Interim Results
Close Brothers Aim Vct PLC
24 October 2007
CLOSE BROTHERS AIM VCT PLC
HALF-YEARLY FINANCIAL RESULTS
24 October 2007
Announcement of half-yearly financial results for the six months ended 31 August
2007. This announcement constitutes the Half-yearly financial report and copies
can also be accessed via www.closeventures.co.uk
Close Brothers AIM VCT PLC (the 'Company'), which invests in companies listed on
the Alternative Investment Market, across a variety of sectors, today announces
the half-yearly financial results for the six months ended 31 August 2007. This
Half-yearly Financial Report was approved by the Board on 24th October 2007.
Interim Management Report
The six months to 31st August 2007, even more than the comparable period in the
previous year, proved a most volatile time for stock markets and particularly
for small companies. The AIM index peaked in July and then fell by over 14 %
before recovering slightly to finish the period under review unchanged from the
beginning of the year. Once again it has proved to be an imperfect benchmark as
the widest gyrations have been in the international resource stocks, which meant
that it recovered more quickly from its trough in July than smaller companies in
general. These often more illiquid stocks, which are the stocks found in VCT
portfolios, did not see their share prices bounce back in the same way. The most
important driver of share prices for such companies is the news from them.
However uncertain market conditions, reduction in appetite for risk and lack of
liquidity at the smaller end made share prices react more violently to any
disappointments. This did not help the performance of the Net Asset Values in
the period.
Although it is disappointing to have to report that in the first six months of
the year the Net Asset Value of the Ordinary shares fell by 6.6% (after adding
back the first interim dividend), the net asset value of the D shares did manage
a small increase of 2.3% on the same basis.
Not surprisingly, the flow of new issues onto AIM has been slow. Nevertheless at
the end of the period the Ordinary share portfolio and the D share portfolio
were respectively 85 % and 65 % invested in qualifying investments.
Dividends
It is your Board's policy to strive to maintain annual an dividend of at least
5.0p per Ordinary and D share, (where applicable subject to HM Revenue & Customs
approval).
Ordinary shares
The Board has declared a second interim dividend of 2.5p per Ordinary share
(2006 : 2.5p) from realised capital profits.
D shares
The Board has declared a second interim dividend of 2.5p per D share (2006 :
1.3p) which is made up of a revenue dividend of 1.0p and a dividend paid out of
realised capital profits of 1.5p per share.
The dividends paid out of realised capital profits are subject to HM Revenue &
Customs approval.
Performance
Market Background
Liquidity was poor throughout the summer, with the supply of fundraisings
noticeably slower. There was some hope that the end of the holiday period would
restore some semblance of normality to the market, but the rumblings from the
sub prime market gathered momentum and the subsequent Northern Rock debacle
prolonged the uncertainty into the Autumn.
Throughout the period, results and statements from companies have generally been
good, with no immediate signs of a drop in economic activity.
Ordinary Share Portfolio
The period under review has been a disappointing one for the Ordinary portfolio,
with a good start to the year eroded by the market conditions discussed above.
After adding back the 2.5p dividend paid in August, the NAV fell by 6.6%
following a similar pattern to last year. Some of the fall was due to collapses
in confidence which resulted in shares being re-rated. For example, the price
of Colliers has suffered with the decline in sentiment towards the property
market, leaving its shares yielding 4%.
In addition, several of the larger holdings had specific problems which
contributed to a decline in the net asset value per share in the period.
Interlink Foods found itself unable to trade out of its difficulties and was
forced to appoint an administrator after a bid for the company failed. Research
Now suffered from the hiatus of having to move premises because of the murder of
its financial controller. This affected sales and cost controls, and led to a
profit warning. It has since reported that it is trading well again. Pilat
Media, having issued an upbeat statement with its full year figures in March,
reported a much less good second quarter which led to reduced profit estimates
for the year on the back of a delay in the award of two contracts. The share
price has almost halved, but the second half of the year is expected to see
several existing contracts 'go live' which will free up cash and should restore
confidence in what remains an exciting growth story. Imprint, the recruitment
operator, has had its share price hit by the failure of a bid together with
increased nervousness about sliding forecasts which has left the shares
languishing at a discount to its peers. The small holding in Accuma was sold,
as the future of the IVA market began to look less certain.
The news has not all been bad. Tanfield's shares doubled in the period under
review, and we have continued to take profits for the payment of future capital
dividends. Pipex announced the sale of its broadband business, and its
intention to break up the rest of its business and return cash to shareholders.
Revenue Assurance also announced a takeover by Spice Group which has since gone
through. This will leave us with a qualifying holding in a company exposed to
growing infrastructure maintenance sector.
Additionally two new investments were made at a total cost of £0.65m during the
period. Since the end of August 2007, a further two investments totalling £0.56m
have been made.
D Share Portfolio
The D share portfolio benefited from its higher weighting in cash against the
background of turbulent markets described above. Like the Ordinary portfolio,
it suffered from the performance of its holdings in Research Now, Pilat and
Imprint. It also suffered from the malaise in the telecoms market with its
holding in Adept, where the share price fell despite upbeat trading.
The portfolio also benefited from a large holding in Tanfield in which we have
taken profits as we have found new investments to take the Revenue cover towards
the 70% target. During the period, we made 10 new investments at a cost of £3.0m
offset by disposals in Tanfield and Accuma of £0.4m. This put the Revenue cover
at 65% at the end of August, and with a further £1.1m invested since the period
end it is now around 70%.
Outlook
Whilst investors remain cautious about risk this will continue to impact on
smaller company share prices. The key question is to what extent the uncertainty
will affect the wider economy, because small companies need a growing economy to
thrive. The Chancellor in his Autumn Pre Budget Report reduced his economic
growth forecasts to 2% but this still represents economic growth and if this
turns out to be correct small companies ought to be able to make progress.
As always, the main challenge is finding enough good quality VCT qualifying
issues to invest in. Fortunately your Company can still invest in companies with
up to £15m of gross assets and is not subject to the lower limits and other
restrictions which are enshrined in the last two Finance Acts. The D share
portfolio is now 70 % invested in qualifying investments.
Since August larger company shares have recovered on the back of interest rate
cuts in America and the hope of UK rates following suit. However it remains to
be seen whether this trend trickles down to smaller companies. If it does, we
are likely to see a repeat of what happened last year when the performance of
the second half of the year more than made up for the disappointing performance
in the first half of the year.
Michael Reeve
Chairman
24 October 2007
Investment Portfolio Summary
as at 31 August 2007
The ten largest equity holdings by value in the Ordinary share portfolio are
listed below:
Ordinary share Portfolio
Company Activity Fair value % of net assets
£'000
Tanfield Group Engineering and electrical vehicle production 1,514 6.4%
company
Bond International Provider of business software and support 1,401 6.0%
solutions to the recruitment and human resource
industry
Pipex Communications Supplier of telecommunication services 908 3.9%
Mears Group Domiciliary care provision to the UK and 860 3.7%
international property sectors
Colliers CRE Provider of real estate solutions 841 3.6%
Clapham House Acquirer and developer of restaurants across the 805 3.4%
UK
Pilat Media Global Software provider for the global multi-channel 779 3.3%
broadcasting market
Claimar Care Group Provider of domiciliary care services to local 762 3.2%
authorities in the Midlands and North-West of UK
Zetar Manufacturer of confectionery and snack foods 725 3.1%
Cello Group Marketing services group 714 3.0%
Total 9,309 39.6%
Other equity investments 10,443 44.5%
Total equity portfolio 19,752 84.1%
Other investments (floating rate 1,917 8.2%
notes)
Total investments 21,669 92.3%
Net current assets 1,806 7.7%
Net assets 23,475 100.0%
Investment Portfolio Summary
as at 31 August 2007
The ten largest equity holdings by value in the D share portfolio are listed
below:
D share Portfolio
Company Activity Fair value % of net assets
£'000
Tanfield Group Engineering and electrical vehicle production 1,270 6.3%
company
Claimar Care Group Provider of domiciliary care services to local 1,027 5.1%
authorities in the Midlands and North-West of UK
Mattioli Woods Provider of pension consultancy and 676 3.4%
administration services
Neuropharm Group Pharmaceutical company specialising in products 583 2.9%
for the central nervous system
Vertu Motors Acquirer and consolidator of UK based motor 533 2.7%
retail businesses
Clerkenwell Ventures Acquirer, developer and operator of leisure 500 2.5%
businesses
Idox IT company specialising in information sharing 483 2.4%
Work Group Provider of recruitment services 480 2.4%
Zetar Manufacturer of confectionery and snack food 453 2.3%
Hexagon Human Capital Provider of recruitment services 439 2.2%
Total 6,444 32.2%
Other equity investments 6,424 32.1%
Total equity portfolio 12,868 64.3%
Other investments (floating rate 4,278 21.4%
notes)
Total investments 17,146 85.7%
Net current assets 2,852 14.3%
Net assets 19,998 100.0%
Responsibility Statement
The Directors have chosen to prepare the financial statements for the Company in
accordance with United Kingdom Generally Accepted Accounting Practice ('UK
GAAP')
In preparing these condensed financial statements for the period to 31 August
2007, we the Directors, confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared in accordance
with pronouncement on interim reporting issued by Accounting Standards Board;
(b) the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first six
months and description of principal risks and uncertainties for the remaining
six months of the year);
(c) the condensed set of financial statements give a true an fair view in
accordance with UK GAAP of the state of affairs of the Company and of the profit
and loss of the Company for that period and comply with UK GAAP and Companies
Act 1985 and;
(d) the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions and changes
therein).
The Half-yearly financial report has not been audited or reviewed by the
auditors.
By order of the Board
Michael Reeve
Chairman
24 October 2007
Condensed Income Statement
Ordinary Shares
Unaudited
Unaudited Six months to Audited
Six months to 31 August 2006 Year to
31 August 2007 28 February 2007
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on 4 - (1,593) (1,593) - (1,764) (1,764) - 1,828 1,828
investments
Investment income 3 215 - 215 208 - 208 387 - 387
Investment (73) (218) (291) (75) (225) (300) (149) (448) (597)
management fee
Other expenses (50) - (50) (62) - (62) (128) - (128)
Return/(loss) on 92 (1,811) (1,719) 71 (1,989) (1,918) 110 1,380 1,490
ordinary activities
before tax
Tax (charge) /credit 5 (2) 2 - 2 - 2 6 - 6
on ordinary
activities
Return/(loss) 90 (1,809) (1,719) 73 (1,989) (1,916) 116 1,380 1,496
attributable to
shareholders
Basic and diluted 7 0.3 (6.1) (5.8) 0.2 (6.4) (6.2) 0.4 4.5 4.9
return/(loss) per
share (pence)
All of the Company's activities derive from continuing operations.
No operations were acquired or discontinued during the period.
The Company has no recognised gains or losses other than those disclosed above,
accordingly a statement of total recognised gains and losses is not required.
The Total column of the Income Statement represents the profit and loss of the
Ordinary shares. The supplementary revenue return and capital return columns
have been prepared in accordance with the Association of Investment Companies'
Statement of Recommended Practice.
Comparative figures have been extracted from the accounts for the period ended
31 August 2006 and the statutory accounts for the year ended 28 February 2007.
Condensed Income Statement
D Shares
Unaudited
Unaudited Six months to Audited
Six months to 31 August 2006 Year to
31 August 2007 28 February 2007
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on 4 - 500 500 - (447) (447) - 1,335 1,335
investments
Investment income 3 282 - 282 238 - 238 493 - 493
Investment (59) (176) (235) (56) (168) (224) (113) (338) (451)
management fee
Other expenses (35) - (35) (44) - (44) (89) - (89)
Return/(loss) on 188 324 512 138 (615) (477) 291 997 1,288
ordinary activities
before tax
Tax (charge)/credit 5 (41) 41 - (30) 28 (2) (60) 54 (6)
on ordinary
activities
Return/(loss) 147 365 512 108 (587) (479) 231 1,051 1,282
attributable to
shareholders
Basic and diluted 7 0.9 2.3 3.2 0.7 (3.7) (3.0) 1.4 6.6 8.0
return/(loss) per
share (pence)
All of the Company's activities derive from continuing operations.
No operations were acquired or discontinued during the period.
The Company has no recognised gains or losses other than those disclosed above,
accordingly a statement of total recognised gains and losses is not required.
The Total column of the Income Statement represents the profit and loss of the D
shares. The supplementary revenue return and capital return columns have been
prepared in accordance with the Association of Investment Companies' Statement
of Recommended Practice.
Comparative figures have been extracted from the accounts for the period ended
31 August 2006 and the statutory accounts for the year ended 28 February 2007.
Condensed Income Statement
Total
Unaudited Unaudited
Six months to Six months to Audited
31 August 2007 31 August 2006 Year to
28 February 2007
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on 4 - (1,093) (1,093) - (2,211) (2,211) - 3,163 3,163
investments
Investment income 3 497 - 497 446 - 446 880 - 880
Investment (132) (394) (526) (131) (393) (524) (262) (786) (1,048)
management fee
Other expenses (85) - (85) (106) - (106) (217) - (217)
Return/(loss) on 280 (1,487) (1,207) 209 (2,604) (2,395) 401 2,377 2,778
ordinary activities
before tax
Tax (charge)/credit 5 (43) 43 - (28) 28 - (54) 54 -
on ordinary
activities
Return/(loss) 237 (1,444) (1,207) 181 (2,576) (2,395) 347 2,431 2,778
attributable to
equity shareholders
All of the Company's activities derive from continuing operations.
No operations were acquired or discontinued during the period.
The Company has no recognised gains or losses other than those disclosed above,
accordingly a statement of total recognised gains and losses is not required.
The Total column of the Income Statement represents the profit and loss of the
Ordinary shares. The supplementary revenue return and capital return columns
have been prepared in accordance with the Association of Investment Companies'
Statement of Recommended Practice.
Comparative figures have been extracted from the accounts for the period ended
31 August 2006 and the statutory accounts for the year ended 28 February 2007.
Condensed Balance Sheet
Ordinary Shares
Unaudited Unaudited Audited
31 August 31 August 28 February
Notes 2007 2006 2007
£'000 £'000 £'000
Fixed asset investments
at fair value through profit or loss
Qualifying investments 19,478 19,543 20,875
Non-qualifying investments 2,191 4,112 4,156
Total fixed asset investments 21,669 23,655 25,031
Current assets
Debtors 88 117 95
Cash at bank 2,048 450 1,211
2,136 567 1,306
Creditors: (330) (69) (49)
amounts falling due within one year
Net current assets 1,806 498 1,257
Net assets 23,475 24,153 26,288
Capital and reserves
Called up share capital 8 14,761 15,310 14,978
Share premium 1,450 1,450 1,450
Special reserve 7,311 8,182 7,665
Capital redemption reserve 3,570 3,021 3,353
Realised capital reserve (6,490) (4,124) (4,055)
Unrealised capital reserve 2,732 184 2,846
Revenue reserve 141 130 51
Equity shareholders' funds 23,475 24,153 26,288
Net asset value per share (pence) 79.52 78.88 87.76
Comparative figures have been extracted from the accounts for the period ended
31 August 2006 and the statutory accounts for the year ended 28 February 2007.
Condensed Balance Sheet
D Shares
Unaudited Unaudited Audited
31 August 31 August 28 February
Notes 2007 2006 2007
£'000 £'000 £'000
Fixed asset investments
at fair value through profit or loss
Qualifying investments 12,792 8,774 10,100
Non-qualifying investments 4,354 7,009 7,077
Total fixed asset investments 17,146 15,783 17,177
Current assets
Debtors 65 78 81
Cash at bank 3,356 2,755 2,895
3,421 2,833 2,976
Creditors: (569) (44) (65)
amounts falling due within one year
Net current assets 2,852 2,789 2,911
Net assets 19,998 18,572 20,088
Capital and reserves
Called up share capital 8 7,924 8,025 8,008
Share premium 39 39 39
Special reserve 9,099 9,341 9,304
Capital redemption reserve 158 57 74
Realised capital reserve 179 (621) 277
Unrealised capital reserve 2,438 1,561 2,253
Revenue reserve 161 170 133
Equity shareholders' funds 19,998 18,572 20,088
Net asset value per share (pence) 126.19 115.72 125.43
Comparative figures have been extracted from the accounts for the period ended
31 August 2006 and the statutory accounts for the year ended 28 February 2007.
Condensed Balance Sheet
Total
Unaudited Unaudited Audited
31 August 31 August 28 February
Notes 2007 2006 2007
£'000 £'000 £'000
Fixed asset investments
at fair value through profit or loss
Qualifying investments 32,270 28,317 30,975
Non-qualifying investments 6,545 11,121 11,233
Total fixed asset investments 38,815 39,438 42,208
Current assets
Debtors 153 195 176
Cash at bank 5,404 3,205 4,106
5,557 3,400 4,282
Creditors: (899) (113) (114)
amounts falling due within one year
Net current assets 4,658 3,287 4,168
Net assets 43,473 42,725 46,376
Capital and reserves
Called up share capital 8 22,685 23,335 22,986
Share premium 1,489 1,489 1,489
Special reserve 16,410 17,523 16,969
Capital redemption reserve 3,728 3,078 3,427
Realised capital reserve (6,311) (4,745) (3,778)
Unrealised capital reserve 5,170 1,745 5,099
Revenue reserve 302 300 184
Equity shareholders' funds 43,473 42,725 46,376
Comparative figures have been extracted from the accounts for the period ended
31 August 2006 and the statutory accounts for the year ended 28 February 2007.
Condensed Reconciliation of Movements in Shareholders' Funds
Ordinary Shares
Share Share Special Capital Realised Unrealised Revenue Total
capital premium reserve redemption capital capital reserve
reserve reserve reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 28 February 2007 14,978 1,450 7,665 3,353 (4,055) 2,846 51 26,288
Net return after taxation for the - - - - (1,695) (114) 90 (1,719)
period
Dividends - - - - (740) - - (740)
Shares purchased for cancellation (217) - (354) 217 - - - (354)
As at 31 August 2007 14,761 1,450 7,311 3,570 (6,490) 2,732 141 23,475
As at 28 February 2006 15,561 1,450 8,547 2,770 (3,231) 1,806 57 26,960
Net return after taxation for the - - - - (367) (1,622) 73 (1,916)
period
Dividends - - - - (526) - - (526)
Shares purchased for cancellation (251) - (365) 251 - - - (365)
As at 31 August 2006 15,310 1,450 8,182 3,021 (4,124) 184 130 24,153
As at 28 February 2006 15,561 1,450 8,547 2,770 (3,231) 1,806 57 26,960
Net return after taxation for the - - - - 340 1,040 116 1,496
year
Dividends - - - - (1,164) - (122) (1,286)
Shares purchased for cancellation (583) - (882) 583 - - - (882)
As at 28 February 2007 14,978 1,450 7,665 3,353 (4,055) 2,846 51 26,288
Condensed Reconciliation of Movements in Shareholders' Funds
D Shares
Share Share Special Capital Realised Unrealised Revenue Total
capital premium reserve redemption capital capital reserve
reserve reserve reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 28 February 2007 8,008 39 9,304 74 277 2,253 133 20,088
Net return after taxation for the - - - - 180 185 147 512
period
Dividends - - - - (278) - (119) (397)
Shares purchased for cancellation (84) - (205) 84 - - - (205)
As at 31 August 2007 7,924 39 9,099 158 179 2,438 161 19,998
As at 28 February 2006 8,040 39 9,373 42 (277) 1,965 223 19,405
Net return after taxation for the - - - - (183) (404) 108 (479)
period
Dividends - - - - (161) - (161) (322)
Shares purchased for cancellation (15) - (32) 15 - - - (32)
As at 31 August 2006 8,025 39 9,341 57 (621) 1,561 170 18,572
As at 28 February 2006 8,040 39 9,373 42 (277) 1,965 223 19,405
Net return after taxation for the - - - - 763 288 231 1,282
year
Dividends - - - - (209) - (321) (530)
Shares purchased for cancellation (32) - (69) 32 - - - (69)
As at 28 February 2007 8,008 39 9,304 74 277 2,253 133 20,088
Condensed Reconciliation of Movements in Shareholders' Funds
Total
Share Share Special Capital Realised Unrealised Revenue Total
capital premium reserve redemption capital capital reserve
reserve reserve reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 28 February 2007 22,986 1,489 16,969 3,427 (3,778) 5,099 184 46,376
Net return after taxation for the - - - - (1,515) 71 237 (1,207)
period
Dividends - - - - (1,018) - (119) (1,137)
Shares purchased for cancellation (301) - (559) 301 - - - (559)
As at 31 August 2007 22,685 1,489 16,410 3,728 (6,311) 5,170 302 43,473
As at 28 February 2006 23,601 1,489 17,920 2,812 (3,508) 3,771 280 46,365
Net return after taxation for the - - - - (550) (2,026) 181 (2,395)
period
Dividends - - - - (687) - (161) (848)
Shares purchased for cancellation (266) - (397) 266 - - - (397)
As at 31 August 2006 23,335 1,489 17,523 3,078 (4,745) 1,745 300 42,725
As at 28 February 2006 23,601 1,489 17,920 2,812 (3,508) 3,771 280 46,365
Net return after taxation for the - - - - 1,103 2,778
year 1,328 347
Dividends - - - - (1,373) - (443) (1,816)
Shares purchased for cancellation (615) - (951) 615 - - - (951)
As at 28 February 2007 22,986 1,489 16,969 3,427 (3,778) 5,099 184 46,376
Condensed Cash Flow Statement
Ordinary Shares
Unaudited Unaudited Audited
Six months to Six months to Year to
31 August 31 August 28 February
2007 2006 2007
£'000 £'000 £'000
Operating activities
Dividend income received 87 61 126
Investment income received 115 102 200
Other income received - - 7
Deposit interest received 19 30 47
Investment management fees paid (261) (317) (598)
Other cash payments (59) (41) (131)
Net cash outflow from operating activities (99) (165) (349)
Capital expenditure and financial investment
Purchase of qualifying investments (400) (1,314) (2,228)
Purchase of non-qualifying investments (5) (77) (102)
Disposal of qualifying investments 420 1,304 4,460
Disposal of non-qualifying investments 2,000 180 181
Net cash inflow from investing activities 2,015 93 2,311
Equity dividends paid
Revenue dividends paid - - (122)
Capital dividends paid (740) (526) (1,164)
Total equity dividends paid (740) (526) (1,286)
Net cash inflow/(outflow) before financing 1,176 (598) 676
Financing
Intercompany account movement 17 986 997
Cancellation of shares (356) (662) (1,186)
Net cash (outflow)/inflow from financing (339) 324 (189)
Increase/(decrease) in cash 837 (274) 487
Condensed Cash Flow Statement
D Shares
Unaudited Unaudited Unaudited
Six months to Six months to Year to
31 August 31 August 28 February
2007 2006 2007
£'000 £'000 £'000
Operating activities
Dividend income received 33 13 27
Investment income received 213 180 340
Deposit interest received 58 37 92
Investment management fees paid (198) (278) (496)
Other cash payments (41) (52) (89)
Net cash inflow/(outflow) from operating activities 65 (100) (126)
Capital expenditure and financial investment
Purchase of qualifying investments (2,496) (1,841) (3,322)
Purchase of non-qualifying investments (17) - -
Disposal of qualifying investments 810 890 7,793
Disposal of non-qualifying investments 2,718 5,000 -
Net cash inflow from investing activities 1,015 4,049 4,471
Equity dividends paid
Revenue dividends paid (119) (161) (321)
Capital dividends paid (278) (161) (209)
Total equity dividends paid (397) (322) (530)
Net cash inflow before financing 683 3,627 3,815
Financing
Intercompany account movement (17) (986) (997)
Cancellation of shares (205) (32) (69)
Net cash outflow from financing (222) (1,018) (1,066)
Increase in cash 461 2,609 2,749
Condensed Cash Flow Statement
for the six months to 31 August 2007
Total
Unaudited Unaudited Audited
Six months to Six months to Year to
31 August 31 August 28 February
2007 2006 2007
£'000 £'000 £'000
Operating activities
Dividend income received 120 74 153
Investment income received 328 282 540
Other income received - - 7
Deposit interest received 77 67 139
Investment management fees paid (459) (595) (1,094)
Other cash payments (100) (93) (220)
Net cash outflow from operating activities (34) (265) (475)
Capital expenditure and financial investment
Purchase of qualifying investments (2,896) (3,155) (5,550)
Purchase of non-qualifying investments (22) (77) (102)
Disposal of qualifying investments 1,230 2,194 12,253
Disposal of non-qualifying investments 4,718 5,180 181
Net cash inflow from investing activities 3,030 4,142 6,782
Equity dividends paid
Revenue dividends paid (119) (161) (443)
Capital dividends paid (1,018) (687) (1,373)
Total equity dividends paid (1,137) (848) (1,816)
Net cash inflow before financing 1,859 3,029 4,491
Financing
Cancellation of shares (561) (694) (1,255)
Net cash outflow from financing (561) (694) (1,255)
Increase in cash 1,298 2,335 3,236
Notes to the Condensed set of Financial Statements
for the six months to 31 August 2007
The principal activity of the Company is that of a Venture Capital Trust. It has
been approved by HM Revenue & Customs as a Venture Capital Trust under Section
842AA of the Income and Corporation Taxes Act 1988.
1. Accounting convention
The financial statements have been prepared under the historical cost
convention, as modified by the revaluation of certain financial instruments, in
accordance with applicable law and United Kingdom Accounting Standards, and with
the Statement of Recommended Practice 'Financial Statements of Investment Trust
Companies' ('SORP') issued by the Association of Investment Trust Companies ('
AITC') in January 2003 and revised in December 2005.
True and fair override
The Company is no longer an investment company within the meaning of Section 266
of the Companies Act 1985. However it conducts its affairs as a Venture Capital
Trust for taxation purposes under Section 842AA of the Income and Corporation
Taxes Act 1988.
The absence of Section 266 status does not preclude the Company from presenting
its accounts in accordance with the AITC's SORP, and furthermore the Directors
consider it appropriate to continue to present the accounts in this manner as it
is consistent with the sector within which it operates.
The Directors therefore consider that the departures from accounting standards
and the specific provisions of Schedule 4 of the Companies Act relating to the
form and content of accounts for companies other than investment companies are
necessary to give a true and fair view. The departures have no effect on the
total return or balance sheet.
2. Accounting policies
The accounting policies used in this half-yearly financial report are consistent
with the accounting policies adopted at the year end.
The principal accounting policies are described below:
a) Investments
In accordance with FRS 26 'Financial Instruments: Measurement', equity
investments are designated as fair value through profit or loss ('FVTPL'). The
Total column of the Income Statement represents the Company's profit and loss
account. Investments listed on recognised exchanges are valued at the closing
bid prices at the end of the accounting period. Fair value movements on equity
investments and gains and losses arising on the disposal of investments are
reflected in the Capital column of the Income Statement in accordance with the
AITC's SORP.
Investments are recognised as financial assets on legal completion of the
investment contract and are de-recognised on legal completion of the sale of an
investment.
The Directors are conscious of the fact that because shares are traded on AIM
this does not guarantee their liquidity. The nature of AIM investments is such
that the prices can be volatile and realisation may not achieve current book
value, especially when such a sale represents a significant proportion of that
Company's market capital. Nevertheless, on the grounds that the investments are
not intended for immediate realisation, they regard bid-market price as the most
objective and appropriate method of valuation.
b) Investment income
Dividends receivable on quoted equity shares are taken to revenue on an
ex-dividend basis. Returns on listed fixed interest securities are recognised on
a time apportionment basis from the date of purchase so as to reflect the
effective yield on the securities.
c) Investment management fees and other expenses
All expenses are accounted for on an accruals basis. Expenses are charged
through the income statement except as follows:
• expenses which are incidental to the acquisition of an investment are
included within the cost of the investment;
• expenses which are incidental to the disposal of an investment are deducted
from the disposal proceeds of the investment; and
• expenses are allocated between capital and revenue where a connection with
maintenance or enhancement of the value of the investments held can be
demonstrated. In respect of the Investment Manager's fee, 75% has been
allocated to capital reserve (realised) and 25% to revenue in the Income
Statement. In respect of the Investment Manager's performance fee, 100% is
allocated to capital reserve (realised), in order to reflect the Directors'
expected long-term view of the nature of the investment return of the
Company.
d) Taxation
Taxation is applied on a current basis in accordance with FRS 16 'current tax'.
Taxation associated with capital expenses is applied in accordance with the
SORP. In accordance with FRS 19 'deferred tax', deferred taxation is provided in
full on timing differences that result in an obligation at the balance sheet
date to pay more tax or a right to pay less tax, at a future date, at rates
expected to apply when they crystallise based on current tax rates and law.
Timing differences arise from the inclusion of items of income and expenditure
in taxation computations in periods different from those in which they are
included in the financial statements. Deferred tax assets are recognised to the
extent that it is regarded as more likely than not that they will be recovered.
The Directors have considered the requirements of FRS 19 and do not believe that
any provision should be made.
e) Debtors and creditors
• Debtors do not carry any interest and are short term in nature and are
accordingly stated at their nominal value as reduced by appropriate
allowances for estimated irrecoverable amounts. The Directors consider that
the carrying amount of debtors approximates to their fair value.
• Creditors are non-interest bearing and are stated at their nominal value.
The Directors consider that the carrying amount of creditors approximate to
their fair value.
f) Reserves
The realised capital reserve contains gains and losses on the realisation of
investments, capital dividends paid to shareholders and investment management
fees allocated to the capital reserve and taxation thereon. The unrealised
capital reserve contains increases and decreases in the valuation of investments
held at the period end. The special reserve is distributable and is primarily
used for the cancellation of the Company's share capital. The capital redemption
reserve accounts for amounts by which the issued capital is diminished through
the repurchase of the Company's own shares.
g) Dividends
In accordance with FRS 21 'Events after the balance sheet date', interim
dividends are not accounted for until paid, and final dividends are accounted
for when approved by shareholders at an Annual General Meeting.
h) D shares
Until such time that D shares are converted into Ordinary shares in 2008, all
investments and returns attributable to this class of share will be separately
identifiable from the existing Ordinary shares. All residual expenses will be
allocated on the basis of total funds raised for each class of share.
3. Investment income
Six months to 31 August 2007 Six months to 31 August 2006 Year to 28 February 2007
Ordinary D shares Ordinary D shares Ordinary D shares
shares £'000 Total shares £'000 Total shares £'000 Total
£'000 £'000 £'000 £'000 £'000 £'000
Income from investments
UK franked investment 84 32 116 79 12 91 136 30 166
income
UK unfranked investment 98 197 295 97 168 265 197 349 546
income
182 229 411 176 180 356 333 379 712
Other income
Deposit interest 33 53 86 32 58 90 47 114 161
Other income - - - - - - 7 - 7
Total income 215 282 497 208 238 446 387 493 880
4. (Losses)/gains on investments
Six months to 31 August 2007 Six months to 31 August 2006 Year to 28 February 2007
Ordinary D shares Ordinary D shares Ordinary D shares
shares £'000 Total shares £'000 Total shares £'000 Total
£'000 £'000 £'000 £'000 £'000 £'000
Realised(losses)/gains (1,339) 377 (962) (142) (43) (185) 788 1,047 1,835
(Decrease)/increase in (254) 123 (131) (1,622) (404) (2,026) 1,040 288 1,328
unrealised appreciation
(1,593) 500 (1,093) (1,764) (447) (2,211) 1,828 1,335 3,163
5. Tax credit/(charge) on ordinary activities
The tax charge for the half-year is nil (31 August 2006: nil, 28 February 2007:
nil) based on an estimated effective tax rate of 0% for the year ending 28
February 2008. The estimated effective tax rate is 0% as investment gains are
exempt from tax owing to the Company's status as a Venture Capital Trust and
there is expected to be an excess of management expenses over taxable income.
6. Dividends
The amounts recognised as distributions to equity shareholders in the period
were as follows:
Six months to 31 August 2007 Six months to 31 August 2006 Year to 28 February 2007
Ordinary D shares Ordinary D shares Ordinary D shares
shares £'000 Total shares £'000 Total shares £'000 Total
£'000 £'000 £'000 £'000 £'000 £'000
Dividends paid per - 740 740 - 526 526 122 1,164 1,286
Ordinary share
Dividends paid per 119 278 397 161 161 322 321 209 530
D share
119 1,018 1,137 161 687 848 443 1,373 1,816
Ordinary shares
The Directors have declared a dividend of 2.50 pence per share (to be paid out
of realised gains) subject to approval by HM Revenue & Customs. The record date
and payment date of this dividend will be announced on the London Stock Exchange
RNS service.
D shares
The Directors have declared a dividend of 2.50 pence per share (1.00 pence
revenue and 1.50 pence to be paid out of realised gains) subject to approval by
HM Revenue & Customs. The record date and payment date of this dividend will be
announced on the London Stock Exchange RNS service.
7. Basic and diluted return per share
Return per share has been calculated on 29,683,973 (2006: 30,927,771) Ordinary
shares and 15,922,959 (2006: 16,075,418) D shares being the weighted average
number of shares in issue for the period.
There are no convertible instruments, derivatives or contingent share agreements
in issue for Close Brothers AIM VCT PLC hence there are no dilution effects to
the return per share. The basic return per share is therefore the same as the
diluted return per share.
Management performance incentive fee
A management performance incentive was approved by shareholders at the
Extraordinary General Meeting on 26 November 2004 and became effective from 1
March 2005. The Board has the discretion to make payments under this incentive
by cash or shares. This could have a dilutive effect on the return per share
calculation.
For the period to 31 August 2007, no payment had become due under this incentive
and as a result, there were no dilutive effects on the return per share
calculation.
8. Called up share capital
31 August 31 August 28 February
2007 2006 2007
£'000 £'000 £'000
Authorised
45,000,000 Ordinary shares of 50p each 22,500 22,500 22,500
25,000,000 D shares of 50p each 12,500 12,500 12,500
35,000 35,000 35,000
Allotted called up and fully paid
29,522,615 Ordinary shares of 50p each 14,761 15,310 14,978
15,846,847 D shares of 50p each 7,924 8,025 8,008
22,685 23,335 22,986
During the period, the Company purchased for cancellation 432,825 Ordinary
shares and 168,341 D shares at a cost of £354,000, and £205,000 respectively.
This represented 1.44% of the Ordinary shares and 1.05% of the D shares as at 31
August 2007.
9. Reconciliation of net return before taxation to net cash outflow from
operating activities
Six months to 31 August 2007 Six months to 31 August Year to 28 February 2007
2006
Ordinary D shares Ordinary D Ordinary D
shares Total shares shares Total shares shares Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Net return before taxation 92 188 280 71 138 209 110 291 401
Investment management fee (218) (176) (394) (225) (168) (393) (448) (338) (786)
charged to capital
(Increase)/decrease in (9) 16 7 (24) (11) (35) (9) (33) (42)
other debtors
Increase/(decrease) in 36 37 73 13 (59) (46) (2) (46) (48)
other creditors
Net cash outflow from operating (99) 65 (34) (165) (100) (265) (349) (126) (475)
activities
10. Related party transactions
Close Investments Limited, as Investment Manager of the Company is considered to
be a related party by virtue of its management contract with the Company. During
the half-year, services of a total value of £526,000 (31 August 2006: £524,000,
28 February 2007: £1,048,000) were purchased by the Company from Close
Investments Limited. At the 31 August 2007, the amount due to Close Investments
Limited disclosed under creditors was £89,000.
As at 31 August 2007 and the date of this report, Close Investments Limited held
7,050 Ordinary Shares and 8,264 D Shares in the Company.
11. Other information
The information set out in this announcement does not constitute the Company's
statutory accounts within the terms of S240 of the Companies Act 1985 for the
period ended 31 August 2007 and 31 August 2006, and is unaudited. The
information for the year ended 28 February 2007 does not constitute statutory
accounts within the terms of S240 of the Companies Act 1985 and is derived from
the statutory accounts for the financial year, which have been delivered to the
Registrar of Companies. The auditors reported on those accounts; their report
was unqualified and did not contain a statement under S237(2) or (3) of the
Companies Act 1985.
12. Publication
The half-yearly financial report is being sent to shareholders and copies will
be made available electronically at www.closeventures.co.uk. The half-yearly
financial reports will also be made available to the public at the registered
office of the Company and at Companies House.
For further information, please contact:
Andrew Buchanan / Kate Tidbury Karen Wagg
Close Investments Limited Polhill Communications
Tel: 020 7426 4000 Tel: 020 7655 0540
This information is provided by RNS
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