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Victory VCT PLC (VICT)

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Wednesday 26 May, 2010

Victory VCT PLC

Annual Financial Report

RNS Number : 5638M
Victory VCT PLC
26 May 2010
 

ViCTory VCT PLC REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31st JANUARY 2010

 

The Report and Financial Statements for the year ended 31 January 2010 and the Notice of Annual General Meeting have been posted to shareholders and is available in electronic format for download on Amati Global Investors website www.amatiglobal.com.

 

Copies of the Report and Financial Statements will shortly be submitted to the UK Listing Authority and subsequently be available for inspection at the UK Listing Authority's Document Viewing Facility, which is situated at:

 

The Financial Services Authority

25 The North Colonnade

Canary Wharf

London

E14 5HS

 

 

Key data         

31 January 2010

31 January 2009

Total net assets

£17,802,541

£19,198,113

Net asset value per share ("NAV")

42.43p

44.46p

Share price

32.75p

28.25p

Market capitalisation

£13.74m

£12.20m

Share price discount to NAV

22.81%

36.46%

NAV per share plus cumulative dividends paid to date

52.18p

54.21p

Total return for year

-4.56%

-39.98%

Return on FTSE AIM All-Share Total Return Index during the year

67.02%

-57.61%

Total return since inception

-50.03%

-47.64%

Return on FTSE AIM All-Share Total Return Index since inception

-49.60%

-69.82%

Total dividends for the year

£nil

£1,117,166

Dividend per ordinary share (paid in the year)

nil

2.50p

Qualifying investments of the current investment portfolio

83.06%

80.23%

Total dividends paid to date

9.75p

9.75p

 

Highlights

• Very disappointing result for the year.

• Name change to ViCTory VCT PLC.

• Appointment of Amati Global Investors as fund manager after year end.

• Recommendation to introduce more active non-qualifying investment strategy.

 

Chairman's Statement

 

Introduction

As at the date of the Company's Annual Report, the Board is considerably more optimistic than it was when the financial year ended 31 January 2010 closed. At the end of January, we were aware that the year had seen further disappointing performance for our shareholders and we had taken the decision to seek a new fund manager; as I write, the Board has appointed Amati Global Investors ("Amati") having been both impressed and encouraged by their proposals for the management of the Company's funds. Amati has written an Investment Portfolio commentary which immediately follows this Statement and the Board has asked Amati to write to our shareholders outlining its proposed investment strategy. Regrettably, there is no "quick fix" but the Directors believe a significant step has been taken towards securing improved performance.

 

The Board has also asked Amati to undertake a thorough review of the Company's costs and to prepare, for the Board's consideration, proposals for much improved communication with ViCTory's shareholders. As early evidence of this intent, Amati will be making a presentation at the forthcoming annual general meeting on the future investment strategy for ViCTory.

 

Financial Performance & Dividends

The total loss for the year was £972,414 or 2.27 pence per share (2009: loss of £14,067,134 or 31.92 pence per share). Shareholders' funds reduced to £17,802,541 (2009: £19,198,113) as a result of a combination of the loss for the year and the effect of the Company's buy back programme.

 

ViCTory will continue to repurchase its own shares from time to time as appropriate and within the powers granted at the annual general meeting.

 

The Board are not recommending the payment of a final dividend.

 

Investment Performance

In the year ended 31 January 2010, global stock markets rose sharply as governments bailed out financial institutions and central banks pumped liquidity into the system on an unprecedented scale.  Having fallen less fast than the FTSE AIM All-Share Total Return Index in the year to 31 January 2009, I am sorry to report that the net asset value ("NAV") of the Company did not participate in the bounce of the wider market during the year to 31 January 2010. This was due in no small part to a number of our largest positions being wiped out completely, including one of our long standing qualifying investments with a large market capitalisation and supposedly substantial profitability, Aero Inventory, as well as our largest unquoted investment, U4EA. Recognising the serious disappointment that this overall result would be to shareholders, and with the ambition of improving the long term performance of the Company, the Board determined in October 2009 that a new fund manager should be appointed. Agreement has also been reached with the then investment manager, Williams de

Broë, that it would waive its notice period. The Board is grateful to Williams de Broë for this decision.

 

After a formal selection process, Amati Global Investors ("Amati") was appointed in March 2010. Dr Paul Jourdan and Douglas Lawson, the two founders of Amati, have extensive experience of managing AIM VCTs. Dr Jourdan founded the First State AIM VCT in 2005, which has gone through difficult markets to establish one of the best track records amongst AIM VCTs, as well as being one of the most shareholder friendly. When he moved to Noble Fund Managers in 2007 the name was changed to Noble AIM VCT. In January of this year Dr Jourdan and Mr Lawson led the acquisition of Noble Fund Managers and re-named it Amati Global Investors.

One of the reasons for the appointment of Amati by the Board is the active and extensive non-qualifying investment policy exemplified by Noble AIM VCT. This allows the fund manager to invest in small and mid-sized company shares quoted in London on both the main market and on AIM with a view to complementing the qualifying portfolio. For example, it is often cited by AIM VCT managers that they have no investments in the resources sector, and hence cannot match the performance of the FTSE AIM All-Share Index in this regard, where resources are heavily represented. Noble AIM VCT has been able to invest widely in the resources sector over the past five years from the non-qualifying portfolio, albeit not with the same level of weighting as the FTSE AIM All-Share Index. Similarly, it has been able to direct a portion of the portfolio at the higher growth economies in the Far East.

 

For this reason the Board is proposing a change to the investment mandate of ViCTory VCT for approval by shareholders at the AGM to allow it to be run along similar lines to Noble AIM VCT in respect of its non-qualifying investments in equity and debt instruments.

 

The Board also believes that Amati have a good understanding of what has gone wrong for many AIM VCTs and have a credible strategy for making qualifying investments which will avoid many of the pitfalls experienced by ViCTory over the past year.

 

Corporate Developments

Dominic Wheatley resigned as a Director of the Company during September 2009 as a result of relocating to the United States for business reasons. The Board would like to thank him for his contribution to the running of the Company.

 

As a consequence of the appointment of Amati, the Board also appointed a new company secretary, The City Partnership (UK) Limited ("City"). City acts for a number of other VCTs and is independent of any fund manager.

 

The annual general meeting will be held at 120 Old Broad Street at 3pm on Tuesday 15 June 2010. The new Manager will be making a presentation to shareholders at the AGM and the Board would welcome the opportunity given by both the meeting and the presentation for discussion with, and comments from, shareholders.

 

Outlook

Amati has settled into its role quickly and the Board will be working closely with Paul Jourdan and Douglas Lawson to improve the Company's investment performance, formalise a dividend policy, reduce ViCTory's cost base and improve shareholder communication. As one of the steps towards this goal, the Board recommends that the Company's shareholders vote in favour of the revised investment policy which is being put to the annual general meeting. 

 

Should you have any questions about your investment in ViCTory, please do not hesitate to contact City in the first instance either by telephone (0131 243 7210) or email (VCT-enquiries@amatiglobal.com).

 

CLJ Moorsom

Chairman

ViCTory VCT PLC

19 May 2010

 

Investment Portfolio - Commentary and Outlook

 

Performance

During the year under review the Company saw a NAV total return of -4.6% whilst the FTSE AIM All-Share Total Return Index showed a rise of 67.0%. During the second half of the year the NAV fell by 5.9%, whilst the FTSE AIM All-Share Total Return Index rose by 23.8%. Shareholders who invested in any of the original share issues can track their returns to date on the table given on page 3 of the Report and Financial Statements.

 

There were three principal reasons for the under-performance during the year. The first and most damaging was the failure or writing off of seven material investments, including the largest quoted investment and the two largest unquoted investments. The quoted stocks written off (in order of size of impact) were Aero Inventory, Relax Group, Smallbone and Pubs 'N' Bars. The unquoted stocks written off were U4EA, Lilestone Holdings, and Imagesound. On the unquoted side this was largely the catch up effect of the credit crunch which impacts quoted stocks more immediately because the prices are transparent and tend to reflect the changing climate much faster. On the quoted side, Smallbone and Pubs 'N' Bars had already been hit hard last year. Aero Inventory and Relax Group, however, both involved accounting irregularities and, in the former case, gave rise to allegations of fraud. The scale of these write downs neutralised the successes elsewhere in the portfolio. The five largest made a negative contribution roughly equal to the top nineteen gainers in the portfolio.

 

Aero Inventory was the single largest equity investment held by the Company a year ago, representing over 6% of the portfolio. In September it announced it was preparing to move to the Official List, and delayed its results to the last possible date, 28 October, as a result. However, on 26 October 2009, the company announced the suspension of its shares, having been unable to publish its annual accounts for 30 June 2009. The company blamed new systems which picked up problems with the valuation of inventory acquired during their financial year 2008. It foresaw a material impact on the 2008 and 2009 accounts. By not publishing results the company also put itself in breach of its loan covenants. On 3 November the company announced that the issues went wider than first thought.  The following day the finance director resigned. A week later the banks had lost confidence in the company, refused to provide any short term financing, and an administrator was appointed. The details of this rapid demise of a company which was supposedly one of AIM's success stories, are not yet clear. At the end of February 2010 the Serious Fraud Office began an investigation into the affairs of the company. Whilst the company reported a net profit of $51.6m for the year to June 2008 talking about 'record results' and being 'excellently positioned', there was an operating cash outflow of $223.4m, and a massive increase in debt which received less attention. In the interims the company reported net profit of $22.7m and an operating cash outflow of $50.2m, together with another big jump in net debt. Such mismatches tend not to end prettily.  Whilst often beguiling with their apparently low price-to-earnings ratios, companies where the reported profits are completely divorced from cash flow will not form part of the portfolio

going forwards.

 

Relax Group, although a very different type of business to Aero Inventory, shared with it the same feature of reporting cashless profits. In this case the profits derived from an aggressive revenue recognition policy, which in some cases would book profits 3-4 years before the cash payments were likely to be received. This rapidly created a large and problematic debtor book. Meanwhile, when the company reported positive operating cash flow in December 2008 it was more than wiped out by a mysterious cash outflow for 'acquisition of intangible assets'. It emerged in the interims that these intangibles were in fact data purchases from specialist lead providers, which were used by Relax Group to contact potential customers. The group had no exclusivity arrangements for this data or any ownership of these prospective customers. The company therefore had little control over future economic benefits from this data and these costs should, in our view, have been expensed as incurred, instead of capitalised. Prior to the collapse of the company a new CEO was appointed, but unfortunately too late to salvage the situation.

The two most significant unquoted holdings which have been written down to zero are U4EA (2.5% of the portfolio a year ago) and Lilestone Holdings (4.1% of the portfolio a year ago, which has been written down following a review by Amati resulting in an adjustment to the initially reported year end NAV from 44.02p to 42.43p.) ViCTory VCT had not offered further funding to U4EA over the last two years, and following the withdrawal of support from its major shareholder,

the company was forced to appoint an administrator. Lilestone Holdings, which manufacturers a range of lingerie products has been consistently losing money and is in need of yet another round of financing. Amati does not propose to offer any follow on funding and has taken the view that the existing holding is of questionable value until the nature of the next financing round becomes clear. Imagesound, a much smaller holding, has also been written down following a review by

Amati. The company de-listed in 2008 after borrowing heavily to fund acquisitions. Amati have taken the view that the de-listing, coupled with a broader cost cutting exercise, is unlikely to give the company adequate cash flows to service its debts. It is nonetheless possible that some value can be retrieved from both Lilestone Holdings and Imagesound in the future, and Amati will look for all possible ways to achieve this.

 

The second contributor to underperformance during the year was the high level of cash and fixed interest balances held by the Company during a period of ultra-low interest rates. Yields on short and medium term UK government bonds moved little during the year, staying close to the 1% level.  The Board is looking to address this issue going forwards with the proposed changes to the non-qualifying investment mandate outlined in the Chairman's Statement above.

 

The third main contributor to underperformance was both the lack of exposure to the strongest performing sector on AIM during 2009, namely natural resources, and more generally a dearth of clear winners in the qualifying portfolio. Natural resources accounts for over 30% of the FTSE AIM All-Share Index, and according to the RBS Hoare Govett Index 2010 study, this sector accounted for almost all of the difference in performance in 2009 between the FTSE AIM All-Share Total Return Index which gained 67.0%, and the FTSE All-Share Total Return Index which gained 33.2%. The biggest positive contribution during the year came from Green Compliance, a share issue subscribed for only in December, which rapidly rose to a 100% premium. Other positive contributors, in order of magnitude, were Synergy Health, a large and long-standing position, which rebounded strongly; Lo-Q, which sells a queue-busting device to theme park visitors in Europe and the US and has recently seen trading pick up sharply and has managed to expand its customer base significantly; Zytronic, the touch screen technology company, which has been making good trading progress; Symphony Environmental Technologies, the manufacturer of degradable plastic, which finally turned profitable in 2008 and saw good growth in 2009; and AssetCo, the provider of fire engines and fire backup services, which entered into a new ten year joint venture with the Abu Dhabi government for the construction of a new fire training facility.

 

Portfolio Activity

Nine new qualifying investments were made during the year. The largest were Green Compliance, a newly formed company headed by a senior manager from Connaught, for acquiring support services companies in the fields of water and fire safety equipment and inspection, and pest control; Kiotech International, which supplies high performance natural feed additives to enhance health, growth and sustainability in agriculture and aquaculture internationally; and Savile Group, a small outplacement business. Other significant new holdings were Synchronica, Hightex Group, Lipoxen, Omega Diagnostics Group, Freshwater UK and LiDCO Group. Descriptions of each of these are given later in the report.

Outlook

The past two years have taught investors the virtues of caution, and many missed much of last year's rally by being reluctant to re-enter the stock market. For these investors the relentless rise in markets is inexplicable and unjustified. However, in the absence of contagion from the Greek crisis it looks as if the exceptionally loose monetary conditions will continue to drive growth and some further progress from stock markets, albeit far less rapidly than last year.

 

From the perspective of the UK it is easy to feel gloomy. The recession here lasted for 18 months, longer than any other country in the G7. Government spending has run way ahead of GDP, rising from 44% of GDP in 2006 to 52% in 2009 according to the OECD. In February, IMF forecasts suggest that 2010 will see UK government borrowing as a percentage of GDP running at the highest level of any country in the G20. On the plus side, however, we have an open and flexible economy, and have come through many crises before. We also have the benefit of our own currency, which helps act as a safety valve.  The new coalition government looks set to make deficit reduction a high priority.  In doing so it will have extraordinary demands of leadership placed upon it.  In the meantime we will be seeking out strong and well financed niche businesses in the UK. We like those that can offer real efficiency savings to the public sector.  In addition we would also like to include exposure to earnings streams outside the UK, especially in the Far East, with a focus on the fast growing domestic economies of China and India. These are very under-represented in the ViCTory portfolio at present.

 

Dr Paul Jourdan

CEO & Founder

Amati Global Investors

19 May 2010

Statement of Directors' Responsibilities

Company law requires the Directors to prepare Financial Statements for each financial year which give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that year. In preparing those financial statements, the Directors are required to:

 

·      select suitable accounting policies and then apply them consistently;

·      make judgements and estimates that are reasonable and prudent;

·      state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the Financial Statements; and

·      prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

 

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

The Directors are responsible for the maintenance and integrity of the Company's website.  Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

 

The Directors are responsible for ensuring that the Report of the Directors and other information included in the Report and Financial Statements are prepared in accordance with Company law in the United Kingdom. They are also responsible for ensuring that the Report and Financial Statements include information required by the Listing Rules of the Financial Services Authority.

 

Statement under DTR 4.1.12

The Directors certify that to the best of their knowledge the Financial Statements have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets, liabilities, financial positions and profit and loss of the Company. The Directors further certify that the Annual Report includes a fair review of the development and performance of the business together with the principal risks and uncertainties facing the Company.

 

 

Income Statement for the year ended 31 January 2010





Year ended



Year ended




31 January 2010


31 January 2009



Revenue

Capital

Total

Revenue

Capital

Total


Notes

£

£

£

£

£

£

Net losses on








investments at fair value

10

-

(724,347)

(724,347)

-

(14,685,951)

(14,685,951)









Income

2

342,429

-

342,429

589,510

-

589,510









Administrative expenses








Investment management fees

3

(72,075)

(216,224)

(288,299)

80,919

242,758

323,677









Decrease in share option provision

4

-

-

-

8,469

25,406

33,875









Other expenses

5

(302,197)

-

(302,197)

(328,245)

-

(328,245)









Total administrative (expenses)/income


(374,272)

(216,224)

(590,496)

(238,857)

268,164

29,307









(Loss)/return on ordinary activities








before taxation


(31,843)

(940,571)

(972,414)

350,653

(14,417,787)

(14,067,134)









Taxation on ordinary activities

7

-

-

-

-

-

-









(Loss)/return on ordinary activities








after taxation for the financial year


(31,843)

(940,571)

(972,414)

350,653

(14,417,787)

(14,067,134)









(Loss)/return per ordinary share

9

(0.07)p

(2.20)p

(2.27)p

0.79p

(32.71)p

(31.92)p

 

The total column of this statement is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations.

There are no gains or losses other than shown in the income statement.

The notes form part of these financial statements.

 

Reconciliation of Movements in Shareholders' Funds for the year ended 31 January 2010



Called

Share



Capital

Share






up share

premium

Merger

Special

redemption

options

Capital

Revenue




capital

account

reserve

reserve

reserve

reserve

reserve

reserve

Total


Notes

£

£

£

£

£

£

£

£

£

Year ended











31 January 2008


2,248,449

2,954,794

16,492,539

19,112,927

487,979

33,875

(5,931,126)

16,867

35,416,304

Re-purchase and











cancellation of











ordinary shares


(89,502)

-

-

(1,000,016)

89,502

-

-

-

(1,000,016)

Decrease in share











option provision

4

-

-

-

-

-

(33,875)

-

-

(33,875)

Net (loss)/return











after taxation for











the year


-

-

-

-

-

-

(14,417,787)

350,653

(14,067,134)

Dividends paid

8

-

-

-

-

-

-

(1,014,191)

(102,975)

(1,117,166)

Year ended











31 January 2009


2,158,947

2,954,794

16,492,539

18,112,911

577,481

-

(21,363,104)

264,545

19,198,113












Re-purchase and











cancellation of











ordinary shares


(61,025)

-

-

(423,158)

61,025

-

-

-

(423,158)

Net loss after











taxation for











the year


-

-

-

-

-

-

(940,571)

(31,843)

(972,414)

Year ended











31 January 2010


2,097,922

2,954,794

16,492,539

17,689,753

638,506

-

(22,303,675)

232,702

17,802,541

The notes form part of these financial statements.

 

Balance Sheet as at 31 January 2010


Notes

As at

As at



31 January 2010

31 January 2009



£

£

Fixed assets




Investments at fair value




Qualifying investments


12,646,657

11,321,027

Non-qualifying investments


5,248,088

5,953,242


10

17,894,745

17,274,269

Current assets




Debtors

11

67,789

80,769

Cash at bank


1,338

2,000,041



69,127

2,080,810

Creditors: amounts falling




due within one year




Bank overdraft


(25,299)

-

Other creditors and accruals

12

(136,032)

(156,966)



(161,331)

(156,966)





Net current (liabilities)/assets


(92,204)

1,923,844





Net assets


17,802,541

19,198,113





Capital and reserves




Called up share capital

14

2,097,922

2,158,947

Share premium account

15

2,954,794

2,954,794

Merger reserve

15

16,492,539

16,492,539

Special reserve

15

17,689,753

18,112,911

Capital redemption reserve

15

638,506

577,481

Share options reserve

15

-

-

Capital reserve

15

(22,303,675)

(21,363,104)

Revenue reserve

15

232,702

264,545





Total shareholders' funds


17,802,541

19,198,113





Net asset value per ordinary share

16

42.43p

44.46p

 

The financial statements were approved by the Board of Directors on 19 May 2010 and signed on their behalf by:

 

C J L Moorsom

Chairman

 

The notes form part of these financial statements.

 

Cash Flow Statement for the year ended 31 January 2010


Notes

Year ended

Year ended



31 January 2010

31 January 2009



£

£

Operating activities




Investment income received


338,769

504,812

Deposit interest received


1,134

67,892

Investment management fees (paid)/received


(289,608)

127,122

Other expenses paid


(331,070)

(325,762)

Bank interest paid


(11)

-





Net cash (outflow)/inflow from operating




activities

17

(280,786)

374,064





Capital expenditure and financial investment




Purchases of investments


(7,835,770)

(714,000)

Disposals of investments


6,516,042

2,512,566





Net cash (outflow)/inflow from capital




expenditure and financial investment


(1,319,728)

1,798,566





Equity dividends paid


-

(1,117,166)





Net cash (outflow)/inflow before financing


(1,600,514)

1,055,464





Financing




Cost of ordinary shares purchased




for cancellation


(423,488)

(1,072,526)





Net cash outflow from financing


(423,488)

(1,072,526)





Decrease in cash for the year

18

(2,024,002)

(17,062)

 

The notes form part of these financial statements.

 

Notes to the Financial Statements

 

1 ACCOUNTING POLICIES

A summary of the principal accounting policies is set out below.

 

a) Basis of accounting

The financial statements have been prepared under the historical cost convention, modified to include the revaluation of fixed asset investments. The financial statements have been prepared in accordance with applicable accounting standards and law in the United Kingdom, and are in compliance with the revised January 2009 Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the  "SORP").

 

b) Investments

All investments held by the Company are classified "at fair value through profit or loss". Investments are initially recognised at cost, being the fair value of consideration given. Interest accrued on fixed interest rate securities at the date of purchase or sale is accounted for separately as accrued income, so that the value or purchase price or sale proceeds is shown net of such items.

 

After initial recognition, investments are measured at fair value, with unrealised gains and losses on investments and impairment of investments recognised in the income statement and allocated to capital. Realised gains and losses on investments sold are calculated as the difference between sales proceeds and cost.

 

For investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices at the close of business on the balance sheet date, without adjustment for transaction costs necessary to realise the asset.

 

Where trading in the securities of an investee company is suspended, the investment is valued at the Board's estimate of its net realisable value.

 

Unquoted investments are stated at the fair value with reference to the International Private Equity and Venture Capital Valuation ("IPEV") guidelines issued in October 2006, updated in September 2009, where appropriate.

 

Capital gains and losses on investments, whether realised or unrealised, are dealt with in the capital reserve.

 

c) Income

Dividends receivable on listed and quoted equity shares are brought into account on the ex-dividend date. Dividends receivable on unquoted equity shares are brought into account when the Company's right to receive payment is established and there is no reasonable doubt that payment will be received. Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis so as to reflect the effective yield, provided there is no reasonable doubt that payment will be received in due course. Interest receivable is included in the accounts on an accruals basis.

 

d) Expenses

All expenses are recognised on an accruals basis. Expenses are charged through revenue in the income statement except as follows:

·      expenses which are incidental to the acquisition of an investment are included within the cost of the investment, where permitted by the relevant accounting standards;

·      expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds on an investment; and

·      expenses are charged to capital where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect the investment management fee has been allocated 75% to capital and 25% to revenue, in line with the Board's expected long-term split of returns, in the form of capital gains and income respectively, from the investment portfolio of the Company.

 

e) Trail commission

Trail commission is paid to Independent Financial Advisors ("IFAs") annually at a rate of 0.375% of the investors original holding multiplied by the previous year end NAV. It is recognised on an accruals basis.  Trail commission that has not been cashed for an extended period of time can be written off at the discretion of the Company.

 

f) Financial instruments

Cash at bank and in hand may comprise cash and demand deposits which are readily convertible to a known amount of cash and are subject to insignificant risk of changes in value.

 

All other current assets do not carry any interest, are short term in nature and are accordingly stated at nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

 

g) Taxation

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversals of the underlying timing differences can be deducted. Timing differences are differences between the Company's taxable profits and its results as stated in the financial statements.

 

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.

 

Any tax relief obtained in respect of management fees allocated to capital is reflected in the capital reserve and a corresponding amount is charged against revenue. The tax relief is the amount by which corporation tax payable is reduced as a result of these capital expenses.

 

h) Capital reserve

Capital reserves: relating to gains and losses on sales of investments

 

The following are accounted for as realised returns:

·      Gains and losses on sale of investments;

·      realised exchange differences of a capital nature;

·      expenses and finance costs, together with the related tax effect to this reserve in accordance with the policies; and

·      realised gains and losses on transactions undertaken to hedge an exposure of a capital nature.

 

Capital reserves: relating to investment holding gains and losses

The following are accounted for as unrealised returns:

·      Increases and decreases in the valuation of investments held at the year end;

·      unrealised exchange differences of a capital nature; and

·      unrealised gains and losses on transactions undertaken to hedge an exposure of a capital nature.

 

i) Share based payments

In accordance with FRS 20: Share Based Payments, an expense is recognised in the financial statements relating to the value of the share options awarded to Singer & Friedlander Investment Management Limited under the arrangements agreed on the merger of the Company with AIM and AIM 2.

 

The accounting charge is based on the fair value of each grant. The fair value of Singer & Friedlander Investment Management Limited's option is determined at the date of grant and is expensed on a straightline basis over the vesting period based on the Company's estimate of shares that will eventually vest. In the case of the options granted, fair value is measured by a Black-Scholes pricing model, further details of which are set out in note 4. The deemed movement in provision is transferred to the share options reserve.

 

j) Dividends payable to shareholders

Interim dividends are not accounted for until paid. Final dividends are accounted for when approved by the members in the general meeting.

 

2 INCOME


Year ended

Year ended


31 January 2010

31 January 2009


£

£

Income from investments



UK equities

150,979

264,812

Fixed interest securities

189,457

261,228

Fixed interest securities reinvested

-

1,480


340,436

527,520

Other income



Deposit interest

1,993

61,633

Other interest

-

357


1,993

61,990




Total income

342,429

589,510

 

 


Year ended

Year ended


31 January 2010

31 January 2009


£

£

Total income comprises:



Dividends

150,979

264,812

Interest

191,450

324,698


342,429

589,510

Income from investments comprises:



Quoted UK securities

340,436

526,040

Unquoted UK securities

-

1,480


340,436

527,520

 

 

3 INVESTMENT MANAGEMENT FEES




Year ended



Year ended



31 January 2010


31 January 2009


Revenue

Capital

Total

Revenue

Capital

Total

 


£

£

£

£

£

£

Investment management fee

72,075

216,224

288,299

96,528

289,584

386,112

Irrecoverable VAT thereon

-

-

-

8,553

25,658

34,211

Recovered VAT from previous periods

-

-

-

(186,000)

(558,000)

(744,000)


72,075

216,224

288,299

(80,919)

(242,758)

(323,677)

 

Recovered VAT on Investment management fee

Management fees are now exempt from VAT, the 2009 figures include the amount of £744,000 of VAT that was recovered for the period 1 July 2001 to 30 June 2008 when VAT was charged.

 

Following the purchase on 21 October 2008 of the business of Singer & Friedlander Investment Management Limited by

Williams de Broë Limited, the management of the assets of the Company were migrated to Williams de Broë Limited on 12 January 2009.

 

Williams de Broë Limited and the Company signed an Investment Management Agreement on 28 April 2009.

 

Williams de Broë Limited received an annual management fee of 1.5% of the net asset value of the Company. The annual management fee was calculated based on the quarter end net asset value and was payable calendar quarterly in arrears. At 31 January 2010, £22,721 (31 January 2009: £24,030) was owed to the Manager.

 

On 22 March 2010, Amati Global Investors Limited ("Amati") were appointed as Investment Manager of the Company.

 

4 MANAGERS' OPTION

In accordance with the arrangements agreed on the merger of the Company with AIM and AIM 2, Singer & Friedlander Investment Management Limited were granted an option which provides that if by the date of payment of the final dividend in respect of the ordinary shares for the Company's accounting year ending 31 January 2013 cumulative dividends declared and paid on each ordinary share (by reference to a record date after the merger) exceed a return of 8 per cent (compounded annually) of the net asset value per ordinary share they will be entitled to subscribe at par for such number of additional ordinary shares as shall in aggregate be equal to 15 per cent of ordinary shares in the enlarged Company as enlarged by such subscriptions.

 

This right is a share based payment under FRS 20. This right or option has been valued on the date that it was granted to Singer & Friedlander Investment Management Limited and this cost is being charged to the income statement as part of the management fee evenly over the period over which it vests. These options currently have a nil value (2009: a decrease in the provision of £33,875 to nil). This is shown as a separate reserve in the balance sheet.

 

The option pricing model (Black-Scholes) has measured the fair value of the option using the following information:

 


31 January 2010

31 January 2009

Share price at grant date

87.95p

87.95p

Exercise price

5.00p

5.00p

Option life in years

3 years

4 years

Risk free rate

2.12%

2.76%

Expected volatility

12.87%

12.55%

Value

-

-

 

The Managers' Option was not transferred to Williams de Broë Limited with the purchase of the business of Singer & Friedlander Investment Management Limited.  The Board is looking to open discussions with Singer & Friedlander Investment Management Limited to have the agreement set aside.

 

5 OTHER EXPENSES


Year ended

Year ended


31 January 2010

31 January 2009


£

£

Directors' emoluments (note 6)

72,375

78,000

Auditor's fee - annual audit (current period)

35,263

39,905

Auditor's fee - taxation services

10,285

30,717

Registrar's fee

13,434

20,062

Secretarial fee

18,073

17,250

Administration fee

60,983

58,315

Printing

16,506

11,540

Insurance

26,647

26,737

Trail commission

17,613

8,183

Bank interest

36

-

Other

30,982

37,536


302,197

328,245

 

The auditor's fees disclosed above include VAT.

 

Evolution Group Services Limited performed company secretarial services for an annual fee of £18,500 including VAT of £2,413 (under previous contract with Singer & Friedlander Secretaries Limited - 2009: £17,250 including VAT of £2,250). At 31 January 2010, £17,942 including VAT of £2,672 was owed to Evolution Group Services Limited (amount owed under previous contract with Singer & Friedlander Secretaries Limited - 2009: £25,875 including VAT of £3,375).

 

With effect from 1 April 2010, The City Partnership (UK) Limited was appointed to provide company secretarial services to the Company.

 

Capita Sinclair Henderson Limited provided book keeping and accounting services for an annual fee of 0.1% of the gross amounts raised under the original Offer for Subscription of the Company's ordinary share capital, subject to annual review in line with the RPI. The agreement can be terminated by not less than one year's notice in writing. At 31 January 2010, £4,419 excluding VAT (2009: £5,082 including VAT of £663) was owed to Capita Sinclair Henderson Limited.

 

6 DIRECTORS' EMOLUMENTS

 


Year ended

Year ended


31 January 2010

31 January 2009


£

£

C J L Moorsom

18,000

18,000

J D Hambro*

15,000

15,000

M S Killingley

15,000

15,000

D M Page

15,000

15,000

D M D A Wheatley (resigned 15 September 2009)

9,375

15,000


72,375

78,000

 

* The fees in respect of James Hambro are paid to charity.

No pension scheme contributions or retirement contributions were paid. There are no share option contracts held by the Directors.

 

7 TAXATION ON ORDINARY ACTIVITIES




Year ended



Year ended




31 January 2010



31 January 2009


Revenue

 

Capital

Total

Revenue

Capital

Total


£

£

£

£

£

£

Based on the profits







for the period:







UK corporation tax charge/

-

-

-

-

-

-

(credit) at 28% (2009: 28.3%)

-

-

-

-

-

-

 

As a Venture Capital Trust, the Company is not liable to taxation on its realised capital gains.

 

Current taxation

The current taxation for the year is lower than the standard rate of corporation tax in the UK 28% (2009: 28.3%). The differences are explained below:

 

Reconciliation of tax charge




Year ended



Year ended




31 January 2010



31 January 2009


Revenue

Capital

Total

Revenue

Capital

Total


£

£

£

£

£

£

(Deficit)/return on ordinary







activities before taxation

(31,843)

(940,571)

(972,414)

350,653

(14,417,787)

(14,067,134)

Theoretical tax at UK







corporation tax charge of







28% (2009: 28.3%)

(8,916)

(263,360)

(272,276)

99,235

(4,080,234)

(3,980,999)

Effects of:







- UK dividends which are







   not taxable

(42,274)

-

(42,274)

(74,942)

-

(74,942)

- Non-taxable losses







   on investments

-

202,817

202,817

-

4,156,124

4,156,124

- Expenses which are not







   allowable for corporation







   tax purposes

4,932

-

4,932

(81)

(7,190)

(7,271)

- Excess expenses of







   current year carried forward

46,258

60,543

106,801

-

-

-

- Excess expenses of







   previous year utilised

-

-

-

(24,212)

(68,700)

(92,912)

Actual current tax charge

-

-

-

-

-

-








Deferred taxation

There is no potential liability to deferred tax (2009: £nil). There is an unrecognised deferred tax asset of £779,417 (2009: £679,823). The deferred tax asset relates to unutilised expenses. It is considered more likely than not that there will be insufficient taxable profits in the future against which the deferred tax assets can be offset and, therefore, in accordance with FRS 19, the asset has not been recognised.

 

8 DIVIDENDS IN RESPECT OF EQUITY SHARES


Year ended

Year ended


31 January 2010

31 January 2009


£

£

Declared and paid



Relating to prior year:



Final dividend of nil (2009: 2.0p) per ordinary share

-

899,379




Relating to current year:



Interim dividend of nil (2009: 0.5p) per ordinary share

-

217,787

Total

-




1,117,166

Proposed



Final dividend of nil (2009: nil) per ordinary share

-

-

Total

-

-

 

9 (LOSS)/RETURN PER ORDINARY SHARE

Basic revenue return per ordinary share is based on the net loss on ordinary activities after taxation of £31,843 (2009: return of £350,653) and on 42,764,055 (2009: 44,075,233) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

 

Basic capital return per ordinary share is based on net capital loss for the year of £940,571 (2009: £14,417,787) and 42,764,055 (2009: 44,075,233) ordinary shares, being the weighted average number of ordinary shares in issue during the year.

 

10 INVESTMENTS


31 January 2010

31 January 2009


£

£

Valuation



Listed investments

5,786,002

7,216,168

Quoted investments

11,773,228

8,401,661

Unquoted investments

335,515

1,656,440

Total

17,894,745

17,274,269

 

Movements in investments during the year ended 31 January 2010 are summarised as follows:


Unquoted

AIM

PLUS

Listed



investments*

quoted

markets

securities

Total


£

£

£

£

£

Opening book cost

15,620,098

19,873,527

209,990

6,115,537

41,819,152

Opening unrealised (losses)/gains

(13,963,658)

(11,472,076)

(209,780)

1,050,594

(24,594,920)

Amortisation of discount on fixed






interest securities**

-

-

-

50,037

50,037

Opening valuation

1,656,440

8,401,451

210

7,216,168

17,274,269

Transfers between categories

3,286,831

(3,442,683)

-

155,852

-

Purchases

160,000

3,785,950

-

3,889,820

7,835,770

Sale proceeds

-

(721,640)

-

(5,794,402)

(6,516,042)

Realised (losses)/gains on sales

(2,914,370)

(29,591)

-

388,022

(2,555,939)

(Increase)/decrease in unrealised losses

(1,853,386)

3,779,531

-

(69,458)

1,856,687

Closing valuation as at 31 January 2010

335,515

11,773,018

210

5,786,002

17,894,745







Closing book cost as at 31 January 2010

16,152,559

19,465,563

209,990

4,754,829

40,582,941

Closing unrealised (losses)/gains

(15,817,044)

(7,692,545)

(209,780)

956,041

(22,763,328)

Amortisation of discount on fixed






interest securities**

-

-

-

75,132

75,132

Closing valuation as at 31 January 2010

335,515

11,773,018

210

5,786,002

17,894,745

 

* Included within unquoted investments are fixed income securities representing £260,000 (2009: £100,000) by book cost and £nil (2009: £100,000) by market value, this stock has been written off.

** The income recognised from the debt securities on an effective yield basis taking account of the discounts on issue.

 


31 January 2010


£

Qualifying investments

12,646,657

Non-qualifying investments

5,248,088


17,894,745

Qualifying investments are made up of:


AIM quoted companies (excluding non-qualifying investments)

10,551,570

Fully listed companies

1,759,362

PLUS Markets traded companies

210

Unquoted companies

335,515


12,646,657

Non-qualifying investments are made up of:


AIM quoted companies (non-qualifying investments)

1,221,448

Loan stock in AIM quoted companies

100,000

UK Government loans

4,026,640


5,248,088

 

All qualifying investments within the portfolio are based in the UK. An analysis of the investment portfolio by broad industrial or commercial sector, and a list of investments, is contained within the Investment Portfolio Summary section of the Report and Financial Statements.


Year ended

Year ended


31 January 2010

31 January 2009


£

£

Realised losses on sales of investments

(2,555,939)

(1,485,954)

Movement in unrealised losses

1,856,687)

(13,179,463)

Movement in amortisation of discount on fixed



interest securities

(25,095)

(20,534)

Total losses on investments

(724,347)

(14,685,951)

 

Transaction costs - during the year the Company incurred transaction costs of £3,137 (2009: £nil) and £23 (2009: £56) on purchases and sales of investments respectively. These amounts are included in losses on investments at fair value as disclosed in the income statement.

 

11 DEBTORS


31 January 2010

31 January 2009


£

£

Prepayments and accrued income

67,789

80,769

 

 

12 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR


31 January 2010

31 January 2009


£

£

Other tax and social security

1,085

832

Stamp duty on buy backs

185

515

Accrued expenses

134,762

155,619


136,032

156,966

 

13 SIGNIFICANT INTERESTS

The Company has a holding of 3% or more that is material in the context of the financial statements in the following investments. No consolidation is required because the Company does not exercise or hold significant influence over operating and financial policies of these investee companies.

 

Name of undertaking

Percentage of ordinary


shares held by


Company


%

Sportsweb.com

11.4

Mediwatch

8.4

Bright Things

6.2

ID Data

6.0

RTC Group

6.0

Lilestone

5.8

Arcontech

5.4

Coolabi

5.4

First Artist Corporation

5.3

Infonic

5.2

Omega Diagnostics Group

4.8

Lo-Q

4.7

ILX Group

4.2

1st Dental Laboratories

4.1

Green Compliance

3.9

Savile Group

3.8

Freshwater UK

3.5

Kiotech International

3.2

Intelligent Environments Group

3.0

 

14 CALLED UP SHARE CAPITAL



Number of

Issued and

Number of


Authorised

shares

fully paid

shares


£


£


As at 31 January 2009

5,000,000

100,000,000

2,158,947

43,178,940

Ordinary shares of 5p bought





for cancellation

-

-

(61,025)

(1,220,503)

As at 31 January 2010

5,000,000

100,000,000

2,097,922

41,958,437

 

15 RESERVES







Capital reserve








Gains and




Share



Capital

Share

losses on

Investment



premium

Merger

Special

redemption

options

sales of

holding gains

Revenue


account

reserve

reserve

reserve

reserve

investments

and losses

reserve


£

£

£

£

£

£

£

£

31 January 2009

2,954,794

16,492,539

18,112,911

577,481

-

3,231,816

(24,594,920)

264,545

Re-purchase and









cancellation of









ordinary shares

-

-

(423,158)

61,025

-

-

-

-

Net gain on the









realisation of









investments

-

-

-

-

-

48,762

-

-

Increase in unrealised









depreciation

-

-

-

-

-

-

(748,014)

-

Amortisation of









discount on fixed









interest securities

-

-

-

-

-

-

(25,095)

-

Transfer on disposal









of investments

-

-

-

-

-

(2,604,701)

2,604,701

-

Costs charged






(216,224)



to capital









Retained net loss









for the year








(31,843)

31 January 2010

2,954,794

16,492,539

17,689,753

638,506

-

459,653

(22,763,328)

232,702

 

The special reserve was created out of the cancellation of the share premium account on 15 March 2002.

The special reserve, capital reserve and revenue reserve are distributable reserves.

The changes in the special reserve arise from the repurchase of 1,220,503 of the Company's ordinary shares for cancellation at a total consideration of £423,158.

The merger reserve was created from the merger with Singer & Friedlander AIM VCT and Singer & Friedlander AIM 2 VCT in February 2006. The merger reserve is a non-distributable reserve.

 

16 NET ASSET VALUE PER ORDINARY SHARE

The net asset value per ordinary share at 31 January 2010 has been calculated by reference to net assets of £17,802,541 (2009: £19,198,113) and 41,958,437 (2009: 43,178,940) ordinary shares, being the number of ordinary shares in issue at the year end.

 

17 RECONCILIATION OF NET DEFICIT BEFORE TAXATION TO NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES


Year ended

Year ended


31 January 2010

31 January 2009


£

£

Net deficit before taxation

(972,414)

(14,067,134)

Net losses on investments at fair value

724,347

14,685,951

Decrease in share option provision

-

(33,875)

Decrease in debtors

12,980

7,017

Decrease in creditors and accruals

(20,604)

(195,881)

Interest reinvested

-

(1,480)

Amortisation of discount on fixed interest securities

(25,095)

(20,534)

Net cash (outflow)/inflow from operating activities

(280,786)

374,064

 

 

18 RECONCILIATION OF NET CASH FLOW TO NET FUNDS


Opening


Closing


net funds

Movement

net funds


At 1 February 2009

in year

At 31 January 2010


£

£

£

Cash at bank

2,000,041

(1,998,703)

1,338

Bank overdraft

-

(25,299)

(25,299)


2,000,041

(2,024,002)

(23,961)

 

19 COMMITMENTS AND CONTINGENCIES

At 31 January 2010, there were no commitments or contingent liabilities (2009: none).

 

20 USE OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company's financial instruments comprise securities, cash balances and debtors and creditors that arise from its operations, for example, in respect of sales and purchases awaiting settlement and debtors for accrued income.

 

The principal risks arising from the Company's financial instruments are, market risk (comprising interest rate risk and other price risk) and liquidity risk. The Company has little exposure to credit risk and has no exposure to foreign currency risk.

 

The risk management policies of the Company have not changed since the previous year and are discussed below.

 

a) Market risk

Market risk arises from uncertainty about the future prices of financial instruments held in accordance with the Company's investment objectives. It represents the potential loss that the Company might suffer through holding market positions in the face of market movements.

 

The Board, through the nominated Director, considers each investment purchase to ensure that any acquisition allows the Company to maintain an appropriate spread of market risk. In addition it considers each investment to ensure that it falls within the VCT qualifying criteria at the time of purchase. It also considers the associated business risks of investing in each individual company. These include, but are not restricted to, the industry sector, management expertise and financial stability of each company.

 

The Company does not use derivative instruments to hedge against market risk.

 

b) Market price risk

Market price risks (i.e. changes in market price other than those arising from interest rate risk or currency risk) may affect the value of the portfolio.

 

Management of the risk

The Board of Directors manages the risks inherent in the investment portfolios by ensuring full and timely reporting of relevant information from the Investment Manager. Investment performance is reviewed at each Board meeting. The Board monitors the Investment Manager's compliance with the Company's objectives, and is directly responsible for investment strategy and asset allocation.

 

The Company's exposure to other changes in market prices at 31 January on its investments is as follows:


31 January 2010

31 January 2009


£

£

Investments at fair value

17,894,745

17,274,269

 

Other price risk sensitivity

If the investment portfolio valuation fell by 10% at 31 January 2010 the impact on net assets and the return/(loss) for the year would have been negative £1,789,000 (2009: £1,727,000), the management fee accrual would have reduced by £3,000 (2009: £3,000). If the investment portfolio valuation rose by 10% the impact on net assets and the return/(loss) for the year would have been positive £1,789,000 (2009: £1,727,000), the management fee accrual would also have increased by £3,000 (2009: £3,000).

 

In order to provide further information on the valuation techniques used to measure assets carried at fair value, the measurement basis has been categorised into a "fair value hierarchy" as follows:

 

- Quoted market prices in active markets - "Level 1"

Inputs to Level 1 fair values are quoted prices in active markets for identical assets. An active market is one in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. The Company's investments classified within this category are AIM quoted companies, fully listed companies, PLUS market traded companies and UK Government loans.

 

- Valued using models with significant observable market parameters - "Level 2"

Inputs to Level 2 fair values are inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly. The Company has one bond investment classified within this category.

 

- Valued using models with significant unobservable market parameters - "Level 3"

Inputs to Level 3 fair values are unobservable inputs for the asset. Unobservable inputs may have been used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset at the measurement date (or market information for the inputs to any valuation models). As such, unobservable inputs reflect the assumptions the Company considers that market participants would use in pricing the asset. The Company's unquoted equities and loan stock are classified within this category. As explained in note 1, unquoted investments are valued in accordance with the International Private Equity and Venture Capital Association ("IPEV") guidelines.

 

Financial assets at fair value through profit or loss

As at 31 January 2010

Level 1

Level 2

Level 3

Total


£

£

£

£

Equity shares

13,432,590

-

335,515

13,768,105

Bonds

4,026,640

100,000

-

4,126,640


17,459,230

100,000

335,515

17,894,745

 

The table below shows movements in the assets measured at fair value based on Level 3 valuation techniques for which any significant input is not based on observable market data.

 

Level 3 financial assets at fair value through profit or loss

As at 31 January 2010

Equity




shares

Bonds

Total


£

£

£

Opening balance at 1 February 2009

1,556,440

100,000

1,656,440

Transfers to Level 3 (see details below)

3,286,831

-

3,286,831

Purchases

-

160,000

160,000

Total net losses recognised in the income statement

(4,507,756)

(260,000)

(4,767,756)

Closing balance at 31 January 2010

335,515

-

335,515

 

The following stocks delisted during the financial year and moved from Level 1 to Level 3 - Aero Inventory,

Chromogenex, Optimisa, Playgolf Holdings, Pubs 'N' Bars, Relax Group & Smallbone.

 

The bond's value was written down to zero during the year.

 

c) Currency risk

All of the Company's assets, liabilities and income are denominated in Sterling (the Company's functional currency and presentational currency). As a result, the Company does not have any exposure to currency risk.

 

d) Interest rate risk

The exposure to interest rate risk arises due to the short time to maturity of the fixed rate financial assets, as it may not be possible to reinvest in assets which provide the same rates of those currently held. Interest is earned on cash balances at banks at variable rates.

 

Management of the risk

The majority of the Company's financial assets are non-interest bearing. As a result, the Company's financial assets are not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates. Derivative contracts are not used to hedge against the exposure to interest rate risk.

 

The interest rate profile of the Company's financial assets at 31 January 2010 was:


Financial

Fixed rate

Variable rate


Weighted

Average


assets on which

financial

financial


average

period to


no interest paid

assets

assets

Total

interest rate

maturity


£

£

£

£

%

(years)

Equity shares

13,768,105

-

-

13,768,105



Bonds

-

4,126,640

-

4,126,640

2.209

2.97

Cash

-

-

(23,961)

(23,961)



Debtors

67,789

-

-

67,789



Total

13,835,894

4,126,640

(23,961)

17,938,573










The interest rate profile of the Company's financial assets at 31 January 2009 was:


Financial

Fixed rate

Variable rate


Weighted

Average


assets on which

financial

financial


average

period to


no interest paid

assets

assets

Total

interest rate

maturity


£

£

£

£

%

(years)

Equity shares

11,459,601

-

-

11,459,601



Bonds

-

5,814,668

-

5,814,668

3.678

1.14

Cash

-

-

2,000,041

2,000,041



Debtors

80,769

-

-

80,769



Total

11,540,370

5,814,668

2,000,041

19,355,079



 

The variable rate is based on the banks' deposit rate which at 31 January 2010 was 0.05% (2009: 0.20%).

 

It is, and has been throughout the year under review, the Company's policy that no trading in derivative financial instruments shall be undertaken.

 

The Company's investments in equity shares and similar instruments have been excluded from the interest rate risk profile as they have no maturity date and would thus distort the weighted average period information.

 

Financial liabilities are creditors which are due within one year as disclosed in note 12 and a bank overdraft of £25,299. No interest is paid on the creditors and the overdraft is subject to a variable rate of interest of 1.50%. The Company finances its operations through its issued share capital and existing reserves.

 

Interest rate sensitivity

If the bank base rate had increased by 1%, the impact on the return/(loss) would have been negative £240 (2009: positive £20,000). If the bank base rate had decreased by 1%, the impact on the return/(loss) would have been positive £240 (2009: negative £20,000). The calculations are based on the cash balances as at the respective balance sheet dates and are not representative of the year as a whole.

 

e) Liquidity risk

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.

 

Details of the Company's investment portfolio at the balance sheet date are disclosed in the Investment Portfolio Summary. The investments the Company holds are primarily quoted on AIM where the liquidity is generally below that of securities quoted in the main market. The ability of the Company to realise positions may therefore be restricted when there are no willing purchasers.

 

The Company also holds unquoted equity investments which are not traded on a recognised exchange and which generally could be considered to be illiquid. As a result the Company may not be able to liquidate quickly some of these investments in order to meet its liquidity requirements. The list of the unquoted investments are disclosed in the Investment Portfolio Summary.

 

Management of the risk

The Board mitigates this risk by seeking to ensure that an appropriate proportion of the Company's investment portfolio is invested in cash and quoted securities that are readily realisable, which are sufficient to pay creditors and accrued expenses and to meet any funding commitments that may arise.

 

Liquidity risk exposure

Financial liabilities are creditors which are due within one year as disclosed in note 12.

 

f) Credit risk

The failure of the counterparty to a transaction to discharge its obligations under that transaction could result in the Company suffering a loss.

 

Management of the risk

 

Credit risk is managed as follows:

·      investment transactions are carried out with a large number of approved brokers, whose credit-standard is reviewed  periodically by the investment manager, and limits are set on the amount that may be due from any one broker.

·      cash at bank is held only with reputable banks and is subject to continual review.

 

None of the Company's financial assets or liabilities are secured by collateral or other credit enhancements.

 

In summary, compared to the amounts included in the balance sheet, the maximum exposure to credit risk at 31 January was as follows:



31 January 2010


31 January 2009


Balance

Maximum

Balance

Maximum


sheet

exposure

sheet

exposure


£

£

£

£

Current assets:





Other debtors (amounts due from brokers,





dividends and interest receivable)

67,789

67,789

80,769

80,769

Cash at bank

1,338

1,338

2,000,041

2,000,041

 

None of the Company's financial liabilities are past due or impaired.

 

g) Fair values of financial instruments

The balances in respect of debtors and creditors represent the fair values as determined by the Board of Directors in accordance with the Company's accounting policies. These balances are the carrying amounts as stated in the balance sheet. There is no material difference between the fair value of debtors and cash as debtors are short term in nature. The Company's equity and preference shares are valued at fair value.

 

Unquoted investments are stated at the fair value with reference to the International Private Equity and Venture Capital Valuation ("IPEV") guidelines where appropriate.

 

There are no committed undrawn facilities as at year end.

 

h) Derecognition of financial assets and liabilities

Financial assets are derecognised when the right to receive cash flows from the financial assets have expired or where the Company commits to transfer substantially all risks and rewards of ownership.

Financial liabilities are derecognised when the obligation of the Company specified in the contract is discharged, cancelled or expired.

 

i) Capital management policies and procedures

The Company's capital management objectives are:

·      to ensure that it will be able to continue as a going concern; and

·      to maximise the income and capital return to its equity shareholders.

 

The Board with the assistance from the investment manager monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes:

·      the need to buy back equity shares for cancellation, which takes account of the difference between the net asset value per share and the share price (i.e. share premium or discount)

·      the need for new issue of equity shares; and

·      the extent to which revenue in excess of that which is required to be distributed should be retained.

 

The Company's objectives, policies and procedures for managing capital are unchanged from the previous year.

 

21 RELATED PARTY TRANSACTIONS

On 21 October 2008, Williams de Broë Limited acquired an economic interest in the business operations of Singer & Friedlander Investment Management Limited and the investment management staff of Singer & Friedlander Investment Management Limited transferred to the employment of Williams de Broë Limited. Williams de Broë Limited were appointed formally as investment manager and Evolution Group Services Limited as the company secretary on 28 April 2009. The fee arrangements for these services and the fees payable are set out in notes 3 and 5. Accrued balances at the year end were £22,721 (2009: £24,030) and £17,942 including VAT (2009: £25,875 including VAT), respectively.

 

22 INVESTMENT IN SUBSIDIARY

During the year, the Company created the subsidiary, Singer & Friedlander AIM 3 VCT Limited, for the purpose of keeping the Singer & Friedlander AIM 3 VCT PLC name. The issued share capital is 1 share with the nominal value of £1 and is owned 100% by ViCTory VCT PLC. There have been no transactions in this company during the year.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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