TIDMNOA
RNS Number : 0799N
Noble AIM VCT Plc
04 June 2010
Noble AIM VCT plc (the "Company")
Annual Report & Accounts for the year ended 28 February 2010
Overview
corporate Objective
The objective of Noble AIM VCT plc (the "Company") is to provide an attractive
return to shareholders. The Company generates tax-free capital gains and
income by building and maintaining a well-balanced portfolio of qualifying
investments for the purposes of the tax legislation under which the Company
operates. The qualifying investments are predominantly in AIM-traded companies
or companies to be traded on AIM. The Company is managed as a Venture Capital
Trust in order that shareholders may benefit from the tax reliefs available.
Key Data
+-------------------------------+------------+------------+
| | 28/02/10 | 28/02/09 |
+-------------------------------+------------+------------+
| Total Net Asset Value ("NAV") | GBP25.8m | GBP18.3m |
+-------------------------------+------------+------------+
| Shares in issue | 36,087,457 | 35,257,187 |
+-------------------------------+------------+------------+
| NAV per share | 71.4p | 51.9p |
+-------------------------------+------------+------------+
| Share price | 71.5p | 56.0p |
+-------------------------------+------------+------------+
| Market capitalisation | GBP25.8m | GBP19.7m |
+-------------------------------+------------+------------+
| Share price premium to NAV | 0.1% | 7.9% |
+-------------------------------+------------+------------+
| Total return for the year | 45.4% | (44.3)% |
| (assuming reinvested | | |
| dividends) | | |
+-------------------------------+------------+------------+
| FTSE AIM All-Share total | 73.9% | (61.3)% |
| return index | | |
+-------------------------------+------------+------------+
| Dividends declared during the | 4.0p | 3.5p |
| year | | |
+-------------------------------+------------+------------+
| | | |
+-------------------------------+------------+------------+
Highlights
· NAV total return for the year of 45.4%.
· NAV plus cumulative dividends of 90.2p per share at 28 February
2010. This includes cumulative dividends paid to date of 18.8p per share.
· Proposed final dividend of 2.5p per share, following 1.5p per
share interim dividend paid on 11 December 2009.
· Management buyout of the fund manager re-emphasises the
commitment of the management team to the long-term future of the Company.
Chairman's Statement
The year ended 28 February 2010 has seen a rapid recovery from the highly
distressed market conditions brought about by the banking crisis. The speed of
this recovery has been driven by a wholesale shift of debt from the private to
the public sector, as the government has both bailed out failing banks and
injected vast quantities of liquidity into the market through a programme of
quantitative easing managed by the Bank of England. The portfolio was more
defensively positioned than the benchmark on the way down and has, consequently,
recovered more slowly. Nonetheless, the portfolio has made back a good deal of
lost ground over the year.
The net result for the Company has been a net asset value total return of 23.0p
including dividends of 3.5p per share. This equates to a total return of 45.4%
(assuming dividend re-investment), compared with a rise of 73.9% for the FTSE
AIM All-Share total return index, assuming re-invested dividends in both cases.
An interim dividend of 1.5p per share was paid to shareholders during December.
It is proposed that a final dividend of 2.5p per share will paid to shareholders
on the register at 16 July 2010 on 13 August 2010. Recognising the importance
of dividends to investors the Board will target cumulative annual dividend
payments around 5% of year-end net asset value, subject to adequate liquidity
being available.
The Company worked hard to maintain critical mass and liquidity through the
downturn, and this has meant that there was cash available to invest throughout
the worst periods of the crisis. Whilst the severity of the recession has
purged the portfolio of weaker holdings, our ability to continue an investment
programme during the distressed times leaves the Company emerging from the
recession in good shape. The portfolio of qualifying convertible loan
investments built up during the last year has served to increase income and
reduce overall volatility. Those companies top which we gave equity finance
during 2009 appeared to have compellingly good propositions which should benefit
the Company in the future.
Of the AIM VCTs which floated in the tax year 2004/5 the Company now has one of
the strongest performace records, and has been one of very few to have retained
critical mass, thanks in part to the introduction of our enhanced share buy back
offer, which has allowed existing shareholders an efficient way of making a new
investment in the Company from the proceeds of selling shares held for longer
than the qualifying period. We have been the only AIM VCT to have raised funds
in every year since floating. This year we issued a prospectus detailing a
share offer which will remain open until 12 August 2010. So far we have raised
GBP3.8m through this offer. Shareholders in the Company benefit from an
additional 3% of their subscription being invested in extra shares if they apply
directly using the shareholder offer form (available on Amati's website given
below).
In January 2010 Paul Jourdan and Douglas Lawson, together with the team directly
involved in the day-to-day running of the Company completed the acquisition of
Noble Fund Managers, which has been renamed Amati Global Investors. The
directors are proposing a change in the name of the Company to Amati VCT plc for
approval by shareholders at the AGM. Share certificates under the names of
First State Investments AIM VCT plc and Noble AIM VCT plc will remain valid and
do not need to be changed.
Please do not hesitate to contact the Company Secretary on 0131 243 7215 if you
have any queries. We also have a dedicated email enqury service through
vct-enquiries@amatiglobal.com . The Company's fund manager, Amati Global
Investors ("Amati"or "Manager") maintains an informative website for the Company
- www.amatiglobal.com - on which monthly investment updates, performance
information, and all relevant documentation can be found.
Simon Miller
Chairman
3 June 2010
Fund Manager's Review
Market Review
The Company's financial year under review began just two weeks before the stock
market's low point in mid-March 2009. Following the most severe financial
crisis since the 1930s, the prices to which stocks had fallen were in many cases
spectacularly low. Whilst most of us were fretting over value lost, Warren
Buffet wrote in his annual letter to Berkshire Hathaway shareholders that he and
vice chairman, Charlie Munger, saw so many investment opportunities that they
felt like two mosquitoes in a nudist colony! Amidst small cap stocks, there was
something of a liquidity crunch driven by the many hedge funds with small cap
holdings which were put into liquidation, thus becoming forced sellers. This
gave an element of randomness as to which particular stocks would be hardest
hit. Companies which had financial problems clearly all fell very heavily, in
some cases never to recover. But many perfectly sound companies which had grown
their earnings through the downturn were also hit hard due to forced selling.
This created some excellent investment opportunities, worthy even for
mosquitoes.
The co-ordinated policy response to the crisis by central banks around the world
was more effective at delivering a recovery than most people imagined possible a
year ago. Once the banks were bailed out through massive capital injections and
guarantee programmes, quantitative easing (a technical term for creating money
without actually feeling the need to print it) provided the much needed boost to
money supply. The rescue has not come cheaply however, and as a result, a store
of further problems has been set up for the future, such that it feels more as
if the financial crisis has been deferred rather than averted. The tough
question is working out how long this deferral might last, and what the impact
of a future crisis might be. What has happened in Greece and what happens next,
is clearly an important case study in this respect.
The first half of the year saw one of the sharpest market bounces in a
generation, and the market rally continued into the second half, albeit at a
slower pace. The market should be able to make some further progress in 2010
whilst central banks maintain a highly accommodative monetary policy and
governments tread carefully for fear of snuffing out the recovery. In the UK,
whilst the fiscal deficit looks utterly unsustainable and Treasury forecasts of
revenue receipts appear optimistic, the term structure of government debt is
favourable with the Debt Management Office ("DMO") having favoured long maturity
issues for many years. This buys time, albeit time which will need to be used
wisely.
Beyond the massive capital injections and bank bailouts, the most significant
component of recovery in global markets has come from China. China's increased
consumption of raw materials, in particular base metals and energy, has driven
the recovery of the resources sector long before one would have expected
according to the recovery patterns over the last 50 years. Nearly all
international companies we now meet have a China strategy. But the tables are
now turning, and it transpires that many Chinese companies now have a European
strategy, not to mention an African strategy and an Americas strategy. One of
our non-qualifying investments, Emerald Energy, an oil and gas company with
assets in Columbia and Syria, was bid for by Sinochem in the second half. The
day the bid was announced we sold and re-invested into Gulfsands Petroleum,
which owns the other half of the same Syrian block as that part-owned by Emerald
Energy. Since the end of the financial year, a preliminary offer for Gulfsands
Petroleum has been announced. Bidders are likely to be either from India or
China. If so, they have serious amounts of money to spend and strategic
imperatives to buy.
We have tried to reflect the Asian growth theme in various ways in the
portfolio. Given the constraints of qualifying investments, this is more
naturally the territory of the non-qualifying investments. Natural resources
and Asian agricultural stocks are one component of this. UK-quoted Chinese and
Indian companies are another, and there are a surprising number of these quoted
in London. Whereas a few years ago there was a steady stream of Chinese
companies seeking London listings because they could obtain higher valuations in
the UK, nowadays these same companies would attract markedly higher valuations
on local stock markets, and several have sought out secondary listings in Hong
Kong as a result. This valuation gap still presents some interesting investment
opportunities, and the companies themselves tend to offer direct exposure to the
development of the domestic Chinese and Indian economies. We believe the
attractions of these companies will become clear over the coming years and they
should see a significant boost to their ratings.
Performance
Having risen 30.3% in the first half, the Company's NAV rose a further 11.3% in
the second half, compared to the benchmark index's rise of 53.4% in the first
half and 13.3% in the second half. The disparity in the first half was
discussed at length in the Company's half-yearly report ("Half-yearly Report").
At the start of the financial year, the fund had just passed the third
anniversary of the 2006 fund raising and so the requirement for qualifying
investments had increased. We were holding a larger than normal amount of cash
in order to make further qualifying investments to build in a buffer over and
above the required levels of qualifying holdings. Several of the most
substantial of these new investments were made through convertible bonds, which
have many appealing characteristics, but which would be held at cost unless the
underlying equity rose above the conversion price (typically requiring a 40-50%
rise). The rally on AIM was also dominated by the very large component of
resources stocks. According to the RBS Hoare Govett 2010 Index Study by Elroy
Dimson and Paul Marsh, the entire outperformance of AIM in 2009 relative to the
FTSE All-Share Index was attributable to the resources sector. Even though
Noble AIM VCT is unusual amongst VCTs for holding any resources stocks, having a
mature qualifying portfolio means it cannot match the weightings found in the
FTSE AIM All-Share Index.
Amongst the notable successes in the first half of the year was the exit from
the secured loan notes in Cantono, the managed services and data centre
business, which we had taken part in financing through to the point where it
would be able to sell its principal data centre asset at Fareham. The eventual
sale of the asset gave us a gain of 42% on our investment. Elsewhere we
achieved a good exit from Pure Circle, the stevia extract producer, and Emerald
Energy, which became a bid target as mentioned above. In the second half there
was further beneficial corporate action in the portfolio. Essentially Group,
which had fallen to a highly distressed share price recovered and was then bid
for in stock by Chime Communications, a PR and advertising business. In
December, Hallin Marine Subsea International, which manufactures and rents out
specialist diving support equipment for the oil and gas industry, received a bid
at more than an 80% premium to the quoted stock price. Novera Energy, a wind
farm developer and operator of landfill gas electricity generation sites around
the UK, which we bought in April on a very low valuation, was always likely to
be an acquisition target, having a strategic investor with a similar footprint
in landfill gas sites. It was eventually bid for in November giving us a profit
of more than 100% on our investment. Other investments which have seen rises of
more than 100% during the year were: Skywest Airlines, the airline business
which dominates the routes around Western Australia; Velosi, the oil and gas
services and inspection business; ImmunoDiagnostic Systems, which has
established a diagnostic testing platform for laboratory use; Centamin Egypt,
the gold mining company which operates in Egypt; and Great Eastern Energy
Corporation, the Indian coal bed methane company. Amongst the qualifying
portfolio similar examples were Avanti Communications, the satellite operator,
and now the largest company by market capitalisation in the qualifying
portfolio; ADVFN, the financial website operator; Software Radio Technology,
which makes units for the electronic identification of boats, and Sprue Aegis, a
PLUS Markets listed manufacturer of fire alarms.
On the negative side, as noted in the Half-yearly Report, we wrote down TMO
Renewables and Spinvox in the first half. We made a further investment in TMO
Renewables via a convertible loan with warrants attached (this is the only debt
instrument the company has) believing that the technology which enables the
production of ethanol from non-edible sugars has strategic importance, but ended
up writing off Spinvox in the second half after the value of the trade sale came
in too low to give us a return. Elsewhere the fallers included London Capital
Group Holdings where the bumper earnings of 2008 led to very disappointing
earnings in 2009; and Amino Technology, the IPTV set top box business, which
warned twice on profits during 2009, and which we ended up disposing of
afterwards.
Transactions
Qualifying Portfolio
In the first half there were very few qualifying investment opportunities. As a
result we made two bespoke investments via convertible loans for Hardide and TMO
Renewables, where we were the only convertible loan investor alongside equity
investors. We invested only GBP1.3m in qualifying investments in four companies
during these six months. In the second half activity levels picked up
significantly. We made qualifying investments totalling GBP3.6m in seven
companies, all with equity investments. The first was Kiotech International, an
animal food additive business which markets its products globally, which we
funded in order to make an acquisition. Then Sabien Technology Group, a company
which manufactures and distributes energy saving controller devices for
commercial boilers, and Tristel, a company which has developed the chemistry to
make Ph neutral sodium chloride, which is one of the most powerful sterilising
cleaning agents known. Tristel sells to the majority of UK hospitals providing
a profitable core business, and is seeking to broaden its product usage and
develop overseas markets. In December we made an investment in Bango, a company
which floated on AIM with a very promising billing platform for content
providers to mobile phones. This platform has taken longer to materialise than
first envisaged, but is now maturing fast, whilst the share price is still a
fraction of its flotation price; sales have risen strongly throughout since
flotation and are now nearly ten times their starting level. The final three
investments were of the cash-shell variety. Green Compliance, is a vehicle put
together by Bob Holt, who was the driving force behind Mears' success. The
company raised around GBP10m when John Prowse joined as CEO from Connaught.
Marwyn Capital I and Marwyn Capital II are pure cash shells. Marwyn has been
behind many of the most successful young companies on AIM, and this is the first
time (to our knowledge) where it has taken significant amounts of outside money
for the cash shells it uses to start their ventures. We expect both to announce
their initial acquisitions and management teams in a reasonably short timeframe.
Non-Qualifying Portfolio
The significant new investments in the first half, namely Chemring Group,
ImmunoDiagnostic Systems, Kentz, Novera Energy and Niger Uranium, all went on to
perform very strongly in the second half. During the second half the notable
new investments were StatPro Group, the financial software company; Rambler
Metals & Mining, a copper mining company in Canada, in which we have taken early
profits following a strong rise; and Juridica Investments,a company which
provides funding for legal cases in the US. In addition we made two investments
in companies whose operations are in the Far East, New Britain Palm Oil and
Asian Citrus Holdings. New Britain Palm Oil owns and operates some of the best
and long established palm oil plantations in the world in Papua New Guinea.
Given the appalling record that the palm oil industry has, New Britain has
sought to distinguish itself through rigorous attention to environmental policy.
It is unusual in its vertical integration, with its own port facilities in
Liverpool, and a recently opened refinery nearby which allows them to produce
fully certified, traceable palm oil for the UK market. Asian Citrus is China's
largest independent orange grower, with three farms in southern China. It
dominates the supply of high quality US orange varieties. The company knows that
its production should increase by around 18% per year over the next ten years,
given the maturity profile of its farms. It is a classic Chinese domestic
economy stock. To fund new investments we sold a number of holdings, including
in the second half, Immunodiagnostic Systems, Alterian, Kentz, and Niger
Uranium.
VCT Objectives
Although the principles behind the VCT legislation have never been spelt out as
such, we have always assumed that the core objectives behind the tax reliefs are
that funding will be available for innovative and dynamic ventures and for
strong management teams, which will in turn produce jobs and other economic
benefits for the UK as a whole, in particular reaping some of the value of the
technology that the country has been so good at developing, but historically
poor at commercialising.
After five years of investing it seems worth reflecting on how our portfolio
stands up to these principles with some thoughts on our largest holding, Deltex
Medical Group. The first point to make is that the GBP4.9m of new qualifying
investments we made during 2009 were made during a year when the banks had
increased their charges hugely, and the stock market had shut its doors for the
first nine months. Early in the year we invested GBP1m via a convertible bond
at a time when the company had no other realistic access to funds. Deltex
Medical Group is the classic example of a British company commercialising
important technology. The cost of selling to the NHS has been very high, and
the speed of adoption slow. Finally, however, there are clear signs that the
NHS could make a strategic decision to adopt the Oesophageal Doppler Monitor
which Deltex Medical Group makes in an instrument called CardioQ. The product
measures cardiac output, and can be used to maintain the optimal fluid levels in
patients during surgery. It is now well attested in over 200 clinical papers
that such fluid optimisation reduces average recovery times from major surgery
as well as overall mortality rates. Patients getting better 2-3 days faster
results in a significant cost reduction for the hospital. Competing products
make similar claims, but are not clinically validated to produce the same
benefits, and in our view, are unlikely to be. In January this year the Office
for Life Sciences published a document entitled 'Life Sciences 2010: Delivering
the Blueprint'. Chapter 4 looks at 'Improving uptake and diffusion of
innovative, cost-effective medicines and medical technology by the NHS',
referring to the establishment of a Delivery Board to make sure that relevant
technologies are adopted: 'One such example is oesophageal Doppler guided
intra-operative fluid management' the report goes on to say, taking this as a
case study. If the Delivery Board can effectively reduce the barriers to NHS
adoption nationwide, this will not only be very good for Deltex Medical, and
hence Noble AIM VCT, but could also result in savings of several GBP100m for the
NHS, creating a very tangible return from the investment in VCTs by HM Treasury.
Since starting out five years ago, Noble AIM VCT has invested over GBP33m in
qualifying companies covering a very wide range of industries, from industrial
to agriculture, from energy to healthcare, and from media to software. Some
derive their sales from the UK, but many more have a strong presence in
international markets. Craneware, which has been an exemplary investment in
every respect, develops its software in Scotland, but sells entirely to US
hospitals. Most of the investment mistakes we have made have been down to
problems in management teams. Some successful investments such as Tanfield
turned out to have flawed management teams and have performed disastrously since
we exited. Some mistakes were just flawed concepts or poorly timed, as
unfortunately the airline start up Silverjet turned out to be. Fortunately we
have arrived now at a core set of qualifying positions in companies such as
Kiotech International, Brulines Group and Tristel, each of which has a well
financed, profitable business and a strong management team. Each has the
potential to become a highly successful corporation, operating in several
international markets as well as the UK, generating significant export revenue.
Other examples, focussed purely in the UK, are Melorio, which has become one of
the UK's most successful providers of vocational training for young people and
adults, and IDOX, which supplies software to Local Authorities. The spin-off
benefits to the UK from such enterprises are far reaching, and go well beyond
job creation and tax revenues.
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 rapid 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 are seeking out strong and well financed, niche businesses in the UK. We
like those that can offer real efficiency savings to the public sector. We have
also been increasing our 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.
Dr Paul Jourdan
CEO and Founder
Amati Global Investors
3 June 2010
Statement of Directors' Responsibilities in respect of the Annual Report and the
Financial Statements
The directors are responsible for preparing the annual report and the financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each
financial year. Under that law they have elected to prepare the financial
statements in accordance with UK Accounting Standards and applicable law (UK
Generally Accepted Accounting Practice).
Under company law the directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Company and of the profit or loss of the Company for that period. In
preparing these financial statements, the directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgments and estimates that are reasonable and prudent;
· state whether applicable UK Accounting Standards 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 adequate accounting records that are
sufficient to show and explain the Company's transactions and 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 2006.
They have general responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the Company and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the directors are also responsible for
preparing a Directors' Report, Directors' Remuneration Report and Corporate
Governance Statement that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company's website. Legislation in the
UK governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL FINANCIAL
REPORT
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with the applicable set
of accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
· the Directors' Report includes a fair review of the development and
performance of the business and the position of the issuer, together with a
description of the principal risks and uncertainties that they face.
Charles Pinney
Director
3 June 2010
Income Statement for the year ended 28 February 2010
+-------------------+-------+---------+---------+---------+---------+----------+----------+
| | Notes | 2010 | 2010 | 2010 | 2009 | 2009 | 2009 |
| | | Revenue | Capital | Total | Revenue | Capital | Total |
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-------------------+-------+---------+---------+---------+---------+----------+----------+
| Gain/(loss) | 7 | - | 8,094 | 8,094 | - | (13,697) | (13,697) |
| on | | | | | | | |
| investments | | | | | | | |
+-------------------+-------+---------+---------+---------+---------+----------+----------+
| Income | 2 | 473 | - | 473 | 575 | - | 575 |
+-------------------+-------+---------+---------+---------+---------+----------+----------+
| Investment | 3 | (104) | (311) | (415) | (116) | (346) | (462) |
| management | | | | | | | |
| fee | | | | | | | |
+-------------------+-------+---------+---------+---------+---------+----------+----------+
| VAT | 3 | 73 | 221 | 294 | - | - | - |
| recovered | | | | | | | |
+-------------------+-------+---------+---------+---------+---------+----------+----------+
| Other | 4 | (243) | (7) | (250) | (271) | 16 | (255) |
| (expenses)/income | | | | | | | |
+-------------------+-------+---------+---------+---------+---------+----------+----------+
| Profit/(loss) | | | | | | | |
| on ordinary | | 199 | 7,997 | 8,196 | 188 | (14,027) | (13,839) |
| activities | | | | | | | |
| before | | | | | | | |
| taxation | | | | | | | |
+-------------------+-------+---------+---------+---------+---------+----------+----------+
| Taxation on | 5 | - | - | - | (2) | - | (2) |
| ordinary | | | | | | | |
| activities | | | | | | | |
+-------------------+-------+---------+---------+---------+---------+----------+----------+
| Profit/(loss) | | | | | | | |
| on ordinary | | 199 | 7,997 | 8,196 | 186 | (14,027) | (13,841) |
| activities | | | | | | | |
| after | | | | | | | |
| taxation | | | | | | | |
+-------------------+-------+---------+---------+---------+---------+----------+----------+
| Return per | 6 | 0.56p | 22.43p | 22.99p | 0.57p | (42.94)p | (42.37)p |
| Ordinary | | | | | | | |
| share | | | | | | | |
+-------------------+-------+---------+---------+---------+---------+----------+----------+
The total column is the profit and loss account of the Company.
The accompanying notes are an integral part of the statement.
All revenue and capital items derive from continuing operations.
No operations were acquired or discontinued during the year.
There were no other recognised gains or losses in the year.
The accompanying notes form part of these financial statements.
Dividends paid
+-------------------------------------+---------+---------+
| | 2010 | 2009 |
| | GBP'000 | GBP'000 |
+-------------------------------------+---------+---------+
| Interim dividend for the year ended | - | 520 |
| 28 February 2009 of 1.5p per | | |
| Ordinary share - paid on 5 | | |
+-------------------------------------+---------+---------+
| December 2008 | | |
+-------------------------------------+---------+---------+
| Final dividend for the year ended | 711 | - |
| 28 February 2009 of 2.0p per | | |
| Ordinary share - paid on 14 | | |
+-------------------------------------+---------+---------+
| August 2009 | | |
+-------------------------------------+---------+---------+
| Interim dividend for the year ended | 538 | - |
| 28 February 2010 of 1.50p per | | |
| Ordinary share - paid on | | |
+-------------------------------------+---------+---------+
| 11 December 2009 | | |
+-------------------------------------+---------+---------+
| | 1,249 | 520 |
+-------------------------------------+---------+---------+
Reconciliation of Movements in Shareholders' Funds
for the year ended 28 February 2010
+----------------------------------+---------+----------+
| | 2010 | 2009 |
| | GBP'000 | GBP'000 |
+----------------------------------+---------+----------+
| Opening shareholders' funds | 18,292 | 25,410 |
+----------------------------------+---------+----------+
| Profit/(loss) for the year | 8,196 | (13,841) |
+----------------------------------+---------+----------+
| Increase in share capital in | 3,693 | 9,220 |
| issue | | |
+----------------------------------+---------+----------+
| Shares issued in connection with | - | 1,996 |
| asset acquisition | | |
+----------------------------------+---------+----------+
| Share buy backs | (3,163) | (3,973) |
+----------------------------------+---------+----------+
| Dividends paid | (1,249) | (520) |
+----------------------------------+---------+----------+
| Closing shareholders' funds | 25,769 | 18,292 |
+----------------------------------+---------+----------+
The accompanying notes are an integral part of the statement.
Balance Sheet as at 28 February 2010
+----------------------------------+------+---------+----------+
| | Note | 2010 | 2009 |
| | | GBP'000 | GBP'000 |
+----------------------------------+------+---------+----------+
| Fixed assets | | | |
+----------------------------------+------+---------+----------+
| Investments held at fair value | 7 | 24,746 | 16,096 |
+----------------------------------+------+---------+----------+
| | | | |
+----------------------------------+------+---------+----------+
| Current assets | | | |
+----------------------------------+------+---------+----------+
| Debtors | 8 | 233 | 54 |
+----------------------------------+------+---------+----------+
| Cash at bank | | 291 | 478 |
+----------------------------------+------+---------+----------+
| Investments - liquidity funds | | 1,032 | 1,864 |
+----------------------------------+------+---------+----------+
| | | 1,556 | 2,396 |
+----------------------------------+------+---------+----------+
| Current liabilities | | | |
+----------------------------------+------+---------+----------+
| Creditors: amounts falling due | 9 | (533) | (200) |
| within one year | | | |
+----------------------------------+------+---------+----------+
| Net current assets | | 1,023 | 2,196 |
+----------------------------------+------+---------+----------+
| Total assets less current | | 25,769 | 18,292 |
| liabilities | | | |
+----------------------------------+------+---------+----------+
| | | | |
+----------------------------------+------+---------+----------+
| Capital and reserves | | | |
+----------------------------------+------+---------+----------+
| Called up share capital* | 10 | 3,608 | 3,525 |
+----------------------------------+------+---------+----------+
| Share premium account* | 12 | 14,758 | 11,677 |
+----------------------------------+------+---------+----------+
| Special reserve | 13 | 15,087 | 19,499 |
+----------------------------------+------+---------+----------+
| Capital redemption reserve* | 14 | 1,114 | 585 |
+----------------------------------+------+---------+----------+
| Capital reserve | 15 | (8,637) | (16,634) |
+----------------------------------+------+---------+----------+
| Revenue reserve | 16 | (161) | (360) |
+----------------------------------+------+---------+----------+
| Equity shareholders' funds | | 25,769 | 18,292 |
+----------------------------------+------+---------+----------+
| Net asset value per share | 17 | 71.41p | 51.88p |
+----------------------------------+------+---------+----------+
* These reserves are not distributable.
The financial statements were approved and authorised for issue by the board of
directors on 3 June 2010 and were signed on its behalf by
Charles Pinney
Director
Company Number SC278722
The accompanying notes are an integral part of the balance sheet.
Cash Flow Statement for the year ended 28 February 2010
+--------------------------------+------+----------+----------+
| | | 2010 | 2009 |
+--------------------------------+------+----------+----------+
| | Note | GBP'000 | GBP'000 |
+--------------------------------+------+----------+----------+
| Operating activities | | | |
+--------------------------------+------+----------+----------+
| Investment income received | | 383 | 525 |
+--------------------------------+------+----------+----------+
| Deposit interest received | | 1 | 48 |
+--------------------------------+------+----------+----------+
| Underwriting commission | | - | 3 |
| received | | | |
+--------------------------------+------+----------+----------+
| Interest received on recovered | | 13 | - |
| VAT | | | |
+--------------------------------+------+----------+----------+
| Investment management fees | | (382) | (513) |
+--------------------------------+------+----------+----------+
| VAT recovered | | 169 | - |
+--------------------------------+------+----------+----------+
| Other operating costs | | (238) | (271) |
+--------------------------------+------+----------+----------+
| Interest paid | | (3) | (7) |
+--------------------------------+------+----------+----------+
| Net cash outflow from | 19 | (57) | (215) |
| operating activities | | | |
+--------------------------------+------+----------+----------+
| | | | |
+--------------------------------+------+----------+----------+
| Taxation | | | |
+--------------------------------+------+----------+----------+
| Overseas tax paid | | - | (2) |
+--------------------------------+------+----------+----------+
| | | | |
+--------------------------------+------+----------+----------+
| Financial investment | | | |
+--------------------------------+------+----------+----------+
| Purchase of investments | | (14,161) | (20,172) |
+--------------------------------+------+----------+----------+
| Sale/(purchase) of liquidity | | 881 | (1,921) |
| funds | | | |
+--------------------------------+------+----------+----------+
| Disposals of investments | | 13,857 | 17,171 |
+--------------------------------+------+----------+----------+
| Net cash inflow/(outflow) from | | 577 | (4,922) |
| financial investment | | | |
+--------------------------------+------+----------+----------+
| | | | |
+--------------------------------+------+----------+----------+
| Acquisitions and disposals | | | |
+--------------------------------+------+----------+----------+
| Funds received as part of | | - | 252 |
| asset acquisition | | | |
+--------------------------------+------+----------+----------+
| Legal costs relating to asset | | 7 | (214) |
| acquisition | | | |
+--------------------------------+------+----------+----------+
| Net cash inflow from | | 7 | 38 |
| acquisitions | | | |
+--------------------------------+------+----------+----------+
| | | | |
+--------------------------------+------+----------+----------+
| Dividends | | | |
+--------------------------------+------+----------+----------+
| Payment of dividends | | (1,249) | (379) |
+--------------------------------+------+----------+----------+
| Net cash outflow before | | (722) | (5,480) |
| financing | | | |
+--------------------------------+------+----------+----------+
| | | | |
+--------------------------------+------+----------+----------+
| Financing | | | |
+--------------------------------+------+----------+----------+
| Issue of shares | | 3,920 | 10,840 |
+--------------------------------+------+----------+----------+
| Expenses of the issue of | | (215) | (389) |
| shares | | | |
+--------------------------------+------+----------+----------+
| Share buy backs | | (3,163) | (3,973) |
+--------------------------------+------+----------+----------+
| Expenses relating to special | | - | (41) |
| reserve transfer | | | |
+--------------------------------+------+----------+----------+
| Net cash inflow from financing | | 542 | 6,437 |
+--------------------------------+------+----------+----------+
| (Decrease)/increase in cash | | (180) | 957 |
+--------------------------------+------+----------+----------+
| | | | |
+--------------------------------+------+----------+----------+
| Reconciliation of net cash | | | |
| flow to movement in net cash | | | |
+--------------------------------+------+----------+----------+
| Net cash at 1 March | | 478 | (495) |
+--------------------------------+------+----------+----------+
| Currency losses/(gains) | | 7 | (16) |
+--------------------------------+------+----------+----------+
| Net cash at 28 February | | 291 | 478 |
+--------------------------------+------+----------+----------+
| (Decrease)/increase in cash | | (180) | 957 |
| during the year | | | |
+--------------------------------+------+----------+----------+
The accompanying notes are an integral part of the statement.
Notes to the Financial Statements
1 Accounting Policies
Basis of Accounting
The financial statements have been prepared under the historical
cost convention, modified to include a revaluation of fixed asset investments,
and in accordance with applicable Accounting Standards and with the Statement of
Recommended Practice, 'Financial Statements of Investment Trust Companies and
Venture Capital Trusts ("SORP") revised in January 2009.
Income
Dividends on quoted shares are recognised as income on the date
that the related investments are marked ex dividend and where no dividend date
is quoted, when the Company's right to receive payment is established.
Income from fixed interest securities, other investment income and deposit
income are included on an accruals basis provided there is no reasonable doubt
that payment will be received in due course.
Expenses
All expenses are accounted for on an accruals basis. In respect of
the analysis between revenue and capital items presented within the income
statement, all expenses have been prescribed as revenue items except as follows:
Expenses are split and presented partly as capital items where a connection with
the maintenance or enhancement of the value of the investments held can be
demonstrated, and accordingly the investment management fee is currently
allocated 25% to revenue and 75% to capital, which reflects the directors'
expected long-term view of the nature of the investment returns of the Company.
Performance fees are paid 100% from capital.
Issue Costs
Issue costs are deducted from the share premium account.
Taxation
Deferred taxation is recognised in respect of all timing
differences that have originated but not reversed at the balance sheet date.
Deferred tax assets are only recognised when they arise from timing differences
where recovery in the foreseeable future is regarded as probable. Timing
differences are differences arising between the Company's taxable profits and
its results as stated in the financial statements which are capable of reversal
in one or more subsequent periods.
Current tax is expected tax payable on the taxable income for the period, using
tax rates enacted or substantively enacted at the balance sheet date and any
adjustment to tax payable in respect of previous years. The tax effect of
different items of expenditure is allocated between revenue and capital on the
same basis as a particular item to which it relates, using the Company's
effective rate of tax, as applied to those items allocated to revenue, for the
accounting period.
Investments
Investments are classified at fair value through the income
statement. Financial assets designated at fair value through the income
statement are measured at subsequent reporting dates at fair value.
Gains and losses arising from changes in fair value are considered
to be realised to the extent that they are readily convertible to cash in full
at the balance sheet date.
Those venture capital investments that may be termed associated undertakings are
carried at fair value as determined by the directors in accordance with the
Company's normal policy and are not equity accounted as required by the
Companies Act 2006. The directors consider that, as these investments are held
as part of the Company's portfolio with a view to the ultimate realisation of
capital gains, equity accounting would not give a true and fair view of the
Company's interests in these investments. Quantification of the effect of this
departure is not practicable. Carrying investments at fair value is
specifically permitted under Financial Reporting Standard 9 "Associates and
Joint Ventures", where venture capital entities hold investments as part of a
portfolio.
In respect of investments that are traded on AIM or PLUS, these are valued at
bid prices, in accordance with FRS 26.
Unquoted investments are shown at fair value as assessed by the
directors in accordance with International Private Equity Venture Capital
Valuation ("IPEV") guidelines. Valuations of unquoted investments are reviewed
quarterly.
- where a company is well established after one year from the date of
investment the shares may be valued by using the most appropriate methodology
recommended by the IPEV guidelines, including earnings multiples, net assets,
discounted cashflows and industry valuation benchmarks.
- alternatively where a value is indicated by a material arms-length
transaction by a third party in the shares of the company the valuation will
normally be based on this.
Realised and unrealised surpluses or deficits on the disposal of investments,
the revaluation of investments and permanent impairments in the value of
investments are taken to the capital reserve.
Financial Instruments
The Company classifies financial instruments, or their component parts, on
initial recognition as a financial asset, a financial liability or an equity
instrument in accordance with the substance of the contractual arrangement.
Financial instruments are recognised on trade date when the Company becomes a
party to the contractual provisions of the instrument. Financial instruments
are recognised initially at fair value plus, in the case of a financial
instrument not at fair value through profit and loss, transaction costs that are
directly attributable to the acquisition or issue of the financial instrument.
Financial instruments are derecognised on trade date when the Company is no
longer a party to the contractual provisions of the instrument.
Financial Assets at Fair Value through Profit or Loss
Financial assets at fair value through profit or loss comprise equity
investment. Movements in fair values are taken directly to the income
statement.
Foreign Currency
Foreign currency assets and liabilities are translated into sterling at the
exchange rates ruling at the balance sheet date. Transactions during the year
are converted into sterling at the rates ruling at the time the transactions are
executed. All exchange differences are reflected in the income statement.
Trade Debtors
Trade debtors are stated at their original invoiced value, as the interest that
would be recognised from discounting future cash receipts over the short credit
period is not considered to be material. Trade receivables are reduced by
appropriate allowances for estimated irrecoverable amounts. Interest on overdue
trade receivables is recognised as it accrues.
Trade Creditors
Trade creditors are stated at their original invoiced value, as the interest
that would be recognised from discounting future cash payments over the short
payment period is not considered to be material.
2 Income
+-----------------------------+----------+----------+
| | Year to | Year to |
+-----------------------------+----------+----------+
| | 28 | 28 |
| | February | February |
+-----------------------------+----------+----------+
| | 2010 | 2009 |
+-----------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+-----------------------------+----------+----------+
| Income: | | |
+-----------------------------+----------+----------+
| Dividends from UK companies | 207 | 422 |
+-----------------------------+----------+----------+
| Dividends from overseas | 66 | 7 |
| companies | | |
+-----------------------------+----------+----------+
| UK loan stock interest | 171 | 52 |
+-----------------------------+----------+----------+
| Interest from bank deposits | 1 | 47 |
+-----------------------------+----------+----------+
| Interest from liquidity | 7 | 44 |
| funds | | |
+-----------------------------+----------+----------+
| Underwriting commission | - | 3 |
+-----------------------------+----------+----------+
| Interest received on VAT | 21 | - |
| recovered | | |
+-----------------------------+----------+----------+
| | 473 | 575 |
+-----------------------------+----------+----------+
3 Investment Management Fees
The Manager provides investment management and secretarial services to the
Company under an investment management agreement. Details of this agreement are
given on pages 21 and 22 of the Annual Report and Accounts.
Investment management fees for the year were as follows:
+------------------------------------+----------+----------+
| | Year | Year |
| | to | to |
+------------------------------------+----------+----------+
| | 28 | 28 |
| | February | February |
+------------------------------------+----------+----------+
| | 2010 | 2009 |
+------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+------------------------------------+----------+----------+
| Due to the Manager by the Company | 80 | 131 |
| at 1 March | | |
+------------------------------------+----------+----------+
| Management fee charge to revenue | 415 | 462 |
| and capital for the year | | |
+------------------------------------+----------+----------+
| VAT recovered | (294) | - |
+------------------------------------+----------+----------+
| Fees paid to the Manager during | (213) | (513) |
| the year (including VAT recovered) | | |
+------------------------------------+----------+----------+
| Debtor due from Noble for VAT | 125 | - |
| recoverable | | |
+------------------------------------+----------+----------+
| Due to the Manager by the Company | 113 | 80 |
| at 28 February | | |
+------------------------------------+----------+----------+
Annual running costs, being the directors' and manager's fees, professional fees
and the costs incurred by the Company in the ordinary course of its business
(but excluding any performance fee payable to the Manager, irrecoverable VAT and
exceptional costs, including wind-up costs), are capped at 3.5% of the Company's
average Net Asset Value during the period. Any excess is met by the Manager by
way of reduction in future management fees.
The total costs of the 2009/10 offer for subscription are expected to be around
GBP100,000 (including irrecoverable VAT but excluding commissions). All of the
costs of the offer will be borne by the Company (other than trail commission).
4 Other Expenses
+------------------------------------+----------+----------+
| | Year | Year |
| | to | to |
+------------------------------------+----------+----------+
| | 28 | 28 |
| | February | February |
+------------------------------------+----------+----------+
| | 2010 | 2009 |
+------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+------------------------------------+----------+----------+
| Directors' remuneration | 56 | 51 |
+------------------------------------+----------+----------+
| Auditors' remuneration | 24 | 23 |
+------------------------------------+----------+----------+
| Legal and professional services | 107 | 132 |
| and other expenses | | |
+------------------------------------+----------+----------+
| Overdraft interest | - | 6 |
+------------------------------------+----------+----------+
| Other interest | - | 3 |
+------------------------------------+----------+----------+
| Administration and secretarial | 56 | 56 |
| services | | |
+------------------------------------+----------+----------+
| | 243 | 271 |
+------------------------------------+----------+----------+
The Company has no employees.
Details of directors' remuneration are provided in the directors' remuneration
report in the Annual Report and Accounts.
Capital other expenses of GBP7,000 (2009: GBP16,000 income) relates to the
exchange (loss)/gain on revaluing the bank accounts.
Auditor's remuneration can be broken down into:
+------------------------------------+----------+----------+
| | Year | Year |
| | to | to |
+------------------------------------+----------+----------+
| | 28 | 28 |
| | February | February |
+------------------------------------+----------+----------+
| | 2010 | 2009 |
+------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+------------------------------------+----------+----------+
| Audit of these financial | 19 | 19 |
| statements | | |
+------------------------------------+----------+----------+
| Audit of previous period | - | (6) |
| adjustment | | |
+------------------------------------+----------+----------+
| Amounts receivable by the | 5 | 10 |
| auditors' and their associates in | | |
| respect of other services | | |
+------------------------------------+----------+----------+
| | 24 | 23 |
+------------------------------------+----------+----------+
Charges for non audit services provided by the auditor in the year ended 28
February 2010 relate to tax compliance work and advice. The directors consider
the auditor was best placed to provide these services. The board reviews the
nature and extent of non audit services to ensure that independence is
maintained.
5 Tax on Ordinary Activities
5a Analysis of credit for the year
+------------------------------+----------+----------+
| | Year to | Year to |
+------------------------------+----------+----------+
| | 28 | 28 |
| | February | February |
+------------------------------+----------+----------+
| | 2010 | 2009 |
+------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+------------------------------+----------+----------+
| Overseas tax | - | 2 |
+------------------------------+----------+----------+
| Net charge | - | 2 |
+------------------------------+----------+----------+
The income statement shows the tax credit allocated between revenue and capital.
5b Factors affecting the tax charge for the year
+-------------------------------+----------+----------+
| | Year | Year to |
| | to | |
+-------------------------------+----------+----------+
| | 28 | 28 |
| | February | February |
+-------------------------------+----------+----------+
| | 2010 | 2009 |
+-------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+-------------------------------+----------+----------+
| Profit on ordinary activities | 199 | 188 |
| before taxation | | |
+-------------------------------+----------+----------+
| Corporation tax at standard | 56 | 53 |
| rate of 28% (2009: 28.17%) | | |
+-------------------------------+----------+----------+
| Effect of: | | |
+-------------------------------+----------+----------+
| Movement in excess management | 2 | 65 |
| expenses | | |
+-------------------------------+----------+----------+
| Overseas tax | - | 2 |
+-------------------------------+----------+----------+
| Non-taxable UK dividends | (58) | (118) |
+-------------------------------+----------+----------+
| Tax charge for the year (note | - | 2 |
| 5a) | | |
+-------------------------------+----------+----------+
Due to the Company's tax status as an approved Venture Capital Trust, deferred
tax has not been provided on any net capital gains arising on the disposal of
investments as such gains are not taxable.
No deferred tax asset has been recognised on surplus expenses carried forward as
it is not envisaged that any such tax will be recovered in the foreseeable
future. The amount of carried forward losses is GBP2,575,000 (2009:
GBP2,129,913).
6 Return per Share
The revenue return per share is based on the revenue on ordinary activities
after taxation of GBP199,000 (2009: GBP186,000) and on 35,660,368 (2009:
32,663,155) shares, being the weighted average number of shares in issue during
the year. The capital return per share is based on the profit on ordinary
activities after taxation of GBP7,997,000 (2009: loss of GBP14,027,000) and on
35,660,368 (2009: 32,663,155) shares, being the weighted average number of
shares in issue during the year.
7 Investments
+-----------+---------------------+-------------+-------------+-------------+----------+
| | Quoted | Unquoted | | |
| | | | | |
+---------------------------------+-------------+-------------+-------------+----------+
| | investments | investments | Derivatives | Total |
| | | | | |
+---------------------------------+-------------+-------------+-------------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------+-------------+-------------+-------------+----------+
| Cost at 1 March 2009 | 22,412 | 3,307 | - | 25,719 |
+---------------------------------+-------------+-------------+-------------+----------+
| Purchases | 12,944 | 1,512 | - | 14,456 |
+---------------------------------+-------------+-------------+-------------+----------+
| Disposals | - proceeds received | (12,763) | (1,130) | 41 | (13,852) |
+-----------+---------------------+-------------+-------------+-------------+----------+
| | - realised | 3,106 | 753 | (41) | 3,818 |
| | gains/(losses) on | | | | |
| | disposal | | | | |
+-----------+---------------------+-------------+-------------+-------------+----------+
| | - realisation of | | | | |
| | revaluation | (3,637) | - | - | (3,637) |
| | movements from | | | | |
| | previous years | | | | |
+-----------+---------------------+-------------+-------------+-------------+----------+
| Cost at 28 February 2010 | 22,062 | 4,442 | - | 26,504 |
+---------------------------------+-------------+-------------+-------------+----------+
| Unrealised losses at 1 | (9,162) | (461) | - | (9,623) |
| March 2009 | | | | |
+---------------------------------+-------------+-------------+-------------+----------+
| Unrealised gains/(losses) | 4,634 | (406) | - | 4,228 |
| on investments during the | | | | |
| year | | | | |
+---------------------------------+-------------+-------------+-------------+----------+
| Realisation of | 3,637 | - | - | 3,637 |
| revaluation movements | | | | |
| from previous years | | | | |
+---------------------------------+-------------+-------------+-------------+----------+
| Unrealised losses at 28 | (891) | (867) | - | (1,758) |
| February 2010 | | | | |
+---------------------------------+-------------+-------------+-------------+----------+
| Valuation at 1 March 2009 | 13,250 | 2,846 | - | 16,096 |
+---------------------------------+-------------+-------------+-------------+----------+
| Valuation at 28 February | 21,171 | 3,575 | - | 24,746 |
| 2010 | | | | |
+---------------------------------+-------------+-------------+-------------+----------+
| Equity shares | 20,896 | 614 | - | 21,510 |
+---------------------------------+-------------+-------------+-------------+----------+
| Preference shares | 254 | - | - | 254 |
+---------------------------------+-------------+-------------+-------------+----------+
| Loan stock | 21 | 2,961 | - | 2,982 |
+---------------------------------+-------------+-------------+-------------+----------+
| Total investments at | 21,171 | 3,575 | - | 24,746 |
| valuation | | | | |
+-----------+---------------------+-------------+-------------+-------------+----------+
+--------------------------------------------+---------+----------+
| | 2010 | 2009 |
+--------------------------------------------+---------+----------+
| | GBP'000 | GBP'000 |
+--------------------------------------------+---------+----------+
| Realised gains/(losses) on disposal | 3,859 | (4,340) |
+--------------------------------------------+---------+----------+
| Realised (losses)/gains on derivatives | (41) | 84 |
+--------------------------------------------+---------+----------+
| Realised gains/(losses) on liquidity fund | 14 | (22) |
+--------------------------------------------+---------+----------+
| | 3,832 | (4,278) |
+--------------------------------------------+---------+----------+
| Unrealised gains/(losses) on investments | 4,228 | (9,380) |
| during the year | | |
+--------------------------------------------+---------+----------+
| Unrealised losses on derivatives during | - | (5) |
| the year | | |
+--------------------------------------------+---------+----------+
| Unrealised gains/(losses) on liquidity | 34 | (34) |
| fund | | |
+--------------------------------------------+---------+----------+
| | 4,262 | (9,419) |
+--------------------------------------------+---------+----------+
| Net gain/(loss) on investments | 8,094 | (13,697) |
+--------------------------------------------+---------+----------+
Transaction Costs
During the year the Company incurred transaction costs of GBP43,000 and
GBP30,000 on purchases and sales of investments respectively. These amounts are
included in gain/(loss) on investments as disclosed in the income statement.
8 Debtors
+-----------------------------------------+---------+---------+
| | 2010 | 2009 |
+-----------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+-----------------------------------------+---------+---------+
| Receivable for investments sold | - | 5 |
+-----------------------------------------+---------+---------+
| Prepayments and accrued income | 108 | 47 |
+-----------------------------------------+---------+---------+
| Due from Noble for VAT recoverable* | 125 | - |
+-----------------------------------------+---------+---------+
| Costs to be reclaimed from Manager re | - | 2 |
| fundraising | | |
+-----------------------------------------+---------+---------+
| | 233 | 54 |
+-----------------------------------------+---------+---------+
*The amount due from Noble relates to the VAT recoverable as a result of the
announcement by HM Revenue & Customs that it accepts that the fund management of
VCTs should have fallen within the VAT exemption for fund management services
introduced on 1 January 2007.
9 Creditors: Amounts Falling Due Within One Year
+-----------------------------------------+---------+---------+
| | 2010 | 2009 |
+-----------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+-----------------------------------------+---------+---------+
| Payable for investments bought | 324 | 29 |
+-----------------------------------------+---------+---------+
| Related party payables | 113 | 80 |
+-----------------------------------------+---------+---------+
| Other creditors | 96 | 91 |
+-----------------------------------------+---------+---------+
| | 533 | 200 |
+-----------------------------------------+---------+---------+
10 Called Up Share Capital
+-----------------------------+-------------+---------+-------------+---------+
| | 2010 | 2009 |
+-----------------------------+-----------------------+-----------------------+
| Ordinary shares (10p | Number | GBP'000 | Number | GBP'000 |
| shares) | | | | |
+-----------------------------+-------------+---------+-------------+---------+
| Allotted, issued and fully | 35,257,187 | 3,525 | 26,614,814 | 2,661 |
| paid at 1 March | | | | |
+-----------------------------+-------------+---------+-------------+---------+
| Issued during the year | 6,119,296 | 612 | 11,404,508 | 1,140 |
+-----------------------------+-------------+---------+-------------+---------+
| Issued as part of asset | - | - | 2,961,611 | 296 |
| acquisition | | | | |
+-----------------------------+-------------+---------+-------------+---------+
| Repurchase of own shares | (5,289,026) | (529) | (5,723,746) | (572) |
| for cancellation | | | | |
+-----------------------------+-------------+---------+-------------+---------+
| At 28 February | 36,087,457 | 3,608 | 35,257,187 | 3,525 |
+-----------------------------+-------------+---------+-------------+---------+
During the year a total of 5,829,026 Ordinary shares of 10p each were purchased
by the Company at an average price of 59p per share.
11 Reserves
+------------+----------+----------+---------+------------+----------+---------+----------+
| | | | | Capital | | | |
+------------+----------+----------+---------+------------+----------+---------+----------+
| | Share | Share | Special | redemption | Capital | Revenue | Total |
+------------+----------+----------+---------+------------+----------+---------+----------+
| | capital* | premium* | reserve | reserve* | reserve | reserve | reserves |
+------------+----------+----------+---------+------------+----------+---------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------+----------+----------+---------+------------+----------+---------+----------+
| At 1 March | 3,525 | 11,677 | 19,499 | 585 | (16,634) | (360) | 18,292 |
| 2009 | | | | | | | |
+------------+----------+----------+---------+------------+----------+---------+----------+
| Shares | 612 | 3,309 | - | - | - | - | 3,921 |
| issued | | | | | | | |
+------------+----------+----------+---------+------------+----------+---------+----------+
| Share | - | (228) | - | - | - | - | (228) |
| issue | | | | | | | |
| expenses | | | | | | | |
+------------+----------+----------+---------+------------+----------+---------+----------+
| Repurchase | (529) | - | (3,163) | 529 | - | - | (3,163) |
| of shares | | | | | | | |
+------------+----------+----------+---------+------------+----------+---------+----------+
| Dividends | - | - | (1,249) | - | - | - | (1,249) |
| paid | | | | | | | |
+------------+----------+----------+---------+------------+----------+---------+----------+
| Profit | - | - | - | - | 7,997 | 199 | 8,196 |
| for the | | | | | | | |
| year | | | | | | | |
+------------+----------+----------+---------+------------+----------+---------+----------+
| At 28 | 3,608 | 14,758 | 15,087 | 1,114 | (8,637) | (161) | 25,769 |
| February | | | | | | | |
| 2010 | | | | | | | |
+------------+----------+----------+---------+------------+----------+---------+----------+
*These reserves are not distributable.
The Capital reserve realised and Capital reserve unrealised have been
amalgamated under the revised SORP, as there is no requirement to show realised
and unrealised separately and therefore comparative balances have been restated
to show merged figures.
At 28 February 2010, the capital reserve constitutes realised losses of
GBP6,894,000 (28 February 2009: GBP6,998,000 restated) and investment holding
losses of GBP1,743,000 (28 February 2009: GBP9,636,000 restated). The figures
for 2009 have been restated in accordance with the new provisions of the 2009
SORP.
Distributable reserves comprise the special reserve, the revenue reserve and the
capital reserve. At 28 February 2010, the amount of reserves deemed
distributable is GBP6,289,000 (28 February 2009: GBP2,505,000), a net movement
in the period of GBP3,784,000. The net movement is comprised of profit on
ordinary activities in the income statement of GBP8,196,000, less the repurchase
of shares of GBP3,163,000 and dividends paid of GBP1,249,000.
A final dividend for the year ended 28 February 2010 of 2.5p per share has been
proposed to be paid in August 2010. The proposed dividend is subject to
approval by shareholders at the Annual General Meeting.
12 Share Premium Account
+-----------------------------------------+---------+---------+
| | 2010 | 2009 |
+-----------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+-----------------------------------------+---------+---------+
| At 1 March | 11,677 | 1,897 |
+-----------------------------------------+---------+---------+
| Premium on allotment of shares | 3,309 | 8,469 |
+-----------------------------------------+---------+---------+
| Premium on allotment of shares as part | - | 1,700 |
| of asset acquisition | | |
+-----------------------------------------+---------+---------+
| Share issue expenses | (228) | (389) |
+-----------------------------------------+---------+---------+
| At 28 February | 14,758 | 11,677 |
+-----------------------------------------+---------+---------+
13 Special Reserve
+----------------------------------------+---------+---------+
| | 2010 | 2009 |
+----------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+----------------------------------------+---------+---------+
| At 1 March | 19,499 | 23,472 |
+----------------------------------------+---------+---------+
| Repurchase of own shares for | (3,163) | (3,973) |
| cancellation | | |
+----------------------------------------+---------+---------+
| Dividends paid | (1,249) | - |
+----------------------------------------+---------+---------+
| At 28 February | 15,087 | 19,499 |
+----------------------------------------+---------+---------+
At the AGM on 28 June 2007 the reduction in the share premium was authorised and
the credit arising was applied in crediting a distributable reserve to be
established which shall be able to be applied in any manner in which the
Company's profits available for distribution (as determined in accordance with
section 263(3) of the Act) are able to be applied.
14 Capital Redemption Reserve
+----------------------------------------+---------+---------+
| | 2010 | 2009 |
+----------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+----------------------------------------+---------+---------+
| At 1 March | 585 | 13 |
+----------------------------------------+---------+---------+
| Repurchase of own shares for | 529 | 572 |
| cancellation | | |
+----------------------------------------+---------+---------+
| At 28 February | 1,114 | 585 |
+----------------------------------------+---------+---------+
15 Capital Reserve
+----------------------------------------+----------+----------+
| | 2010 | 2009 |
+----------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+----------------------------------------+----------+----------+
| At 1 March | (16,634) | (2,087) |
+----------------------------------------+----------+----------+
| Profit/(loss) for the year | 7,997 | (14,027) |
+----------------------------------------+----------+----------+
| Dividends paid | - | (520) |
+----------------------------------------+----------+----------+
| At 28 February | (8,637) | (16,634) |
+----------------------------------------+----------+----------+
The Capital reserve realised and Capital reserve unrealised have been
amalgamated under the revised SORP, as there is no requirement to show realised
and unrealised separately and therefore comparative balances have been restated
to show merged figures.
At 28 February 2010, the capital reserve constitutes realised losses of
GBP6,894,000 (28 February 2009: GBP6,998,000 restated) and investment holding
losses of GBP1,743,000 (28 February 2009: GBP9,636,000 restated). The figures
for 2009 have been restated in accordance with the new provisions of the 2009
SORP.
16 Revenue Reserve
+-----------------------------------------+---------+---------+
| | 2010 | 2009 |
+-----------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+-----------------------------------------+---------+---------+
| At 1 March | (360) | (546) |
+-----------------------------------------+---------+---------+
| Profit for the year | 199 | 186 |
+-----------------------------------------+---------+---------+
| At 28 February | (161) | (360) |
+-----------------------------------------+---------+---------+
17 Net Asset Value per Ordinary Share
The calculation of net asset value per share at 28 February 2010 is based on net
assets of GBP25,769,000 (2009: GBP18,292,000) divided by the 36,087,457 (2009:
35,257,187) shares in issue at the year end.
18 Analysis of Changes in Cash
+----------------------------------------+---------+---------+
| | 2010 | 2009 |
+----------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+----------------------------------------+---------+---------+
| At 1 March | 478 | (495) |
+----------------------------------------+---------+---------+
| Currency (losses)/gains | (7) | 16 |
+----------------------------------------+---------+---------+
| (Decrease)/Increase in cash | (180) | 957 |
+----------------------------------------+---------+---------+
| At 28 February | 291 | 478 |
+----------------------------------------+---------+---------+
19 Reconciliation of Gain/(Loss) on Ordinary Activities Before
Taxation to Net Cash Outflow from Operating Activities
+---------------------------------------+---------+----------+
| | 2010 | 2009 |
+---------------------------------------+---------+----------+
| | GBP'000 | GBP'000 |
+---------------------------------------+---------+----------+
| Gain/(loss) on ordinary activities | 8,196 | (13,839) |
| before taxation | | |
+---------------------------------------+---------+----------+
| Net (gain)/loss on investments | (8,094) | 13,697 |
+---------------------------------------+---------+----------+
| Decrease in creditors, excluding | (193) | (58) |
| corporation tax payable | | |
+---------------------------------------+---------+----------+
| Decrease in debtors | 27 | 1 |
+---------------------------------------+---------+----------+
| Currency losses/(gains) | 7 | (16) |
+---------------------------------------+---------+----------+
| Net cash outflow from operating | (57) | (215) |
| activities | | |
+---------------------------------------+---------+----------+
20 Significant Interests
The Company has the following significant interests (amounting to an investment
of 3% or more of the equity capital of an undertaking):
+----------------------------------------+------------+------+
| | Nominal | % |
| | | held |
+----------------------------------------+------------+------+
| Marwyn Capital II Limited | 5,000,000 | 10.2 |
+----------------------------------------+------------+------+
| Vicorp Group plc | 15,966,954 | 8.3 |
+----------------------------------------+------------+------+
| Marwyn Capital I Limited | 5,001,000 | 8.0 |
+----------------------------------------+------------+------+
| Kiotech International plc | 29,620,000 | 7.0 |
+----------------------------------------+------------+------+
| Sabien Technology Group plc | 1,610,000 | 5.1 |
+----------------------------------------+------------+------+
| Air Touring Group plc | 600,000 | 4.9 |
+----------------------------------------+------------+------+
| Vitec Global Limited | 300,000 | 4.2 |
+----------------------------------------+------------+------+
| Managed Support Services plc | 6,602,000 | 4.0 |
+----------------------------------------+------------+------+
| Marwyn Value Investors | 200,000 | 4.0 |
+----------------------------------------+------------+------+
| Tristel plc | 1,253,059 | 3.8 |
+----------------------------------------+------------+------+
| Chromogenex plc | 2,300,000 | 3.8 |
+----------------------------------------+------------+------+
| Clearstream Technologies Group plc | 1,575,000 | 3.4 |
+----------------------------------------+------------+------+
| Cantono plc | 1,021,667 | 3.4 |
+----------------------------------------+------------+------+
| Brookwell Limited 'A' Preference | 243,809 | 3.1 |
+----------------------------------------+------------+------+
21 Unquoted Investments
During the year the Company made the following material disposals of unquoted
investments:
· At 28 February 2009, the Company held 721,000 units of Cantono loan
notes. The investment cost was GBP721,000 and the valuation was GBP721,000.
During the year ended 28 February 2010, the Company purchased a further 78,695
units at a cost of GBP78,695 and disposed of 376,630 units for GBP1,129,889.
22 Post Balance Sheet Events
The following transactions have taken place between 28 February 2010 and the
date of this report:
· 1,523,452 shares were allotted raising net proceeds of GBP1,160,320.
23 Segmental Analysis
The operations of the Company are wholly in the United Kingdom.
24 Related Parties
The Company holds 29,620,000 shares in Kiotech International plc ("Kiotech"), an
AIM traded company, of which Mr Peter Lawrence is a non-executive director.
On 21 September 2005 ECO Animal Health Group plc agreed to undertake the
administration and accounting work of Kiotech, one of the Company's investments,
for which ECO Animal Health Group plc charges GBP40,968 per annum. Mr Lawrence
is also chairman of ECO Animal Health Group plc. Mr Lawrence holds 642,870
shares in Kiotech in his own name, in addition to 1,000,000 share options in the
same company, and was appointed as a non-executive director of Kiotech on 21
September 2005 for which ECO Animal Health Group plc receive a fee of GBP21,000
per annum plus out of pocket expenses.
On 27 November 2006, Kiotech acquired the Agil division of ECO Animal Health
Group plc for a total consideration of up to GBP5.5 million. ECO Animal Health
Group plc received a cash payment of GBP4.7 million and 8,333,334 new ordinary
Kiotech shares. In addition Kiotech agreed to advance a further payment of up
to GBP0.555 million, of which GBP0.15 million has been paid to date with
GBP0.025 million received during the year ended 28 February 2010.
Save as disclosed in this paragraph, there is no conflict of interest between
the Company, the duties of the directors and their interests.
25 Financial Instruments
The Company's financial instruments comprise equity and fixed interest
investments, cash balances and liquid resources including debtors and creditors.
The Company holds financial assets in accordance with its investment policy to
invest in qualifying investments predominantly in AIM traded companies or
companies to be traded on AIM.
Fixed asset investments (see note 7) are valued at fair value. For quoted
securities this is the bid price. In respect of unquoted investments, these are
valued by the directors using rules consistent with IPEV guidelines. The fair
value of all other financial assets and liabilities is represented by their
carrying value in the balance sheet.
The Company's investing activities expose it to various types of risk that are
associated with the financial instruments and markets in which it invests. The
most important types of financial risk to which the Company is exposed are
market risk, credit risk and liquidity risk. The nature and extent of the
financial instruments outstanding at the balance sheet date and the risk
management policies employed by the Company are discussed below.
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 traded companies
and fully listed companies.
- 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 quoted equities and some of its convertible loan stock
investments 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
At 28 February 2010
+--------------------+---------+---------+---------+---------+
| | Level | Level | Level | Total |
| | 1 | 2 | 3 | |
+--------------------+---------+---------+---------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------+---------+---------+---------+---------+
| Ordinary shares | 20,647 | 196 | 667 | 21,510 |
+--------------------+---------+---------+---------+---------+
| Preference shares | - | 254 | - | 254 |
+--------------------+---------+---------+---------+---------+
| Loan stock | - | 2,016 | 966 | 2,982 |
| investments | | | | |
+--------------------+---------+---------+---------+---------+
| | 20,647 | 2,466 | 1,633 | 24,746 |
+--------------------+---------+---------+---------+---------+
Level 3 financial assets at fair value
At 28 February 2010
+----------------------------+----------+-------------+---------+
| | Ordinary | Loan | |
| | | stock | |
+----------------------------+----------+-------------+---------+
| | shares | investments | Total |
+----------------------------+----------+-------------+---------+
| | GBP'000 | GBP'000 | GBP'000 |
+----------------------------+----------+-------------+---------+
| Opening balance at 1 March | 1,223 | 858 | 2,081 |
| 2009 | | | |
+----------------------------+----------+-------------+---------+
| Transfers to Level 3 (see | 247 | - | 247 |
| details below) | | | |
+----------------------------+----------+-------------+---------+
| Purchases | - | 879 | 879 |
+----------------------------+----------+-------------+---------+
| Sales | (752) | (377) | (1,129) |
+----------------------------+----------+-------------+---------+
| Total net losses | (51) | (394) | (445) |
| recognised in the income | | | |
| statement | | | |
+----------------------------+----------+-------------+---------+
| Closing balance at 28 | 667 | 966 | 1,633 |
| February 2010 | | | |
+----------------------------+----------+-------------+---------+
The following stocks delisted during the financial year and moved from Level 1
to Level 3: - Air Touring Group plc, Cantono plc, Chromogenex plc and Vicorp
Group plc.
Changing one or more of the valuation inputs to reasonably alternative
assumptions would not materially change the value of the Level 3 investments.
26 Market Risk
Market risk embodies the potential for both losses and includes interest rate
risk and price risk.
The Company's strategy on the management of investment risk is driven by the
Company's investment objective as outlined in the corporate objective in the
Annual Report and Accounts. The management of market risk is part of the
investment management process. The portfolio is managed in accordance with
policies and procedures in place as described in more detail in the Directors'
Report and Business Review in the Annual Report and Accounts with an awareness
of the effects of adverse price movements through detailed and continuing
analysis, with an objective of maximising overall returns to shareholders.
Investments in unquoted stocks and AIM traded companies, by their nature,
involve a higher degree of risk than investments in the main market. Some of
that risk can be mitigated by diversifying the portfolio across business sectors
and asset classes. The Company's overall market positions are monitored by the
board on a quarterly basis.
Details of the Company's investments at the balance sheet date are disclosed in
the Investment Portfolio.
Of the Company's investments 86% (2009: 82%) are traded on AIM or fully listed.
A 10% increase in stock prices as at 28 February 2010 would have increased the
net assets attributable to the Company's shareholders and the total profit for
the year by GBP2,100,000 (2009: GBP1,325,000); an equal change in the opposite
direction would have decreased the net assets attributable to the Company's
shareholders and the total profit for the year by an equal amount.
Of the Company's investments 14% (2009: 18%) are in unquoted companies held at
fair value. A 10% increase in the valuations of unquoted investments at 28
February 2010 would have increased the net assets attributable to the Company's
shareholders and the total profit for the year by GBP357,000 (2009: GBP285,000);
an equal change in the opposite direction would have decreased the net assets
attributable to the Company's shareholders and the total profit for the year by
an equal amount.
27 Interest Rate Risk
Fixed rate
Nine of the Company's financial assets are interest bearing at a fixed rate. As
a result, the Company is subject to exposure to fair value interest rate risk
due to fluctuations in the prevailing levels of market interest rates.
The total current market value of these stocks is GBP2,982,000, the weighted
average interest rate is 7.2% and the average years to maturity is 2 years.
Floating rate
The Company has a floating rate overdraft facility. Any cash balances held by
the Company are also subject to floating rates. At 28 February 2010, the
overdraft balance was GBPnil (2009: GBPnil). A change in interest rates would
therefore have had a GBPnil impact.
28 Credit Risk
Credit risk is the risk that the counterparty to a financial instrument will
fail to discharge an obligation or commitment that it has entered into with the
Company. The Manager has in place a monitoring procedure in respect of
counterparty risk which is revised on an ongoing basis. The carrying amount of
financial assets best represents the maximum credit risk exposure at the balance
sheet date. At 28 February 2010, the financial assets exposed to credit risk
amounted to GBP233,000 (2009: GBP54,000).
Credit risk on the unquoted loan stock held within unlisted investments is
considered to be part of market risk.
Credit risk arising on transactions with brokers relates to transactions
awaiting settlement. Risk relating to unsettled transactions is considered to
be small due to the short settlement period involved and the high credit quality
of the brokers used. The board monitors the quality of service provided by the
brokers used to further mitigate this risk.
All the assets of the Company which are traded on AIM are held by Vidacos
Nominees Limited, the Company's custodian. Bankruptcy or insolvency of the
custodian may cause the Company's rights with respect to securities held by the
custodian to be delayed or limited. The board and the Manager monitor the
Company's risk by reviewing the custodian's internal control reports as
described in the Directors' Report and Business Review.
At 28 February 2010, substantially all of the cash held by the Company was held
by Citigroup. The Company also has a Global liquidity fund with Standard Life
Investments Limited and has moved part of the cash to this account. Bankruptcy
or insolvency of any of these institutions may cause the Company's rights with
respect to the cash held by them to be delayed or limited. It was considered
appropriate to spread this risk by maintaining the cash with more than one
institution whilst also mitigating the risk that the Company could breach VCT
rules by receiving less than 70% of income from qualifying sources. Any income
from the chosen fund is qualifying income for VCT rules purposes. Should the
credit quality or the financial position of any of these institutions
deteriorate significantly the Company has the ability to move the cash at short
notice.
There were no significant concentrations of credit risk to counterparties at 28
February 2010 or 28 February 2009. No individual investment exceeded 5% of the
Company's portfolio at 28 February 2010.
29 Liquidity Risk
The Company's financial instruments include investments in unlisted equity
investments which are not traded in an organised public market and which
generally may be illiquid. As a result, the Company may not be able to
liquidate quickly some of its investments in these instruments 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 liquidity risk is managed on an ongoing basis by the Manager in
accordance with policies and procedures in place as described in the Directors'
Report and Business Review. 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 2010,
these investments were valued at GBP1,323,000 (2009: GBP2,342,000).
30 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;
· to satisfy the relevant HMRC requirements; and
· to provide returns to its shareholders.
As a VCT, the Company must have, within 3 years of raising its capital, at least
70% by value of its investments in VCT qualifying holdings, which are relatively
high risk UK smaller companies. In satisfying this requirement, the Company's
capital management scope is restricted. The Company does have the option of
maintaining or adjusting its capital structure by varying dividends, returning
capital to shareholders, issuing new shares or selling assets to maintain a
certain level of liquidity. There has been no change in the objectives,
policies or processes for managing capital from the previous year.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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