Final Results
Octopus AIM VCT PLC
Final Results
27 May 2009
Octopus AIM VCT PLC (the "Company"), managed by Octopus Investments
Limited, today announces the final results for the year ended 28
February 2009.
These results were approved by the Board of Directors on 26 May 2009.
You may view the Annual Report in full at www.octopusinvestments.com
by navigating to VCT Meetings & Reports under the 'Services' section.
About Octopus AIM VCT PLC
Octopus AIM VCT PLC (the "Company" or "Fund") is a venture capital
trust ("VCT") which aims to provide shareholders with attractive
tax-free dividends and long-term capital growth.
The investment manager is Octopus Investments Limited ("Octopus" or
"Manager"). The Company was launched as Close AIM VCT PLC in spring
of 1998 and raised £10.1 million from private investors through an
issue of Ordinary Shares.
Between October 2000 and March 2001 a further £20.0 million was
raised through an issue of C Shares. Furthermore, between 16 March
2004 and final closing on 5 April 2004 the Company raised £3.3
million by way of a D Share issue.
The C Shares were merged and converted into Ordinary Shares on 31 May
2004 at a conversion ratio determined by a price mechanism related to
the respective net assets per share of both the Ordinary Shares and C
Shares at 29 February 2004 (which resulted in C Shareholders
receiving 1.0765 Ordinary Shares for each C Share held).
A further £15.0m was raised between 6 January 2005 and 8 April 2005
through an issue of New D Shares.
In the year covered by this report, the Ordinary Shares converted
into D Shares on 31 May 2008 at a conversion ratio of 0.5448 D Shares
for each Ordinary Share. The two classes of shares were combined and
renamed New Ordinary Shares which is now the only class of share
capital.
Financial Summary
Year to 28 February 2009 New Ordinary shares*
Net assets ('000) £19,443
Net loss after tax ('000) £(12,285)
Net asset value per share ("NAV") 64.50p
Cumulative dividends paid since launch 2.50p
Total return (NAV plus dividends paid) 67.00p
*No comparatives are shown for New Ordinary Shares given the
conversion of Ordinary Shares to 'D' Shares on 31 May 2008. The
resulting share class was named "New Ordinary Shares". Ordinary
shares were converted into 'D' Shares at a conversion ratio of 0.5448
'D' Shares for every Ordinary share. All of the 'D' Shares were then
redesignated into New Ordinary shares on 31 May 2008.
Prior period pre-conversion of the share classes are shown below.
Year to 29 February 2008 Ordinary Shares D Shares Total
Net assets ('000) £17,346 £17,437 £34,783
Net loss after tax ('000) £(6,709) £(1,625) £(8,334)
Net asset value per share ("NAV") 60.06p 110.23p -
Cumulative dividends paid since
launch 64.61p 11.05p -
Total return (NAV plus dividends
paid) 124.67p 121.28p -
Ordinary D shares
Dividends paid in New Ordinary Shares (pence per
the Period Ended Shares # C shares # share)
28 February 1999 - 1.88p - -
29 February 2000 - 3.13p - -
28 February 2001 - 37.25p - -
28 February 2002 - 6.50p 2.55p -
28 February 2003 - 3.50p 1.50p -
29 February 2004 - 0.50p 0.50p -
28 February 2005 - 0.50p 0.50p 0.50p
28 February 2006 - 2.15p 2.31p 2.25p
28 February 2007 - 4.20p 4.52p 3.30p
31 August 2007 - 2.50p 2.69p 2.50p
29 February 2008 - 2.50p 2.69p 2.50p
31 August 2008 - 2.50p 2.69p 2.50p
28 February 2009 2.50 - - -
Total dividends (capital 67.11p
and revenue) 2.50p 19.65p 13.55p
Total return as at 28 -
February 2009 67.00p - -
# Subsequently converted to Ordinary shares.
Notes
* The Ordinary Shares were first listed on 17 March 1998.
* Dividends paid before 5 April 1999 were paid to qualifying
shareholders inclusive of the associated tax credit.
* The D Shares were first listed on 17 March 2004.
* The C Shares were converted into Ordinary Shares on 31 May 2004, in
accordance with the conversion factor of 1.0765 Ordinary Shares for
each C Share. This adjustment is shown in the net asset value per C
share above.
* The Ordinary Shares were converted into D Shares on 31 May 2008, in
accordance with the conversion factor of 0.5448 D Shares for each
Ordinary Share. This adjustment is shown in the net asset value per
Ordinary share above.
* New D Shares issued between 6 January 2005 and 8 April 2005, did
not rank for the final dividend.
* All dividends paid by the Company are free of income tax. It is an
HM Revenue & Customs requirement that dividend vouchers indicate
the tax element should dividends have been subject to income tax.
Investors should ignore this figure on their dividend voucher and
need not disclose any income they receive from a VCT on their tax
return.
* The above table excludes the tax benefits investors received upon
subscription.
* The net asset value of the Company is not its share price as quoted
on the official list of the London Stock Exchange. The share price
of the Company can be found in the Investment Companies section of
the Financial Times on a daily basis. Investors are reminded that
it is common for shares in VCTs to trade at a discount to their net
asset value, primarily as a result of the initial tax relief which
is non-transferable.
Chairman's Statement
Introduction
Following the appointment of Octopus Investments Limited ("Octopus")
as investment manager in place of Close Investments Limited in July
2008 your Company's name was changed to its present form. The
appointment of Octopus followed the move to that Company by Andrew
Buchanan and Kate Tidbury who had been responsible for the management
of the Company's portfolio for many years.
At the end of May 2008 the Ordinary shares and 'D' Shares were
combined and renamed New Ordinary Shares which is now the only class
of share capital.
Despite our commitment to manage as best we can the discount against
net asset value at which your shares stand in the market close to 10%
by the repurchase of shares, the discount has recently widened.
However, at the end of the period the discount stood at around 7%.
During the year we repurchased 284,564 Ordinary shares, 526,701 D
Shares and 723,039 New Ordinary Shares.
In recent years, the Chancellor has in his budget tightened the
criteria for VCT qualifying investments on several occasions thus
dampening the demand for new VCT shares. At a time when many small
companies are finding it difficult to obtain credit it is
particularly disappointing that the Chancellor has shown such
indifference in the recent Budget by totally ignoring the potential
for VCTs to foster growth in small companies.
Performance
The year to 28 February 2009, which these accounts cover, has been a
turbulent one and has seen smaller companies deserted by many
investors. Share prices have fallen under the weight of several
factors, which have not been avoidable as the Company has to maintain
exposure to the stock market in order to retain VCT status.
This background has made the last year a very difficult one for
shareholders of all sorts, but particularly for those invested in
very small companies. The Investment Manager's Review will deal with
this matter more fully, but in the year to 28 February 2009 the FTSE
All Share Index fell by 36.8% and the FTSE AIM All-Share index by
61.2%. Thus, although very disappointing, the fall in the NAV of
44.8% after adding back the dividend paid needs to be viewed in the
context of the conditions that have prevailed and the need to remain
invested.
Portfolio
Activity has been very subdued this year as new issues have all but
dried up, and with the combined portfolio already fully invested for
HM Revenue and Customs ("HMRC") purposes, your Manager has been very
selective about investment opportunities. Only three new qualifying
investments were made in the year, and of these, two Advanced
Computer Software and Praesepe, were to back management teams which
have previously delivered a successful result for your Company. Your
Manager has started to make a few non-qualifying investments in
smaller companies at prevailing low ratings to benefit from market
recovery as confidence is restored.
Dividend
Your Board has declared a final dividend of 2.5p per share which is
made up of a revenue dividend of 0.4p and a capital dividend of 2.1p
which is subject to approval by HMRC. The record date and payment of
this dividend will be announced on the London Stock Exchange news
service in due course. If approval is received the dividend payment
for the year will amount to 5p per share, made up of a revenue
dividend of 0.8p and a capital dividend of 4.2p. Assuming the current
market price of 63p per share this represents a tax free yield of
7.9%.
VCT Qualifying Status
PricewaterhouseCoopers LLP provides the Board and Investment Manager
with advice on the ongoing compliance with HMRC rules and regulations
concerning VCTs. The Board has been advised that Octopus AIM VCT PLC
is in compliance with the conditions laid down by HMRC for
maintaining approval as a VCT. As at 28 February 2009, nearly 80.0%
of the portfolio (as measured by HMRC rules) was invested in VCT
qualifying investments.
VAT on Management Fees
The Government has announced that VCTs will be exempt from paying VAT
on investment management fees with effect from 1 October 2008. This
follows a European Court of Justice Judgement against the Government
in a case relating to VAT payable by investment trusts. It is now
virtually certain that a VAT repayment will be obtained for VAT paid
on management fees for the last four years. However, the extent and
timing of repayments is not yet known. We will follow developments
with the help of our advisers. For the purposes of these accounts,
and with guidance from our advisers at Octopus, we have accrued
income of £350,000.
Risks and Uncertainties
As required under the new Listing Rules under which your Company
operates, we are required to comment on the potential risks and
uncertainties which could have a material impact over the Company's
performance. The key risk derives from the need to maintain
compliance with the HMRC regulations requiring 70 per cent of your
Company to be invested in qualifying holdings. In addition, the
current fall in GDP combined with a contraction in the lending
markets is a more challenging economic backdrop for smaller companies
and this could continue to have an adverse effect on share prices.
Further details are set out in the Director's Report on page 24.
Annual General Meeting
In order to ensure that the Company can look forward to a successful
long-term future as an AIM VCT, your Board believes that it is
important that the Company maintains an attractive dividend yield
(where possible within the constraints of the performance of the
Company and the level of cash reserves). Whilst there are some signs
that a secondary market in VCT shares is starting to develop, the
Board also intends to continue to offer a share buyback facility to
allow any shareholders who need to sell their shares to do so. The
Board further believes that the Company should have the ability to
conduct top up share offers to raise further cash resources.
Increasing the size of the Company would reduce the running costs of
the VCT as a percentage of net assets (by spreading the fixed costs
over a larger base), while also providing further financial resources
with which to take advantage of the investment opportunities that
will emerge in the coming years. In order to be able to issue new
shares to investors, it is important that the Company's life extends
beyond the five year minimum holding period that applies to investors
who wish to obtain upfront income tax relief by participating in a
top up share offer. Therefore, a resolution will be proposed at the
Annual General Meeting to extend the life of the Company until 2015,
and the Board anticipates that it will put a similar resolution to
shareholders at subsequent Annual General Meetings in order to
preserve the ability of the Company to conduct top ups in future
years.
Outlook
Your Company's portfolio is 80% invested in qualifying investments.
This is fortunate as a paltry £13 million of new money was raised on
the AIM market in the last quarter of 2008 and a mere £3 million in
the first quarter of 2009, which may be compared with £300 million in
the same period in 2008.
In my statement last year I said that the year under review had been
an exceptionally difficult time for financial assets and smaller
companies in particular. All I can say is that that year was nothing
compared with the year currently under review. When the market
capitalisation of major financial institutions can double and halve
not just once but twice in a three month period one realises that
volatility knows no bounds and uncertainty is rife. Some see green
shoots, others do not or if they do fear that they will be quickly
frosted and that the recovery from the worst global recession since
the nineteen thirties will be slow. There is no doubt that credit is
tight. However, if smaller companies remain less favoured by banks,
there is an interesting opportunity for investors to provide capital
to good companies at attractive share price ratings. With this in
mind, the Board's strategy remains to maintain an appropriate level
of liquidity in the balance sheet to achieve four aims which should
benefit VCT investors in the years to come:
* to take advantage of new investment opportunities as they arise;
* to support further investment in existing portfolio companies if
required;
* to assist liquidity in the Company's shares through the buy back
facility;
* to establish a consistent dividend flow over time.
By adhering to sound investment principles in applying these aims, I
hope and trust that in a year's time, as the stock market
discriminates between companies, it will be possible to report a
higher NAV.
Michael Reeve
Chairman
26 May 2009
Investment Manager's Review
The AIM Market
In the twelve months to 28 February 2009 the FTSE AIM Index fell by
61%, severely impacted by the well publicised banking crisis and a
rapidly deteriorating economic outlook. As is usual during periods of
uncertainty, investors shun small companies in favour of larger and
more liquid investments. However, as you will be aware, the latter
fared little better as the banking crisis unfolded.
The severe derating of shares has been particularly marked in the
microcap sector where your VCT makes its investments. This has made
the process of investing harder in the short term, because new
companies looking to float have been put off by the constant stream
of bad news about the economy and financial markets and the
inevitably lower values afforded to businesses by the stock market.
This is well illustrated in the chart below, which shows the funds
raised on AIM over the year. Most of the VCT qualifying
opportunities that have arisen have been further fundraisings for
existing companies, many of which have been at lower prices than a
year ago.
Performance
The total return of the New Ordinary Shares fell by 44.8% in the year
to 28 February 2009. Although disappointing, this reflected the
market conditions outlined above. The FTSE All share Index fell
36.8% and the FTSE Smaller Companies Index ex Investment Trusts fell
by 51.5%. The FTSE AIM Index fared even worse as the previous
outperformance of the resource sector unwound and poorly financed
companies suffered savage share price falls.
The portfolio has suffered from both deteriorating economic
conditions and from reduced bank funding, especially in the second
half of the financial year. The businesses in the Company's
portfolio have direct experience of the treatment the smallest
companies have been subjected to as the banking industry's problems
have unfolded.
Sadly, even before the banking crisis really had its full effect,
four investments, Cains Beer Company, Hatpin, Food & Drink and
Landround had called in administrators. The reasons range from poor
management controls to the early impact of the economic downturn.
Two companies have delisted - Conder Environmental and Independent
Media Support. Both of these investments have been written down to
nil, although there may be a small payment to shareholders
eventually. Since the year end Playgolf has, as expected, appointed
an administrator. As an indebted leisure facilities developer, with
Bank of Scotland as its bank, the events of the last few months had
created a certain inevitability.
However, there are holdings that continue to perform well. Notable
amongst these are Craneware, Pressure Technologies, Animalcare and
Mattioli Woods, although unfortunately this is not reflected in
present share prices as increased fear and deteriorating sentiment
have overridden trading results. It is not surprising therefore that
the NAV fell more in the second half of the financial year. It has to
be hoped that the worst, in terms of share price falls, is now over
and is reflected in share price ratings.
As the last interim and annual accounts noted, smaller company shares
have been steadily derated. This process has gathered considerable
momentum in the last six months of the financial year. It has
appeared, for much of the time, to be indiscriminate and a function
of greater risk aversion rather than any view of an individual
company's prospects. Examples of this would be Vertu Motors and Bond
International Software where the cyclical nature of their businesses
and the likelihood of downgrades to forecasts caused their share
prices to fall to levels, which suggested that they were in danger of
failing. Both have since seen their share prices rebound quite
strongly.
Portfolio Activity
During the year two new holdings were established, being Advanced
Computer Software, which has been set up by a management team to
consolidate software operators in the healthcare sector. It has made
two acquisitions so far. The second is Optare which manufactures
both double and single deck buses. The holding in Pipex returned
cash to shareholders, following the sale of its internet service
provision business and the company was renamed Freedom4 Group. Maelor
has also changed its name to IS Pharma. The holding in Hartest was
sold and the bid for Imprint Search & Selection was accepted.
In the months since the year end in February we have reluctantly
accepted the bid for Pilat Media Global, although since this bid has
now failed your company continues to hold the investment. The holding
in Clipper Ventures was sold. We remain wary of bids for portfolio
companies where potential acquirors can capitalise on the present low
ratings and, in the interests of shareholders, will do our best to
resist such situations. However, we are also making investments in
non-qualifying holdings in order to capitalise on present low
ratings, particularly now that the portfolio has had its two Floating
Rate Notes redeemed and it has substantial liquidity to take
advantage of these situations. Since the year end we have bought a
number of non-qualifying holdings with the intention of improving the
Net Asset Value. These are listed in Note 17.
Ten Largest Holdings by value
Mattioli Woods plc
Mattioli Woods plc is a provider of pensions consultancy and
administration services
Cost: £523,000
Valuation: £928,000
Valuation basis: Bid Price
Equity held: 2.29%
Last audited accounts: 31 May 2008
Profit before tax: £3.51m
Net assets: £14.03m
Mears Group plc
Mears is a building maintenance contractor to local authorities, the
MOD and the private sector. Provider of domiciliary care for the
elderly on local authority contracts.
Cost: £170,000
Valuation: £916,000
Valuation basis: Bid Price
Equity held: 0.50%
Last audited accounts: 31 December 2008
Profit before tax: £16.58m
Net assets: £95.7m
Advanced Computer Software plc
The group was formed to acquire and manage software businesses in
sectors where the directors believe there are opportunities for
consolidation. It has made one healthcare related acquisition to
date.
Cost: £600,000
Valuation: £706,000
Valuation basis: Bid price
Equity held: 1.85%
Last audited accounts: 28 February 2009
Profit before tax: £1.1m
Net assets: £25.44m
Melorio plc
Melorio plc was formed to consolidate the UK vocational training
market. In September 2007, it acquired CLW, the UK's largest provider
of on-site construction assessment and training. As well as the
construction industry, Melorio will focus on acquisitions within the
utility, logistics and care sectors.
Cost: £816,000
Valuation: £685,000
Valuation basis: Bid price
Equity held: 2.09%
Last audited accounts: 31 March 2009
Profit before tax: £7.6 million
Net assets: £42.7 million
Research Now plc
Research Now operates specialist online research panels in the UK,
Europe, the US and Asia.
Cost: £454,000
Valuation: £618,000
Valuation basis: Bid Price
Equity held: 1.64%
Last audited accounts: 31 October 2008
Profit before tax: £5.7m
Net assets: £24.81m
Brooks MacDonald Group plc
Brooks MacDonald is a provider of asset management and financial
consulting services with a particular emphasis on the pensions.
market
Cost: £330,000
Valuation: £589,000
Valuation basis: Bid Price
Equity held: 2.37%
Last audited accounts: 30 June 2008
Profit before tax: £2.03m
Net assets: £5.84m
Praesepe plc
Praesepe operates low stake high street gaming outlets under the
Casino brand. The Group was established to consolidate this
marketplace.
Cost: £550,000
Valuation: £550,000
Valuation basis: Bid price
Equity held: 3.25%
Last audited accounts: 31 December 2008
Profit before tax: £3.87m loss
Net assets: £8.7m
Pressure Technologies plc
Pressure Technologies the holding company for Chesterfield Special
Cylinders ("CSC"). CSC designs, manufactures and offers testing and
refurbishment services for a range of speciality high pressure,
seamless steel gas cylinders for global energy and defence markets.
Cost: £302,000
Valuation: £432,000
Valuation basis: Bid price
Equity held: 1.78%
Last audited accounts: 30 September 2008
Profit before tax: £5.0 million
Net assets: £11.2 million
Idox plc
Idox is a leading developer and supplier of software solutions and
services to local government for core functions relating to land,
people and property.
Cost: £362,000
Valuation: £398,000
Valuation basis: Bid Price
Equity held: 1.40%
Last audited accounts: October 2008
Profit before tax: £6.6million
Net assets: £25.4 million
Animalcare plc
Animalcare is a manufacturer and distributor of veterinary medicines,
identification chips and other products for pets and livestock.
Cost: £300,000
Valuation: £382,000
Valuation basis: Bid price
Equity held: 2.77%
Last audited accounts: June 2008
Profit before tax: £1.1 million
Net assets: £14.6 million
Outlook
The steady stream of bad news about the state of the banks, the
economy and Government finances, continues to dominate the press, not
helped by the recent budget, which underlined the extent of the debt
problem facing this country. There remain substantial economic
problems, which will require some time to resolve. However, for
those companies without uncomfortable levels of debt, life, whilst
undoubtedly tougher, goes on. Trade even in a recession continues.
This message seems to have got through to the stock market in the
last few weeks and there have been signs recently of investors
looking for value amongst share prices which have fallen too far. It
is for this reason that smaller companies have outperformed their
larger peers in the current financial year, as the scale of the
ratings discounts, at which they were trading, have become apparent.
For your VCT, this should mean that there is scope for the asset
values to recover as investments made over the past three years
mature and as the economy stops shrinking, begins to flatten out and
then grow. In time too it will mean that new issues revive.
If you have any questions on any aspect of your investment, please
call Kate Tidbury or Andrew Buchanan on 0800 316 2347.
The Octopus AIM Team
Octopus Investments Limited
26 May 2009
Directors' Responsibility Statement
The Directors are responsible for preparing the annual report and the
financial statements in accordance with applicable law and
regulations. They are also responsible for ensuring that the annual
report includes information required by the Listing Rules of the
Financial Services Authority.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have elected to
prepare the financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law). The financial statements are required
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 accounting standards have been followed,
subject to any material departures disclosed and explained in the
financial statements;
* 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 the financial
statements comply with the Companies Act 1985. 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 confirm that to the best of their knowledge that the
financial statements for the year ended 28 February 2009 comply with
the requirements set out above and that suitable accounting policies,
consistently applied and supported by reasonable and prudent
judgement, have been used in their preparation. They also confirm
that the annual report includes a fair review of the development and
performance of the business together with a description of the
principal risks and uncertainties faced by the Company.
Under applicable law and regulations, the Directors are responsible
for preparing a Directors' Report (including Business Review),
Directors' Remuneration Report and Corporate Governance Statement
which comply with that law and those regulations.
In so far as the Directors are aware:
* there is no relevant audit information of which the Company's
auditor is unaware; and
* the Directors have taken all steps that they ought to have taken
to make themselves aware of any relevant audit information and to
establish that the auditor is aware of that information.
The Manager is responsible for the maintenance and integrity of the
corporate and financial information included on the Investment
Manager's website. Legislation in the United Kingdom governing the
preparation and dissemination of the financial statements and other
information included in annual reports may differ from legislation in
other jurisdictions. The work carried out by PKF (UK) LLP as
independent auditor of the Company does not involve consideration of
the maintenance and integrity of the website and accordingly they
accept no responsibility for any changes that have occurred to the
financial statements since they were initially presented on the
website.
The Directors confirm to the best of their knowledge that:
* the financial statements prepared in accordance with UK Generally
Accepted Accounting Practice (UK GAAP) and the 2003 Statement of
Recommended Practice, "Financial Statements of Investment Trust
Companies" (SORP), revised December 2005, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company.
* the annual report includes a fair review of the development and
performance of the business and the position of the Company,
together with a description of the principal risks and
uncertainties that it faces.
Brief biographical notes on the Directors are given on page 22.
On Behalf of the Board
Michael Reeve
Chairman
26 May 2009
Income Statement
Year to 28 February 2009
Ordinary Shares* New Ordinary Shares** Total
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gain/(Loss) on
disposal of
fixed
asset
investments 10 - 229 229 - (2,608) (2,608) - (2,379) (2,379)
Loss on
valuation of
fixed asset
investments 10 - (1,335) (1,335) - (8,725) (8,725) - (10,060) (10,060)
Loss on
valuation of
current asset
investments 11 - - - - (2) (2) - (2) (2)
Investment
Income 2 86 - 86 544 - 544 630 - 630
Investment
management fees 3 (25) (76) (101) (112) (335) (447) (137) (411) (548)
Management fee
VAT rebate 3 - - - 78 236 314 78 236 314
Other expenses 4 (43) - (43) (197) - (197) (240) - (240)
Profit/(loss)
on ordinary
activities
before tax 18 (1,182) (1,164) 313 (11,434) (11,121) 331 (12,616) (12,285)
Taxation on
profit/(loss)
on
ordinary
activities 6 4 16 20 (28) 8 (20) (24) 24 -
Profit/(loss)
on ordinary
activities
after tax 22 (1,166) (1,144) 285 (11,426) (11,141) 307 (12,592) (12,285)
Earnings/(loss)
per share -
basic and
diluted 8 0.0p (4.0)p (4.0)p 0.8p (33.6)p 32.8p - - -
* the 'Total' column of this statement represents the statutory
Profit and Loss account of the Company; the supplementary revenue
return and capital return columns have been prepared in
accordance with the AITC Statement of Recommended Practice
* all revenue and capital items in the above statement derive from
continuing operations
* the accompanying notes are an integral part of the financial
statements
* the Company has only one class of business and derives its income
from investments made in shares and securities and from bank and
money market funds
The Company has no recognised gains or losses other than the results
for the year as set out above. Accordingly a statement of total
recognised gains or losses is not required.
Other than revaluation movements arising on investments held at fair
value through profit and loss account, there were no differences
between the profit/ (loss) as stated above and at historical cost
* Ordinary Shares for the period 1 March 2008 to 31 May 2008
**No comparatives are shown for New Ordinary Shares given the
conversion of Ordinary Shares to D Shares on 31 May 2008. The
resulting share class was named "New Ordinary Shares." Ordinary
shares were converted into D Shares at a conversion ratio of 0.5448 D
Shares for every Ordinary Share.
Income Statement
Year to 29 February 2008
Ordinary Shares D Shares Total
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Loss/(gain) on
disposal of
fixed asset
investments 10 - (1,587) (1,587) - 987 987 - (600) (600)
Loss on
disposal of
current asset
investments 11 - - - - (4) (4) - (4) (4)
Loss on
valuation of
fixed asset
investments 10 - (4,831) (4,831) - (2,544) (2,544) - (7,375) (7,375)
Loss on
valuation of
current asset
investments 11 - (18) (18) - (25) (25) - (43) (43)
Investment
Income 2 369 - 369 494 - 494 863 - 863
Investment
management fees 3 (133) (398) (531) (114) (341) (455) (247) (739) (986)
Other expenses 4 (114) - (114) (75) - (75) (189) - (189)
Profit/(loss)
on ordinary
activities
before tax 122 (6,834) (6,712) 305 (1,927) (1,622) 427 (8,761) (8,334)
Taxation on
profit/(loss)
on ordinary
activities 6 3 - 3 (59) 56 (3) (56) 56 -
Profit/(loss)
on ordinary
activities
after tax 125 (6,834) (6,709) 246 (1,871) (1,625) 371 (8,705) (8,334)
Earnings/(loss)
per share -
basic and
diluted 8 0.4p 23.2p (22.8)p 1.6p (11.8)p (10.2)p
* the 'Total' column of this statement represents the statutory
Profit and Loss account of the Company; the supplementary revenue
return and capital return columns have been prepared in
accordance with the AITC Statement of Recommended Practice
* all revenue and capital items in the above statement derive from
continuing operations
* the accompanying notes are an integral part of the financial
statements
* the Company has only one class of business and derives its income
from investments made in shares and securities and from bank and
money market funds
The Company has no recognised gains or losses other than the results
for the year as set out above. Accordingly a statement of total
recognised gains or losses is not required.
Other than revaluation movements arising on investments held at fair
value through profit and loss account, there were no differences
between the profit/(loss) as stated above and at historical cost.
Balance Sheet
As at 28
February 2009 As at 29 February 2008
New Ordinary Ordinary
Notes Shares Shares D Shares Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Fixed asset investments 10 12,821 14,170 11,686 25,856
Current assets:
Investments 11 6,163 1,901 4,264 6,165
Debtors 12 485 127 115 242
Cash at bank 167 1,211 1,432 2,643
6,815 3,239 5,811 9,050
Creditors: amounts
falling due
within one year 13 (193) (63) (60) (123)
Net current assets 6,622 3,176 5,751 8,927
Net assets 19,443 17,346 17,437 34,783
Called up equity share
capital 14 15,965 14,762 7,923 22,685
Share premium 15 8,209 1,450 39 1,489
Special distributable
reserve 15 16,412 7,311 9,100 16,411
Capital redemption 15
reserve 3,727 3,569 159 3,728
Capital reserve - 15
realised (11,052) (7,508) 459 (7,049)
15
- unrealised (12,381) (2,003) (316) (2,319)
Own shares held in 15
treasury (1,636) (411) (28) (439)
Revenue Reserve 15 199 176 101 277
Total equity
shareholder's
funds 19,443 17,346 17,437 34,783
Net asset value per
share -
basic and diluted 9 64.5p 60.1p 110.2p n/a
The accompanying notes are an integral part of the financial
statements.
The statements were approved by the Directors and authorised for
issue on 26 May 2009 and are signed on their behalf by:
Michael Reeve
Chairman
Reconciliation of Movements in Shareholders' Funds
Year to 29 February
2009
New Ordinary
Ordinary Shares Shares Total
£'000 £'000 £'000
Shareholders' funds at start
of period 17,346 17,437 34,783
Loss for the period (1,144) (11,141) (12,285)
Shares purchased and held in
Treasury (147) (1,049) (1,196)
Transfer between share
class (16,055) 16,055 -
Dividends paid - (1,859) (1,859)
Shareholders' funds at end
of period - 19,443 19,443
Reconciliation of Movements in Shareholders' Funds
Year to 29 February 2008
Ordinary Shares D Shares Total
£'000 £'000 £'000
Shareholders' funds at start of
period 26,288 20,088 46,376
Loss for the period (6,709) (1,625) (8,334)
Shares purchased for cancellation (354) (204) (558)
Shares purchased and held in
Treasury (411) (28) (439)
Dividends paid (1,468) (794) (2,262)
Shareholders' funds at end of
period 17,346 17,437 34,783
Cash Flow Statement
Year to 28 February 2009
Ordinary New Ordinary
Shares* shares** Total
£'000 £'000 £'000
Loss on ordinary activities before tax (1,164) (11,121) (12,285)
Decrease/(increase) in debtor 127 (370) (243)
Increase/(decrease) in creditors (63) 133 70
Loss/(Gain) on realisation of
investments (229) 2,608 2,379
Loss/(Gain) on valuation of
investments 1,335 8,727 10,062
Net cash inflow/(outflow) from
operating activities 6 (23) (17)
Taxation: UK Corporation tax paid - - -
Capital expenditure and financial
investment
Purchase of investments - (1,706) (1,706)
Disposal of investments 1,089 1,213 2,302
Net cash (outflow) / inflow from
investing activities 1,089 (493) 596
Equity dividends paid
Dividends paid - (1,859) (1,859)
Net cash (outflow) / inflow before
financing 1,095 (2,375) (1,280)
Financing :
Own shares held in treasury (147) (1,049) (1,196)
Net cash (outflow) / inflow from
financing 948 (3,424) (2,476)
Interclass transfer (2,159) 2,159 -
Increase/(decrease) in cash resources (1,211) (1,265) (2,476)
* Ordinary shares for the period 29 February 2008 to 31 May 2008
**No comparatives are shown for New Ordinary Shares given the
conversion of Ordinary shares to D shares on 31 May 2008. The
resulting share class was named "New Ordinary Shares." Ordinary
shares were converted into D shares at a conversion ratio of 0.5448 D
shares for every Ordinary share.
Reconciliation of Net Cash Flow to Movement in Liquid Resources
Year to 28 February 2009
Ordinary New Ordinary
Shares shares Total
£'000 £'000 £'000
Increase/(decrease) in cash at
bank (1,211) (1,265) (2,476)
Decrease in liquid reserves - - -
Opening net liquid resources 1,211 1,432 2,643
Net liquid resources at 28
February - 167 167
Cash Flow Statement
Year to 29 February 2008
Ordinary shares D shares Total
£'000 £'000 £'000
Loss on ordinary activities before
tax (6,712) (1,622) (8,334)
Decrease/ (increase) in debtors 32 33 65
Increase/ (decrease) in creditors 14 (6) 8
Loss / (Gain) on realisation of
investments 1,587 (983) 604
Loss / (Gain) on valuation of
investments 4,849 2,569 7,718
Net cash inflow/(outflow) from
operating activities (230) (9) (239)
Taxation: UK Corporation tax paid - - -
Capital expenditure and financial
investment
Purchase of investments (1,389) (4,970) (6,359)
Disposal of investments 3,847 4,543 8,390
Net cash (outflow) / inflow from
investing activities 2,458 (427) 2,031
Equity dividends paid
Dividends paid (1,468) (794) (2,262)
Net cash (outflow) / inflow before
financing 760 (1,230) (470)
Financing :
Cancellation of shares (355) (205) (560)
Own shares held in treasury (405) (28) (433)
Net cash (outflow) / inflow from
financing (760) (233) (993)
Increase/(decrease) in cash
resources - (1,463) (1,463)
Reconciliation of Net Cash Flow to Movement in Liquid Resources
Year to 29 February 2008
Ordinary Shares D shares Total
£'000 £'000 £'000
Increase/(decrease) in cash at bank - (1,463) (1,463)
Decrease in liquid resources - - -
Opening net liquid resources 1,211 2,895 4,106
Net liquid resources at 29 February 1,211 1,432 2,643
Notes to the Financial Statements
1. Principal Accounting policies
The financial statements have been prepared under the historical cost
convention, except for the revaluation of certain financial
instruments, and in accordance with UK Generally Accepted Accounting
Practice (UK GAAP). Where presentational guidance set out in the
Statement of Recommended Practice (SORP) "Financial Statements of
Investment Trust Companies", revised December 2005, is consistent
with the requirements of UK GAAP, the Directors have sought to
prepare the financial statements on a consistent basis compliant with
the recommendations of the SORP.
The principal accounting policies have remained unchanged from those
set out in the Company's 2008 annual report and financial
statements. A summary of the principal accounting policies is set
out below.
The accounts have been drawn up to include a statutory Profit and
Loss account in accordance with Schedule 4 of the Companies Act 1985.
Investment company status was revoked on 3 March 2000.
Investments
Purchases and sales of investments are recognised in the financial
statements at the date of the transaction (trade date).
These investments will be managed and their performance evaluated on
a fair value basis in accordance with a documented investment
strategy and information about them has to be provided internally on
that basis to the Board. Accordingly as permitted by FRS 26, the
investments will be designated as fair value through profit and loss
("FVTPL") on the basis that they qualify as a group of assets
managed, and whose performance is evaluated, on a fair value basis in
accordance with a documented investment strategy. The Company's
investments are measured at subsequent reporting dates at fair
value.
In the case of investments quoted on a recognised stock exchange,
fair value is established by reference to the closing bid price on
the relevant date or the last traded price, depending upon convention
of the exchange on which the investment is quoted. This is
consistent with the International Private Equity and Venture Capital
(IPEVC) guidelines. For the avoidance of doubt, the Company does not
hold any unquoted investments.
Gains and losses arising from changes in fair value of investments
are recognised as part of the capital return within the Income
Statement and allocated to the capital reserve unrealised.
In preparation of the valuations of assets the Directors are required
to make judgements and estimates that are reasonable and incorporate
their knowledge of the performance of the investee companies.
Current asset investments
Current asset investments comprise Floating Rate Notes ("FRN") and
are designated as FVTPL. Gains and losses arising from changes in
fair value of investments are recognised as part of the capital
return within the Income Statement and allocated to the capital
reserve unrealised as appropriate. FRNs are classified as current
asset investments as they are investments held for the short term and
comparative classification in the Balance Sheet has been restated
accordingly.
The current asset investments are all invested with the Company's
cash manager and are readily convertible into cash at the choice of
the Company. The current asset investments are held for trading, are
actively managed and the performance is evaluated on a fair value
basis in accordance with a documented investment strategy.
Information about them has to be provided internally on that basis to
the Board.
Income
Investment income includes interest earned on bank balances and money
market securities and includes income tax withheld at source.
Dividend income is shown net of any related tax credit.
Dividends receivable 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 debt and money
market 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.
Expenses
All expenses are accounted for on an accruals basis. Expenses are
charged wholly to revenue with the exception of the investment
management fee, which has been charged 25% to the revenue account and
75% to the realised capital reserve to reflect, in the Directors'
opinion, the expected long term split of returns in the form of
income and capital gains respectively from the investment portfolio.
Revenue and capital
The revenue column of the Income Statement includes all income and
revenue expenses of the Company. The capital column includes
realised and unrealised gains and losses on investments. Gains and
losses arising from changes in fair value are considered to be
realised only to the extent that they are readily convertible to cash
in full at the balance sheet date.
Taxation
Corporation tax payable is applied to profits chargeable to
corporation tax, if any, at the current rate. The tax effect of
different items of income/gain and expenditure/loss is allocated
between capital and revenue return on the "marginal" basis as
recommended in the SORP.
Deferred tax is recognised on an undiscounted basis in respect of all
timing differences that have originated but not reversed at the
balance sheet date where transactions or events have occurred at that
date that will result in an obligation to pay more, or a right to pay
less tax, with the exception that deferred tax assets are recognised
only to the extent that the Directors consider that it is more likely
than not that there will be suitable taxable profits from which the
future reversal of the underlying timing can be deducted.
Cash and liquid resources
Cash, for the purposes of the cash flow statement, comprises cash in
hand and deposits repayable on demand, less overdrafts payable on
demand. Liquid resources are current asset investments which are
disposable without curtailing or disrupting the business and are
either readily convertible into known amounts of cash at or close to
their carrying values or traded in an active market. Liquid
resources comprise term deposits of less than one year (other than
cash), government securities, investment grade bonds and investments
in money market managed funds.
Loans and receivables
The Company's loans and receivables are initially recognised at fair
value and subsequently measured at amortised cost.
Financial instruments
The Company's principal financial assets are its investments and the
policies in relation to those assets are set out above. Financial
liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity
instrument is any contract that evidences a residual interest in the
assets of the entity after deducting all of its financial
liabilities. Where the contractual terms of share capital do not have
any terms meeting the definition of a financial liability then this
is classed as an equity instrument. Dividends and distributions
relating to equity instruments are debited direct to equity.
Dividends
Dividends payable are recognised as distributions in the financial
statements when the Company's liability to make payment has been
established. This liability is established when the dividends
proposed by the Board are approved by the shareholders.
2. Income
28 February 2009
New Ordinary
Ordinary Shares shares Total
£'000 £'000 £'000
Dividends received (fixed asset
investments) 36 166 202
Income on money market securities
and bank balances 50 377 427
Other - 1 1
86 544 630
29 February 2008
Ordinary Shares 'D' shares Total
£'000 £'000 £'000
Dividends received (fixed asset
investments) 76 102 198
Income on money market securities
and bank balances 293 392 665
369 494 863
3. Investment management fees
28 February 2009
Ordinary Shares New Ordinary shares Total
£'000 £'000 £'000
Investment management fee:
Revenue 25 112 137
Capital 76 335 411
Total 101 447 548
VAT rebate:
Revenue - (78) (78)
Capital - (236) (236)
Total - (314) (314)
29 February 2008
Ordinary Shares 'D' shares Total
£'000 £'000 £'000
Investment management fee:
Revenue 133 114 247
Capital 398 341 739
Total 531 455 986
For the purposes of the revenue and capital columns in the Income
Statement, the management fee (including VAT) has been allocated 25%
to revenue and 75% to capital, in line with the Board's expected long
term return in the form of income and capital gains respectively from
the Company's investment portfolio.
Octopus provides investment management and accounting and
administration services to the Company under a management agreement
dated 03 February 1998 which was revised in September 2000 and again
in January 2004 for an initial fixed term to June 2008 and may be
terminated at any time thereafter by not less than twelve months'
notice given by either party. No compensation is payable in the
event of terminating the agreement by either party, if the required
notice period is given. The fee payable, should insufficient notice
be given, will be equal to the fee that would have been paid should
continuous service be provided, or the required notice period was
given. The basis upon which the management fee is calculated is
disclosed within note 19 to the financial statements.
The Chancellor of the Exchequer announced in his budget statement on
12 March 2008 that the Finance Act 2008 would contain draft
legislation exempting VCTs from VAT on management fees with effect
from 1 October 2008. This legislation was passed in July 2008 and as
such all VCTs have been made exempt from VAT on management fees from
this date, thus VAT has not been included on management fees for this
year and has been rebated for previous years.
4. Other expenses
28 February 2009
New Ordinary
Ordinary Shares shares Total
£'000 £'000 £'000
Directors' remuneration
(including VAT & NIC) 10 58 68
Fees payable to the Company's
auditor for the audit of
the financial statements* 2 17 19
Fees payable to the Company's
auditor - Deloitte fee
for share merger - 12 12
Other administration expenses 31 110 141
43 197 240
29 February 2008
Ordinary Shares 'D' shares Total Shares
£'000 £'000 £'000
Directors' remuneration
(including VAT & NIC) 44 29 73
Fees payable to the Company's
auditor for the audit of
the financial statements* 9 6 15
Other administration expenses 61 40 101
114 75 189
*Please note all 2008 audit fees were payable to Deloitte & Touche
LLP. All fees relating to the Company's auditor in 2009 were paid
wholly to PKF LLP except as otherwise noted above.
The total expense ratio for the Company for the year to 28 February
2009 was 3.2 per cent (2008: 3.4 per cent).
5. Directors' remuneration
(Excluding including VAT & NIC) 28 February 2009 29 February 2008
£'000 £'000
Directors' emoluments
Michael Reeve 24 24
Roger Smith 18 18
Stephen Hazell-Smith 18 18
Frank Malcolm - 5
60 65
None of the Directors received any other remuneration or benefit from
the Company during the year. The Company has no employees other than
non-executive Directors. The average number of non-executive
Directors in the year was three (2008: three).
6. Tax on ordinary activities
The corporation tax charge for the year was £nil (2008: £nil)
Factors affecting the tax charge for the current year:
The current tax charge for the year differs from the standard rate of
corporation tax in the UK of 20.9% (2008: 30.0%). The differences
are explained below.
28 February 2009 Ordinary Shares
Revenue Capital Total
£'000 £'000 £'000
Profit/(loss) on ordinary activities
before tax 18 (1,182) (1,164)
Current tax at 20.9% 4 (247) (243)
Income not liable to tax (8) - (8)
Expenses not deductible for tax
purposes - 231 231
Total current tax charge (4) (16) (20)
28 February 2009 New Ordinary Shares
Revenue Capital Total
£'000 £'000 £'000
Profit/(loss) on ordinary
activities before tax 313 (11,434) (11,121)
Current tax at 20.9% 65 (2,389) (2,324)
Income not liable to tax (37) - (37)
Expenses not deductible for tax
purposes - 2,362 2,362
Excess management expenses - 19 19
Total current tax charge 28 (8) 20
28 February 2009 Total
Revenue Capital Total
£'000 £'000 £'000
Profit/(loss) on ordinary activities before
tax 331 (12,616) (12,285)
Current tax at 20.9% 69 (2,636) (2,567)
Income not liable to tax (45) - (45)
Expenses not deductible for tax purposes - 2,593 2,593
Excess management expenses - 19 19
Total current tax charge 24 (24) -
29 February 2008
Ordinary Shares
Revenue Capital Total
£'000 £'000 £'000
Profit/(loss) on ordinary activities before
tax 122 (6,834) (6.712)
Current tax at 30.0% 37 (2,050) (2,013)
Income not liable to tax (41) - (41)
Non-taxable losses on investments - 1,931 1,931
Marginal relief adjustment 1 - 1
Excess management expenses - 119 119
Total current tax charge (3) - (3)
29 February 2008
D Shares
Revenue Capital Total
£'000 £'000 £'000
Profit/(loss) on ordinary activities before
tax 305 (1,927) (1,622)
Current tax at 30.0% 91 (578) (487)
Income not liable to tax (19) - (19)
Non-taxable losses on investments - 476 476
Marginal relief adjustment (13) - (13)
Excess management expenses - 46 46
Total current tax charge 59 (56) 3
29 February 2008
Total
Revenue Capital Total
£'000 £'000 £'000
Profit/(loss) on ordinary activities before
tax 427 (8,761) (8,334)
Current tax at 30.0% 128 (2,628) (2,500)
Income not liable to tax (60) - (60)
Non-taxable losses on investments - 2,407 2,407
Marginal relief adjustment (12) - (12)
Excess management expenses - 165 165
Total current tax charge 56 (56) -
Approved venture capital trusts are exempt from tax on capital gains
within the Company. Since the Directors intend that the Company will
continue to conduct its affairs so as to maintain its approval as a
venture capital trust, no current deferred tax has been provided in
respect of any capital gains or losses arising on the revaluation or
disposal of investments.
7. Dividends
The final dividend of 2.5p per share for New Ordinary Shares for the
year ended 28 February 2009, subject to shareholder approval at the
Annual General Meeting, will be paid once HMRC approval has been
obtained.
The interim dividend declared of 2.5 pence per New Ordinary share for
the six months ending 31 August 2008 was paid on 9 January 2009 to
shareholders on the register on 12 December 2008.
8. Earnings per share
The earning per share is based on loss after tax of (£1,144,000) on
Ordinary Shares and (£11,141,000) on New Ordinary Shares, (2008:
(£6,709,000) for Ordinary Shares and (£1,625,000) for D Shares) on
28,719,324 Ordinary Shares and 33,947,228 New Ordinary shares (2008:
29,426,743 Ordinary Shares and 15,882,684 D Shares), being the
weighted average number of shares in issue during the year.
There are no potentially dilutive capital instruments in issue and,
as such, the basic and diluted earnings per share are identical.
9. Net asset value per share
The calculation of net asset value per New Ordinary Share (basic and
diluted) as at 28 February 2009 is based on net assets of £19,443,000
(2008: £17,346,000 for Ordinary Shares and £17,437,000 for D Shares)
divided by 30,148,687 (2007: 28,883,802 Ordinary Shares and
15,818,800 D Shares) New Ordinary Shares in issue at that date
(excluding treasury shares).
10. Fixed asset investments (AIM and PLUS Quoted)
29 February 2008
New Ordinary
Ordinary Shares shares Total
£'000 £'000 £'000
Book cost as at 29 February 16,155 11,980 28,135
Revaluation to 29 February (1,985) (294) (2,279)
Valuation at 29 February 14,170 11,686 25,856
28 February 2009
Opening valuation at 29
February 14,170 11,686 25,856
Purchases at cost - 1,706 1,706
Disposal proceeds (1,089) (1,213) (2,302)
(Loss)/Profit on realisation
of investments - current year 229 (2,608) (2,379)
Revaluation in year (1,335) (8,725) (10,060)
Transfer between share classes (11,975) 11,975 -
Closing valuation at 28
February - 12,821 12,821
Book cost at 28 February: - 25,160 25,160
Revaluation to 28 February: - (12,339) (12,339)
- 12,821 12,821
Valuation at 28 February - 12,821 12,821
28 February 2007
Ordinary Shares 'D' shares Total
£'000 £'000 £'000
Book cost as at 28 February 18,265 7,917 26,182
Revaluation to 28 February 2,846 2,250 5,096
Valuation at 28 February 21,111 10,167 31,278
29 February 2008
Opening valuation at 28 February 21,111 10,167 31,278
Purchases at cost 1,386 4,955 6,341
Disposal proceeds (1,909) (1,879) 3,788
(Loss) / Profit on realisation
of investments - current year (1,587) 987 (600)
Revaluation in year (4,831) (2,544) (7,375)
Closing valuation at 29 February 14,170 11,686 25,856
Book cost at 29 February: 16,155 11,980 28,135
Revaluation to 29 February: (1,985) (294) (2,279)
Valuation at 29 February 14,170 11,686 25,856
Further details of the fixed asset investments held by the Company
are shown within the Investment Manager's Review on pages 8 to 17.
All investments are designated as fair value through profit or loss
from the time of acquisition, and all capital gains or losses on
investments so designated. Given the nature of the Company's venture
capital investments, the changes in fair value of such investments
recognised in these financial statements are not considered to be
readily convertible to cash in full at the balance sheet date and
accordingly these gains are treated as unrealised.
At 28 February 2009 and 28 February 2008 there were no commitments in
respect of investments approved by the manager but not yet completed.
Transaction costs on purchases and disposals for the year were
£3,000.
11. Current asset investments
Current asset investments at 28 February 2009 comprised Floating Rate
Notes ("FRNs")*.
29 February 2008
New Ordinary
Ordinary Shares shares Total
£'000 £'000 £'000
Book cost at 29 February 1,919 4,286 6,205
Revaluation to 29 February (18) (22) (40)
Valuation as at 29 February 1,901 4,264 6,165
28 February 2009
£'000 £'000 £'000
Opening valuation at 29
February 1,901 4,264 6,165
Disposal proceeds: - -
Profit/(loss) in year on
realisation of investments: - -
Revaluation in year: - (2) (2)
Transfer between share classes (1,901) 1,901 -
Closing valuation as at 28
February - 6,163 6,163
Book cost at 28 February: - 6,205 6,205
Revaluation to 28 February: - (42) (42)
- 6,163 6,163
Closing valuation as at 28
February - 6,163 6,163
28 February 2007
Ordinary Shares 'D' shares Total
£'000 £'000 £'000
Book cost at 28 February 3,920 7,007 10,927
Revaluation to 28 February - 3 3
Valuation as at 28 February 3,920 7,010 10,930
29 February 2008
£'000 £'000 £'000
Opening valuation at 28 February 3,920 7,010 10,930
Disposal proceeds: (2,001) (2,717) (4,718)
Profit/(loss) in year on
realisation of investments: - (4) (4)
Revaluation in year: (18) (25) (43)
Closing valuation as at 29
February 1,901 4,264 6,165
Book cost at 29 February: 1,919 4,286 6,205
Revaluation to 29 February: (18) (22) (40)
Closing valuation as at 28
February 1,901 4,264 6,165
* FRNs represent money held pending investment and can be accessed
with 5 workings days notice. FRNs were classified as fixed asset
investments in the prior year but are classified as current asset
investments in the current year.
Transaction costs on purchases and disposals for the year were £nil.
12. Debtors
28 February 29 February 2008
2009
New Ordinary Ordinary
Shares Shares 'D' shares Total
£'000 £'000 £'000 £'000
Prepayments and accrued
income 42 50 62 112
Inter class debtor - 3 - 3
Sales awaiting settlement 78 63 53 116
Other debtors 365 11 - 11
485 127 115 242
13. Creditors: amounts falling due within one year
28 February 2009 29 February 2008
New Ordinary Ordinary
Shares Shares 'D' shares Total
£'000 £'000 £'000 £'000
Bank overdraft - current
account 18 - - -
Accruals 175 57 57 114
Purchases awaiting
settlement - 6 - 6
Inter class Creditor - - 3 3
193 63 60 123
14. Share capital
28 February
2009 29 February 2008
New Ordinary Ordinary
Shares Shares 'D' shares Total
£000 £000 £000 £000
Authorised:
70,000,000 New Ordinary
shares of 50p each 35,000 - - -
45,000,000 Ordinary shares
of 50p each - 22,500 - 22,500
25,000,000 D shares of 50p
each - - 12,500 12,500
35,000 22,500 12,500 35,000
Allotted and fully paid up
(including Treasury shares)
31,930,030 New Ordinary
shares of 50p each 15,965 - - -
29,522,615 Ordinary Shares
of 50p each - 14,762 - 14,762
15,846,847 D Shares of 50p
each - - 7,923 7,923
15,965 14,762 7,923 22,685
The capital of the Company is managed in accordance with its
investment policy with a view to the achievement of its investment
objective as set on page 25. The Company is not subject to any
externally imposed capital requirements.
At an Extraordinary General Meeting and separate class meetings held
on 22 April 2008, shareholders approved extraordinary resolutions to
revise the merger arrangement. The revised arrangements made to the
Articles of Association merged the two share classes by converting
the Ordinary Shares into D Shares ("the Conversion") at a ratio of
0.5448 D Shares for each Ordinary Share and then redesignating all of
the D Shares into New Ordinary Shares ("New Shares") on 31 May 2008.
The Company did not issue any other shares in the year (2008: nil).
During the year the Company did not purchase any shares for
cancellation (2008: 432,825 Ordinary Shares and 168,341 D Shares at a
cost of £353,878 and £204,767 respectively, representing 1.44 per
cent of the Ordinary Shares and 1.05 per cent of the D Shares in
issue at 28 February 2007).
Prior to the share conversion on 31 May 2008, the Company purchased
284,564 Ordinary shares for a weighted average price of 51.8p per
share for total consideration £147,306 and 526,701 'D' shares for a
weighted average price of 96.3p per share for total consideration
£507,472.
Post 31 May 2008, the Company purchased 723,039 New Ordinary shares
for a weighted average price of 74.0p per share for total
consideration £534, 990.(2008: 638,813 Ordinary Shares and 28,047 D
Shares at a cost of £411,163 and £27,881 respectively). This
represented 0.96% of Ordinary shares, 2.27% of D shares and 3.16% of
New Ordinary shares (2008: 2.13 per cent of the Ordinary Shares and
0.18 per cent of the D Shares in issue at 28 February 2007.).
15. Reserves
Ordinary Shares
Own
Special Capital Capital Capital shares
Share Distributable Redemption Reserve Reserve held in Revenue
premium reserve Reserve realised unrealised treasury reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 28 1,450 3,569
February 2008 7,311 (7,508) (2,003) (411) 176
Profit on -
ordinary
activities - - - - - 22
Repurchase of -
own
shares - - - - (147) -
Capitalisation -
of
management
fees - - (76) - - -
Gains/(losses) -
on
revaluation - - 229 (1,335) - -
Transfer to (1,450)
"New Ordinary
Shares" (7,311) (3,569) 7,355 3,338 558 (198)
Balance as at - -
28 February
2009 - - - - -
Own
Share Special Capital Capital Capital shares
Premium Distributable Redemption Reserve Reserve held in Revenue
account reserve Reserve realised unrealised treasury reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 28
February 2008 39 9,100 159 459 (316) (28) 101
D share
conversion 6,720 - - - - - -
Transfer from
"Ordinary
Shares" 1,450 7,311 3,569 (7,355) (3,338) (558) 198
Repurchase of
own
shares - - - - - (1,050) -
Capitalisation
of
management
fees - - - (74) - - -
Losses on
valuation - - - (2,608) (8,727) - -
Profit on
ordinary
activities
after tax - - - - - - 285
Dividends paid - - - (1,474) - - (385)
Reverse b/fwd
stamp duty
paid by Close - 1 (1) - - - -
Balance as at
28 February
2009 8,209 16,412 3,727 (11,052) (12,381) (1,636) 199
* Formerly D shares
When the Company revalues its investments during the period, any
gains or losses arising are credited/charged to the Income
Statement. Unrealised gains/losses are then transferred to the
capital reserve - unrealised. When an investment is sold any balance
held on the capital reserve unrealised is transferred to the capital
reserve - realised as a movement in reserves. The purpose of the
special distributable reserve was to create a reserve which will be
capable of being used by the Company to pay dividends and for the
purpose of making repurchases of its own shares in the market with a
view to narrowing the discount at which the Company's shares trade to
net asset value.
16. Financial instruments and risk management
The Company's financial instruments comprise equity investments,
FRNs, cash balances and liquid resources including debtors and
creditors. The Company holds financial assets in accordance with its
investment policy of investing mainly in a portfolio of VCT
qualifying unquoted and AIM-quoted securities whilst holding a
proportion of its assets in cash or near-cash investments in order to
provide a reserve of liquidity.
Fixed and current asset investments (see note 10 and 11) are valued
at fair value. For quoted investments this is bid price. The fair
value of all other financial assets and liabilities is represented by
their carrying value in the balance sheet. The Directors believe
that the fair value of the assets held at the year end is equal to
their book value.
In carrying on its investment activities, the Company is exposed to
various types of risk associated with the financial instruments and
markets in which it invests. The most significant types of financial
risk facing the Company are price risk, interest rate risk, credit
risk and liquidity risk. The Company's approach to managing these
risks is set out below together with a description of the nature and
amount of the financial instruments held at the balance sheet date.
Market risk
The Company's strategy for managing investment risk is determined
with regard to the Company's investment objective, as outlined on
page 26. The management of market risk is part of the investment
management process and is a central feature of venture capital
investment. The Company's portfolio is managed in accordance with the
policies and procedures described in the Corporate Governance
statement on pages 34 to 37, having regard to the possible effects of
adverse price movements, with the objective of maximising overall
returns to shareholders. Investments in smaller companies, by their
nature, usually involve a higher degree of risk than investments in
larger companies quoted on a recognised stock exchange, though the
risk can be mitigated to a certain extent by diversifying the
portfolio across business sectors and asset classes. The overall
disposition of the Company's assets is regularly monitored by the
Board.
Details of the Company's investment portfolio at the balance sheet
date are set out on pages 10 to 13.
99.6% (31 February 2008: 93% for Ordinary Shares and 91% for D
shares) by value of the Company's net assets comprises equity
securities listed on the London Stock Exchange or quoted on AIM. A
30% increase in the bid price of these securities as at 28 February
2009 would have increased net assets and the total return for the
year by £5,700,000 (31 February 2008: £4,800,000 for Ordinary Shares
and £4,800,000 for D shares); a corresponding fall would have reduced
net assets and the total return for the year by the same amount.
Interest rate risk
Some of the Company's financial assets are interest-bearing. As a
result, the Company is exposed to fair value interest rate risk due
to fluctuations in the prevailing levels of market interest rates.
Floating rate
The Company's floating rate investments comprise cash held on
interest-bearing deposit accounts and, where appropriate, within
interest bearing money market securities. The benchmark rate which
determines the rate of interest receivable on such investments is the
bank base rate, which was 1.0% at 28 February 2009 (29 February 2008:
5.25%). The amounts held in floating rate investments at the balance
sheet date were as follows:
28 February
2009 29 February 2008
New Ordinary Ordinary
Shares Shares 'D' Shares Total Shares
£'000 £'000 £'000 £'000
Floating rate 4,264
notes 6,163 1,901 6,165
Cash on deposit 167 1,211 1,432 2,643
6,330 3,112 5,696 8,808
A 1% increase in the base rate would increase income receivable from
these investments and the total return for the year by £63,300 (29
February 2008: £88,080)
Credit risk
Credit risk is the risk that a counterparty to a financial instrument
will fail to discharge an obligation or commitment that it has
entered into with the Company. The Investment Manager and the Board
carry out a regular review of counterparty risk. The carrying values
of financial assets represent the maximum credit risk exposure at the
balance sheet date.
At 28 February 2009 the Company's financial assets exposed to credit
risk comprised the following:
28 February
2009 29 February 2008
New Ordinary Ordinary 'D' Total
Shares Shares Shares Shares
£'000 £'000 £'000 £'000
Floating rate
notes 6,163 1,901 4,264 6,165
Cash on deposit 167 1,211 1,432 2,643
Accrued dividends
and interest
receivable 18 25 24 49
6,348 3,137 5,720 8,857
Credit risk relating to listed money market securities is mitigated
by investing in money market instruments issued by major companies
and institutions with a minimum Moody's long term debt rating of 'A'.
Those assets of the Company which are traded on recognised stock
exchanges are held on the Company's behalf by third party custodians
(BNP Paribas in the case of listed money market securities and quoted
equity securities). Bankruptcy or insolvency of a custodian could
cause the Company's rights with respect to securities held by the
custodian to be delayed or limited.
Credit risk arising on the sale of investments is considered to be
small due to the short settlement and the contracted agreements in
place with the settlement lawyers.
The Company's interest-bearing deposit and current accounts are
maintained with Royal Bank of Scotland.
Other than cash or liquid money market funds, there were no
significant concentrations of credit risk to counterparties at 28
February 2009 or 29 February 2008.
Liquidity risk
The Company's financial assets include investments in AIM-quoted
companies, which by their nature; involve a higher degree of risk
than investments on the main market. As a result, the Company may
not be able to realise some of its investments in these instruments
quickly at an amount close to their fair value in order to meet its
liquidity requirements, or to respond to specific events such as
deterioration in the creditworthiness of any particular issuer.
The Company's listed money market securities are considered to be
readily realisable as they are of high credit quality as outlined
above.
The Company's liquidity risk is managed on a continuing basis by the
Investment Manager in accordance with policies and procedures laid
down by the Board. The Company's overall liquidity risks are
monitored on a quarterly basis by the Board.
The Company maintains sufficient investments in cash and readily
realisable securities to pay accounts payable and accrued expenses.
At 28 February 2009 these investments were valued at £167,000, (29
February 2008 £1,211,000 for Ordinary shares and £1,432,000 for 'D'
shares).
17. Post balance sheet events
The following events occurred between the balance sheet date and the
signing of these financial statements:
* The Company has purchased 66,242 New Ordinary shares at a
weighted average price of 59.8p per share. These shares are held
in Treasury.
Date Company Valuation (£) Purchase/Sell (P/S)
12 March Optimisa plc 7,821 S
2009
24 April Clipper Ventures 79,688 S
2009
20 April Hargreaves Services 120,000 P
2009
28 April System C Healthcare 382,500 P
2009
29 April Matchtech 194,350 P
2009
6 May 2009 Ashley House 87,600 P
7 May 2009 Advanced Computer 10,9880 P
Software
11 May Immunodiagnostoc Ststems 229,000 P
2009
20 May B Global plc 18,518 S
2009
* 24 April 2009, Play golf was placed into administration
18. Contingencies, guarantees and financial commitments
There were no contingencies, guarantees or financial commitments as
at 28 February 2009 (2008: £nil).
19. Related party transactions
Octopus acts as the Investment Manager of the Company. Under the
management agreement, Octopus receives a fee of 2.0% per annum of the
net assets of the Company for the investment management services.
During the period 1 August to 28 February 2009, the Company incurred
management fees of £275,000 (2008: £nil) payable to Octopus. At the
period end there was £Nil (2008: £nil) outstanding to Octopus.
Prior to 1 August 2008, Close acted as the Investment Manager of the
Company. During the period 1 March 2008 to 31 July 2008, the Company
incurred management fees of £309,000 (including VAT at the applicable
rate at that time) payable to Close. At the period end there was
£nil outstanding to Close.
---END OF MESSAGE---
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