30th May 2006 13:40
Close Brothers Aim Vct PLC30 May 2006 CLOSE BROTHERS AIM VCT PLC ANNUAL RESULTS 30 May 2006 Close Brothers AIM VCT PLC ("the Company"), which invests in companies listed onthe Alternative Investment Market, across a variety of sectors, today announcesannual results for the year ended 28 February 2006. This announcement wasapproved by the Board of Directors on 26 May 2006. Chairman's statement I am pleased to present your Company's eighth annual report for the year to 28February 2006. As reported in my interim statement, your Company continued to develop and goodprogress was made in the year under review. The D share offer for the 2004/5 taxyear raised the full £15m by its final closing. The total fund value at the endof the financial year was £46.4m. During the year your Manager has concentrated on investing the proceeds of the Dshare issue and of the top up issues of Ordinary shares, as well as replacingsome of the older investments in the Ordinary portfolio. This was helped by abuoyant new issues market and in the period under review a total of £10.6m wasinvested across the two portfolios in qualifying investments. This puts theCompany comfortably on target to meet its HM Revenue & Customs requirements,with the Ordinary Portfolio 74% invested at the end of the period and the Dshare portfolio 40% invested. The latter has two more years within which toachieve the 70% threshold. In the Interim Report last November I referred to a resumption in the payment ofa dividend out of realised capital profits for Ordinary shareholders. It is theBoard's intention that, subject to HM Revenue & Customs approval, twice yearlydividends will become a regular feature for Ordinary shareholders. Dshareholders, who are invested in a much less mature portfolio will continue toearn income dividends from non-qualifying investments, and this will besupplemented by dividends paid out of realised capital as and when profits aremade and realised. Changes in accounting standards During the year your Company adopted new Financial Reporting Standards issued bythe Accounting Standards Board as part of the convergence process withInternational Reporting Standards for which last year's accounts have beenrestated. Net Asset Values are now calculated using bid prices rather than midmarket prices. This has had the initial effect of reducing the reported NetAsset Value figure by around 2%. Furthermore dividends will in future appear inthe accounts in the period in which they are paid. Thus, the dividends beingdeclared in respect of these results do not actually feature in the accountsthemselves, but will appear in the Interim Accounts published in October 2006. Performance Ordinary Share Portfolio The Net Asset Value of the Ordinary shares rose 5.6% in the year. This wasparticularly encouraging as in the first half of the year it fell by 1.8%against a difficult market background. Apart from a sharp correction in October,AIM had a much better second half and the Fund also performed well, giving atotal return (ie: change in NAV plus total dividends of 2.15p paid out in theyear) of 8.2%. This compares favourably with a total return for the AIM Indexfor the period of 4.2%. D Share Portfolio The D share portfolio performed well in the period, giving its shareholders atotal return (change in NAV plus total dividends of 2.25p paid out in the year)of 13.3% against a total return from the AIM Index of 4.2% Manager's Performance fee Under the terms of the investment management contract the Manager is entitled toa performance fee if Net Asset Value growth in a year exceeds the average baserate of The Royal Bank of Scotland plus 2%. I am glad to be able to report thatthe outperformance referred to above in respect of both the Ordinary and D shareportfolio has triggered the payment of such a fee. The payments which will bemade in cash will be charged 100% to the capital account and are included inthese results. They amount to £9,267 and £50,309 for the Ordinary share and Dshare portfolios respectively. Dividends Ordinary Shares The Board has declared a second interim dividend out of realised capital profitsof 1.7p per Ordinary share which is subject to H.M.Revenue & Customs approval.Together with interim dividends totalling 1.7p per Ordinary share declared inNovember 2005 this will make a total distribution of 3.4p per Ordinary share inrespect of the year to 28 February 2006 (2005: 0.7p). The total distribution ismade up of a revenue dividend of 0.2p and a capital dividend of 3.2p. D Shares The Board has declared a second interim dividend of 2.0p per D share made up of1.0p revenue dividend and 1.0p dividend paid out of realised capital profits;the latter is subject to HM Revenue & Customs approval. Together with thedividends declared last November this makes a total distribution of 4.0p per Dshare in respect of the year to 28 February 2006. The total distribution is madeup of a revenue dividend of 1.5p and a dividend paid out of realised capitalprofits of 2.5p per D share. Cancellation of Shares and Management of the Discount Your Board believes that it is in the interest of all shareholders for it tomanage the discount to NAV at which the shares trade with a view to maintainingit as close to 8% as possible. During the year under review your Board exercisedits power to buy back for cancellation 1,537,521 Ordinary shares. It also boughtin 8,450 D shares for cancellation. Unfortunately, following the introduction ofthe Market Abuse Directive the publication of a weekly Net Asset Value is nolonger sufficient to enable the Company to buy in its own shares during closeperiods. This means that for the eight week period before results are publishedin May and October the Company is unable to purchase its own shares. I wouldlike to re-iterate that shareholders wishing to sell at any other time shouldfirst contact the Manager, Close Investment Limited, in the interests ofachieving a reasonable price. New VCT Tax Rules Shareholders may have read about the changes in tax rules relating to newinvestment in Venture Capital Trusts announced in this year's Budget. Thisreduces the amount of income tax relief available on investment from 40% to 30%and increases the holding period to achieve this tax break from three to fiveyears. For funds raised by future VCTs, the maximum gross assets of a companybefore an investment is made will be reduced from £15m to £7m, concentrating newVCT capital into smaller companies. None of these changes are retrospective, andthey apply only to funds raised after 6 April 2006. They do not thereforedirectly impact shareholders in your Company. They are likely, however to shrinkthe size of new fund raising in the VCT market in coming years from the peak of£785m raised in the 2005/6 tax year. Thus, although your Manager will still bein competition to invest with all existing VCT funds, the pool of VCT moneyseeking to invest in companies with gross assets of between £7m and £15m is nowlimited following these recent changes. Outlook During the first quarter of 2006 there was an increase in the Net Asset Value ofboth the Ordinary and D share portfolios. However, more recently the NAV hasweakened in more turbulent market conditions. UK economic growth is expected tobe strong again this year, making a generally favourable background forinvestors in small companies. It is, however expected to lag the growth in theworld economy and for this reason mainstream investors are likely to search forinvestment opportunities among large companies first, which could leave somesmaller company share prices behind. The Ordinary and D share portfolios both have money to invest and the pipelineof new issues is still flowing, although not nearly as strongly as it was in thefinal quarter of 2005. After a record fundraising tax year for VCTs, thechallenge for the Manager is not to be forced into paying too high a price forinvestments. However, the changes in tax rules referred to above should help, asall future funds raised will have to abide by the new £7m gross assets rulerather than the existing less restrictive £15m one. A slight cooling in the newissue market is not seen as a great concern as it is likely to give the Managerthe chance to make investments at more attractive valuations. Both portfolioshave benefited from the subsequent appreciation of investments made in slowermarkets over the past two years. Michael Reeve Chairman 26 May 2006 Income Statement for the year ended 28 February 2006 Ordinary Shares D Shares Total 28 February 2006 28 February 2006 28 February 2006 Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Gains on investments - 2,331 2,331 - 1,544 1,544 - 3,875 3,875 Dividends and interest 406 - 406 556 - 556 962 - 962 Investment management fee (156) (469) (625) (90) (271) (361) (246) (740) (986) Performance fee - (9) (9) - (50) (50) - (59) (59) Other expenses (142) - (142) (80) - (80) (222) - (222) Return on ordinary activities before tax 108 1,853 1,961 386 1,223 1,609 494 3,076 3,570 Tax on ordinary activities 1 13 14 (93) 79 (14) (92) 92 - Return attributable to equity shareholders 109 1,866 1,975 293 1,302 1,595 402 3,168 3,570 Return per share (pence) Basic and diluted 0.34 5.82 6.16 1.93 8.58 10.51 All of the Company's activities derive from continuing operations. The Company has no recognised gains or losses other than the results for theyear as set out above, accordingly a statement of total recognised gains orlosses is not required. The total column of the income statement represents the profit and loss accountof the Company. The supplementary revenue return and capital return columns havebeen prepared in accordance with the Association of Investment Trust Companies'Statement of Recommended Practice. Income Statement for the year ended 28 February 2005 Restated* Restated* D Shares Restated* Ordinary Shares 28 February 2005 Total 28 February 2005 28 February 2005 Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 (Losses)/gains on investments - (1,223) (1,223) - 687 687 - (536) (536) Dividends and Interest 483 - 483 77 - 77 560 - 560 Investment management fee (157) (472) (629) (20) (60) (80) (177) (532) (709) Other expenses (171) - (171) (21) - (21) (192) - (192) Return on ordinary activities before tax 155 (1,695) (1,540) 36 627 663 191 (1,068) (877) Tax on ordinary activities - - - - - - - - - Return 155 (1,695) (1,540) 36 627 663 191 (1,068) (877) attributable to equity shareholders Return per share (pence) Basic 0.48 (5.22) (4.74) 1.05 18.37 19.42 Diluted 0.43 (4.75) (4.32) 0.93 16.17 17.10 *Comparative figures have been restated in accordance with FRS 21 and FRS 26 in respect of declared dividends and financial instruments as disclosed in the notes at the end of this announcement. All of the Company's activities derive from continuing operations. The Company has no recognised gains or losses other than the results for theyear as set out above, accordingly a statement of total recognised gains orlosses is not required. The total column of the income statement represents the profit and loss accountof the Company. The supplementary revenue return and capital return columns havebeen prepared in accordance with the Association of Investment Trust Companies'Statement of Recommended Practice. Balance Sheet As at 28 February 2006 Ordinary Shares D Shares Total As at As at As at 28 28 28 February February February 2006 2006 2006 £'000 £'000 £'000 Fixed assets Investments 25,960 15,866 41,826 Current assets Debtors 1,100 5,071 6,171 Cash at bank 724 146 870 1,824 5,217 7,041 Creditors: amounts falling due within one year (824) (1,678) (2,502) Net current assets 1,000 3,539 4,539 Net assets 26,960 19,405 46,365 Capital and reserves Called up share capital 15,561 8,040 23,601 Share premium 1,450 39 1,489 Special reserve 8,547 9,373 17,920 Capital redemption reserve 2,770 42 2,812 Realised capital reserve (3,231) (277) (3,508) Unrealised capital reserve 1,806 1,965 3,771 Revenue reserve 57 223 280 Equity shareholders' funds 26,960 19,405 46,365 Net asset value per share (pence) 86.62 120.68 Balance Sheet As at 28 February 2005 Restated* Restated* Restated* Ordinary Shares D Shares Total As at As at As at 28 February 28 February 28 February 2005 2005 2005 £'000 £'000 £'000 Fixed assetsInvestments 26,539 4,880 31,419 Current assetsDebtors 193 110 303Cash at bank 220 119 339 413 229 642Creditors: amounts falling due within one year (136) (55) (191) Net current assets 277 174 451 Net assets 26,816 5,054 31,870 Capital and reservesCalled up share capital 16,330 2,324 18,654Share premium 1,449 2,112 3,561Special reserve 9,691 (66) 9,625Capital redemption reserve 2,001 38 2,039Realised capital reserve (1,220) 130 (1,090)Unrealised capital reserve (1,593) 497 (1,096)Revenue reserve 158 19 177 Equity shareholders' funds 26,816 5,054 31,870 Net asset value per share (pence) 82.10 108.74 * Comparative figures have been restated in accordance with FRS 21 and FRS 26 in respect of declared dividends and financial instruments as disclosed in the notes at the end of this announcement. Reconciliation of movements in shareholders' funds For the year ended 28 February 2006 Ordinary Shares Called Share Special Capital Realised Unrealised Revenue Total up share premium reserve redemption capital capital reserve capital reserve reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 As at 28 February 2005 16,330 1,449 9,691 2,001 (1,220) (1,593) 158 26,816 Brought forward losses realised in the year - - - - (1,403) 1,403 - - Net realised gains on investments in the year - - - - 335 - - 335 Capitalised management and performance fees - - - - (478) - - (478) Tax relief on costs charged to capital - - - - 13 - - 13 Issue of shares (net of expenses) - 1 2 - - - - 3 Share redemptions (769) - (1,146) 769 - - - (1,146) Movement in unrealised appreciation - - - - - 1,996 - 1,996 Revenue return - - - - - - 109 109 Dividends - - - - (478) - (210) (688) As at 28 February 2006 15,561 1,450 8,547 2,770 (3,231) 1,806 57 26,960 As at 29 February 2004 as 14,898 - 13,308 157 (1,555) 1,355 93 28,256previously stated Adjustment as required by - - - - - (918) - (918)the adoption of FRS 26 Adjustment as required by - - - - - - 124 124the adoption of FRS 21 As at 29 February 2004 as 14,898 - 13,308 157 (1,555) 437 217 27,462restated Movement in the year as previously reported Net realised gains on investments in the year - - - - 807 - - 807 Capitalised management fees - - - - (472) - - (472) Issue of shares (net of expenses) 1,771 1,449 (2,369) 1,505 - - - 2,356 Share redemptions (339) - (1,248) 339 - - - (1,248) Movement in unrealised depreciation - - - - - (2,300) - (2,300) Revenue return - - - - - - 155 155 Dividends - - - - - - (237) (237) 1,432 1,449 (3,617) 1,844 335 (2,300) (82) (939) Movement in valuation of portfolio at fair value - - - - - 270 - 270 Dividends unpaid at year end - - - - - - 23 23 Movement in the year as restated 1,432 1,449 (3,617) 1,844 335 (2,030) (59) (646) As at 28 February 2005 16,330 1,449 9,691 2,001 (1,220) (1,593) 158 26,816 Reconciliation of movements in shareholders' funds For the year ended 28 February 2006 D Shares Called Share Special Capital Realised Unrealised Revenue Total up share premium reserve redemption capital capital reserve capital reserve reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 As at 28 February 2005 2,324 2,112 (66) 38 130 497 19 5,054 Brought forward losses realised in the year - - - - 121 (121) - - Net realised losses on investments in the year - - - - (45) - - (45) Capitalised management and performance fees - - - - (321) - - (321) Tax relief on costs charged to capital - - - - 79 - - 79 Issue of shares (net of expenses) 5,720 7,388 - - - - - 13,108 Share redemptions (4) - (9) 4 - - - (9) Transfer to special reserve - (9,461) 9,461 - - - - - Costs of cancelling share premium account - - (13) - - - - (13) Movement in unrealised appreciation - - - - - 1,589 - 1,589 Revenue return - - - - - - 293 293 Dividends - - - - (241) - (89) (330) As at 28 February 2006 8,040 39 9,373 42 (277) 1,965 223 19,405 As at 29 February 2004 - - - - - - - - Movement in the year Net realised gains on investments in the year - - - - 190 - - 190 Capitalised management fees - - - - (60) - - (60) Issue of shares (net of expenses) 2,362 2,112 - - - - - 4,474 Share redemptions (38) - (66) 38 - - - (66) Movement in unrealised appreciation - - - - - 583 - 583 Revenue return - - - - - - 36 36 Dividends - - - - - - (25) (25) 2,324 2,112 (66) 38 130 583 11 5,132 Adjustment as required by the adoption of FRS 26 - - - - - (86) - (86) Adjustment as required by the adoption of FRS 21 - - - - - - 8 8 Movement in the year as restated 2,324 2,112 (66) 38 130 497 19 5,054 As at 28 February 2005 2,324 2,112 (66) 38 130 497 19 5,054 Cash Flow Statement for the year ended 28 February 2006 Ordinary Shares D Shares Total 28 February 28 February 28 February 2006 2006 2006 £'000 £'000 £'000 Operating activities Dividend income received 109 8 117 Investment income received 263 454 717 Deposit interest received 74 86 160 Investment management fees paid (635) (370) (1,005) Other cash payments (117) (62) (179) Net cash (outflow)/inflow from operating activities (306) 116 (190) Servicing of finance Interest paid (14) - (14) Capital expenditure and financial investment Purchase of investments (6,154) (15,102) (21,256) Disposal of investments 9,899 1,298 11,197 Net cash inflow/(outflow) from investing activities 3,745 (13,804) (10,059) Equity dividends paid Revenue dividends paid (210) (89) (299) Capital dividends paid (478) (241) (719) (688) (330) (1,018) Net cash inflow/(outflow) before financing 2,737 (14,018) (11,281) Financing Intercompany account movement (997) 997 - Issue of equity net of expenses (88) 13,070 12,982 Cancellation of shares (1,148) (22) (1,170) Net cash (outflow)/inflow from financing (2,233) 14,045 11,812 Increase in cash in the year 504 27 531 Cash Flow Statement for the year ended 28 February 2005 Ordinary Shares D Shares Total As at As at As at 28 February 28 February 28 February 2005 2005 2005 £'000 £'000 £'000 Operating activities Dividend income received 160 1 161 Investment income received 171 (16) 155 Deposit interest received 101 54 155 Other income received 2 - 2 Investment management fees paid (642) (68) (710) Other cash payments (193) (19) (212) Net cash outflow from operating activities (401) (48) (449) Capital expenditure and financial investment Purchase of investments (8,287) (4,755) (13,042) Disposal of investments 6,342 493 6,835 Net cash outflow from investing activities (1,945) (4,262) (6,207) Equity dividends paid Revenue dividends paid (214) (17) (231) Net cash outflow before financing (2,560) (4,327) (6,887) Financing Issue of equity net of expenses 1,700 4,512 6,212 Cancellation of shares (492) (66) (558) Net cash inflow from financing 1,208 4,446 5,654 (Decrease)/increase in cash in the year (1,352) 119 (1,233) Notes: 1. Details about the Manager Close Brothers AIM VCT PLC is managed by Close Investment Limited. CloseInvestment Limited is authorised and regulated by the Financial ServicesAuthority and is a subsidiary of Close Brothers Group plc. 2. Statutory accounts The financial information set out in this announcement does not constitute theCompany's statutory accounts for the year ended 28 February 2006 or 28 February2005 but is derived from those accounts. The financial information for the yearended 28 February 2005 is derived from the statutory accounts delivered to theRegistrar of Companies. This financial information has been restated in order tocomply with the new financial reporting standards as detailed in note 4 below.The financial information for the year ended 28 February 2006 has been derivedfrom the statutory accounts for the year which will be delivered to theRegistrar of Companies in due course. The auditors reported on both of theseaccounts; their reports were unqualified and did not contain statements undereither section 237(2) or (3) of the Companies Act 1985. 3. Changes in Equity There were no changes in equity other than those arising from capitaltransactions with the owners and distributions to owners. 4. Changes in accounting policies This financial information is prepared on the basis of the accounting policiesas stated in the previous year's statutory accounts with the exception of thechanges as detailed below. With effect from 1 March 2005, the Company adopted the new Financial ReportingStandards ("FRS") 21-26 that have been issued by the Accounting Standards Boardas part of the convergence process between United Kingdom Generally AcceptedAccounting Practice ("UK GAAP") with International Financial Reporting Standards("IFRS"). The effects of the relevant accounting policies and the comparativefigures are detailed below. Investments In accordance with FRS 26 "Financial Instruments: Measurement", equityinvestments are designated as fair value through profit or loss. The totalcolumn of the Income Statement represents the Company's profit and loss account.Investments listed on recognised exchanges are valued at the closing bid pricesat the end of the accounting period. Fair value movements on equity investmentsand gains and losses arising on the disposal of investments are reflected in thecapital column of the Income Statement in accordance with the AITC SORP. Investments are recognised as financial assets on legal completion of theinvestment contract and are de-recognised on legal completion of the sale of aninvestment. The Directors are conscious of the fact that because shares are traded on AIMthis does not guarantee their liquidity. The nature of AIM investments is suchthat the prices can be volatile and realisation may not achieve current bookvalue, especially when such a sale represents a significant proportion of thatCompany's market capital. Nevertheless, on the grounds that the investments arenot intended for immediate realisation, they regard bid-market price as the mostobjective and appropriate method of valuation. Dividends In accordance with FRS 21 "Events after the balance sheet date", interimdividends are not accounted for until paid, and final dividends are accountedfor when approved by the shareholders at annual general meeting. Capitaldividends are charged to the realised capital reserve. Restatement of revenue and unrealised capital reserves In accordance with FRS 26 "Financial Instruments: Measurement", comparatives forunrealised capital reserves have been restated in recognition of the change inaccounting policy. In accordance with FRS 21 "Events after the balance sheet date", comparativesfor revenue reserves have been restated in recognition of the change inaccounting policy. The effect of FRS 26 as at 28 February 2005 and 29 February 2004 is a decreasein the unrealised capital reserves as a result of revaluing investments from midto bid prices. The effect of FRS 21 as at 28 February 2005 and 29 February 2004 is a decreasein the distribution liability as a result of the de-recognition of proposeddividends thereon and an increase in the revenue reserves. A reconciliation of reserves incorporating the adjustments and restatementsrequired by the adoption of FRS 21 and FRS 26 is illustrated below: Ordinary shares D shares 28 February 29 February 28 February 29 February 2005 2004 2005 2004 £'000 £'000 £'000 £'000Reconciliation of revenue reserves Revenue reserves previously reported at year end 11 93 11 - Adjustment as required by adoption of FRS 21 - change in accounting for dividends 147 124 8 - Revenue reserves at 28 February 2005 and 29 February 2004 as restated 158 217 19 - Reconciliation of unrealised capital reserves Unrealised capital reserves previously reported at year end (945) 1,355 583 - Adjustment as required by adoption of FRS 26 - change in valuation of AIM quoted investments to bid price (648) (918) (86) - Unrealised capital reserves at 28 February 2005 and 29 February 2004 as restated (1,593) 437 497 - 5. Basic and diluted return per share Ordinary shares The revenue return per Ordinary Share is based on the revenue return on ordinaryactivities after taxation of £109,000 (2005: £155,000) whilst the capital returnis based on the capital return on ordinary activities after taxation of£1,866,000 (2005 restated: £1,695,000 loss). This is in respect of 32,030,767Ordinary Shares (2005 32,445,353 Shares) being the weighted average number ofshares in issue during the year. The diluted return for the year ended 28 February 2005 is based upon theexercise of the Manager's option, thus assuming a further 3,266,036 shares werein issue throughout the year. The Manager's share option scheme was replacedwith an incentive fee scheme effective from 1 March 2005. Therefore, there areno dilutive elements affecting the basic return per Ordinary Share for the yearended 28 February 2006. D shares The revenue return per D Share is based on the revenue return on ordinaryactivities after taxation of £293,000 (2005: £36,000) whilst the capital returnis based on the capital return on ordinary activities after taxation of£1,302,000 (2005 restated: £627,000). This is in respect of 15,172,423 D Shares(2005 3,413,033 Shares) being the weighted average number of shares in issueduring the year. The diluted return for the year ended 28 February 2005 is based upon theexercise of the Manager's option, thus assuming a further 464,799 shares were inissue throughout the year. The Manager's share option scheme was replaced withan incentive fee scheme effective from 1 March 2005. Therefore, there are nodilutive elements affecting the basic return per D Share for the year ended 28February 2006. 6. Net asset value per share Ordinary Shares The net asset value per share is based on net assets attributable to Ordinaryshareholders of £26,960,000 (2005 restated: £26,816,000) and 31,122,889 (2005:32,660,360) Ordinary Shares in issue at the year end D Shares The net asset value per share is based on net assets attributable to Dshareholders of £19,405,000 (2005 restated: £5,054,000) and 16,078,833 (2005:4,647,993) D Shares in issue at the year end. For further information, please contact: Andrew Buchanan / Freda Isingoma Karen Brunskill / Laura Cronin Close Investment Limited Lanson Tel: 020 7426 4000 Tel: 020 7294 3685 / 020 7294 3607 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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