TIDMAQT1
RNS Number : 1766M
Acuity VCT PLC
23 January 2009
ACUITY VCT PLC
Final Results for the Year Ended 30 September 2008
In accordance with DTR 6.3.5 the Final Results of Acuity VCT Plc for the year
ended 30 September 2008 are made available below.
The full Annual Report and Accounts can be accessed via the website
www.acuitycapital.co.uk
References in this announcement to Acuity VCT Plc have been abbreviated to "the
Company" or "the Fund". References to the Investment Manager, Acuity Capital
Management Limited, have been abbreviated to "Acuity Capital".
FINANCIAL HIGHLIGHTS
+---------------------------------------------------------------------------+----------------+----------------+
| Ordinary Shares | | |
+---------------------------------------------------------------------------+----------------+----------------+
| Year ended 30 September | 2008 | 2007 |
+---------------------------------------------------------------------------+----------------+----------------+
| | | (re-stated) |
+---------------------------------------------------------------------------+----------------+----------------+
| | | |
+---------------------------------------------------------------------------+----------------+----------------+
| | | |
+---------------------------------------------------------------------------+----------------+----------------+
| Net assets | GBP11.9m | GBP15.7m |
+---------------------------------------------------------------------------+----------------+----------------+
| | | |
+---------------------------------------------------------------------------+----------------+----------------+
| | | |
+---------------------------------------------------------------------------+----------------+----------------+
| Net asset value per ordinary share | 62.2p | 78.7p |
+---------------------------------------------------------------------------+----------------+----------------+
| | | |
+---------------------------------------------------------------------------+----------------+----------------+
| Dividend paid per ordinary share | 0.0p | 1.5p |
+---------------------------------------------------------------------------+----------------+----------------+
| | | |
+---------------------------------------------------------------------------+----------------+----------------+
| | | |
+---------------------------------------------------------------------------+----------------+----------------+
| Cumulative return to shareholders since launch | | |
+---------------------------------------------------------------------------+----------------+----------------+
| | | |
+---------------------------------------------------------------------------+----------------+----------------+
| | | |
+---------------------------------------------------------------------------+----------------+----------------+
| Dividends paid per ordinary share | 12.1p | 12.1p |
+---------------------------------------------------------------------------+----------------+----------------+
| | | |
+---------------------------------------------------------------------------+----------------+----------------+
| | | |
+---------------------------------------------------------------------------+----------------+----------------+
| Net asset value plus dividends paid per ordinary share | 74.3p | 90.8p |
+---------------------------------------------------------------------------+----------------+----------------+
| | | |
+---------------------------------------------------------------------------+----------------+----------------+
| | | |
+---------------------------------------------------------------------------+----------------+----------------+
| C Shares | | |
+---------------------------------------------------------------------------+----------------+----------------+
| Year ended 30 September | 2008 | 2007 |
+---------------------------------------------------------------------------+----------------+----------------+
| | | |
| Net assets | GBP9.3m | GBP8.4m |
+---------------------------------------------------------------------------+----------------+----------------+
| | | |
+---------------------------------------------------------------------------+----------------+----------------+
| | | |
+---------------------------------------------------------------------------+----------------+----------------+
| Net asset value per C share | 102.7p | 92.3p |
+---------------------------------------------------------------------------+----------------+----------------+
CHAIRMAN'S STATEMENT
Overview
During the year ended 30 September 2008, the Net Asset Value (NAV) of the
Ordinary shares fell by 21% and the NAV of the C shares rose by 11%. In the same
period the FTSE All Share Index fell by approximately 25% and the AIM market by
almost 45%.
Ordinary Shares
On 30 September 2008 the NAV per ordinary share was 62.2p. When cumulative
dividends are included (12.1p paid since the Company's inception), the total was
74.3p per ordinary share, a fall of 18% over the year.
During the year the Company made four investments in established trading
companies. Details of these are set out in the Investment Manager's report.
Throughout the year the Company complied with VCT qualification requirements.
By year end the Portfolio held a total of 20 qualifying investments, more than
half of it (by value) in unquoted investments. Some 15% was in unquoted loan
stock instruments, which rank ahead of equity and so reduce the risk in the
portfolio.
C Shares
As at 30 September 2008 the NAV per C share was 102.7p, an increase of 8% over
the Fund's starting NAV of 94.5p and up by 11% over the year. No dividends have
yet been paid on the C shares. The comparative strength of the C shares is due
partly to the small proportion of AIM investments (only 3% of the portfolio),
and also to the Manager's cautious approach to investing.
The Company made four C share investments during the year, bringing the total to
10 qualifying investments and meeting the 70% investment test by year end.
Some 90% (by value) of the portfolio was in unquoted investments, with unquoted
loan stock instruments representing 48% of the value. Again, these have helped
to de-risk the portfolio.
Co-Investment
Your Fund has co-invested alongside the other two VCTs managed by Acuity
Capital, so it has had access to larger transactions - a significant help in
difficult times, when the smallest companies have often suffered the most.
Portfolio Activity
During the year a further GBP0.8m of the ordinary share pool of capital was
invested in or committed to qualifying companies, plus GBP3.4m of the C Share
pool. Details of these transactions are in the Investment Manager's review.
In addition to the qualifying investments, the portfolio held investments in
Electra Private Equity PLC, a fund associated with Acuity Capital. As at 30
September 2008 the ordinary share investment was valued at GBP1.8m (30 September
2007: GBP4.0m) and the C share investment at GBP0.5m (30 September 2007:
GBP0.8m). The ordinary share holdings of cash stood at GBP0.6m at year end and
the C share pool at GBP0.1m.
Dividend
Although no dividends were paid in the year, total dividends paid to date to
ordinary shareholders are 12.1p. Tax-free dividend distributions remains a key
objective of the Fund and the Board will seek to make further distributions in
2009, market conditions and liquidity permitting.
Share buy backs
In line with the Company's stated policy of buying back ordinary shares from the
market maker, the Company acquired 677,850 ordinary shares for cancellation
during the year. As at 30 September 2008, the buy back discount rate was 15% to
the last published NAV per share.
However, in the light of recent exceptional market turbulence, the Board has
decided to suspend the buy back programme. This will allow the Manager to
protect the value of the Fund and avoid being forced to sell assets at
unfavourable prices - something that would not serve the interests of all
shareholders. The Board will monitor the position closely and will restore buy
backs as and when conditions allow.
The Investment Manager
Shareholders may recall that last year's Annual Report described negotiations
intended to lead to Acuity Capital establishing an LLP. I am pleased to report
that Acuity Capital LLP acquired Acuity Capital in February 2008, meaning that
the Investment Manager is now the majority owner of Acuity Capital LLP, with
Electra Partners maintaining a minority interest. The change will enhance the
continuity of investment management and provide a bigger incentive for the
Manager to produce good results.
VAT on Management Fees
After initially deciding that VCTs will be exempt from paying VAT on investment
management fees with effect from 1 October 2008, the Government has now
acknowledged that VCTs should be treated in the same way as investment trusts
(following a European Court of Justice judgment) and that they should have been
exempt from VAT. Under current regulations, a claim can be made to HMRC to
recover VAT paid for a maximum of three years. Over the last three years the
amount of VAT paid by the Company is approximately GBP0.2m and it is expected
that the recoverable amount of VAT will be approximately GBP0.1m. In addition,
as a result of the Fee Cap of 3.6% as set out in Note 2, which included VAT on
management fees as an expense, the exemption results in additional fees payable
to the Investment Manager over the last three years of GBP0.2m.
The Board believes that the Investment Manager complied with HMRC's directives
in charging the Company VAT on the Management Fee up to 30 September 2008, so it
should not be unduly penalised by the Government's change of policy. The Board
has therefore decided that whatever VAT can be reclaimed from HMRC will then be
paid to the Investment Manager in settlement of the additional management fees
due. The Board has also agreed to review on a regular basis the negative impact
of increased non-recoverable VAT on the Investment Manager, and that in
principle the Investment Manager should recharge a reasonable proportion of such
non-recoverable VAT to the Company. In return, the Investment Manager will make
all reasonable efforts to minimize its non-recoverable VAT. In effect, the
Company will benefit from a reduction of expenses by the elimination of VAT
payable on management fees.
Shareholder Communication
If shareholders have any general queries, they should contact the Investment
Manager by telephone or email. The Manager's website provides information on
Acuity and the Fund.
As the Investment Manager is keen to increase communication with shareholders,
its website (www.acuitycapital.co.uk) will include regular investment updates.
Shareholders are encouraged to register their internet details with the
Investment Manager if they have not already done so.
Risks
Risks associated with the Company are set out in detail in the Report of the
Directors' and in note 20 of the Notes to the Accounts. The Board believes that
opportunities for selling both quoted and unquoted investments may be reduced by
recent events in the financial markets. In addition, the fair market value of
its unquoted holdings may also suffer by reference to comparable quoted
companies and publicly announced transactions. However, the Company believes
that it has insignificant exchange risk and minor credit or interest rate risk.
The Board
One of your Directors, Michael Broke, has decided to retire from the Board
following the Company's Annual General Meeting in February 2009. As a Director
of the Company from its launch, we would like to extend our appreciation to
Michael Broke for his hard work and diligence and wish him well for the future.
Outlook
Since year-end, stockmarkets have shown further weakness. With the increased
probability of a sustained economic downturn, it is increasingly important to
ensure that the Company's portfolio maintains its diversity, crystallises gains
where possible and conserves its resources. This should help the Fund to weather
the storm and put it in a position to capitalise on the opportunities that next
year may bring.
I look forward to reporting to you on progress at the Half Year stage.
Rupert Pennant-Rea
Chairman
12 January 2009
INVESTMENT STRATEGY
Investment Objective
In accordance with the Company's prospectus dated 2 October 2001, the Company's
objective is to achieve capital gains and maximise UK tax-free income to its
shareholders from dividends and capital distributions. It is intended that this
objective will be achieved by investing the majority of the Company's funds in a
portfolio of Qualifying Investments as described under "Investment Strategy"
below.
Investment Strategy
The Company offers investors the opportunity to gain access to the venture
capital market.
The investment focus of the Investment Manager has been to seek out established
companies, most of whom are cash positive, in preference to early stage
opportunities.
In addition, where possible, unquoted investments are normally structured as a
mixture of equity and loan stock. The loan stock represents the majority of the
finance provided. Typically, funds managed by Acuity Capital own a significant
percentage of the equity of the investee company.
This investment focus, combined with a diversified sector strategy and the
typical investment structure, will, in the opinion of the Directors, contribute
materially to reducing the overall risk of investing in smaller companies.
As at 30 September 2008, the ordinary share pool of capital of the Company was
invested in 20 qualifying companies, while, at the same date, the C share pool
of capital of the Company was invested in 10 qualifying companies.
As at 30 September 2008, the Company had no bank indebtedness.
The Directors do not wish the Company to be restricted by having a fixed limit
on what exposure to gearing it may have, apart from the restriction in the
Company's Articles, which limits borrowing to an amount equal to its adjusted
capital and reserves.
Co-investment
The Company also invests alongside the other Acuity VCTs which will enable
shareholders to participate in larger unquoted transactions, which tend to have
a lower risk profile than smaller venture capital investments.
Qualifying Investments
The Company intends to invest in companies that it believes have a high growth
potential. In the Directors' opinion, each of these companies should generally
reflect the following criteria:
* A well defined business plan and ability to demonstrate strong demand for its
products or services;
* Products or services that can be supplied at sustainable high margins and be
cash generative;
* Objectives of management and shareholders to be similarly aligned;
* Adequate capital resources or access to further resources to achieve the targets
set out in the business plan; and
* High calibre management teams.
The Company seeks to invest in a diversified portfolio of unquoted, PLUS traded
and AIM quoted companies and will not specialise unduly in any particular
industry sector. Unquoted investments will typically be in companies where the
Company believes that there are reasonable prospects of an exit through a trade
sale or flotation in the medium term.
As at 30 September 2008, the ordinary share pool of capital of Company had
invested more than 75% of its net funds by valuation in qualifying companies. At
the same date, the C share pool of capital of the Company had invested 90% of
its net funds by valuation in qualifying companies. The average investment size
at cost is GBP0.8 million and GBP0.7 million respectively.
Non-Qualifying Investments
Associated Funds
As at 30 September 2008, 15% of the ordinary share net funds by valuation of the
Company was invested in Electra Private Equity Plc. With respect to the C
shares, the equivalent percentage is 6%. In order to fund investments in
qualifying companies and provide liquidity, it is expected that the Company's
investment in its associated Fund Electra Private Equity Plc, will continue to
be progressively reduced.
Risk Management
Since the Company is flexible with regard to those areas in which it invests, it
aims to achieve a significant degree of diversification and to spread risk by
investing in unquoted, PLUS traded and AIM quoted companies. In addition, there
is no emphasis on any particular industry sector and even the non-qualifying
investments have quite a high level of in-built diversification. The Company is
restricted to investing no more than 15% of the value of its total assets at the
time of investment in any one individual qualifying investment or non-qualifying
investment. Investment Portfolio
Ordinary Shares
The investment classification by value expressed as a percentage of the net
assets of the ordinary share pool as at 30 September 2008 was as follows
(including cash allocated to investments and awaiting investment, but excluding
associated funds and cash assets not connected to an investment in the case of
"By Sector"):
By Sector
+-------------------------+------------+
| Business Services | 34% |
+-------------------------+------------+
| Manufacturing | 33% |
+-------------------------+------------+
| Consumer | 23% |
+-------------------------+------------+
| Media | 10% |
+-------------------------+------------+
By Asset Type
+-------------------------+------------+
| Unquoted - Loan Stock | 15% |
+-------------------------+------------+
| Unquoted - Ordinary and | 36% |
| Preference shares | |
+-------------------------+------------+
| AIM | 28% |
+-------------------------+------------+
| Associated Funds | 15% |
+-------------------------+------------+
| Cash | 6% |
+-------------------------+------------+
By Time Investments Held
+-------------------------+------------+
| Less than 1 year | 10% |
+-------------------------+------------+
| Between 3 and 5 years | 64% |
+-------------------------+------------+
| More than 5 years | 26% |
+-------------------------+------------+
C Shares
The investment classification by value expressed as a percentage of the net
assets of the C share pool as at 30 September 2008 was as follows (excluding
associated funds and cash assets not connected to an investment in the case of
"By Sector"):
By Sector
+-------------------------+------------+
| Manufacturing | 32% |
+-------------------------+------------+
| Consumer | 15% |
+-------------------------+------------+
| Media | 53% |
+-------------------------+------------+
By Asset Type
+-------------------------+------------+
| Unquoted - Loan Stock | 48% |
+-------------------------+------------+
| Unquoted - Ordinary and | 42% |
| Preference shares | |
+-------------------------+------------+
| AIM | 3% |
+-------------------------+------------+
| Associated Funds | 6% |
+-------------------------+------------+
| Cash | 1% |
+-------------------------+------------+
By Time Investments Held
+-------------------------+------------+
| Less than 1 year | 54% |
+-------------------------+------------+
| Between 1 and 3 years | 46% |
+-------------------------+------------+
INVESTMENT MANAGER'S REVIEW
As set out in the Investment Strategy above in this announcement, our aim is to
concentrate, where possible, our investments in unquoted companies with
significant existing revenues and profits and to seek to add value through
organic growth and "buy & build" strategies. Access to these types of investment
is enhanced through co-investing with the other Acuity VCTs.
Ordinary Shares
During the year the main portfolio uplifts were in two unquoted companies and
one AIM listed company where your Company's holdings were increased in value in
line with improving fundamentals. These were Amber Taverns, The Fin Machine
Company and Advanced Medical Solutions respectively. The largest uplift was
Amber Taverns with an increase in value of GBP0.7m followed by Advanced Medical
Solutions with an increase in value of GBP0.4m and The Fin Machine Company with
an increase in value of GBP0.2m.
In a presentation made to Acuity Capital in September 2008, the chairman of
Amber Taverns , Clive Preston, described his company as the "Aldi and Lidl of
the pub market". Opening at the value-end of the industry, Amber Taverns
supplies leading beer brands at discounted prices in modern, well equipped
surroundings to customers who, in the main, do not own vehicles or have
mortgages and are relatively immune to the credit crunch. The business currently
has a portfolio of 28 pubs.
Advanced Medical Solutions, an AIM listed company, specialises in advanced wound
care products that are sold to the NHS and over the counter. In addition, it has
patented a surgical glue which is used as an alternative to sutures. Over the
year, the company announced several Food and Drug Administration (FDA) approvals
for its products which promises to open up greater opportunities for the company
in the $15 billion global wound care market.
A supplier of capital equipment used to manufacture heat exchangers in the
automotive industry, The Fin Machine Company traded extremely well under new
ownership. The business not only finished its financial year 30 September 2008
surpassing its budget for the year but also reported an order book already
representing 51% of next year's budgeted revenues. The business is benefiting
from regulatory change and the need for more energy efficient radiators. In
addition, there is considerable opportunity for the business to expand more
fully into the air conditioning market.
The Company also made a follow on investment in Defaqto Group. Defaqto has made
significant progress over the period and is an increasingly well known brand
with Tesco featuring its annual ratings product on its March 2008 TV advertising
campaign and Lloyds TSB Bank making its Aequos Compare product available in over
2,000 branches.
The most material downward movement of GBP1.2m arose from the write down of the
Company's investment in the AIM listed company, Hill Station. A series of wet
Summers combined with the more difficult economic and banking conditions forced
the Company into administration in October 2008 However, after carrying out
extensive due diligence and backing a seasoned food business entrepreneur, David
Lavelle, the Company supported the purchase of the assets and intellectual
property of Hill Station from the Administrator and committed a further GBP0.4
million of a total GBP0.8m to the business, since renamed Loseley Dairy Ice
Cream Company. The decision to continue to support the business is based on the
opportunity to recover the Company's lost investment in Hill Station and to
provide a significant return on the new funds invested.
In addition, the Company's holding in Electra Private Equity declined in value
by GBP0.8 million. Electra Private Equity reported a net asset value per
ordinary share of GBP18.01 as at 30 September 2008. Net cash and floating rate
notes represented GBP4.53 per ordinary share. The downward movement is therefore
principally a reflection of the increasing discount given by the market to
investment trusts and with a share price of GBP12.35 as at 30 September 2008 it
stood at a 31% discount to the net asset value per share.
Excluding Hill Station, the Company's holdings in AIM listed companies saw a
decline in aggregate of GBP0.8m which reflects a reduction over the year of 19%.
Against the comparative 44% fall of the FTSE AIM All Share Index, the decline
has been less severe due to the strong performance of Advanced Medical
Solutions.
In addition to investing in the Fin Machine Company, during the period, the Fund
invested in the following three trading qualifying companies:
Brands Acquisitions was established to fund Greg Tufnell, the former CEO of
Marchpole Holdings Plc, in acquiring strong but underdeveloped brands. The first
acquisition was Peter Werth. Established in 1975, Peter Werth is one of the key
players in the smart casual menswear market for those aged 18 to 35.
Red Reef Media is the newco established to fund the management buy in/management
buy out of TNT Magazine, the leading publication aimed at Antipodean visitors to
the UK and independent travellers. Reaching over 250,000 readers weekly, TNT has
outstanding brand value. Key to the investment is the development and
commercialisation of its website and building on its brand in its readers' home
markets. In August 2008, Red Reef Media announced the acquisition of ZA
Publishing and so added the SA Times to its portfolio. The SA Times fills an
equivalent role for South African visitors to the UK as does TNT Magazine for
Antipodeans.
Connect2Media is the platform for creating a cross-platform games publisher. In
August 2008, as part of an investment round in which the Company participated,
the business concluded an agreement with Hands-On Mobile, Inc. by which the
business gained the bulk of Hands-On's European, Middle Eastern and African
assets. Connect2Media intends to build upon the success of Hands-On's
web-to-wireless gaming efforts and extensive expertise in publishing, developing
and distributing mobile games to offer games across multiple platforms
incorporating mobile, web and interactive TV.
C Shares
The C Share pool of capital performed well over the period. In part due to its
exposure to AIM listed investments being limited to 3% of value as at 30
September 2008, but also due to the strong performance of The Fin Machine
Company in which it invested GBP1m compared to the GBP0.2 million invested by
the ordinary shares. Over the year, the main investment uplifts were in The Fin
Machine Company and in Target Entertainment Group. The uplifts were GBP1.2m and
GBP0.4m respectively.
The Fin Machine Company is described above.
Target Entertainment Group is one of the UK's leading television producers and
distributors. In March 2008, the business acquired an independent production
company, Greenlit Rights Ltd, which is best known for producing Foyle's War.
Greenlit Rights Ltd recently received a commission to produce a six part drama
called Collision for ITV as well as a further three feature length episodes for
Foyle's War.
The most material reduction in value in the C share portfolio was a reduction in
value of Acrobat Music Group which was reduced by GBP0.3m to reflect an increase
in the discount rate from 10% to 15% used in the valuation of its music
catalogue which underpins its holding value as it continues its strategy of
expanding distribution channels. The reduction in value is due to the delay
experienced by the company in monetising its catalogue.
Portfolio Summary
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Qualifying | Cost | Cost | Valuation | Valuation | Total | Valuation | % of |
| Investments | Ordinary | C | Ordinary | C Shares | GBP'000 | | Portfolio |
| at 30 September 2008 | | Shares | Shares | GBP'000 | | movement | |
| | Shares | GBP'000 | GBP'000 | | | in the | by |
| | GBP'000 | | | | | year | Value |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Acrobat Music Group | - | 922 | - | 608 | 608 | (314) | 3.1 |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Advanced Medical | 487 | - | 1,892 | - | 1,892 | 373 | 9.6 |
| Solutions | | | | | | | |
| | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Amber Taverns | 750 | - | 1,429 | - | 1,429 | 679 | 7.2 |
| | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Brady | 750 | - | 370 | - | 370 | 37 | 1.9 |
| | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Brand Acquisitions | 200 | 1,000 | 200 | 1,000 | 1,200 | - | 6.1 |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Centurion | 765 | - | - | - | - | (103) | 0.0 |
| Electronics | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Connect2Media | 69 | 790 | 69 | 790 | 859 | - | 4.4 |
| | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Defaqto | 1,230 | - | 1,694 | - | 1,694 | 31 | 8.6 |
| | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Emote Games | - | 314 | - | 250 | 250 | (64) | 1.3 |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| First Dental | 750 | - | 188 | - | 188 | (63) | 1.0 |
| | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Hallmarq | 1,300 | 300 | 664 | 300 | 964 | 111 | 4.9 |
| | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Happy Times | 1,149 | - | - | - | - | (70) | 0.0 |
| | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Hill Station | 1,661 | - | - | - | - | (1,188) | 0.0 |
| | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Immedia | 275 | - | 21 | - | 21 | (9) | 0.1 |
| | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Keycom | 1,705 | - | 177 | - | 177 | (401) | 0.9 |
| | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| MA Hubbards | 800 | - | 426 | - | 426 | (374) | 2.2 |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Media Square | 1,123 | - | 316 | - | 316 | (210) | 1.6 |
| | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Mount Engineering | - | 251 | - | 222 | 222 | (14) | 1.1 |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Music Copyright | 483 | - | 256 | - | 256 | (540) | 1.3 |
| Solutions | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Quadnetics | 400 | - | 189 | - | 189 | (332) | 1.0 |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Red Reef Media Ltd | 234 | 588 | 235 | 588 | 823 | - | 4.2 |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Sanastro | 1,000 | - | 385 | - | 385 | 34 | 2.0 |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Sport Media Group | - | 250 | - | 54 | 54 | (183) | 0.3 |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Target Entertainment | - | 2,000 | - | 2,390 | 2,390 | 390 | 12.1 |
| Group | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| The Fin Machine | 200 | 1,000 | 437 | 2,186 | 2,623 | 1,423 | 13.1 |
| Company | | | | | | | |
| | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Sub Total | 15,331 | 7,415 | 8,948 | 8,388 | 17,336 | (787) | 88.0 |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Qualifying | Cost | Cost | Valuation | Valuation | Total | Valuation | % of |
| Investments | Ordinary | C | Ordinary | C Shares | GBP'000 | | Portfolio |
| at 30 September 2008 | | Shares | Shares | GBP'000 | | movement | |
| | Shares | GBP'000 | GBP'000 | | | in the | by |
| | GBP'000 | | | | | year | Value |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Non Qualifying | | | | | | | |
| Investments | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Electra Private | 960 | 705 | 1,760 | 531 | 2,291 | (839) | 11.5 |
| Equity | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Media Square | 455 | - | 89 | - | 89 | (61) | 0.5 |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Centurion | 433 | - | - | - | - | - | 0.0 |
| Electronics | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Sub Total | 1,848 | 705 | 1,849 | 531 | 2,380 | (900) | 12.00 |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Total Investments | 17,179 | 8,120 | 10,797 | 8,919 | 19,716 | (1,687) | 100.00 |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Other Assets | | | | | | | |
| | | | | | | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Liquidity Funds | | | 96 | - | 96 | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Cash | | | 591 | 83 | 674 | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
| Total | | | 11,484 | 9,002 | 20,486 | | |
+----------------------+----------+---------+-----------+-----------+---------+-----------+-----------+
INVESTMENT MANAGER
The Fund's investments are managed by Acuity Capital. Formerly a subsidiary of
Electra Partners Group, Acuity Capital, previously named Electra Quoted
Management Limited, was acquired in February 2008 by Acuity Capital LLP, a
partnership owned substantially by Acuity Capital's management and in which
Electra Partners Group continues as a minority partner. Acuity Capital was
established in 1981 and is authorised and regulated by the Financial Services
Authority.
Acuity Capital has considerable expertise in quoted and unquoted investments and
has a well developed deal flow, including unquoted company proposals that
originate from its own contacts and network, pre-float finance opportunities and
broker led AIM flotations.
Acuity Capital is also the Investment Manager of Acuity VCT 2 Plc, Acuity VCT 3
Plc and CF Acuity Real Active Management Fund, the successor fund to Electra
Active Management Plc.
The Investment Manager has established an Investment Committee comprising three
Acuity Capital executives and two independent members. In addition, the
Investment Committee is chaired by Hugh Mumford, a senior executive of Electra
Partners Group. The Investment Committee meets as required to consider and
review investment proposals.
CO-INVESTMENT ARRANGEMENTS WITH OTHER ACUITY VCTS
The Directors welcome the fact that the Investment Manager has five VCT pools of
funds, Acuity VCT Plc Ordinary Share pool, Acuity VCT Plc 'C' Share pool, Acuity
VCT 2 Plc Ordinary Share pool, Acuity VCT 2 Plc 'C' Share pool and Acuity VCT 3
Plc (together "the Acuity VCTs"), it can use for co-investment. This allows each
fund to spread its investment risk and gain access to larger investments than it
could do on its own. Where a co-investment opportunity arises between the
Company and one or more of the other funds, the Company will invest in an agreed
and consistent proportion, on the same terms and in the same securities as the
funds with which it co-invests. Costs associated with any such investment will
be borne by each fund pro-rata to its investment.
In more detail, the Board has adopted a set of guidelines on its co-investment
arrangements with the Acuity VCTs and the Investment Manager as follows:-
* Other than as set out below, investments will be allocated between the Company
and the Acuity VCTs by reference to the size of each fund and to each fund's
available cash resources.
* Where an opportunity arises for a second or subsequent round of investment in a
company in which one of the Acuity VCTs has invested at an earlier stage, the
fund holding the existing investment will have a preferential right to take up
any pro-rata entitlement it may have in the new financing round. The amount it
invests on this basis will not be taken into account in determining its
co-investment share thereafter.
* The Company will make an investment in which one or more of the Acuity VCTs have
existing investments only when the Board considers that to be in the best
interests of the Company.
* Any potential conflict of interest in a proposed investment by one or more of
the Acuity VCTs will be referred by the Investment Manager to the Board of the
Company and the other relevant Boards.
* In the event of a possible conflict of interest between the Investment Manager
and the Company, the matter will be decided by those Directors who are
independent of the Investment Manager.
The Board of the Company acknowledges that the Investment Manager may
occasionally recommend an allocation of investments on a different basis from
the one described above. For example, an exception may be made to ensure that
one or more of the Company, Acuity VCT 2 Plc or Acuity VCT 3 Plc maintain their
status as a HMRC approved VCT, or in the interests of balancing their
portfolios. A different basis may also be necessary to meet the requirements of
potential investee companies. In these cases the Directors may use their
judgement.
QUALIFYING INVESTMENTS
The Fin Machine Company
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP1,200,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP2,623,000 | Year Ended 30 | 2008 | 2007 |
| | | September | GBPm | GBPm |
| | | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/EBITDA | Sales | 17.0 | 15.4 |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 10.8% | Profit before tax | 1.0 | 0.5 |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Specialist | Retained Profit | 0.6 | 0.6 |
| | Engineering | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT 2, | Net Assets | 2.3 | 1.6 |
| Investing | Acuity VCT 3 | | | |
+-------------------------+----------------+----------------------+--------+--------+
Target Entertainment Group
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP2,200,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP2,390,000 | Year Ended | 2007 | 2006 |
| | | 31 December | GBPm | GBPm |
| | | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/Sales | Sales | 17.1 | 10.3 |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 13.33% | Loss before tax | (0.5) | (0.3) |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Television | Retained Loss | (0.3) | (0.4) |
| | Distribution | | | |
| | Company | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT 2, | Net Liabilities | (0.5) | (1.8) |
| Investing | Acuity VCT 3 | | | |
+-------------------------+----------------+----------------------+--------+--------+
Advanced Medical Solutions
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP487,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP1,892,000 | Year Ended | 2007 | 2006 |
| | | 31 December | GBPm | GBPm |
| | | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | Bid Price | Sales | 16.9 | 14.3 |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 4.0% | Profit before tax | 1.9 | 0.6 |
+-------------------------+----------------+----------------------+--------+--------+
| Business | The Operation | Profit after tax | 2.2 | 0.7 |
| | of Designing, | | | |
| | Development | | | |
| | and | | | |
| | Manufacture of | | | |
| | Polymers and | | | |
| | Medical | | | |
| | Adhesives | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | N/A | Net Assets | 15.7 | 13.0 |
| Investing | | | | |
+-------------------------+----------------+----------------------+--------+--------+
Defaqto Group
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP1,230,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP1,694,000 | Year Ended 31 March | 2008 | 2007 |
| | | (10 months to | GBPm | GBPm |
| | | 31/3/07) | | |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | Recent | Sales | 7.8 | 4.7 |
| | Fundraising | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 9.0% | Loss before tax | (1.8) | (6.2) |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Financial | Loss after tax | (1.7) | (6.2) |
| | product data | | | |
| | provider | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT 2, | Net Liabilities | (7.9) | (6.2) |
| Investing | Acuity VCT 3 | | | |
+-------------------------+----------------+----------------------+--------+--------+
Amber Taverns
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP750,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP1,429,000 | Year Ended 31 | 2007 | 2006 |
| | | January | GBPm | GBPm |
| | | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/Sales | Sales | 3.7 | 2.4 |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 16.5% | Loss before tax | 0.0 | (0.3) |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Pub Chain | Retained Loss | (0.1) | (0.3) |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT 2 | Net Liabilities | 7.6 | 6.3 |
| Investing | | | | |
+-------------------------+----------------+----------------------+--------+--------+
Brand Acquisitions
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP1,200,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP1,200,000 | Year Ended | 2008 | 2007 |
| | | 31 January | GBPm | GBPm |
| | | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | Cost | Sales | 13.6 | 15.0 |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 16.6% | Profit before tax | 0.6 | 1.2 |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Branded | Profit after tax | 0.4 | 0.9 |
| | Menswear | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT 2, | Net Assets | 3.4 | 3.0 |
| Investing | Acuity VCT 3 | | | |
+-------------------------+----------------+----------------------+--------+--------+
The Company was dormant during the period to 31 December 2006
Hallmarq
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP1,600,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP964,000 | Year Ended 31 August | 2007 | 2006 |
| | | | GBPm | GBPm |
| | | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | Recent | Sales | 2.0 | 1.4 |
| | Fundraising | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 16.7% | Loss before tax | (1.5) | (0.3) |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Design, | Loss after tax | (1.5) | (0.3) |
| | manufacture | | | |
| | and sale of | | | |
| | MRI equipment | | | |
| | to the equine | | | |
| | market | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | N/A | Net assets | 1.0 | 1.2 |
| Investing | | | | |
+-------------------------+----------------+----------------------+--------+--------+
Connect2Media
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP859,000 | No audited accounts | | |
| | | yet produced | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP859,000 | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | Cost | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 9.0% | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Developer and | | | |
| | global | | | |
| | publisher and | | | |
| | distributor | | | |
| | for digital | | | |
| | entertainment | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT 2, | | | |
| Investing | Acuity VCT 3 | | | |
+-------------------------+----------------+----------------------+--------+--------+
Red Reef Media
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP823,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP823,000 | Year ended 31 March | 2007 | 2006 |
| | | | GBPm | GBPm |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | Cost | Sales | 6.1 | 6.7 |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 20.2% | Profit before tax | 3.3 | 4.1 |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Magazine | Profit after tax | 3.2 | 2.7 |
| | Publishing | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT 2, | Net assets | 2.5 | 13.1 |
| Investing | Acuity VCT 3 | | | |
+-------------------------+----------------+----------------------+--------+--------+
Red Reef Media is a new company. The numbers above relate to Trader Media (TNT)
Limited, which has been bought by Red Reef Media in 2008
Acrobat Music Group
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP922,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP608,000 | Year ended December | 2007 | 2006 |
| | | | GBPm | GBPm |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | Discounted | Sales | 0.1 | N/A |
| | cash flow | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 7.5% | Loss before tax | (0.6) | N/A |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Games | Retained Loss | (0.5) | N/A |
| | production, | | | |
| | finance, | | | |
| | trying to buy | | | |
| | master rights | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT 2, | Net assets | 0.4 | N/A |
| Investing | Acuity VCT 3 | | | |
+-------------------------+----------------+----------------------+--------+--------+
Note:-
In many cases, the qualifying investment is made substantially in the form of
loan notes which both carry a high interest rate and are treated as debt for
statutory purposes. Shareholders should therefore be advised that often the
investee companies report both retained losses and net liabilities as a result.
BOARD OF DIRECTORS
Rupert Pennant-Rea, Chairman
Appointed a Director on 24 September 2001.
He is a former Deputy Governor of the Bank of England and Editor of The
Economist. He is currently Chairman of Henderson and a Director of Go-Ahead and
a number of other companies. He is Chairman of the Nomination Committee.
Michael Broke*
Appointed a Director on 24 September 2001.
He was until recently executive Chairman of Stockley Park Consortium. Previously
he was a non-executive Director of Chelsfield, having joined the Board in
October 1987 as Managing Director. He was Chief Executive of Stockley from
January 1984 to June 1987 and prior to that a Director of J Rothschild and Co.
Previous directorships have included Stalwart Group (Chairman) (now known as GE
Life Group), Aspen Healthcare Holdings (Chairman) and Ashbourne Group.
David Donnelly*
Appointed a Director on 24 September 2001.
He is Chairman of Caithness Petroleum. Previously he was CEO of the Private
Equity business of Fleming Family & Partners. Previous directorships included
Highland Participants (Chairman and Chief Executive), a listed exploration
company and R&W Hawthorn Leslie & Co (Executive Director), a publicly quoted
shipbuilding and repair company. He was formerly a member of the London Stock
Exchange. He is Chairman of the Remuneration Committee.
Nicholas Ross
Appointed a Director on 24 September 2001.
He is a founding member of Acuity Capital LLP, prior to the Management buy-out
he had been at Electra Quoted Management since 1993. Previously he had several
years in investment analysis and fund management. He has been responsible for
the launch of the three Acuity VCT funds. He is a Managing Partner of Acuity
Capital LLP and a Director of Acuity Capital and all three Acuity VCT funds. He
also sits on a number of investee company boards.
David Sebire*
Appointed a Director on 24 September 2001.
He is a Chartered Accountant with extensive industrial and corporate finance
experience. Previous chairmanships have included Bridport, PTS and Clearspeed
Technology. He is Chairman of PegasusBridge Fund Management and a number of
private companies. He has been nominated the Senior Independent Director under
the Combined Code on Corporate Governance and is additionally Chairman of the
Audit Committee.
All Directors are also Directors of Acuity VCT.
*Member of the Audit, Remuneration and Nomination Committees
REPORT OF THE DIRECTORS
To the Members of Acuity VCT Plc
The Directors present the audited accounts of the Company for the year ended 30
September 2008 and their Report on its affairs.
Investment Company Status
In February 2005, in order to permit the payment of dividends out of realised
capital gains, the Company revoked its status as an investment company within
the meaning of Section 833 of the Companies Act 2006.
VCT Status
HM Revenue and Customs has granted the Company approval under Section 274 of the
Income Tax Act 2007 (ITA 2007) as a VCT, the approval being effective from the
first day on which the Company's ordinary shares were listed on the London Stock
Exchange (being 25 January 2002). The Board continues to direct the affairs of
the Company to enable it to maintain approval as a VCT.
Business Review
Objective and Investment Strategy
A review of the Company's Objective and Investment Strategy is detailed above in
this announcement.
Current and Future Development
A review of the main features of the year is contained in the Chairman's
Statement and the Investment Manager's Review above in this announcement.
The Board regularly reviews the development and strategic direction of the
Company. The Board's main focus continues to be on the Company's long-term
investment return. Attention is paid to the integrity and success of an
investment process and on factors which may have an impact on this approach. Due
regard is given to the marketing and promotion of the Company, including
effective communication with shareholders and other external parties.
Performance
A detailed review of performance during the year under review is contained in
the Investment Manager's Review above in this announcement.
A number of performance measures are considered by the Board and Investment
Manager in assessing the Company's success in achieving its objectives.
The key performance indicators ('KPIs') used to measure the progress and
performance of the Company are established industry measures and are as
follows:-
* The movement in net asset value per share
* The movement in share price
* The movement of net asset value and share price performance compared to the FTSE
All-Share Index
Details of the KPIs are shown in the Financial Highlights and through a graph
comparing the Company's total return on a share price and net asset value basis
over the five years to 30 September 2008 with the FTSE All-Share Index total
return over the same period as set out in the Directors' Remuneration Report
below in this announcement.
The Board recognises that it is in the long term interests of shareholders to
reduce discount volatility and believes that the prime driver of discounts over
the longer term is performance. As outlined in the Report of the Directors, the
Board intends to seek renewal of its annual share buy-back authority at the
Company's Annual General Meeting in 2009. As noted in the Chairman's Statement,
due to the recent market turbulence, the Board has temporarily suspended the
share buy-back programme but are monitoring the position closely and will
restore share buy-backs when conditions allow.
Risk Management
Since the Company is flexible with regard to those areas in which it invests, it
aims to achieve a significant degree of diversification and to spread risk by
investing in unquoted, PLUS traded and AIM quoted companies. In addition, there
is no emphasis on any particular industry sector and even the non-qualifying
investments have quite a high level of in-built diversification. The Company is
restricted to investing no more than 15% of the value of its total assets at the
time of investment in any one individual qualifying investment or non-qualifying
investment.
The key risks facing the Company include Market Risk, Interest Rate Risk, Credit
Risk and Liquidity Risk as further detailed in Note 20 of the Notes to the
Accounts.
In addition the Company is also focused on the following key risks:
Macroeconomic risks
The performance of the Company's underlying investment portfolio is principally
influenced by a combination of economic growth, interest rates, the availability
of well-priced debt finance, the number of active trade and private equity
buyers and the level of merger and acquisition activity. All of these factors
have an impact on the Company's ability to invest and on the Company's ability
to exit from its underlying portfolio or on the levels of profitability achieved
on exit.
Long-term strategic risk
The Company is subject to the risk that its long-term strategy and its level of
performance fails to meet the expectations of its shareholders. The Company
constantly monitors the level of discount of its Net Asset Value to its share
price and considers the most effective methodologies to keep this at a minimum
including its share buy-back policy. The Company has in the last year
repurchased shares within parameters set by the Board and subject to shareholder
authority.
In addition the Company regularly reviews its Objectives and Investment Strategy
in light of prevailing investor sentiment to ensure the Company remains
attractive to its shareholders.
Government policy and regulation risk
The Company carries on business as a VCT under section 274 of the Income Tax Act
2007 (ITA 2007). Continuation of this status is subject to the Company directing
its affairs in line with the relevant requirements of the legislation.
Anticipated and actual changes in government policy and related tax treatment of
VCTs' are closely monitored, as are other changes which could affect results of
operations or financial position.
Acuity Capital is an authorised person under the Financial Services and Markets
Act 2000 and regulated by the FSA. Changes to the regulatory framework under
which Acuity Capital operates are closely monitored by Acuity Capital and
reported upon as necessary by Acuity Capital to the Company.
Investment risks
The Company operates in a very competitive market. Changes in the number of
market participants, the availability of funds within the market, the pricing of
assets, or in the ability of Acuity Capital to access deals on a proprietary
basis could have a significant effect on the Company's competitive position and
on the sustainability of returns.
In order to source and execute good quality investments the Company is primarily
dependent on Acuity Capital having the ability to attract and retain people with
the requisite investment experience and whose compensation is in line with the
Company's objectives.
Once invested, the performance of the Company's portfolio is dependent upon a
range of factors. These include but are not limited to: (i) the quality of the
initial investment decision described above; (ii) the ability of the portfolio
company to execute successfully its business strategy; and (iii) actual outcomes
against the key assumptions underlying the portfolio company's financial
projections. Any one of these factors could have an impact on the valuation of a
portfolio company and upon the Company's ability to make a profitable exit from
the investment within the desired timeframe.
A rigorous process is put in place by Acuity Capital for managing the
relationship with each investee company for the period to anticipated
realisation. This includes regular asset reviews and, in many cases, board
representation by one of Acuity Capital's executives.
The Company reviews both the performance of Acuity Capital and its incentive
arrangements on a regular basis to ensure that both are appropriate to the
objectives of the Company.
Operational risks
The Company's investment management, custody of assets and all administrative
systems are provided or arranged for the Company by Acuity Capital. Therefore
the Company is exposed to a range of operational risks at Acuity Capital which
can arise from inadequate or failed processes, people and systems or from
external factors affecting these.
The Company's system of internal control mainly comprises the monitoring of the
services provided by Acuity Capital, including the operational controls
established by them to ensure they meet the Company's business objectives, as
discussed further in the Corporate Governance Statement below in this
announcement.
Share Capital
The current authorised share capital of the Company is GBP1,020,000 divided into
80 million ordinary shares of 1p each, 20 million C shares of 1p each and 20
million deferred shares of 0.1p each. The ordinary shares and C shares have
voting rights attached, holders are entitled to receive notice of and attend
shareholder meetings and to receive dividends once declared and approved. The
other rights and obligations attaching to the ordinary shares, C shares and
deferred shares are set out in the Company's Articles of Association.
Authority to make Market Purchases of Shares
At the Annual General Meeting of the Company held on 27 February 2008,
authority was given to make market purchases of up to 1,949,967 of the Company's
issued ordinary share capital and up to 909,315 of the Company's C share
capital.
During the year under review, the Company made the following purchases of its
own ordinary shares in the market:
Under the authority granted by shareholders at the Annual General Meeting held
in March 2007:
+--------------------+------------------+--------------------+--------------------+
| Ordinary Shares | Date of Purchase | Percentage of | Buyback |
| Purchased for | | issued Capital at | Price per Ordinary |
| Cancellation | | Time of Purchase | Share |
+--------------------+------------------+--------------------+--------------------+
| 179,652 | 29 January 2008 | 0.62% | 71.0p |
+--------------------+------------------+--------------------+--------------------+
| 200,000 | 8 February 2008 | 0.69% | 71.0p |
+--------------------+------------------+--------------------+--------------------+
Under the authority granted by shareholders at the Annual General Meeting held
in February 2008:
+--------------------+------------------+--------------------+--------------------+
| Ordinary Shares | Date of Purchase | Percentage of | Buyback |
| Purchased for | | issued Capital at | Price per Ordinary |
| Cancellation | | Time of Purchase | Share |
+--------------------+------------------+--------------------+--------------------+
| 36,762 | 7 March 2008 | 0.13% | 71.0p |
+--------------------+------------------+--------------------+--------------------+
| 60,533 | 28 March 2008 | 0.21% | 71.0p |
+--------------------+------------------+--------------------+--------------------+
| 67,695 | 21 May 2008 | 0.24% | 54.5p |
+--------------------+------------------+--------------------+--------------------+
| 12,650 | 30 May 2008 | 0.04% | 54.5p |
+--------------------+------------------+--------------------+--------------------+
| 47,162 | 27 June 2008 | 0.17% | 54.5p |
+--------------------+------------------+--------------------+--------------------+
| 73,396 | 29 August 2008 | 0.26% | 54.5p |
+--------------------+------------------+--------------------+--------------------+
To date, no C shares have been purchased for cancellation.
The Company does not hold any shares in treasury.
Accordingly, at 30 September 2008, authority remained to purchase a further
1,651,769 ordinary shares and 909,315 C shares.
At 30 September 2008 a total of 19,201,481 (2007: 19,879,331) ordinary shares of
1p each (representing 68% of the total issued share capital) and 9,093,156
(2007: 9,093,156) C shares of 1p each (representing 32% of the total issued
share capital) were in issue.
Results and Dividend
The loss attributable to shareholders amounted to GBP2,316,000 (2007: loss
GBP4,250,000). The loss on ordinary shares amounted to GBP3,265,000
(2007:GBP4,238,000) and C shares amounted to a profit of GBP949,000 (2007: Loss
GBP12,000). The Directors do not recommend the payment of a final dividend in
respect of the year ended 30 September 2008 (2007: GBPnil).
Directors
The current Directors of the Company are listed above in this announcement. Mr
RL Pennant-Rea, Mr MHA Broke, Mr DJ Donnelly, Mr NRW Ross and Mr DJ Sebire
served as Directors of the Company throughout the financial year ended 30
September 2008. No other person was a Director of the Company during any part of
the year. Mr DJ Donnelly and Mr NRW Ross will both retire at the Annual General
Meeting in 2009 and, being eligible, offer themselves for re-election. Mr MHA
Broke will retire as a Director at the Annual General Meeting. Short
biographical details of all the Directors are provided above in this
announcement. Following performance appraisals of all of the Directors, details
of which are to be found in the Corporate Governance Statement below in this
announcement, the Board considers that the performance of each Director retiring
at the Annual General Meeting and offering himself for re-election continues to
be effective and that each Director continues to show commitment to his role.
Accordingly, the Board recommends that those Directors retiring at the Annual
General Meeting in 2009 and offering themselves for re-election be re-elected.
Directors' Interests
The beneficial interests of the Directors in the ordinary shares of the Company
are shown below. Save as disclosed, no Director had any notifiable interest in
the securities of the Company. No Director bought or sold any ordinary shares or
any C shares of the Company during the year under review. There have been no
changes in the interests of any of the Directors in the ordinary shares of the
Company between 1 October 2008 and 12 January 2009. No options over shares in
the capital of the Company have been granted to the Directors.
+----------------------------+---------------------------+----------------------+
| 30 September 2008 | 1 October 2007 |
| Ordinary Shares of 1p each | Ordinary Shares of |
| | 1p each |
+--------------------------------------------------------+----------------------+
| RL Pennant-Rea | 11,080 | 11,080 |
| MHA Broke | 10,200 | 10,200 |
| DJ Donnelly | - | - |
| NRW Ross | 51,001 | 51,001 |
| DJ Sebire | 10,200 | 10,200 |
+----------------------------+---------------------------+----------------------+
No Director holds C shares in the Company.
Directors' Remuneration Report
An Ordinary Resolution to approve the Directors' Remuneration Report will be put
to the Annual General Meeting in 2009.
Contracts with Directors
No Director has a service contract with the Company. As a result of being a
Partner of Acuity Capital LLP, Mr NRW Ross is deemed to have an interest in the
Management Contract between the Company and Acuity Capital.
Directors' and Officers' Liability Insurance
Directors' and Officers' Liability Insurance is maintained on behalf of the
Directors in respect of their positions as Directors of the Company.
Substantial Shareholders
At 12 January 2009 the Directors had not been notified of any interests of 3% or
more in the Company's issued share capital.
Independent Auditors
Following the resignation of PricewaterhouseCoopers LLP during the year under
review, the Directors appointed KPMG Audit Plc as Auditors to fill the casual
vacancy thereby arising. A resolution to appoint KPMG Audit Plc as Auditors to
the Company will be proposed at the Annual General Meeting in 2009. A separate
resolution will be proposed at the Annual General Meeting in 2009 authorising
the Directors to fix the remuneration of the Auditors.
The Directors confirm that so far as each Director is aware, there is no
relevant audit information of which the Company's auditors are unaware and that
each Director has taken all the steps that he ought to have taken as a Director
in order to make himself aware of any relevant audit information and to
establish that the Company's auditors are aware of that information.
Creditor Payment Policy
The Company agrees the terms of payment with its suppliers when agreeing the
terms of each agreement. Suppliers are aware of the terms of payment and the
Company abides by the terms of payment. The Company's average creditor payment
period at 30 September 2008 was one day.
Investment Manager
In February 2008 Acuity Capital LLP, a limited liability partnership established
by the current investment management team, acquired the Company's Investment
Manager, Electra Quoted Management Limited. On acquisition Electra Quoted
Management changed its name to Acuity Capital Management Limited ("Acuity
Capital").
Acuity Capital was the Investment Manager of the Company during the year under
review. The Board regularly reviews the performance of the Investment Manager
and as a result believes the continuing appointment of the Investment Manager on
the terms agreed is in the interests of the Company's shareholders as a whole.
Management Fees and Arrangements
Acuity Capital was originally appointed as Investment Manager under an agreement
dated 2 October 2001. The agreement was for an initial period of five years and
thereafter could be terminated by either party giving not less than one year's
notice. Fees were paid quarterly in advance, as a percentage of net assets (less
a rebate of fees suffered in investments in funds managed by Acuity Capital), at
2.5% per annum.
Acuity Capital entered into an amended agreement with the Company dated 1
February 2007. This agreement is for an initial period of five years and
thereafter can be terminated by either party giving not less than one year's
notice. Fees are paid quarterly in advance, as a percentage of net assets (less
a rebate of fees suffered on investments in Funds managed by Acuity Capital).
Running expenses of the Fund are capped at 3.6% of the net asset value as at 30
September. Any excess will be reduced against the management fee payable to the
Investment Manager.
Incentive Schemes
Ordinary Shares
Certain persons engaged in the business of the Investment Manager will receive a
performance fee based on returns to holders of ordinary shares. If the Company's
net asset value per ordinary share in a relevant period increases such that it
exceeds GBP1, less the value of any distributions paid from time to time, plus
notional interest thereon at the rate of 7% per annum (compounded annually),
then the Investment Manager will receive 20% of the excess. The first period
expired on 30 September 2004. Subsequent periods are of one year's duration. In
the event that the performance of the Company falls short of the target in any
period the shortfall must be made up before the Investment Manager is entitled
to a performance fee for subsequent periods. At 30 September 2008, there was no
amount due under this Incentive Scheme.
C Shares
Certain persons engaged in the business of the Investment Manager will be
entitled to receive a performance fee based upon returns to holders of C shares.
If by the end of a financial year, aggregate distributions of 30p per C share
have been declared and if the Performance Value (sum of the Company's net asset
value per C share and the aggregate dividends per C share) at that date exceeds
130p per C share, then the beneficiaries will receive 20% of the excess of such
Performance Value over 100p per C share. In the event that the performance of
the Company falls short of the target in any period the shortfall must be made
up before the beneficiaries are entitled to a performance fee for subsequent
periods.
Going Concern
The Directors believe that it is appropriate to continue to adopt the going
concern basis in preparing the Accounts as the Company has adequate resources to
continue in operational existence for the foreseeable future.
Annual General Meeting
The Annual General Meeting of the Company will be held on 26 February 2009. In
addition to the ordinary business, the following special business will be
considered:-
Authority to allot shares: Resolution 7
An Ordinary Resolution will be proposed at the Annual General meeting in 2009 to
grant the Directors authority under section 80 of the Companies Act 1985 to
allot shares up to a maximum aggregate nominal value of GBP94,315.45 being one
third of the nominal value of the issued share capital of the Company at the
date of this Directors' Report. The authority will expire at the conclusion of
the Company's Annual General Meeting in 2010.The Directors have no present
intention of exercising this authority. The Directors recommend that
shareholders vote in favour of this Ordinary Resolution.
Disapplication of pre-emption rights: Resolution 8
A Special Resolution will be proposed at the Annual General Meeting in 2009 to
grant the Directors authority to allot equity securities for cash without first
offering the securities to existing shareholders in connection with the
allotment of up to 5% of the nominal value of the issued ordinary share capital
of the Company shown in the accounts for the year ended 30 September 2008. The
Directors' authority under this resolution will expire at the conclusion of the
Company's Annual General Meeting in 2010. The Directors recommend shareholders
to vote in favour of this Special Resolution.
Authority to Make Market Purchases of Shares: Resolution 9
As set out in the Chairman's Statement, in the interest of all the Company's
shareholders, the Board has decided to suspend the Company's buy back programme
temporarily because of the exceptional economic circumstances. Nevertheless the
Board wishes to have in place the authority to purchase the Company's own shares
so that the buy back programme can be re-instated as and when conditions permit.
Accordingly, a Special Resolution will be proposed to renew, for one year, the
Board's authority to make market purchases of ordinary shares and/or C shares
provided that such authority is limited to the purchase of 10 per cent. of the
issued ordinary share capital and/or 10 per cent. of the issued C share capital
of the Company immediately prior to the passing of the resolution subject to the
constraints set out in the Special Resolution. Should any shares be purchased
under this authority, it is the intention of the Board that they be cancelled
and not held as treasury shares.
The Directors do not intend to use this authority to purchase shares unless this
would result in an increase in the net asset value per ordinary and/or C share
as applicable and would be in the best interests of shareholders generally. The
Directors recommend shareholders to vote in favour of this Special Resolution.
By order of the Board of Directors
Acuity Capital Management Limited
Secretary
Registered Office:
Paternoster House
65 St Paul's Churchyard
London EC4M 8AB
12 January 2009
CORPORATE GOVERNANCE
The Directors confirm that during the year under review the Company has complied
with Section 1 of the Combined Code on Corporate Governance ("the Code") issued
by the Financial Reporting Council in 2006.
Directors' Attendance at Scheduled Meetings of the Board and Committees of the
Board
+----------------------+--------------+--------------+
| | | |
| | Scheduled | Audit |
| | Board | Committee |
+----------------------+--------------+--------------+
| | | |
| Rupert Pennant-Rea | 4 | n/a |
+----------------------+--------------+--------------+
| | | |
| Michael Broke | 4 | 2 |
+----------------------+--------------+--------------+
| | | |
| David Donnelly | 4 | 2 |
+----------------------+--------------+--------------+
| | | |
| Nick Ross | 4 | n/a |
+----------------------+--------------+--------------+
| | | |
| David Sebire | 4 | 2 |
+----------------------+--------------+--------------+
In addition, a number of Directors attended further Board meetings at short
notice to address specific issues.
The Board of Directors
The Board, which meets regularly, comprised five Directors at 30 September 2008
all of whom were non-executive. All of the Directors who held office at 30
September 2008, apart from Mr NRW Ross, have been considered by the Board to be
independent from the Investment Manager. The Board has nominated Mr DJ Sebire as
the Senior Independent Director.
All of the Directors of the Company are also Directors of Acuity VCT 2 Plc which
was launched in 2004 and which is also managed by Acuity Capital. The Board has
particularly considered the question of the independence of each Director in
light of the Code's provisions on that subject.
The Board believes that each of the Company's Directors, apart from Mr NRW Ross,
continues to be wholly independent under the Code notwithstanding the
cross-directorships detailed above. Independence is a state of mind and the
character and judgement which accompany this are distinct from and, in the
Board's opinion, are not compromised by having cross directorships with other
Directors.
The Board has agreed a schedule of matters reserved for its specific approval,
which includes a regular review of the Company's Management Agreement with
Acuity Capital, together with the monitoring of the performance thereunder. The
Management Agreement sets out the matters over which Acuity Capital has
authority in accordance with the policies and directions of the Board. The Board
Meetings consider as appropriate such matters as overall strategy, investment
performance, share price performance, share price discount and communication
with shareholders. The Board considers that it meets sufficiently regularly to
discharge its duties effectively. The numbers of scheduled meetings of the Board
and the Audit Committee are shown in the table above. All of the Directors
attended the Annual General Meeting.
The Board receives information that it considers to be sufficient and
appropriate to enable it to discharge its duties. Each Director receives board
papers several days in advance of each scheduled Board meeting and is able to
consider in detail the Company's performance and any issues to be discussed at
the relevant meeting.
The Directors believe that the Board has the balance, skills and experience
which enable it to provide effective strategic leadership and proper governance
of the Company. Information about the Directors, including their relevant
experience can be found below in this announcement.
Performance Appraisal
The Board carried out a formal appraisal process of its own and of its
Committees' operation and performance during the year under review. This was
implemented by means of questionnaires circulated to the Directors, the results
of which were then reviewed by the Board. Issues covered included board
composition, meeting arrangements and communication. The process was considered
by the Board to be constructive in identifying areas for improving the
functioning and performance of the Board and of its Committees. The Board
concluded that its performance and that of its Committees was satisfactory.
The Chairman carried out a formal appraisal of each of the Directors during the
year under review and the Board, under the leadership of the Senior Independent
Director, similarly appraised the Chairman. Relevant matters considered included
the attendance and participation at Board and Committee meetings, commitment to
Board activities and the effectiveness of the contribution made by the relevant
Director. As a result of this process the Chairman has confirmed that the
performance of each of the Directors being proposed for re-election continues to
be effective and that each of them continues to show commitment to his role. The
Senior Independent Director has also confirmed the continuing effectiveness and
commitment of the Chairman.
Re-election of Directors
In accordance with the Code's provisions and the Company's Articles, Mr DJ
Donnelly, and Mr NRW Ross will retire at the Annual General Meeting to be held
in 2009 and offer themselves for re-election. Mr MHA Broke will retire at the
forthcoming Annual General Meeting.
Independent Professional Advice
Individual Directors may seek independent professional advice in furtherance of
their duties at the Company's expense within certain parameters. All Directors
have access to the advice and services of the Company Secretary. Any appointment
or removal of the Company Secretary would be a matter for consideration by the
entire Board. Board approval was given to the resignation of Mr Philip Dyke as
Company Secretary on 30 September 2008 and the appointment of Acuity Capital
Management Limited as his successor on 30 September 2008.
The Audit Committee
The Board has an Audit Committee established in compliance with the Code. It
comprises all the Directors other than the Chairman of the Board and Mr NRW
Ross, with Mr DJ Sebire as Chairman of the Committee. The Board has taken note
of the suggestion that at least one member of the Committee should have recent
and relevant experience and is satisfied that the Committee is properly
constituted in this respect. Its authority and duties are clearly defined in its
written terms of reference which are available on Acuity Capital's website.
The Committee's Responsibilities include:
* monitoring and reviewing the integrity of the financial statements, the internal
financial controls and the independence, objectivity and effectiveness of the
external auditors;
* making recommendations to the Board in relation to the appointment of the
external auditors and approving the remuneration and terms of their engagement;
* developing and implementing the Company's policy on the provision of non-audit
services by the external auditors;
* reviewing the arrangements in place within Acuity Capital whereby their staff
may, in confidence, raise concerns about possible improprieties in matters of
financial reporting or other matters insofar as they may affect the Company;
* considering annually whether there is a need for the Company to have its own
internal audit function.
The Committee has reviewed the provision of non-audit services provided by the
external auditors and believes them to be cost effective and not an impediment
to the external auditors objectivity and independence. It has been agreed that
all non-audit work to be carried out by the external auditors, must be approved
by the Audit Committee and that any special projects must be approved in
advance.
Internal Audit
Following the review carried out by the Audit Committee as to whether there is a
need for the Company to have its own internal audit function, the Board has
considered and continues to believe that the internal control systems in place
within Acuity Capital provide sufficient assurance that a sound system of
internal control, which safeguards shareholders' investment and the Company's
assets is maintained. An internal audit function, specific to the Company, is
therefore considered unnecessary.
The Remuneration Committee
During the year under review the Remuneration Committee comprised all the
Directors of the Company other than the Chairman of the Board and Mr NRW Ross,
with Mr DJ Donnelly as Chairman of the Committee. There were no meetings of the
Remuneration Committee during the year. The Committee has written terms of
reference which are available on Acuity Capital's website. Full details of its
role are set out in the Directors' Remuneration Report.
The Nomination Committee
The Nomination Committee meets on an ad hoc basis to consider suitable
candidates for appointment as Director. It comprises all the Directors apart
from Mr NRW Ross, with Mr RL Pennant-Rea as Chairman of the Committee. It was
not necessary to hold any meeting of the Committee during the course of this
year. The Committee has written terms of reference which are available on Acuity
Capital's website. The Committee is responsible for identifying and nominating,
for the approval of the Board, candidates to fill board vacancies to maintain a
balanced Board.
Letters of appointment, which specify the terms of appointment, are issued to
new Directors.
The current Directors of the Company were appointed with regard to their
independence, suitability for the position and their experience in related
business areas.
Induction and Training
New Directors are provided with an induction programme which is tailored to the
particular circumstances of the appointee and which includes being briefed fully
about the Company by the Chairman and senior executives of Acuity Capital.
Following appointment, Directors continue to receive other relevant training and
advice as necessary to enable them to discharge their duties.
The Company's Relationship with its Shareholders
The Company places great importance on communication with the Company's
shareholders. In addition to the Annual and Half-Yearly Reports shareholders
will be sent regular newsletters from the Investment Manager.
At the Annual General Meeting all shareholders are welcome to attend and have
the opportunity to put questions to the Board.
The notice of the Annual General Meeting and related papers are sent to
shareholders at least 20 working days before the meeting. A separate resolution
is proposed on each substantially separate issue including the annual report and
accounts.
All proxy votes are counted and, except where a poll is called, the level of
proxies lodged for each resolution is announced at the Meeting and is published
on Acuity Capital's website. The Chairman and the Senior Independent Director
can always be contacted either through the Company Secretary or care of the
Company's registered office at Paternoster House, 65 St Paul's Churchyard,
London EC4M 8AB.
Internal Control
The Code requires the Directors to review the effectiveness of the Company's
system of internal control and report to shareholders that they have done so.
The Code extended the earlier reporting requirements and now includes financial,
operational and compliance controls and risk management.
The Board confirms that it has an ongoing process for identifying, evaluating
and managing the significant risks faced by the Company. This process has been
in place throughout the year and has continued since the year end and up to the
date of this report. It is reviewed at regular intervals by the Board and
accords with the Financial Reporting Council's 'Internal Control : Revised
Guidance for Directors on the Combined Code'.
The Board is responsible for the Company's system of internal control and it has
reviewed its effectiveness for the year ended 30 September 2008. The system of
internal control is designed to manage, rather than eliminate, the risk of
failure to achieve business objectives and can only provide reasonable and not
absolute assurance against material misstatement or loss.
Since investment management, custody of assets and all administrative services
are provided or arranged for the Company by Acuity Capital, the Company's system
of internal control mainly comprises the monitoring of services provided by
Acuity Capital, including the operating controls established by them, to ensure
they meet the Company's business objectives. The key elements designed to
provide effective internal control for the Company are as follows:
* Financial Reporting - Regular and comprehensive review by the Board of key
investment and financial data including management accounts, revenue
projections, analyses of transactions and performance comparisons.
* Investment Strategy - Agreement by the Board of the Company's investment
strategy and monitoring of all large investments.
* Management Agreements - The Board regularly monitors the performance of Acuity
Capital to ensure that the Company's assets and affairs are managed in
accordance with the guidelines determined by the Board.
* Investment Performance - The investment transactions and performance of the
Company's assets and affairs are managed in accordance with the guidelines
determined by the Board.
* Management Systems - Acuity Capital's system of internal control includes clear
lines of responsibility, delegated authority, control procedures and systems.
Acuity Capital's compliance department monitors compliance with the Financial
Services Authority rules.
The Board keeps under review the effectiveness of the Company's system of
internal control by monitoring the operation of key controls of Acuity Capital
as follows:
* The Board reviews the terms of the Management Agreement and receives regular
reports from Acuity Capital executives.
* The Board reviews the certificates provided by Acuity Capital on a six monthly
basis, verifying compliance with documented controls.
* Custodians are required to produce on a regular basis a report (available for
review by the Directors) on their internal controls and their operations,
including a report by an independent firm of accountants.
Voting Policy
The Company's investee companies are principally a mixture of quoted and
unquoted companies in which the Company is a significant shareholder and the
Company is usually a party to all issues requiring shareholder approval. The
Company has given discretionary voting power to Acuity Capital to vote on its
behalf.
Acuity Capital's voting policy as agent for the Company has been adopted. It
applies the Statement of Principles drawn up by the Institutional Shareholders
Committee, when it considers these in its reasonable judgement to best serve the
financial interests of the Company's shareholders. Acuity Capital's voting
policy has been reviewed and endorsed by the Board.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT, THE
DIRECTORS' REMUNERATION 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).
The financial statements are required by law to give a true and fair view of the
state of affairs of the Company and of the profit or loss of the Company for
that period.
In preparing these financial statements, the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements 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 proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that its financial statements comply with the
Companies Act 1985. 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 Management Company's website.
Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
The accounts of the Company are published on www.acuitycapital.co.uk which is a
website maintained by the Company's Investment Manager, Acuity Capital.
Legislation in the United Kingdom governing the preparation and dissemination of
the accounts may differ from legislation in other jurisdictions.
In accordance with the FSA's Disclosure and Transparency Rules, the Directors
confirm to the best of their knowledge that:-
* the accounts, prepared in accordance with applicable accounting standards, give
a true and fair view of the assets, liabilities, financial position and profit
or loss of the Company; and
* the Report of the Directors includes a fair review of the development and
performance of the business and position of the Company together with a
description of the principal risks and uncertainties that it faces.
By order of the Board of Directors
Rupert Pennant-Rea,
Chairman
Registered Office:
Paternoster House
65 St Paul's Churchyard
London EC4M 8AB
12 January 2009
DIRECTORS' REMUNERATION REPORT
The Directors submit this report in accordance with the requirements of Schedule
7A of the Companies Act 1985. An Ordinary Resolution for the approval of this
report will be put to members at the forthcoming Annual General Meeting. The law
requires the Company's Auditors to audit certain of the disclosures provided.
Where disclosures have been audited they are indicated as such.
Remuneration Committee
During the year under review the Remuneration Committee comprised all the
Directors of the Company other than the Chairman of the Board and Mr NRW Ross.
Mr DJ Donnelly was Chairman of the Remuneration Committee throughout the year.
It was not necessary to hold any meetings of the Committee during the year.
There was no change to the remuneration of the Directors during the year. The
current annual fee rates are GBP20,000 for the Chairman and GBP15,000 for each
of the Directors, apart from Mr DJ Sebire who is paid an additional GBP5,000 per
annum in respect of further duties undertaken in relation to the production of
the Company's Report and Accounts, and Mr NRW Ross who receives no remuneration
from the Company. The Company has not been provided with advice or services by
any person in respect of Directors' remuneration during the year.
Policy on Directors' Remuneration
In accordance with the Articles of Association of the Company, the aggregate
remuneration of the Directors may not exceed GBP100,000 per annum or such higher
amount as may from time to time be determined by an Ordinary Resolution of the
Company. Subject to this overall limit, the Remuneration Committee's policy is
that remuneration of non-executive Directors should be sufficient to attract and
retain the Directors needed to oversee the Company and reflect the specific
circumstances of the Company, the duties and responsibilities of the Directors
and the value and amount of time committed to the Company's affairs. It is
intended that this policy will continue for the year ended 30 September 2009 and
subsequent years. Non-executive Directors are not eligible to receive bonuses,
pension benefits, share options and other benefits.
Directors' Service Contracts
None of the Directors has a service contract with the Company. No arrangements
have been entered into between the Company and the Directors to entitle any of
the Directors for compensation for loss of office.
Performance Graph
Pursuant to the Directors' Remuneration Report Regulations 2002, the Company is
required to show a graph of total shareholder return against a suitable
benchmark index in its Directors' Remuneration Report for the last five
financial years.
The graph on the right shows the Company's performance being measured in terms
of its Total Shareholder Return and its net asset value per share (with
dividends reinvested) over the five financial years to 30 September 2008 against
the Total Shareholder Return of the FTSE All-Share Index.
The graph has incorporated the change in net asset value per share because
changes in net asset value per share relative to the FTSE All-Share Index are an
important indicator of the performance of the Company's assets.
The Directors consider that since the Company invests in a broad range of
commercial sectors, the FTSE All-Share Index is the most appropriate index
against which to compare the Company's performance.
Acuity VCT Share Price Total Return v Acuity VCT Net Asset Value v FTSE
All-Share Index (Total Return)
Total Cumulative Shareholder Return over the last 5 years compared to the FTSE
All-Share Index (Total Return)
+-------------------+-------------------+-------------------+-------------------+
| Date | NAV Total Return | FTSE All-Share | Share Price Total |
| | (gross dividend | Index | Return |
| | re-invested) | Total Return | |
+-------------------+-------------------+-------------------+-------------------+
| 30/09/2003 | 10517 | 88.06 | 85.75 |
+-------------------+-------------------+-------------------+-------------------+
| 30/09/2004 | 113.51 | 95.20 | 101.65 |
+-------------------+-------------------+-------------------+-------------------+
| 31/03/2005 | 115.05 | 99.32 | 96.65 |
+-------------------+-------------------+-------------------+-------------------+
| 30/09/2005 | 113.65 | 110.40 | 103.15 |
+-------------------+-------------------+-------------------+-------------------+
| 31/03/2006 | 110.59 | 127.38 | 105.15 |
+-------------------+-------------------+-------------------+-------------------+
| 30/09/2006 | 112.62 | 130.12 | 102.65 |
+-------------------+-------------------+-------------------+-------------------+
| 31/03/2007 | 110.74 | 139.03 | 101.65 |
+-------------------+-------------------+-------------------+-------------------+
| 30/09/2007 | 90.84 | 143.12 | 100.65 |
+-------------------+-------------------+-------------------+-------------------+
| 31/03/2008 | 76.60 | 128.44 | 72.00 |
+-------------------+-------------------+-------------------+-------------------+
| 30/09/2008 | 74.90 | 87.55 | 52.00 |
+-------------------+-------------------+-------------------+-------------------+
Directors' Remuneration for the Year (audited)
The Directors who served during the year received the following emoluments in
the form of fees:
+-------------------------------+--------------------+------------------------+
| For the year ended | For the year ended 30 |
| 30 September 2008 | September 2007 |
| GBP'000 | GBP'000 |
+----------------------------------------------------+------------------------+
| RL Pennant-Rea | 20 | 20 |
| (Chairman & joint highest | 15 | 15 |
| paid Director) | 15 | 15 |
| MHA Broke | - | - |
| DJ Donnelly | 20 | 18 |
| NRW Ross | | |
| DJ Sebire | | |
| (Joint highest paid Director) | | |
| | | |
+-------------------------------+--------------------+------------------------+
| Total | 70 | 68 |
+-------------------------------+--------------------+------------------------+
As a former executive of the Electra Partners Group and as a current executive
of Acuity Capital, NRW Ross has an interest in the Management Contract between
the Company and Acuity Capital (formerly Electra Quoted Management). NRW Ross
has waived his right to receive a salary from the Fund.
By order of the Board of Directors
Mr DJ Donnelly,
Chairman of the Remuneration Committee,
Registered Office:
Paternoster House,
65 St Paul's Churchyard,
London, EC4M 8AB
12 January 2009
INCOME STATEMENT
+---------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| | For the year ended 30 | For the year ended 30 | For the year ended 30 |
| | September 2008 | September 2008 | September 2008 |
+---------------+-------------------------------------+--------------------------------+--------------------------------+
| | | Ordinary Shares | | C Shares | | Total |
+---------------+-------+-----------------------------+--+-----------------------------+--+-----------------------------+
| | Notes | Revenue | Capital | Total | | Revenue | Capital | Total | | Revenue | Capital | Total |
| | | GBP'000 | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | GBP'000 |
+---------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Loss on | | - | (376) | (376) | | - | (14) | (14) | | - | (390) | (390) |
| realisation | 1 | - | (2,482) | (2,482) | | - | 809 | 809 | | - | (1,673) | (1,673) |
| of | | 181 | - | 181 | | 457 | - | 457 | | 638 | - | 638 |
| investments | | | | | | | | | | | | |
| Fair value | | | | | | | | | | | | |
| movement on | | | | | | | | | | | | |
| revaluation | | | | | | | | | | | | |
| of | | | | | | | | | | | | |
| investments | | | | | | | | | | | | |
| Investment | | | | | | | | | | | | |
| income | | | | | | | | | | | | |
+---------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Investment | 2 | 181 | (2,858) | (2,677) | | 457 | 795 | 1,252 | | 638 | (2,063) | (1,425) |
| management | 3 | (83) | (248) | (331) | | (45) | (134) | (179) | | (128) | (382) | (510) |
| fees | | (289) | 44 | (245) | | (102) | (9) | (111) | | (391) | 35 | (356) |
| Other | | | | | | | | | | | | |
| expenses | | | | | | | | | | | | |
+---------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| | | (372) | (204) | (576) | | (147) | (143) | (290) | | (519) | (347) | (866) |
+---------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Return on | | (191) | (3,062) | (3,253) | | 310 | 652 | 962 | | 119 | (2,410) | (2,291) |
| Ordinary | | | | | | | | | | | | |
| Activities | | | | | | | | | | | | |
| before | | | | | | | | | | | | |
| Interest and | | | | | | | | | | | | |
| Taxation | | | | | | | | | | | | |
+---------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Finance Cost | 4 | (12) | - | (12) | | (13) | - | (13) | | (25) | - | (25) |
| | | | | | | | | | | | | |
+---------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Return on | | (203) | (3,062) | (3,265) | | 297 | 652 | 949 | | 94 | (2,410) | (2,316) |
| Ordinary | | | | | | | | | | | | |
| Activities | | | | | | | | | | | | |
| before | | | | | | | | | | | | |
| Taxation | | | | | | | | | | | | |
+---------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Tax on | 6 | - | - | - | | - | - | - | | - | - | - |
| ordinary | | | | | | | | | | | | |
| activities | | | | | | | | | | | | |
+---------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| (Loss)/Profit | | (203) | (3,062) | (3,265) | | 297 | 652 | 949 | | 94 | (2,410) | (2,316) |
| for the | | | | | | | | | | | | |
| Financial | | | | | | | | | | | | |
| Year | | | | | | | | | | | | |
+---------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
| Basic and | 8 | (1.0)p | (16.0)p | (17.0)p | | 3.3p | 7.1p | 10.4p | | | | |
| Diluted | | | | | | | | | | | | |
| Earnings per | | | | | | | | | | | | |
| Share | | | | | | | | | | | | |
+---------------+-------+---------+---------+---------+--+---------+---------+---------+--+---------+---------+---------+
The amounts dealt with in the Income Statement are all derived from continuing
activities. No operations were acquired or discontinued in the period. There are
no recognised gains or losses other than those included in the Income Statement,
except for a prior year adjustment of GBP29,000, and accordingly no Statement of
Total Recognised Gains or Losses has been presented.
+-------------------+-------+---------+---------+---------+---+---------+---------+---------+--+---------+---------+---------+
| | For the year ended 30 | For the year ended 30 | For the year ended 30 |
| | September 2007 | September 2007 | September 2007 |
| | (Re-stated) | (Re-stated) | (Re-stated) |
+-------------------+-------------------------------------+---------------------------------+--------------------------------+
| | | Ordinary Shares | | C Shares | | Total |
+-------------------+-------+-----------------------------+---+-----------------------------+--+-----------------------------+
| | Notes | Revenue | Capital | Total | | Revenue | Capital | Total | | Revenue | Capital | Total |
| | | GBP'000 | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | GBP'000 |
+-------------------+-------+---------+---------+---------+---+---------+---------+---------+--+---------+---------+---------+
| Profit on | 1 | - | 193 | 193 | | - | - | - | | - | 193 | 193 |
| realisation of | | - | (3,862) | (3,862) | | - | (7) | (7) | | - | (3,869) | (3,869) |
| investments | | 351 | - | 351 | | 140 | - | 140 | | 491 | - | 491 |
| Fair value | | | | | | | | | | | | |
| movement on | | | | | | | | | | | | |
| revaluation of | | | | | | | | | | | | |
| investments | | | | | | | | | | | | |
| Investment income | | | | | | | | | | | | |
| | | | | | | | | | | | | |
+-------------------+-------+---------+---------+---------+---+---------+---------+---------+--+---------+---------+---------+
| Investment | 2 | 351 | (3,669) | (3,318) | | 140 | (7) | 133 | | 491 | (3,676) | (3,185) |
| management fees | 3 | (84) | (253) | (337) | | (20) | (62) | (82) | | (104) | (315) | (419) |
| Other expenses | | (583) | - | (583) | | (63) | - | (63) | | (646) | - | (646) |
| | | | | | | | | | | | | |
+-------------------+-------+---------+---------+---------+---+---------+---------+---------+--+---------+---------+---------+
| | | (667) | (253) | (920) | | (83) | (62) | (145) | | (750) | (315) | (1,065) |
+-------------------+-------+---------+---------+---------+---+---------+---------+---------+--+---------+---------+---------+
| Loss on Ordinary | | (316) | (3,922) | (4,238) | | 57 | (69) | (12) | | (259) | (3,991) | (4,250) |
| Activities before | | | | | | | | | | | | |
| Taxation | | | | | | | | | | | | |
| | | | | | | | | | | | | |
+-------------------+-------+---------+---------+---------+---+---------+---------+---------+--+---------+---------+---------+
| Tax on ordinary | 6 | - | - | - | | (12) | 12 | - | | (12) | 12 | - |
| activities | | | | | | | | | | | | |
| | | | | | | | | | | | | |
+-------------------+-------+---------+---------+---------+---+---------+---------+---------+--+---------+---------+---------+
| Loss for the | | (316) | (3,922) | (4,238) | | 45 | (57) | (12) | | (271) | (3,979) | (4,250) |
| Financial Year | | | | | | | | | | | | |
| | | | | | | | | | | | | |
+-------------------+-------+---------+---------+---------+---+---------+---------+---------+--+---------+---------+---------+
| Basic and Diluted | 8 | (2.1)p | (18.8)p | (20.9)p | | 0.6p | (0.7)p | (0.1)p | | | | |
| Earnings per | | | | | | | | | | | | |
| Share | | | | | | | | | | | | |
+-------------------+-------+---------+---------+---------+---+---------+---------+---------+--+---------+---------+---------+
BALANCE SHEET
+-------------------------+-------+----------+---------+---------+----------+---------+---------+
| | | As at 30 September 2008 | As at 30 September 2007 |
| | | | (Re-Stated) |
+-------------------------+-------+------------------------------+------------------------------+
| | Notes | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+-------------------------+-------+----------+---------+---------+----------+---------+---------+
| Fixed Assets | 9 | 10,797 | 8,919 | 19,716 | 15,070 | 3,427 | 18,497 |
| Investments held at | | | | | | | |
| fair value | | | | | | | |
+-------------------------+-------+----------+---------+---------+----------+---------+---------+
| Current Assets | 10 | 598 | 615 | 1,213 | 732 | 37 | 769 |
| Debtors | 11 | 96 | - | 96 | 1 | 4,050 | 4,051 |
| Other investments | | 591 | 83 | 674 | 127 | 1,067 | 1,194 |
| Cash at Bank | | | | | | | |
| | | | | | | | |
+-------------------------+-------+----------+---------+---------+----------+---------+---------+
| | | 1,285 | 698 | 1,983 | 860 | 5,154 | 6,014 |
+-------------------------+-------+----------+---------+---------+----------+---------+---------+
| | 12 | 54 | 108 | 162 | 129 | 22 | 151 |
| Current Liabilities | | | | | | | |
| Creditors: amounts | | | | | | | |
| falling due within one | | | | | | | |
| year | | | | | | | |
| | | | | | | | |
+-------------------------+-------+----------+---------+---------+----------+---------+---------+
| Net Current Assets | | 1,231 | 590 | 1,821 | 731 | 5,132 | 5,863 |
| | | | | | | | |
+-------------------------+-------+----------+---------+---------+----------+---------+---------+
| Total assets less | 13 | 12,028 | 9,509 | 21,537 | 15,801 | 8,559 | 24,360 |
| current liabilities | | 84 | 168 | 252 | 146 | 167 | 313 |
| Creditors: amounts | | | | | | | |
| falling due after more | | | | | | | |
| than one year | | | | | | | |
| | | | | | | | |
+-------------------------+-------+----------+---------+---------+----------+---------+---------+
| Net Assets | | 11,944 | 9,341 | 21,285 | 15,655 | 8,392 | 24,047 |
| | | | | | | | |
+-------------------------+-------+----------+---------+---------+----------+---------+---------+
| Capital and Reserves | 15 | 193 | 91 | 284 | 199 | 91 | 290 |
| Called-up share capital | 16 | 13,580 | 8,313 | 21,893 | 13,580 | 8,313 | 21,893 |
| Share Premium | 16 | 28 | - | 28 | 22 | - | 22 |
| Capital redemption | 16 | 4,624 | - | 4,624 | 5,070 | - | 5,070 |
| reserve | 16 | (7,182) | 973 | (6,209) | - | - | - |
| Special Reserve | 16 | 701 | (36) | 665 | (3,216) | (12) | (3,228) |
| Revaluation Reserve | | | | | | | |
| Revenue reserve | | | | | | | |
| | | | | | | | |
+-------------------------+-------+----------+---------+---------+----------+---------+---------+
| Total Equity | | 11,944 | 9,341 | 21,285 | 15,655 | 8,392 | 24,047 |
| Shareholders' Funds | | | | | | | |
+-------------------------+-------+----------+---------+---------+----------+---------+---------+
| Net Asset Value per | | 62.2 | 102.7 | | 78.7 | 92.3 | |
| Share | | | | | | | |
| | | | | | | | |
+-------------------------+-------+----------+---------+---------+----------+---------+---------+
+----------------------------+------------+-----------+------+------------+-----------+-----+
| Number of Shares in issue | 19,201,481 | 9,093,156 | | 19,879,331 | 9,093,156 | |
| at end of year | | | | | | |
| | | | | | | |
+----------------------------+------------+-----------+------+------------+-----------+-----+
The Financial Statements were approved and authorised for issue by the Board of
Directors on 12 January 2009 and were signed on their behalf by:
Rupert Pennant-Rea
Chairman
CASH FLOW STATEMENT
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| | | As at 30 September 2008 | As at 30 September 2007 |
+--------------------------+-------+------------------------------+------------------------------+
| | Notes | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| Operating Activities | | 199 | 110 | 309 | 89 | 69 | 158 |
| Investment income | | 7 | 32 | 39 | 11 | 37 | 48 |
| received | | (349) | (186) | (535) | (461) | (105) | (566) |
| Bank deposit interest | | (238) | (15) | (253) | (229) | (44) | (273) |
| received | | | | | | | |
| Investment management | | | | | | | |
| fees paid | | | | | | | |
| Other cash payments | | | | | | | |
| | | | | | | | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| Net Cash (Outflow) from | 18 | (381) | (59) | (440) | (590) | (43) | (633) |
| Operating Activities | | (1,332) | (4,801) | (6,133) | - | (4,539) | (4,539) |
| Capital Expenditure and | | 2,747 | 104 | 2,851 | 2,582 | - | 2,582 |
| Financial Investment | | - | (278) | (278) | - | - | - |
| Investing Activities | | | | | | | |
| Purchase of investments | | | | | | | |
| Sale of investments | | | | | | | |
| Co-investment payment to | | | | | | | |
| related party | | | | | | | |
| | | | | | | | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| Net Cash | 7 | 1,415 | (4,975) | (3,560) | 2,582 | (4,539) | (1,957) |
| Inflow/(Outflow) from | | - | - | - | (305) | - | (305) |
| Investing Activities | | | | | | | |
| Equity Dividends Paid | | | | | | | |
| | | | | | | | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| Cash Inflow/(Outflow) | | 1,034 | (5,034) | (4,000) | 1,687 | (4,582) | (2,895) |
| before Financing and | | | | | | | |
| Management of Liquid | | | | | | | |
| Resources | | | | | | | |
| | | | | | | | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| Management of Liquid | | (95) | 4,050 | 3,955 | 350 | (4,050) | (3,700) |
| Resources | | | | | | | |
| Purchases of current | | | | | | | |
| asset investments | | | | | | | |
| | | | | | | | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| Net Cash | | (95) | 4,050 | 3,955 | 350 | (4,050) | (3,700) |
| (Outflow)/Inflow from | | - | - | - | (880) | (553) | (553) |
| Management of Liquid | | (475) | - | (475) | | - | (880) |
| Resources | | - | - | - | | 9,093 | 9,093 |
| Financing | | | | | | | |
| Share issue expenses | | | | | | | |
| Repurchase of ordinary | | | | | | | |
| shares | | | | | | | |
| Issue of shares | | | | | | | |
| | | | | | | | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| Net Cash | | (475) | - | (475) | (880) | 8,540 | 7,660 |
| (Outflow)/Inflow from | | | | | | | |
| Financing | | | | | | | |
| | | | | | | | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
| (Decrease)/Increase in | 19 | 464 | (984) | (520) | 1,157 | (92) | 1,065 |
| Cash for the Year | | | | | | | |
| | | | | | | | |
+--------------------------+-------+----------+---------+---------+----------+---------+---------+
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
+-----------------------------+----------+---------+---------+----------+---------+---------+
| | For the year ended 30 | For the year ended 30 |
| | September 2008 | September 2007 |
| | | (Re-stated) |
+-----------------------------+------------------------------+------------------------------+
| | Ordinary | C | Total | Ordinary | C | Total |
| | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+-----------------------------+----------+---------+---------+----------+---------+---------+
| Loss/Profit for the | (3,265) | 949 | (2,316) | (4,238) | (12) | (4,250) |
| financial year | - | - | - | (305) | - | (305) |
| Dividend paid | - | - | - | - | 8,404 | 8,404 |
| Shares issued | - | - | - | (183) | - | (183) |
| Deferred share issue | (446) | - | (446) | (887) | - | (887) |
| expense | | | | | | |
| Repurchase of ordinary | | | | | | |
| shares | | | | | | |
| | | | | | | |
+-----------------------------+----------+---------+---------+----------+---------+---------+
| Movements in Total | (3,711) | 949 | (2,762) | (5,613) | 8,392 | 2,779 |
| Shareholders' Funds | 15,655 | 8,392 | 24,047 | 21,268 | - | 21,268 |
| Shareholders' Funds at | | | | | | |
| start of year (originally | | | | | | |
| GBP15,614,000 before | | | | | | |
| addition of prior year | | | | | | |
| adjustment of GBP8,433) | | | | | | |
| | | | | | | |
+-----------------------------+----------+---------+---------+----------+---------+---------+
| Shareholders' Funds at end | 11,944 | 9,341 | 21,285 | 15,655 | 8,392 | 24,047 |
| of Year | | | | | | |
| | | | | | | |
+-----------------------------+----------+---------+---------+----------+---------+---------+
STATEMENT OF ACCOUNTING POLICIES
Basis of Accounting
The accounts are prepared on a going concern basis and on the historical cost
basis of accounting, modified to include the revaluation of fixed asset
investments, in accordance with the Companies Act 1985 and United Kingdom
Generally Accepted Accounting Practice (UK GAAP).
In order to reflect the activities of a Venture Capital Trust, supplementary
information which analyses the financial statements between items of a revenue
and capital nature has been presented alongside the financial statements. In
analysing total income between capital and revenue returns, the Directors have
followed the guidance contained in the Statement of Recommended Practice for
investment trusts issued by the Association of Investment Companies in December
2005 (the "SORP"), where it is consistent with the requirements of UK GAAP.
The recommendations of the SORP which have been followed include:
- Gains and losses arising from changes in fair value of investments or
disposal of investments classified as held at fair value through the income
statement should be shown in the capital column of the income statement. Gains
and losses on investments readily convertible to cash in full are treated as
realised. Those that are not readily convertible to cash are treated as
unrealised.
- Returns on any share or debt security for a fixed amount (whether in
respect of dividends, interest or otherwise) should be shown in the revenue
column of the income statement. The total of the revenue column of the income
statement is taken to the revenue reserve.
If the Board decides that this should be so, the management fee should be
allocated between revenue and capital in accordance with the Board's expected
long term split of returns, and other expenses should be charged to capital only
to the extent that a clear connection with the maintenance or enhancement of the
value of investments can be demonstrated.
Change of accounting policy
In the prior year C Shares were accounted for as a liability which was valued at
amortised cost in the Balance Sheet of the Company. The current year financial
statements have been restated to reflect the C Shares as equity as the Directors
believe that this is more appropriate based on accepted industry practice. The
Directors also believe that a change of accounting policy will ensure that the
accounts are more comparable with other venture capital trusts with C Shares and
will make the accounts more understandable for both the Ordinary shareholders
and C shareholders.
The impact of the restatement on the prior years Income Statement and Balance
Sheet is as follows:
INCOME STATEMENT
+------------------------------------+----------------+--------------+--------------+
| | 2007 | Adjustments | 2007 |
| | | | (restated) |
+------------------------------------+----------------+--------------+--------------+
| | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+----------------+--------------+--------------+
| Loss on ordinary activities | (4,250) | - | (4,250) |
| before interest and taxation | | | |
+------------------------------------+----------------+--------------+--------------+
| Finance cost | (29) | 29 | - |
+------------------------------------+----------------+--------------+--------------+
| Loss on ordinary activities | (4,279) | - | (4,250) |
| before taxation | | | |
+------------------------------------+----------------+--------------+--------------+
| Tax on ordinary activities | - | - | - |
+------------------------------------+----------------+--------------+--------------+
| Loss for the financial year | (4,279) | - | (4,250) |
+------------------------------------+----------------+--------------+--------------+
| | | | |
+------------------------------------+----------------+--------------+--------------+
| Balance Sheet | | | |
+------------------------------------+----------------+--------------+--------------+
| Fixed assets | 18,497 | - | 18,497 |
+------------------------------------+----------------+--------------+--------------+
| Net current assets | 5,863 | - | 5,863 |
+------------------------------------+----------------+--------------+--------------+
| Creditors: amounts falling due | (8,746) | 8,433 | (313) |
| after one year | | | |
+------------------------------------+----------------+--------------+--------------+
| Net assets | 15,614 | - | 24,047 |
+------------------------------------+----------------+--------------+--------------+
| | | | |
+------------------------------------+----------------+--------------+--------------+
| Capital and reserves | 15,614 | 8,433 | 24,047 |
+------------------------------------+----------------+--------------+--------------+
The adjustment of GBP29,000 represents the unwinding of the share issue costs
incurred on the issue of the C shares which would not have occurred had the C
shares been classified as equity.
The impact on the current year's Income Statement of the change in accounting
policy is to reduce the finance costs by GBP96,000 and therefore increase the
profit before tax by GBP96,000. The impact on the current year's Balance Sheet
is to reduce creditors by GBP8,522,000, increase net assets by GBP8,522,000 and
increase capital and reserves by GBP8,522,000.
A summary of the principal accounting policies, all of which have been applied
consistently throughout the current year, follows:
Presentation of Financial Statements
In order to enable the Company to make capital distributions, the Company has
revoked its investment company status.
Following an application to the High Court a special reserve was created from a
reduction in the share premium account. The special reserve has been utilised to
facilitate a share buy back programme and to eliminate realised losses
transferred from the income statement.
A summary of the principal accounting policies, all of which have been applied
consistently throughout the current year, is set out below:
Investments
Purchases and sales of quoted investments are recognised on the trade date where
a contract exists whose terms require delivery within a timeframe determined by
the relevant market. Purchases and sales of unquoted investments are recognised
when the contract for acquisition or sale becomes unconditional. Investments are
designated at fair value through profit or loss (described in the accounts as
investments held at fair value) and are subsequently measured at reporting dates
at fair value. The fair value of direct unquoted investments is calculated in
accordance with the Principles of Valuation of Investments below. Changes in the
fair value of investments are recognised in the Income Statement. Gains and
losses arising from changes in fair value are considered to be realised only to
the extent that they are readily convertible to cash in full at the balance
sheet date. The Directors have adopted FRS 25 'Financial Instruments Disclosure
and Presentation'.
Quoted Investments
Quoted investments are stated at the last traded bid market prices on the
balance sheet date.
Unquoted Investments
Unquoted investments are held at fair value as fixed asset investments. The fair
value is calculated in accordance with International Private Equity and Venture
Capital Valuation Guidelines issued in March 2005 following the methodology
outlined below. The company values new investments at cost for a 12 month
period from acquisition unless there has been a material increase or decrease in
its performance since investment.
Principles of Valuation of Investments
General
In valuing investments, the Directors follow the principles recommended in the
International Private Equity and Venture Capital Valuation Guidelines issued in
March 2005. The Directors have also adopted the requirements of FRS 26
'Financial Instruments Measurement'. Investments are valued at fair value at the
reporting date.
Fair value represents the amount for which an asset could be exchanged between
knowledgeable, willing parties in an arm's length transaction. In estimating
fair value, the Directors use a methodology which is appropriate in light of the
nature, facts and circumstances of the investment and its materiality in the
context of the total investment portfolio. Methodologies are applied
consistently from one period to another except where a change results in a
better estimate of fair value. Because of the inherent uncertainties in
estimating the value of private equity investments, the Directors exercise due
caution in applying the various methodologies.
Unquoted Investments
The principal methodologies applied in valuing unquoted investments including
PLUS investments (a UK market focussed on small and medium companies which the
Directors do not regard as an active market with sufficient liquidity) include
the following:
- Earnings multiple
- Price of recent investment
- Net assets
In applying the Earnings Multiple methodology, the Directors apply a market
based multiple that is appropriate and reasonable to the maintainable earnings
of the company. In the majority of cases the Enterprise Value of the underlying
business is derived by the use of an Earnings Enterprise Value to Sales multiple
applied to current year's earnings where these can be estimated with a
reasonable degree of certainty and are deemed to represent the best estimate of
maintainable earnings. Where this is not the case, historic earnings will
generally be used in their place.
Where a recent investment has been made, either by the Company or by a third
party in one of the Company's investments, this price will be used as the
estimate of fair value for a period of up to one year from the date on which the
investment was made. One of the principal methodologies, as above, may be used
at any time if this is deemed to provide a better assessment of the fair value
of the investment.
The fair value of unquoted investments is calculated in accordance with the
International Private Equity and Venture Capital Valuation Guidelines, which
became effective from 1 January 2005.
The Company manages and evaluates the performance of these investments on a fair
value basis in accordance with its investment strategy and information about the
Company is provided internally on this basis to the entity's key management
personnel.
The valuation policies are set out below:
- Primary valuation methods, namely, earnings multiples, price of a recent
investment or net asset basis, are normally used in determining fair value; and
- Fair values determined by earnings multiples are calculated using the
following approach;
* apply a multiple that is appropriate and reasonable to maintainable earnings of
the Company to derive the Enterprise Value;
* adjust the Enterprise Value derived above for surplus assets or excess
liabilities and other relevant factors to derive a revised Enterprise Value;
* deduct from the Enterprise Value all amounts relating to financial instruments
ranking ahead of the highest ranking instrument of the Company in a liquidation
in order to derive the Gross Attributable Enterprise Value;
* apply an appropriate Marketability Discount to the Gross Attributable Enterprise
Value derived above in order to derive the Net Attributable Enterprise Value;
and
* apportion the Net Attributable Enterprise Value appropriately between the
relevant financial instruments.
Earnings multiples that are used include price earnings ("P/E"), earnings before
interest and tax ("EBIT") and earnings before interest, tax, depreciation and
amortisation ("EBITDA").The Marketability Discount relates to the investment
rather than to the underlying business. It is therefore applied at the level at
which the Company begins to participate in the Enterprise Value of the investee
company. In determining the Marketability Discount, all relevant factors will be
considered, including proximity to exit or influence of the Company over the
timing of a realisation, and a discount in the range of 10% to 30% will be
applied.
Maintainable earnings are defined as earnings figures that can be relied upon.
This can mean the use of historical figures, but, where reliable, forecast
earnings figures can be used.
* In circumstances where the valuation of an investment by earnings is deemed
inappropriate, the use of a net asset basis may be considered. Under this
method, the net asset value will be computed and will be taken as the Enterprise
Value.
* Where a recent investment or transaction has been made in an investee company by
an independent third party, then the cost of this transaction may be used as an
indication of value, although only for a limited period following the date of
the transaction.
* Where the realisation of an investment is imminent and the price of the
transaction has been substantially agreed, the most likely valuation will
involve the use of a simple discount to the expected realisation proceeds.
* In the case of valuing loan notes, primary valuation techniques which are used
to value equity instruments as described above have been adopted with priority
of allocation of net enterprise value.
Although the Company holds more than 20% of the equity of certain companies, it
is considered that the investments are held as part of the investment portfolio.
Accordingly, and as permitted by FRS 9 'Associates and joint ventures', their
value to the Company is based on fair value.
Under FRS 2 'Accounting for subsidiary undertakings' control is presumed to
exist when the parent owns, directly or indirectly more than half of the voting
power by a number of means. The Company does not hold more than 50% of the
equity of any of the companies within the portfolio. In addition, it does not
control any of the companies held as part of the investment portfolio. It is not
considered that any of the holdings represent investments in subsidiary
undertakings.
Income
Dividends receivable from equity investments are accounted for on the
ex-dividend date or, where no ex-dividend date is quoted, are brought into
account when the Company's right to receive payment is established. Fixed
returns on non-equity investments and on debt securities are recognised on a
time apportionment basis, which reflects the effective yield. Where there is
reasonable doubt that a return, which falls within the accounting period, will
actually be received by the Company, the recognition of the return is deferred
until the reasonable doubt has been removed.
Interest receivable on cash deposits is accounted for on an accruals basis.
Revenue and Capital Reserves
The revenue return in the Income Statement is taken to the revenue reserve.
Gains and losses on the realisation of investments are taken to the revenue
reserve. Gains and losses arising from changes in fair value are considered to
be realised only to the extent that they are readily convertible to cash in full
at the balance sheet date. Otherwise Gains and Losses are treated as unrealised.
Expenses
All expenses are accounted for on an accruals basis. Expenses are charged
through the revenue account except for expenses in connection with the disposal
of fixed asset investments, which are deducted from the disposal proceeds of the
investment and investment management and incentive fees which are dealt with
below. A split of expenses is made between Ordinary and C shares in proportion
to the Net Asset Value.
Taxation
The tax effects of different items in the Income Statement are allocated between
capital and revenue on the same basis as the particular item to which they
relate using the Company's effective rate of tax for the accounting period.
Due to the Company's status as a venture capital trust and the continued
intention to meet the conditions required to comply with Section 274 of the
Income Tax Act 2007 (ITA 2007), no provision for taxation is required in respect
of any realised or unrealised appreciation of the Company's investments.
Deferred tax is provided on all timing differences that have originated but not
reversed by the balance sheet date. Deferred tax assets are only recognised to
the extent that they are recoverable.
Dividends Payable
Dividend distributions to shareholders are recognised as a liability in the year
in which they are paid in respect of interim dividends or when approved by
members in respect of final dividends.
C Shares
Unless and until C Shares are converted into Ordinary Shares, all investments
and returns attributable to this class of share will be separately identifiable
from the existing Ordinary Shares. All residual expenses will be allocated on
the basis of total funds raised for each class of share.
Trail Commission
The fair value of trail commission payable on new shares issues is estimated on
the date the new shares are issued based on the net asset value of the trust at
that time, annualised growth in NAV of 5% per annum over the life of the
contract and a discount rate of 8%. Subsequent to initial recognition, changes
in the value of the creditor arising through the unwinding of the discount rate
are recognised in the revenue column of the Income Statement and movements in
the value of the creditor resulting from changes in assumptions are recognised
in the capital column of the Income Statement.
1. Income
+------------------------+----+----------+---------+---------+----------+---------+---------+
| | | As at 30 September 2008 | As at 30 September 2007 |
+------------------------+----+------------------------------+------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| Franked investment | | 107 | 52 | 159 | 136 | - | 136 |
| income* | | 12 | 89 | 101 | - | 90 | 90 |
| Income from liquidity | | 55 | 284 | 339 | 211 | 13 | 224 |
| funds# | | 7 | 32 | 39 | 4 | 37 | 41 |
| Unfranked investment | | | | | | | |
| income* | | | | | | | |
| Investment from bank | | | | | | | |
| deposits# | | | | | | | |
| | | | | | | | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| | | 181 | 457 | 638 | 351 | 140 | 491 |
+------------------------+----+----------+---------+---------+----------+---------+---------+
#Denotes Income arising on financial assets not designated as fair value through
profit or loss.
*Denotes income arising from investments designated as fair value through profit
or loss on initial recognition.
2. Investment Manager's Fees
+------------------------+----+---------+---------+---------+---------+---------+---------+
| | | As at 30 September 2008 | As at 30 September 2007 |
+------------------------+----+-----------------------------+-----------------------------+
| | | Revenue | Capital | Total | Revenue | Capital | Total |
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+----+---------+---------+---------+---------+---------+---------+
| Ordinary Shares | | | | | | | |
+------------------------+----+---------+---------+---------+---------+---------+---------+
| Acuity Capital | | 83 | 248 | 331 | 84 | 253 | 337 |
| | | | | | | | |
+------------------------+----+---------+---------+---------+---------+---------+---------+
| C Shares | | | | | | | |
+------------------------+----+---------+---------+---------+---------+---------+---------+
| Acuity Capital | | 45 | 134 | 179 | 20 | 62 | 82 |
| | | | | | | | |
+------------------------+----+---------+---------+---------+---------+---------+---------+
| Total | | 128 | 382 | 510 | 104 | 315 | 419 |
| | | | | | | | |
+------------------------+----+---------+---------+---------+---------+---------+---------+
The Management Fee includes irrecoverable VAT of GBP80,000 (2007: GBP62,000).
Acuity Capital also received an administration fee of GBP72,000 (2007:
GBP69,000), net of VAT, which increases each year in line with RPI. The
administration fee is included in the administration expenses of GBP142,000 in
Note 3.
Management Fees and Arrangements
Acuity Capital was appointed as Investment Manager under an agreement dated 2
October 2001, later superseded by a management agreement dated 1 February 2007.
The agreement was for an initial period of five years and thereafter until
terminated by not less than one year's notice to expire at any time after the
initial period. Fees for Ordinary and C shares are paid quarterly in advance as
a percentage of net assets (less a rebate of fees suffered in the investment in
funds managed by Acuity Capital at 2.5% per annum.
Neither the Company nor the Investment Manager has issued a notice to terminate.
Running expenses of the Ordinary Share Fund and the C Share Fund are capped at
3.6% of the Net Asset Value as at 30 September. Any excess will be reduced
against the management fee payable to the Investment Manager.
Incentive Schemes
The Investment Manager will receive a performance fee based on returns to
shareholders for both Ordinary and C Shares. If the Company's net asset value
per share in a relevant calculation period increases so that it exceeds GBP1,
less the value of distributions per share plus notional interest at 7% per annum
compounded annually, the Investment Manager will receive 20% of the excess. For
ordinary shares the first period expired on 30 September 2004. Subsequent
periods are of one year's duration. In the event that the performance of the
Company falls short of the target in any period the shortfall must be made up
before the Investment Manager is entitled to a performance fee for subsequent
periods.
At 30 September 2008 there was no amount due under the Incentive Schemes.
3. Other Expenses
[*** UNPARSEABLE TABLE ***]
4. Finance Cost
+------------------------+----+----------+---------+---------+----------+---------+---------+
| | | As at 30 September 2008 | As at 30 September 2007 |
+------------------------+----+------------------------------+------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| Share issue expense | | 12 | 13 | 25 | - | - | - |
| amortisation | | | | | | | |
| | | | | | | | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| | | 12 | 13 | 25 | - | - | - |
+------------------------+----+----------+---------+---------+----------+---------+---------+
5. Directors Remuneration
Details of Directors' remuneration are shown in the table in the "Directors
Remuneration for the Year" section of the Directors' Remuneration Report below
in this announcement.
The Company had no employees or employee costs in 2008 (2007: GBPnil).
6. Taxation of Ordinary Activities
+------------------------+----+----------+---------+---------+----------+---------+---------+
| | | As at 30 September 2008 | As at 30 September 2007 |
+------------------------+----+------------------------------+------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| Analysis of charge in | | - | - | - | - | - | - |
| the period | | | | | | | |
| Current tax: | | | | | | | |
| UK Corporation tax at | | | | | | | |
| 20.5% (2007: 19.5%) | | | | | | | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| Total Current Tax | | - | - | - | - | - | - |
| Factors affecting tax | | (3,265) | 949 | (2,316) | (4,209) | (41) | (4,250) |
| charge for the period | | | | | | | |
| (Loss)/profit on | | | | | | | |
| ordinary activities | | | | | | | |
| before tax | | | | | | | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| (Loss)/profit on | | (669) | 194 | (475) | (821) | (8) | (829) |
| ordinary activities | | (22) | (11) | (33) | (27) | - | (27) |
| before tax at | | (2) | (1) | (3) | 5 | 1 | 6 |
| corporate tax rate | | 496 | (162) | 334 | 716 | 1 | 717 |
| Effects of: | | 20 | (20) | - | - | - | - |
| Dividend income not | | 177 | - | 177 | 127 | 6 | 133 |
| subject to tax | | | | | | | |
| Expenses not | | | | | | | |
| deductable for tax | | | | | | | |
| purposes | | | | | | | |
| Realised and | | | | | | | |
| unrealised | | | | | | | |
| (losses)/gains on | | | | | | | |
| investments | | | | | | | |
| Other adjustments | | | | | | | |
| Unutilised tax losses | | | | | | | |
| arising in the year | | | | | | | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| Total Current Tax | | - | - | - | - | - | - |
+------------------------+----+----------+---------+---------+----------+---------+---------+
In light of the Company's status as a venture capital trust and the Directors'
intention to continue to meet the conditions necessary to obtain such approval
in the foreseeable future, the Company has not provided for deferred tax on any
capital gains and losses arising on the revaluation or disposal of investments.
There is no unprovided deferred tax liability at 30 September 2008.
There has been no recognition of a deferred tax asset of GBP513,000
(2007:GBP394,000) for tax losses as the Directors do not anticipate them
being used.
7. Dividend
+------------------------+----+---------+---------+---------+---------+---------+---------+
| | | As at 30 September 2008 | As at 30 September 2007 |
+------------------------+----+-----------------------------+-----------------------------+
| | | Revenue | Capital | Total | Revenue | Capital | Total |
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+----+---------+---------+---------+---------+---------+---------+
| Ordinary Shares | | | | | | | |
| | | | | | | | |
+------------------------+----+---------+---------+---------+---------+---------+---------+
| a) | | - | - | - | 305 | - | 305 |
| Recognised as | | | | | | | |
| distribution in the | | | | | | | |
| financial statements | | | | | | | |
| for the year | | | | | | | |
| First interim paid - | | | | | | | |
| nil (2007 1.5p) per | | | | | | | |
| share | | | | | | | |
+------------------------+----+---------+---------+---------+---------+---------+---------+
| C Shares | | | | | | | |
| | | | | | | | |
+------------------------+----+---------+---------+---------+---------+---------+---------+
| a) | | - | - | - | - | - | - |
| Recognised as | | | | | | | |
| distribution in the | | | | | | | |
| financial statements | | | | | | | |
| for the year | | | | | | | |
| First interim paid - | | | | | | | |
| nil (2007 1.5p) per | | | | | | | |
| share | | | | | | | |
+------------------------+----+---------+---------+---------+---------+---------+---------+
| Total | | - | - | - | 305 | - | 305 |
| | | | | | | | |
+------------------------+----+---------+---------+---------+---------+---------+---------+
+------------------------+----+---------+---------+---------+---------+---------+---------+
| | | As at 30 September 2008 | As at 30 September 2007 |
+------------------------+----+-----------------------------+-----------------------------+
| | | Revenue | Capital | Total | Revenue | Capital | Total |
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+----+---------+---------+---------+---------+---------+---------+
| Ordinary Shares | | | | | | | |
| | | | | | | | |
+------------------------+----+---------+---------+---------+---------+---------+---------+
| b) | | - | - | - | 305 | - | 305 |
| Paid and proposed in | | | | | | | |
| respect for the period | | | | | | | |
| First interim paid - | | | | | | | |
| nil (2007 1.5p) per | | | | | | | |
| share | | | | | | | |
+------------------------+----+---------+---------+---------+---------+---------+---------+
| C Shares | | | | | | | |
| | | | | | | | |
+------------------------+----+---------+---------+---------+---------+---------+---------+
| b) | | - | - | - | - | - | - |
| Paid and proposed in | | | | | | | |
| respect for the period | | | | | | | |
| First interim paid - | | | | | | | |
| nil (2007 GBPnil) per | | | | | | | |
| share | | | | | | | |
+------------------------+----+---------+---------+---------+---------+---------+---------+
| Total | | - | - | - | 305 | - | 305 |
| | | | | | | | |
+------------------------+----+---------+---------+---------+---------+---------+---------+
8. Return per Ordinary Share
Ordinary Shares
Basic and diluted earnings per ordinary share is based on the net loss from
ordinary activities after taxation attributable to the ordinary shareholders of
GBP3,265,000, (2007: GBP4,238,000) and on 19,530,826 (2007: 20,846,843),
ordinary shares, being the weighted average number of ordinary shares in issue
during the year.
C Shares
Basic and diluted earnings per C share is based on the net profit/(loss) from
ordinary activities after taxation attributable to the C shareholders of
GBP949,000 (2007: GBP(12,000)) and on 9,093,156 (2007: 7,905,830), C shares,
being the weighted average number of C shares in issue during the year.
There is no difference between basic and diluted earnings per ordinary share and
per C share because the Company has no potentially dilutive ordinary shares in
issue.
9. Investments
+---------------------+---------+---------+----------+--------------+----------+---------+
| | Qualifying Investments | Non-qualifying | |
| | | Investments | |
+---------------------+------------------------------+-------------------------+---------+
| Ordinary Shares | Traded | Traded | Unquoted | | Traded | Total |
| | on | on | GBP'000 | Closed-ended | on AIM | GBP'000 |
| | AIM | PLUS | | Investment | GBP'000 | |
| | GBP'000 | GBP'000 | | Company | | |
| | | | | GBP'000 | | |
+---------------------+---------+---------+----------+--------------+----------+---------+
| Costs at 1 October | 5,957 | 1,705 | 9,030 | 1,593 | 888 | 19,173 |
| 2007 | (1,419) | (1,127) | (3,198) | 2,380 | (739) | (4,103) |
| Fair Value | | | | | | |
| gains/(losses) at 1 | | | | | | |
| October 2007 | | | | | | |
| | | | | | | |
+---------------------+---------+---------+----------+--------------+----------+---------+
| Valuation at 1 | 4,538 | 578 | 5,832 | 3,973 | 149 | 15,070 |
| October 2007 | | | | | | |
| | | | | | | |
+---------------------+---------+---------+----------+--------------+----------+---------+
| Purchases at cost | 378 | - | 954 | - | - | 1,332 |
| Proceeds | (31) | - | (1,287) | (1,429) | - | (2,747) |
| Realised | 3 | - | (229) | (150) | - | (376) |
| gains/(losses) in | (1,660) | (401) | 273 | (634) | (60) | (2,482) |
| year | | | | | | |
| Fair Value | | | | | | |
| gains/(losses) in | | | | | | |
| year | | | | | | |
| | | | | | | |
+---------------------+---------+---------+----------+--------------+----------+---------+
| Valuation at 30 | 3,228 | 177 | 5,543 | 1,760 | 89 | 10,797 |
| September 2008 | | | | | | |
| | | | | | | |
+---------------------+---------+---------+----------+--------------+----------+---------+
| Cost at 30 | 6,692 | 1,705 | 6,934 | 960 | 888 | 17,179 |
| September 2008 | (3,464) | (1,528) | (1,391) | 800 | (799) | (6,382) |
| Fair Value | | | | | | |
| gains/(losses) at | | | | | | |
| 30 September 2008 | | | | | | |
| | | | | | | |
+---------------------+---------+---------+----------+--------------+----------+---------+
| Valuation at 30 | 3,228 | 177 | 5,543 | 1,760 | 89 | 10,797 |
| September 2008 | | | | | | |
| | | | | | | |
+---------------------+---------+---------+----------+--------------+----------+---------+
+---------------------------------+-----------+----------+----------------+----------+
| | Qualifying |Non-qualifying | |
| | Investments | Investments | |
+---------------------------------+----------------------+----------------+----------+
| C Shares | Traded on | Unquoted | Closed-ended | Total |
| | | GBP'000 | Investment | GBP'000 |
| | AIM | | Company | |
| | GBP'000 | | GBP'000 | |
+---------------------------------+-----------+----------+----------------+----------+
| Costs at 1 October 2007 | 500 | 2,114 | 819 | 3,433 |
| Fair Value gains/(losses) at 1 | (28) | - | 22 | (6) |
| October 2007 | | | | |
| | | | | |
+---------------------------------+-----------+----------+----------------+----------+
| Valuation at 1 October 2007 | 472 | 2,114 | 841 | 3,427 |
| | | | | |
+---------------------------------+-----------+----------+----------------+----------+
| Purchases at cost | - | 4,801 | - | 4,801 |
| Proceeds | - | - | (104) | (104) |
| Realised gains/(losses) in year | - | - | (14) | (14) |
| Fair Value gains/(losses) in | (197) | 1,198 | (192) | 809 |
| year | | | | |
| | | | | |
+---------------------------------+-----------+----------+----------------+----------+
| Valuation at 30 September 2008 | 275 | 8,113 | 531 | 8,919 |
| | | | | |
+---------------------------------+-----------+----------+----------------+----------+
| Cost at 30 September 2008 | 500 | 6,915 | 705 | 8,120 |
| Fair Value gains/(losses) at 30 | (225) | 1,198 | (174) | 799 |
| September 2008 | | | | |
| | | | | |
+---------------------------------+-----------+----------+----------------+----------+
| Valuation at 30 September 2008 | 275 | 8,113 | 531 | 8,919 |
| | | | | |
+---------------------------------+-----------+----------+----------------+----------+
Further details of investments are provided in the Portfolio Summary below in
this announcement and significant interests in the investee companies are
disclosed in Note 14 of the Notes to the Accounts.
The purchases and sales proceeds figures above include transaction costs of
GBPnil (2007: GBP8,000) and GBP4,000 (2007: GBPnil) respectively.
All investments are designated as fair value through profit or loss on initial
recognition; therefore all gains and losses arise on investments designated as
fair value through profit or loss. The changes in fair value of the unquoted,
AIM listed, Open-ended Investment Company, investments recognised in these
financial statements are not considered to be readily convertible to cash in
full at the balance sheet date and accordingly these gains are treated as
unrealised. Changes in fair value of closed-ended investments are treated as
realised as these holdings are considered to be readily convertible into cash.
10. Debtors
+------------------------+----+----------+---------+---------+----------+---------+---------+
| | | As at 30 September 2008 | As at 30 September 2007 |
+------------------------+----+------------------------------+------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| Amounts due within one | | 479 | 328 | 807 | 504 | 13 | 517 |
| year: | | 119 | 287 | 406 | 31 | 3 | 34 |
| Accrued interest | | - | - | - | 197 | 21 | 218 |
| Other debtors | | | | | | | |
| Acuity Capital | | | | | | | |
| Management | | | | | | | |
| | | | | | | | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| | | 598 | 615 | 1,213 | 732 | 37 | 769 |
+------------------------+----+----------+---------+---------+----------+---------+---------+
Other debtors include an amount of GBP278,000 which was paid to Acuity VCT 3 for
co-investment.
11. Other Investments
+------------------------+----+----------+---------+---------+----------+---------+---------+
| | | As at 30 September 2008 | As at 30 September 2007 |
+------------------------+----+------------------------------+------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| Liquidity Funds | | 96 | - | 96 | 1 | 4,050 | 4,051 |
| | | | | | | | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| | | 96 | - | 96 | 1 | 4,050 | 4,051 |
+------------------------+----+----------+---------+---------+----------+---------+---------+
The fair value of the Liquidity Funds is GBP96,000 (2007: GBP4,051,000).
12. Creditors: amounts falling due within one year
+------------------------+----+----------+---------+---------+----------+---------+---------+
| | | As at 30 September 2008 | As at 30 September 2007 |
+------------------------+----+------------------------------+------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| Deferred share issue | | 29 | 23 | 52 | 44 | 21 | 65 |
| expenses payable | | 25 | 23 | 48 | 46 | 1 | 47 |
| Expense accrual | | - | - | - | 29 | - | 29 |
| Share buy-back accrual | | - | 62 | 62 | 10 | - | 10 |
| Other creditors | | | | | | | |
| | | | | | | | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| | | 54 | 108 | 162 | 129 | 22 | 151 |
+------------------------+----+----------+---------+---------+----------+---------+---------+
13. Creditors: amounts falling due after one year
+------------------------+----+----------+---------+---------+----------+---------+---------+
| | | As at 30 September 2008 | As at 30 September 2007 |
| | | | (Restated) |
+------------------------+----+------------------------------+------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| Deferred share issue | | 84 | 168 | 252 | 146 | 167 | 313 |
| expenses payable | | | | | | | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| | | 84 | 168 | 252 | 146 | 167 | 313 |
| | | | | | | | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
14. Significant Interests
At 30 September 2008 the Company held significant investments, amounting to 3%
or more of the equity capital in the following companies:-
+---------------------+------------+------------+-------------+-------------+-------------+------------+
| | Equity | Equity | Investments | Investments | Total | Percentage |
| | Investment | Investment | Loan Stock | Loan Stock | Investments | Of |
| | (Ordinary | (C Shares) | And | And | GBP'000 | Investee |
| | Shares) | GBP'000 | Preference | Preference | | Company's |
| | GBP'000 | | (Ordinary | (C Shares) | | Total |
| | | | Shares) | GBP'000 | | Equity |
| | | | GBP'000 | | | % |
+---------------------+------------+------------+-------------+-------------+-------------+------------+
| Ma Hubbards | 225 | - | 575 | - | 800 | 25.0 |
| Red Reef | 124 | 309 | 111 | 279 | 823 | 20.2 |
| Hallmarq Veterinary | 1,100 | 300 | 200 | - | 1,600 | 16.7 |
| Imaging | 100 | 100 | 100 | 900 | 1,200 | 16.6 |
| Brands Acquisitions | 225 | - | 525 | - | 750 | 16.5 |
| Amber Taverns | - | 533 | - | 1,467 | 2,000 | 13.3 |
| Target | 1,000 | - | - | - | 1,000 | 12.7 |
| Entertainment Group | 115 | - | 1,034 | - | 1,149 | 12.2 |
| Sanastro | 20 | 100 | 180 | 900 | 1,200 | 10.8 |
| Happy Times | 123 | - | 1,107 | - | 1,230 | 9.0 |
| The Fin Machine | 69 | 790 | - | - | 859 | 9.0 |
| Company | 765 | - | - | - | 765 | 7.7 |
| Defaqto | - | 135 | - | 787 | 922 | 7.5 |
| Connect2Media | - | 57 | - | 257 | 314 | 6.9 |
| Centurion | 908 | - | 753 | - | 1,661 | 6.3 |
| Electronics | 483 | - | - | - | 483 | 5.5 |
| Acrobat Music Group | 1,705 | - | - | - | 1,705 | 4.9 |
| Emote Games | 487 | - | - | - | 487 | 4.0 |
| Hill Station | 750 | - | - | - | 750 | 3.3 |
| Music Copyright | | | | | | |
| Solutions | | | | | | |
| Keycom | | | | | | |
| Advanced Medical | | | | | | |
| Solutions | | | | | | |
| Brady | | | | | | |
| | | | | | | |
+---------------------+------------+------------+-------------+-------------+-------------+------------+
It is considered that, as permitted by FRS 9 "Associates and Joint Ventures",
the above investments are held as part of an investment portfolio and that,
accordingly, their value to the Company lies in their marketable value as part
of its portfolio.
In view of this, it is not considered that the above represent investments in
associated undertakings. The above companies are incorporated in the United
Kingdom.
15. Called Up Share Capital
+----------------------------+------------+------------+------------+------------+
| | | 2008 | | 2007 |
+----------------------------+------------+------------+------------+------------+
| | Number | GBP'000 | Number | GBP'000 |
+----------------------------+------------+------------+------------+------------+
| Authorised: | 80,000,000 | 800 | 80,000,000 | 800 |
| Ordinary Shares of 1p each | | | | |
+----------------------------+------------+------------+------------+------------+
| | 80,000,000 | 800 | 80,000,000 | 800 |
+----------------------------+------------+------------+------------+------------+
+----------------------------+------------+------------+------------+------------+
| | | 2008 | | 2007 |
+----------------------------+------------+------------+------------+------------+
| | Number | GBP'000 | Number | GBP'000 |
+----------------------------+------------+------------+------------+------------+
| Authorised: | 20,000,000 | 200 | 20,000,000 | 200 |
| C Shares of 1p each | | | | |
+----------------------------+------------+------------+------------+------------+
| | 20,000,000 | 200 | 20,000,000 | 200 |
+----------------------------+------------+------------+------------+------------+
+----------------------------+------------+------------+------------+------------+
| | | 2008 | | 2007 |
+----------------------------+------------+------------+------------+------------+
| | Number | GBP'000 | Number | GBP'000 |
+----------------------------+------------+------------+------------+------------+
| Authorised: | 20,000,000 | 20 | 20,000,000 | 20 |
| Deferred Shares of 0.1p | | | | |
| each | | | | |
+----------------------------+------------+------------+------------+------------+
| | 20,000,000 | 20 | 20,000,000 | 20 |
+----------------------------+------------+------------+------------+------------+
+----------------------------+------------+------------+------------+------------+
| Issued Ordinary Shares: | 19,879,331 | 199 | 20,856,651 | 209 |
| At 1 October | (677,850) | (6) | (977,320) | (10) |
| Ordinary Shares of 1p each | | | | |
| repurchased during the | | | | |
| year | | | | |
+----------------------------+------------+------------+------------+------------+
| At 30 September | 19,201,481 | 193 | 19,879,331 | 199 |
+----------------------------+------------+------------+------------+------------+
+----------------------------+------------+------------+------------+------------+
| Issued C Shares: | 9,093,156 | 91 | - | - |
| At 1 October (restated) | - | - | 9,093,156 | 91 |
| C Shares of 1p each issued | | | | |
| during the year | | | | |
+----------------------------+------------+------------+------------+------------+
| At 30 September 2008 | 9,093,156 | 91 | 9,093,156 | 91 |
+----------------------------+------------+------------+------------+------------+
+----------------------------+------------+------------+------------+------------+
| | Number | 2008 | Number | 2007 |
| | | GBP'000 | | GBP'000 |
+----------------------------+------------+------------+------------+------------+
| Deferred Shares | - | - | - | - |
| Issued: | - | - | - | - |
| At 1 October | | | | |
| Deferred Shares of 0.1p | | | | |
| each issued during the | | | | |
| year | | | | |
+----------------------------+------------+------------+------------+------------+
| At 30 September 2008 | - | - | - | - |
+----------------------------+------------+------------+------------+------------+
C Shares
C share issues are used for fund raisings by the Company in order to enable
shares to be issued at a consistent price to all applicants, rather than by
reference to a net asset value per share which may fluctuate over the period of
the offer; and ensure that existing ordinary shareholders are not disadvantaged
by the dilution of a mature investment portfolio through a large injection of
cash and near cash assets.
Management of Capital
The Capital of the Company is managed in accordance with the Company's
investment objective, detailed in the Investment Strategy below in this
announcement.
The Company does not have any externally imposed capital requirements.
During the year under review, the Company made the following purchases of its
own ordinary shares in the market under the authority granted by shareholders at
the Annual General Meeting held in March 2007.
+--------------------+------------------+--------------------+--------------------+
| Ordinary Shares | Date of Purchase | Percentage of | Buy-back Price per |
| Purchased for | | Issued Capital at | Share |
| Cancellation | | Time of Purchase | |
+--------------------+------------------+--------------------+--------------------+
| 179,652 | 29 January 2008 | 0.62% | 71p |
+--------------------+------------------+--------------------+--------------------+
| 200,000 | 08 February 2008 | 0.69% | 71p |
+--------------------+------------------+--------------------+--------------------+
During the year under review the Company made the following purchases of its own
ordinary shares in the market under the authority granted by shareholders at the
Annual General Meeting held in February 2008:
+-------------------+-------------------+-------------------+-------------------+
| Ordinary Shares | Date of Purchase | Percentage of | Buy-back Price |
| Purchased for | | Issued Capital at | per Share |
| Cancellation | | Time of Purchase | |
+-------------------+-------------------+-------------------+-------------------+
| 36,762 | 7 March 2008 | 0.13% | 71p |
+-------------------+-------------------+-------------------+-------------------+
| 60,553 | 28 March 2008 | 0.21% | 71p |
+-------------------+-------------------+-------------------+-------------------+
| 67,695 | 21 May 2008 | 0.24% | 54.5p |
+-------------------+-------------------+-------------------+-------------------+
| 12,650 | 30 May 2008 | 0.04% | 54.5p |
+-------------------+-------------------+-------------------+-------------------+
| 47,162 | 27 June 2008 | 0.17% | 54.5p |
+-------------------+-------------------+-------------------+-------------------+
| 73,396 | 29 August 2008 | 0.26% | 54.5p |
+-------------------+-------------------+-------------------+-------------------+
The Company does not hold any shares in treasury.
At 30 September 2008, a total of 19,201,481 (2007: 19,879,331) ordinary shares
of 1p each and 9,093,156 (2007: 9,093,156) C shares of 1p each of the Company
were in issue.
16. Reserves
+------------------+----------------+----------------+-----------------+----------------+-----------------+
| | | Capital | *Special | Revaluation | |
| | Share | Redemption | Reserve | Reserve | Revenue |
| Ordinary Shares | Premium | Reserve | (Distributable) | (Non | Reserve |
| | Account | (Non | GBP'000 | distributable) | (Distributable) |
| | (Non | distributable) | | GBP'000 | GBP'000 |
| | distributable) | GBP'000 | | | |
| | GBP'000 | | | | |
+------------------+----------------+----------------+-----------------+----------------+-----------------+
| At 1 October | 13,580 | 22 | 5,070 | - | (3,216) |
| 2007 | - | - | - | (4,103) | 4,103 |
| Reclassification | | | | | |
| | | | | | |
+------------------+----------------+----------------+-----------------+----------------+-----------------+
| Total | 13,580 | 22 | 5,070 | (4,103) | 887 |
| | | | | | |
+------------------+----------------+----------------+-----------------+----------------+-----------------+
| Transfer between | - | - | - | (2,380) | 2,380 |
| Reserves* | - | - | - | (1,848) | 1,848 |
| Decrease in | - | - | - | 1,149 | (1,149) |
| unrealised | - | 6 | (446) | - | - |
| appreciation | - | - | - | - | - |
| Transfer of | - | - | - | - | (3,265) |
| prior years | | | | | |
| revaluation to | | | | | |
| revenue reserve | | | | | |
| Shares | | | | | |
| repurchased in | | | | | |
| year | | | | | |
| Dividends | | | | | |
| Retained loss | | | | | |
| for the year | | | | | |
+------------------+----------------+----------------+-----------------+----------------+-----------------+
| At 30 September | 13,580 | 28 | 4,624 | (7,182) | 701 |
| 2008 | | | | | |
+------------------+----------------+----------------+-----------------+----------------+-----------------+
+-------------------+----------------+----------------+-----------------+----------------+-----------------+
| C Shares | Share | Capital | *Special | Revaluation | Revenue |
| | Premium | Redemption | Reserve | Reserve | Reserve |
| | Account | Reserve | (Distributable) | (Non | (Distributable) |
| | (Non | (Non | GBP'000 | distributable) | GBP'000 |
| | distributable) | distributable) | | GBP'000 | |
| | GBP'000 | GBP'000 | | | |
+-------------------+----------------+----------------+-----------------+----------------+-----------------+
| At 1 October | 8,313 | - | - | - | (12) |
| 2007 (Restated) | - | - | - | (6) | 6 |
| Reclassification | | | | | |
| | | | | | |
+-------------------+----------------+----------------+-----------------+----------------+-----------------+
| Total | 8,313 | - | - | (6) | (6) |
| | | | | | |
+-------------------+----------------+----------------+-----------------+----------------+-----------------+
| Transfer between | - | - | - | (22) | 22 |
| Reserves* | - | - | - | 1,001 | (1,001) |
| Increase in | - | - | - | - | 949 |
| unrealised | | | | | |
| appreciation | | | | | |
| Retained profit | | | | | |
| for the year | | | | | |
+-------------------+----------------+----------------+-----------------+----------------+-----------------+
| At 30 September | 8,313 | - | - | 973 | (36) |
| 2008 | | | | | |
+-------------------+----------------+----------------+-----------------+----------------+-----------------+
*With effect from 1 October 2007, changes in the fair value of investments which
are readily convertible to cash in full at the balance sheet date are included
in the revenue reserve, rather than the revaluation reserve. The balances on
both reserves at 1 October 2007 have been amended by a reserve transfer to
reflect this change.
In order to better reflect the activities of the Company, the revaluation
reserve, which was previously included within the revenue reserve has been
presented separately in order to provide additional information in the current
year.
+--------------------+----------------+----------------+-----------------+----------------+-----------------+
| Ordinary Shares | Share | Capital | *Special | Revaluation | Revenue |
| | Premium | Redemption | Reserve | Reserve | Reserve |
| | Account | Reserve | (Distributable) | (Non | (Distributable) |
| | (Non | (Non | GBP'000 | distributable) | GBP'000 |
| | distributable) | distributable) | | GBP'000 | |
| | GBP'000 | GBP'000 | | | |
+--------------------+----------------+----------------+-----------------+----------------+-----------------+
| At 1 October 2006 | 14,024 | 12 | 5,957 | - | 1,066 |
| | | | | | |
+--------------------+----------------+----------------+-----------------+----------------+-----------------+
| Shares repurchased | - | 10 | (887) | - | - |
| in year | - | - | - | - | (305) |
| | (444) | - | - | - | 261 |
| Dividend payment | - | - | - | - | (4,238) |
| for the year | | | | | |
| | | | | | |
| Deferred share | | | | | |
| issue expenses | | | | | |
| | | | | | |
| Loss for the | | | | | |
| financial | | | | | |
| year | | | | | |
+--------------------+----------------+----------------+-----------------+----------------+-----------------+
| At 30 September | 13,580 | 22 | 5,070 | - | (3,216) |
| 2007 | | | | | |
+--------------------+----------------+----------------+-----------------+----------------+-----------------+
+--------------------+----------------+----------------+-----------------+----------------+-----------------+
| C Shares | Share | Capital | *Special | Revaluation | Revenue |
| | Premium | Redemption | Reserve | Reserve | Reserve |
| | Account | Reserve | (Distributable) | (Non | (Distributable) |
| | (Non | (Non | GBP'000 | distributable) | GBP'000 |
| | distributable) | distributable) | | GBP'000 | |
| | GBP'000 | GBP'000 | | | |
+--------------------+----------------+----------------+-----------------+----------------+-----------------+
| At 1 October 2006 | - | - | - | - | - |
| | | | | | |
+--------------------+----------------+----------------+-----------------+----------------+-----------------+
| Shares issued in | 8,480 | - | - | - | - |
| year | - | - | - | - | - |
| Dividend payment | (167) | - | - | - | - |
| for the year | - | - | - | - | (12) |
| Deferred share | | | | | |
| issue expenses | | | | | |
| Loss for the | | | | | |
| financial year | | | | | |
+--------------------+----------------+----------------+-----------------+----------------+-----------------+
| At 30 September | 8,313 | - | - | - | (12) |
| 2007 | | | | | |
+--------------------+----------------+----------------+-----------------+----------------+-----------------+
* The Special Reserve was created by a Court Order in 2003 upon the reduction of
the Share Premium Account. It is treated as a distributable reserve out of which
repurchases of ordinary shares can be made and can also be used to eliminate
realised losses on the Income Statement.
17. Net Asset Value per Ordinary Share and C Share
The basic net asset value per Ordinary share is based on net assets of
GBP11,944,000 and on 19,201,481 ordinary shares, being the number of ordinary
shares in issue.
The basic net asset value per C share is based on net assets of GBP9,341,000 and
on 9,093,156 C shares, being the number of C shares in issue at the end of the
period.
There is no difference between the basic and diluted NAV per ordinary share
because the Company has no potentially dilutive shares in issue.
+------------------------+-------------+-------------+-------------+-------------+
| | As at 30 | As at 30 | As at 30 | As at 30 |
| | September | September | September | September |
| | 2008 | 2008 | 2007 | 2007 |
| | Ordinary | C shares | Ordinary | C shares |
| | shares | Pence | shares | Pence |
| | Pence | | Pence | |
+------------------------+-------------+-------------+-------------+-------------+
| Ordinary shares of 1p | 62.2 | 102.7 | 78.7 | 92.3 |
| and C shares of 1p | | | | |
+------------------------+-------------+-------------+-------------+-------------+
18. Reconciliation of Net Revenue Before Taxation to Net Cash Inflow from
Operating Activities
19. Analysis of Changes in Cash
+------------------------+----+----------+---------+---------+----------+---------+---------+
| | | As at 30 September 2008 | As at 30 September 2007 |
+------------------------+----+------------------------------+------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| At beginning of period | | 127 | 1,067 | 1,194 | 129 | - | 129 |
| Net cash | | 464 | (984) | (520) | (2) | 1,067 | (1,065) |
| (outflow)/inflow | | | | | | | |
| | | | | | | | |
+------------------------+----+----------+---------+---------+----------+---------+---------+
| At 30 September | | 591 | 83 | 674 | 127 | 1,067 | 1,194 |
+------------------------+----+----------+---------+---------+----------+---------+---------+
Included within the cash balance there is a committed cash amount of GBP165,000,
relating to a fixed deposit investment in Connect2Media. This cash is held at
Barclays bank and is accessible immediately.
20. Financial Instruments
Market Risk: Market Risk incorporates the possibility for losses and gains from
investments and encompasses interest rate risk and price risk.
Investment risk management is governed by the Investment Strategy detailed above
in this announcement of these accounts and Market Risk is within that process.
On a regular basis the Investment Manager monitors the Company's market risk, in
accordance with policies and procedures documented in the Report of the
Directors. The Board meets regularly to review the Fund's market position.
Details of the nature of the Company's investment portfolio at the balance sheet
date can be found detailed above in this announcement within the Portfolio
Summary. The constituent parts of those investments can be found in the table
below.
The investment note, note 9, details the split between listed and unlisted
investments, which shows that at the balance sheet date 31% was invested in
quoted stocks (2007:57%). A 5% increase in the bid price of the quoted stocks as
at the Balance Sheet date would have increased net assets and the total return
for the year by GBP303,000 (2007: GBP527,000); an equivalent change in the
opposite direction would have reduced net assets and the total return for the
year by the same amount. A 5% increase in the value of unquoted investments held
at the Balance Sheet date would have increased net assets and the total return
for the year by GBP682,000 (2007:GBP397,000); an equivalent change in the
opposite direction would have reduced net asset and the total return for the
year by the same amount.
Interest Rate Risk: A proportion of the Company's financial assets are interest
bearing, earning a fixed or a variable rate. Therefore, the Company has exposure
to fair value Interest Rate risk due to fluctuations in the market interest
rates.
The interest rate risk profile of the Company's financial assets at 30 September
2008 was:
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| | Financial | Fixed | Variable | Total | Weighted | Weighted |
| | Assets on | Rate | Rate | GBP'000 | Average | Average |
| | which no | Financial | Financial | | Interest | Period |
| | Interest | Assets | Assets | | Rates | for |
| | Paid | GBP'000 | GBP'000 | | % | which |
| | GBP'000 | | | | | rate is |
| | | | | | | fixed |
| | | | | | | (Years) |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| Ordinary shares | 8,147 | - | - | 8,147 | - | - |
| Equity shares | - | 605 | - | 605 | 8.0 | - |
| Non-Equity Shares | - | 2,045 | - | 2,045 | 8.4 | 3.9 |
| Loan stock | - | - | 96 | 96 | 5.5 | - |
| Liquidity Funds | - | - | 591 | 591 | 4.9 | - |
| Cash | 598 | - | | 598 | - | - |
| Debtors | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| C shares | 4,214 | - | - | 4,214 | - | - |
| Equity shares | - | 450 | - | 450 | 8.0 | - |
| Non equity shares | - | 4,255 | - | 4,255 | 8.4 | 4.4 |
| Loan stock | - | - | - | - | - | - |
| Liquidity Funds | - | - | 83 | 83 | 4.9 | - |
| Cash | 615 | - | - | 615 | - | - |
| Debtors | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| Total | 13,574 | 7,355 | 770 | 21,699 | - | - |
| | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
The only financial liabilities are the deferred share issue expenses of
GBP304,000.The interest rate risk profile of the Company's financial assets at
30 September 2007 was:
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| | Financial | Fixed | Variable | Total | Weighted | Weighted |
| | Assets on | Rate | Rate | GBP'000 | Average | Average |
| | which no | Financial | Financial | | Interest | Period |
| | Interest | Assets | Assets | | Rates | for |
| | Paid | GBP'000 | GBP'000 | | % | which |
| | GBP'000 | | | | | rate is |
| | | | | | | fixed |
| | | | | | | (Years) |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| Ordinary shares | 11,690 | - | - | 11,690 | - | - |
| Equity shares | 656 | - | - | 656 | 7.0 | - |
| Non-equity shares | - | 2,725 | - | 2,725 | 9.4 | 3.7 |
| Loan stock | - | - | 1 | 1 | - | - |
| Liquidity Funds | - | - | 127 | 127 | - | - |
| Cash | 732 | - | - | 732 | - | - |
| Debtors | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| C shares | 2,038 | - | - | 2,038 | - | - |
| Equity shares | 57 | - | - | 57 | - | - |
| Non equity shares | - | 1,331 | - | 1,331 | 8.7 | 4.9 |
| Loan stock | - | - | 4,050 | 4,050 | - | - |
| Liquidity Funds | - | - | 1,067 | 1,067 | - | - |
| Cash | 37 | - | - | 37 | - | - |
| Debtors | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| Total | 15,210 | 4,056 | 5,245 | 24,511 | - | - |
| | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
The only financial liabilities are the deferred share issue expenses of
GBP378,000.
Fixed Rate Assets: Represent investments with predetermined yield targets. The
fixed rate investments are held for the medium term and have a predetermined
interest rate, in-line with their risk profile. Therefore a change of 25 basis
points in the interest rate at the balance sheet date would not have a
significant impact on the company's net assets.
Variable Rate Assets: Represent investments with interest rates linked, by
formula, to utilisation of company by investee companies and cash held on
interest-bearing deposit accounts.
Credit Risk: Credit risk is the risk that a counterparty to a financial
instrument is unable to discharge an obligation or commitment entered into with
the Company. The Investment Manager has in place a monitoring procedure in
respect of counterparty risk which is monitored on an ongoing basis. As part of
this process during the financial year the Board approved a change of bankers
from NatWest PLC to HSBC Bank PLC after analysis of their Tier 1 capital
positions. The carrying amounts of financial assets best represent the maximum
credit risk exposure at the balance sheet date.
At the reporting date, the Company's financial assets exposed to the credit risk
amounted to the following:
+------------------------------------------+--------------------+---------------+
| Credit Risk | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+------------------------------------------+--------------------+---------------+
| Investments in fixed interest | 7,355 | 4,056 |
| instruments | | |
+------------------------------------------+--------------------+---------------+
| Investments in variable interest | 770 | 5,245 |
| instruments | | |
+------------------------------------------+--------------------+---------------+
| Cash | 674 | 1,194 |
+------------------------------------------+--------------------+---------------+
| Interest, dividends and other | 1,213 | 769 |
| receivables | | |
+------------------------------------------+--------------------+---------------+
Credit risk on fixed interest instruments which are solely comprised of loan
stock is part of the company's venture capital procedures and are managed within
the main investment management procedures.
Credit risk arising on floating rate instruments is mitigated by investing in
money market company's managed by JP Morgan and Scottish Widows. The board
regularly reviews this strategy and in accordance with that review has decided
to transfer those funds to HSBC Bank Plc post year end.
All the assets of the Company which are traded on a recognised exchange are held
in a secured facility on site. This mitigates the risk of a third party
custodian going into liquidation or becoming bankrupt.
The cash of the Company was held by Natwest for much of the year. However, upon
review of Natwest's risk profile as a subsidiary of RBS Plc, the Board decided
to transfer the funds to HSBC Bank Plc post year end.
Liquidity risk: The liquidity risk is the risk that the Company might encounter
difficulty in meeting its obligations arising from holding financial
instruments.
The Company's financial instruments also 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
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 Investment
Manager as presented in the Report of the Directors.
The Company maintains sufficient investments in cash to pay all accounts payable
and accrued expenses as they become due.
21. Geographical Analysis
The operations of the Company are wholly in the United Kingdom.
22. Transactions with the Investment Manager
During the period ended 30 September 2008 the Company paid GBP566,000
(2007:GBP647,000) to Acuity Capital, the Investment Manager. At 30 September
2008, the Company owed GBPnil (2007:GBP218,000) to the Investment Manager.
Details of the Investment Manager's fee arrangements are included in Note 2.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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