuable in the hands of our
shareholders and it is likely that VCTs will become increasingly attractive. It
is important to stress the need to consult professional advisers regarding any
taxation or pension planning and personal investment. Please email
Michael.probin@isisep.com if you wish to contribute to these topics and state
what is important from your perspective as an interested investor.
Your Board believes it will be important to demonstrate the positive benefit to
the UK economy of VCT tax concessions which encourage investment in
entrepreneurial growth businesses. To support the case for such reliefs we
shall seek to measure the increased employment and consequent increase in tax
revenue to the Treasury delivered by investee companies that have benefited
from our investment. For example the ten largest investee companies have on
average increased the number of employees by over 50 per cent during the first
3 years following our investment.
Dividend
A final dividend of 3.0p will be proposed at the forthcoming AGM and, if
approved, will be paid on 30 December 2009 to shareholders recorded on the
register on 27 November 2009. The ex-dividend date is 25 November 2009.
ANNUAL GENERAL MEETING
I look forward to meeting as many shareholders as possible at our twelfth
Annual General Meeting on Monday 14 December 2009 to be held at the London
Stock Exchange, 10 Paternoster Square near St Paul's Cathedral. The AGM will be
followed by presentations from the Manager, an investee company and a light
lunch. The AGM will start at 11 am and be preceded by a shareholders workshop.
OUTLOOK
Equity markets have rallied in recent months anticipating that the pace of
decline in the UK economy over the past 12 months may have slowed and perhaps
stabilised. While remaining cautious about the economy the Board and Manager
share the belief that once greater stability has returned to UK financial and
industrial markets your Company should be well placed to capitalise on a
potentially more favourable investment environment.
We are concerned by the proposed European Union Alternative Investment Fund
Managers Directive and its impact upon the Company and the Manager and the
additional costs that may be incurred as a result of complying with it. It is
too early to tell how significant the impact of these measures will be to the
way your Company functions, but we are alert to the issues and will comment
further on this Directive as its implications become more apparent.
Clive Parritt
Chairman
17 November 2009
Manager's Review
The priority during the year was working closely with portfolio companies to
ensure their stability and to position them for improvement once we move out of
the current downturn. This we have achieved but the extreme market volatility
precluded much new investment. Selective further investment was made in
existing portfolio companies. Our investees now have a firmer base from which
to grow into the anticipated upswing.
PORTFOLIO REVIEW
The total portfolio comprised 74 investee companies at the year end after the
write off of nine AIM-traded companies. One new investment was made in Clarity
Commerce Solutions, an AIM-traded company. The AIM companies written off had
largely been the subject of provisions taken in prior years and so the decrease
in value this year amounted to £0.3m, approximately 0.5p NAV per share. Further
investments were made in existing investees amounting to £1.7m across four
unquoted and six AIM-traded investees. A shareholding in Inverness Medical, a
NYSE listed company, was taken in exchange for selling our holding in
Concateno. Cash proceeds from all realisations totalled £2.4m. All new
investment and the exits are scheduled on page 9 of the annual report.
Portfolio companies are reviewed quarterly in terms of their financial health
and in the last two quarters, those exhibiting steady or better trading
progress have steadied to 72%. In part this has come from focusing on robust
business models where growth strategies are less dependent on overall economic
growth and more on the competitive advantage in delivering superior value to
their end customers.
ScriptSwitch is a good example of the above, where the demand driver for its
unique prescribing software is reducing cost within Primary Care Trusts' drug
budgets. More than 115 NHS Primary Care Organisations have benefited from their
prescribing decision support resulting in significant savings being made. The
CEO, Mike Washburn, became the BVCA `Venture Capital backed CEO of the year' in
October 2009. As described in the Chairman's Statement ScriptSwitch was subject
to a bid that completed shortly after the year end.
Unquoted portfolio management
ScriptSwitch and three other case studies of unquoted companies across a number
of different market sectors within the portfolio are set out in the Annual
Report. These are the same 4 companies that were profiled last year and the
intention this year has been to show how the Manager has worked with the
management teams to prepare each business for the more difficult trading
conditions that they would experience.
For example, the financial structures adopted in the unquoted portfolio have
been designed to be prudent wherever possible with relatively low levels of
external debt. There are several ways of measuring borrowings but the most
common relates to the level of net borrowings divided by annual operating
profits defined as EBITDA - earnings before interest, tax, depreciation and
amortisation. At an average ratio of 1.7 times across the unquoted portfolio,
the level of debt within the portfolio as a whole is relatively low and
considerably less than those typically used in larger private equity
transactions.
During the year the Manager recruited the services of Anna Highton, an
experienced HR professional. Anna's newly established role is to enhance the
impact that ISIS can have on its investees in the important areas of strategic
HR, talent management and senior team development. Anna previously worked in a
senior HR role at Accenture before working in her own HR consultancy. She
started working with ISIS as a consultant from 2007.
The Manager is also actively involved in assisting investee companies maintain
tight control of overheads, focusing on efficient working capital management
and ensuring early communication with each investee company's banks to help
manage risk and minimise issues. Presentations by investee companies at each
AGM have illustrated the close relationship between the executive management of
unquoted companies and the Manager.
AIM investment strategy
The strategy for investing in AIM companies is to use private equity
disciplines where possible and focus on holdings where the Manager can be an
influential shareholder. The tail of smaller investments has also been
shortened with a number of write offs and sales. The two AIM holdings that were
bought out during the year realised an increase in value of £0.2m since 30
September 2008. This demonstrates that further value uplifts may be possible on
AIM investees through corporate activity.
OUTLOOK
The last year has been a time for entrepreneurial companies to be focused on
running a tight operation and ensuring they can control their destiny despite
the difficulties of the banking market. This has largely been achieved across
the portfolio. In an improving economic climate the objective of these
companies is to grow both market share and profits. It will be the continued
innovation and drive of these companies, aided by the support of the Manager
who is an experienced and active investor that will create value for the
shareholders in Baronsmead VCT 2.
ISIS EP LLP
Investment Managers
17 November 2009
NEW INVESTMENTS IN THE YEAR TO 30 SEPTEMBER 2009
Company Location Sector Activity Investment
cost (£
'000)
NYSE-traded
investments
New
Inverness USA Healthcare & Developer of health 180
Medical Inc†education management programmes
Total 180
NYSE-traded
investments
AIM-traded
investments
New
Clarity Commerce London IT & media Consumer transaction 50
Solutions plc software
Follow on
Brulines Stockton-on-tees Business Pub management systems 298
Holdings plc Services
Electric Word London IT & Media Specialist information 200
plc business servicing the
sport
and education sectors
Ffastfill plc Sevenoaks IT & Media Trading platform 261
software provider
IDOX plc London IT & Media Public sector software 118
and services
Kiotech Surrey Healthcare & Animal feed additives 75
International Education
plc
WIN plc High Wycombe IT & Media Text messaging services 150
Total AIM-traded 1,152
investments
Unquoted
investments
Follow on
Kafevend Crawley Consumer Vending services 6
Holdings Ltd Markets
Nexus Vehicle Leeds Business Vehicle rental broker 499
Holdings Ltd Services
Occam DM Ltd Bath IT & Media Integrated data 52
services
Xention Cambridge Healthcare & Developer of ion 38
Discovery Education channel modulating
drugs
Total Unquoted 595
investments
Total Investment 1,927
in the period
†Paper consideration from sale of Concateno plc.
REALISATIONS IN THE YEAR TO 30 SEPTEMBER 2009
Company First Value at Realised Overall
investment 30 profit/ Multiple
September (loss)
date return*
2008 this
period
£'000
£'000
AIM-traded
realisations
Begbies Traynor Part sale Sep 04 129 - 4.1
Group plc
Claimar Care Group Trade sale Jan 06 73 198 0.5
plc
Concateno plc Trade sale Oct 06 547 (22) 1.3
Craneware plc Part sale Sep 07 192 (7) 1.7
Electric Word plc Transferred to Wood
Street Microcap
Investment Fund Mar 08 11 1 0.7
Independent Media Transferred to Wood
Street Microcap
Distribution plc Investment Fund Mar 08 14 (1) 0.9
MBL Group plc Market sale Jan 03 158 224 0.9
Universe Group plc Market sale May 03 27 (6) 0.1
1,151 387
Written off
Appian Technology Dec 05 157 (157) -
plc
Conder Environmental Nov 00 - - -
plc
EBTM plc May 07 77 (77) -
Fishworks plc Jun 05 35 (35) -
IPT Holdings plc Nov 04 18 (18) -
Landround plc Aug 97 16 (16) -
Loanmakers June 05 - - -
(Holdings) plc
Micap plc Jul 03 - - -
Top Ten Holdings plc Oct 03 11 (11) -
314 (314)
Total AIM-traded 1,465 73
realisations
Unquoted
realisations
Green Issues Write off Dec 05 261 (261) -
ScriptSwitch Loan Note redemption May 07 783 - 1.3
Total Unquoted 1,044 (261)
realisations
Total Realisations 2,509 (188)
*Includes interest/dividends received, loan note redemptions and partial
realisations accounted for in prior periods.
Deferred proceeds were received for Kidsunlimited £1,000 and Language Line £
33,000.
The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority
require certain disclosures in relation to the annual financial report, as
follows:
Principal risks, risk management and regulatory environment
The Board believes that the principal risks faced by the Company are:
-Economic risk - events such as an economic recession and movement in interest
rates could affect smaller companies valuations.
-Loss of approval as a Venture Capital Trust - the Company must comply with
Section 274 of the Income Tax Act 2007 which allows it to be exempted from
capital gains tax on investment gains. Any breach of these rules may lead to
the Company losing its approval as a VCT, qualifying shareholders who have not
held their shares for the designated holding period having to repay the income
tax relief they obtained and future dividends paid by the Company becoming
subject to tax. The Company would also lose its exemption from corporation tax
on capital gains.
-Investment and strategic - an inappropriate strategy, poor asset allocation or
consistent weak stock selection might lead to under performance and poor
returns to shareholders. Therefore the Company's investment strategy is
periodically reviewed by the Board which considers at each meeting the
performance of the investment portfolio.
-Regulatory - the Company is required to comply with the Companies Acts 2006,
the rules of the UK Listing Authority and United Kingdom Accounting Standards.
Breach of any of these might lead to suspension of the Company's Stock Exchange
listing, financial penalties or a qualified audit report.
-Reputational - inadequate or failed controls might result in breaches of
regulations or loss of shareholder trust.
-Operational - failure of the Manager's and administrator's accounting systems
or disruption to its business might lead to an inability to provide accurate
reporting and monitoring.
-Financial - the Board has identified the Company's principal financial risks
which are set out in the notes to the Financial Statements on pages 39 to 43.
Inadequate controls might lead to misappropriation of assets. Inappropriate
accounting policies might lead to misreporting or breaches of regulations.
-Market Risk - investment in AIM traded, PLUS traded and unquoted companies by
nature involve a higher degree of risk than investment in companies traded on
the main market. In particular, smaller companies often have limited product
lines, markets or financial resources and may be dependent for their management
on a smaller number of key individuals. In addition, the market for stock in
smaller companies is often less liquid than that for stock in larger companies,
bringing with it potential difficulties in acquiring, valuing and disposing of
such stock.
-Liquidity Risk - the Company's investments may be difficult to realise. The
fact that a share is traded on AIM does not guarantee its liquidity. The spread
between the buying and selling price of such shares may be wide and thus the
price used for valuation may not be achievable.
-Competitive Risk - retention of key personnel of the Manager is vital to the
success of the Company. Appropriate incentives are in place to ensure retention
of such personnel.
The Board seeks to mitigate the internal risks by setting policy, regular
review of performance, enforcement of contractual obligations and monitoring
progress and compliance. In the mitigation and management of these risks, the
Board applies rigorously the principles detailed in the Turnbull guidance.
Statement of Directors' Responsibilities in respect of the Annual Report and
the Financial Statements
The Directors are responsible for preparing the Annual Report and the Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law they have elected to prepare the financial
statements in accordance with UK Accounting Standards (UK GAAP).
The financial statements are required by law to give a true and fair view of
the state of affairs of the Company and of the profit or loss of the Company
for that period.
In preparing these financial statements, the Directors are required to:
•select suitable accounting policies and then apply them consistently;
•make judgments and estimates that are reasonable and prudent;
•state whether applicable UK Accounting Standards (UK GAAP) have been followed,
subject to any material departures disclosed and explained in the financial
statements; and
•prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
The Directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that its financial statements comply with the
Companies Act 2006. They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the Company and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Directors' Report (including Business Review), Directors'
Remuneration Report and Corporate Governance Statement that comply with that
law and those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company's website,
www.baronsmeadvct2.co.uk. Visitors to the website should be aware that
legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of
the annual financial report
We confirm that to the best of our knowledge:
•the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
•the Directors' Report includes a fair review of the development and
performance of the business and the position of the issuer together with a
description of the principal risks and uncertainties that they face.
On behalf of the Board,
Clive A Parritt
Chairman
17 November 2009
Income Statement
For the Year ended 30 September 2009
Year to 30 September 2009 Year to 30 September 2008
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment holding gains/ - 343 343 - (10,241) (10,241)
(losses)
Realised (losses) on - (154) (154) - (105) (105)
investments
Income 1,297 - 1,297 2,834 - 2,834
Recoverable VAT 68 299 367 85 655 740
Investment management fee (291) (872) (1,163) (350) (1,054) (1,404)
Other expenses (405) - (405) (357) - (357)
Profit/(loss) on ordinary
activities before 669 (384) 285 2,212 (10,745) (8,533)
taxation
Taxation on ordinary (120) 120 - (544) 544 -
activities
Profit/(loss) on ordinary
activities after taxation 549 (264) 285 1,668 (10,201) (8,533)
Return per share:
Basic 0.83p (0.40p) 0.43p 2.73p (16.68p) (13.95p)
The `Total' column of this statement is the profit and loss account of the
Company.
All revenue and capital items in this statement derive from continuing
operations.
No operations were acquired or discontinued in the year.
Reconciliation of Movements in Shareholders' Funds
For the Year ended 30 September 2009
2009 2008
Ordinary Ordinary
shares shares
£'000 £'000
Opening shareholders' funds 54,822 68,745
Profit/(loss) for period 285 (8,533)
Purchase of shares for treasury (582) (2,850)
Issue of shares 8,881 1,786
Expenses for share issue/buybacks (477) (81)
Dividends paid (1,714) (4,245)
Closing shareholders' funds 61,215 54,822
Balance Sheet
As at 30 September 2009
2009 2008
£'000 £'000
Fixed assets
Investments 59,529 50,191
Current assets
Debtors 554 1,378
Cash at bank and on deposit 1,684 4,123
2,238 5,501
Creditors (amounts falling due within one year) (552) (846)
Net current assets 1,686 4,655
Total assets less current liabilities 61,215 54,846
Creditors (amounts falling due after one year) - (24)
Net assets 61,215 54,822
Capital and reserves
Called-up share capital 7,473 6,504
Share premium account 12,573 5,135
Capital redemption reserve 9,254 9,254
Revaluation reserve 1,569 (2,684)
Capital reserve 29,665 36,136
Revenue reserve 681 476
Equity shareholders' funds 61,215 54,822
Net asset value per share
- Basic 89.06p 91.68p
- Treasury 88.13p 91.10p
Cash Flow Statement
As at 30 September 2009
2009 2008
£'000 £'000
Operating activities
Investment income received 1,301 2,949
Interest received 123 152
Recoverable VAT 1,108 -
Investment management fees (1,134) (1,531)
Other cash payments (434) (358)
Net cash inflow from operating activities 964 1,212
Capital expenditure and financial investment
Purchases of investments (75,075) (32,122)
Disposals of investments 65,885 38,917
Net cash (outflow)/inflow from capital expenditure
and financial investment (9,190) 6,795
Dividends
Equity dividends paid (1,714) (4,251)
Net cash (outflow)/inflow before financing (9,940) 3,756
Financing
Issue of shares 8,886 1,786
Expenses of the issue of shares and buybacks (461) (60)
Buy-back of ordinary shares (924) (2,526)
Net cash inflow/(outflow) from financing 7,501 (800)
(Decrease)/increase in cash in the year (2,439) 2,956
Opening cash position 4,123 1,167
Closing cash position 1,684 4,123
Notes
1. The audited results which cover the year ended 30 September 2009 have been
prepared under UK Generally Accepted Accounting Practice (UK GAAP).
In order to better reflect the activities of a VCT and in accordance with the
SORP, supplementary information which analyses the income statement between
items of a revenue and capital nature has been presented alongside the income
statement. Net Revenue is the measure the Directors believe appropriate in
assessing the Company's compliance with certain requirements set out in Section
274 of the Income Tax Act 2007.
2. There were 74,730,194 ordinary shares listed at 30 September 2009. The
Company held 5,993,906 ordinary shares in Treasury as at 30 September 2009. The
total number of shares with voting rights at 30 September 2009 was 68,736,288.
3. Revenue and capital returns per share for the year to 30 September 2009 are
based on a weighted average of 65,802,901 (2008: 61,138,930) ordinary shares in
issue during the year.
4. Income for the year is derived from:
2009 2008
Total £'000 Total £'000
UK franked 208 334
UK unfranked 896 1,987
Redemption 78 358
premium
Interest 115 155
1,297 2,834
5. During the year to 30 September 2009 an amount of £367,000 (2008: £740,000)
recovered VAT has been recognised as a separate item on the income statement,
allocated between revenue and capital in the same proportion as that in which
the irrecoverable VAT was originally charged. Interest relating to the VAT
claim amounting to £93,000 has also been recognised in this period.
6. Related party transactions include Management, Company Secretarial,
Accounting and Performance fees payable to the Manager, ISIS EP LLP, as
disclosed in the notes to the full accounts. In addition, the Manager operates
a Co-Investment scheme, detailed in the Report of the Directors within the full
accounts, whereby employees of the Manager are entitled to participate in
certain unquoted investments alongside the Company.
7. These are not full accounts in terms of Section 434 of the Companies Act
2006. Full audited accounts for the period ending 30 September 2008 have been
lodged with the Registrar of Companies. The annual report for the year ended 30
September 2009 will be sent to shareholders shortly and will then be available
for inspection at 100 Wood Street, London, the registered office of the
Company. The audited accounts for the year ended 30 September 2009 contains an
unqualified audit report.
8. The Annual General Meeting will be held on 14 December 2009 at 11.00am at
the London Stock Exchange, 10 Paternoster Square, London EC4M 7LS.
Date: 17/11/2009
Page 1
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