Final Results
Close Technology & General VCT PLC
18 April 2008
CLOSE TECHNOLOGY & GENERAL VCT PLC
ANNUAL RESULTS
18 April 2008
Preliminary announcement of the annual financial results for the twelve months
to 31 December 2007. Copies of the full Report and Financial Statements can be
found on www.closeventures.co.uk
Close Technology & General VCT PLC ('the Company') is a Venture Capital Trust
which raised £14.3 million in December 2000 and 2002, and raised a further £35.0
million during 2006 through the launch of a C Share issue. The Company offers
investors the opportunity to participate in a balanced portfolio of technology
and non-technology businesses. The Company's investment portfolio is intended
to be split approximately as follows:
• 40% in unquoted UK technology-related companies; and
• 60% in unquoted UK non-technology companies.
This announcement was approved for release by the Board of Directors on 18 April
2008.
Financial Highlights
Year ended Period ended
31 December 2007 31 December 2006
Ordinary shares
Revenue return (pence per share) 4.4 3.2
Capital return (pence per share) 3.2 (1.8)
Dividends paid (pence per share) 8.0 8.0
Net asset value (pence per share) 114.1 114.4
Net assets £15,193,000 £15,485,000
C shares
Revenue return (pence per share) 3.1 2.3
Capital return (pence per share) (2.9) (1.1)
Dividends paid (pence per share) 2.5 0.5
Net asset value (pence per share) 92.7 94.9
Net assets £32,875,000 £33,679,000
In addition to the dividends summarised above, the Directors have declared a
first dividend for the new financial year of 4.0 pence per Ordinary share (2.0
pence to be paid out of revenue profits and 2.0 pence out of capital profits)
and 1.5 pence per C share (out of revenue profits) to be paid on 30 May 2008 to
shareholders on the register at 2 May 2008.
Shareholder value per share since launch
Ordinary Shares
Pence per share
Total dividends paid during the period to 31 December 2006 29.0
Total dividends paid during the year to 31 December 2007 8.0
Total dividends 37.0
Net asset value at 31 December 2007 114.1
Total cumulative return at 31 December 2007 151.1
C Shares
Pence per share
Total dividends paid during the period to 31 December 2006 0.5
Total dividends paid during the year to 31 December 2007 2.5
Total dividends 3.0
Net asset value at 31 December 2007 92.7
Total cumulative return at 31 December 2007 95.7
Chairman's statement
Introduction
I am pleased to report that the year to 31 December 2007 continues the positive
trend experienced by your Company over recent years. The strong investment
return from the Ordinary Share portfolio over the period was generated by some
excellent profits realised from the sale of mature investments. These further
underpinned the continuing policy of paying out a dividend of 8.0 pence per
Ordinary Share from both revenue and realised capital profits. The C Share
portfolio, meanwhile, continues in its programme of building up a balanced
portfolio of investments in technology and non-technology businesses. We are
now in a position to pay out an annual dividend of 3.0 pence per C Share from
revenue profits and it is hoped that this figure will grow further in the
future.
Investment progress and performance
Ordinary share portfolio
The total return per Ordinary Share was 7.6 pence for the year; part of this was
due to the continued growth in income from the investment portfolio, with the
balance from the successful realisation of investments. These comprised a
profit of £607,000 for Careforce, which was taken over by the Mears Group in
April of this year, £292,000 in respect of Intelligent Environments and £132,000
from Bond International (two companies within our residual AIM portfolio),
£217,000 from the portfolio of International Quoted Technology companies (which
was wound down during the period) and £240,000 from the sale of Bold Pub
Company. Meanwhile, £2.3 million was invested in 23 existing and new investee
companies.
INSERT 1 - Ordinary share portfolio to go here
Source: Close Ventures Limited
The investments held are diversified to ensure a spread of risk across the
portfolio. The portfolio is split broadly 67 per cent loan stock and 33 per
cent equity investments. At 31 December 2007 the Ordinary share portfolio was
77 per cent invested for HM Revenue & Customs purposes, in 46 investee
companies.
C share portfolio
The C Share portfolio, which is now over two-thirds of the way through its
initial investment programme, recorded a total return of 0.2 pence per share.
Of this, 3.1 pence was accounted for by the growing revenue return with a
negative capital return of 2.9 pence, relating to a partial write down of two of
its investments, Premier Leisure Suffolk and Helveta. During the year some
£13.0 million was invested or reserved for investment in 20 investee companies.
INSERT 2 - C chare portfolio to go here
Source: Close Ventures Limited
The investments held are diversified to ensure a spread of risk across the
portfolio. The portfolio is split approximately 52 per cent loan stock and 48
per cent equity invested; this does not include cash and cash equivalents.
There is a large proportion of cash and cash equivalents because the C share
portfolio has until 31 December 2008 to meet the minimum 70 per cent. HM Revenue
& Customs qualifying level. At 31 December 2007 the C share portfolio was 43
per cent invested for HM revenue & Customs purposes, taking the total number of
investments to 23.
Risks and uncertainties
The key risk is the UK economy which, while currently still growing, could be
affected by the current unease in the wholesale financial and housing markets.
While this could give rise to additional investment opportunities for a cash
rich fund like ourselves, a downturn could affect existing investee companies
and make it harder for the Manager to assess the prospects of new investment
opportunities, as well as potentially affecting asset values. The Company's
policy of having a first legal charge wherever possible, mitigates some of the
investment risks. Other risks and uncertainties are detailed in the Directors
Report and Business Review of the Annual Report and Financial Statements.
Dividend reinvestment scheme
I draw to shareholders attention a Dividend Reinvestment Scheme whereby
shareholders may elect to reinvest the whole of the dividend due for payment on
30 May 2008 by subscribing for New Ordinary Shares and New C Shares. The
Circular dated 18 April 2008 which is enclosed with the Annual Report and
Financial Statements 'Introduction of a Dividend Reinvestment Scheme; details
the mechanics of this Scheme.
Proposed change to the Company's Articles of Association
I draw shareholders attention to the proposed resolution to change the Articles
of Association, which is described in detail in the Directors' Report and
Business Review of the Annual Report and Financial Statements. The new
provisions of the Companies Act 2006 include the requirement for Directors to
avoid actual or potential conflicts of interest with effect from 1 October 2008.
The Directors are proposing a resolution to align with current legislation
actual or potential conflict situations, should it be in the company's best
interests to do so, and to allow conflicts of interest to be dealt with in a
similar way to the current position.
Results, dividends and prospects
Overall, despite the general economic risks referred to above, your Board
remains positive on the outlook of the Company and its investment portfolio. We
believe that the income generation potential of the portfolio remains strong,
while we have some particularly interesting technology investments which we
believe could prove to be strong generators to shareholder value in the future.
As at 31 December 2007, the net asset value of the Company's Ordinary Shares was
114.1 pence (2006: 114.4 pence) and the net asset value for the C Shares 92.7
pence (2006: 94.9 pence). The revenue return before tax for the Ordinary Shares
was £738,000 (2006: £658,000) and for the C Shares the revenue return before tax
was £1,538,000 (2006: £947,000).
The first dividend for the new financial year will be 4.0 pence per Ordinary
Share (comprising 2.0 pence from revenue profits and 2.0 pence from realised
capital profits) and 1.5 pence per C Share (from revenue profits). Dividends
will be payable on 30 May 2008 to those shareholders on the register on 2 May
2008.
Dr Neil Cross
Chairman
18 April 2008
Statement of Directors' responsibilities
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 the Directors have elected to prepare the
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law).
The financial statements are required by law to give a true and fair view of the
state of affairs of the Company and of the income statement of the Company for
the year. In preparing these financial statements, the Directors are required
to:
• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed; 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 the financial statements comply with the
Companies Act 1985. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company's website. Legislation in the
United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Income statement
Ordinary shares
Year ended 31 December 2007 Year ended 31 December 2006
Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses)
on investments 3 - 664 664 - (3) (3)
Investment
income 4 932 - 932 832 - 832
Investment
management fees (113) (340) (453) (117) (351) (468)
Other expenses (81) - (81) (57) - (57)
Return/(loss)
on ordinary
activities
before tax 738 324 1,062 658 (354) 304
Tax
(charge)/credit
on ordinary
activities 5 (152) 99 (53) (219) 114 (105)
Return/(loss)
attributable to
equity
shareholders 586 423 1,009 439 (240) 199
Basic and
diluted
return/(loss)
per Ordinary
share (pence) 7 4.4p 3.2p 7.6p 3.2p (1.8)p 1.4p
C shares
Year ended 31 December 2007 Year ended 31 December 2006
Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains
on investments 3 - (517) (517) - 202 202
Investment
income 4 1,964 - 1,964 1,322 - 1,322
Investment
management fees (242) (725) (967) (246) (738) (984)
Other expenses (184) - (184) (129) - (129)
Return/(loss)
on ordinary
activities
before tax 1,538 (1,242) 296 947 (536) 411
Tax
(charge)/credit
on ordinary
activities 5 (425) 211 (214) (284) 221 (63)
Return/(loss)
attributable to
equity
shareholders 1,113 (1,031) 82 663 (315) 348
Basic and
diluted
return/(loss)
per Ordinary
share (pence) 7 3.1p (2.9)p 0.2p 2.3p (1.1)p 1.2p
Combined
Year ended 31 December 2007 Year ended 31 December 2006
Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Gains on
investments 3 - 147 147 - 199 199
Investment
income 4 2,896 - 2,896 2,154 - 2,154
Investment
management fees (355) (1,065) (1,420) (363) (1,089) (1,452)
Other expenses (265) - (265) (186) - (186)
Return/(loss)
on ordinary
activities
before tax 2,276 (918) 1,358 1,605 (890) 715
Tax
(charge)/credit
on ordinary
activities 5 (577) 310 (267) (503) 335 (168)
Return/(loss)
attributable to
equity
shareholders 1,699 (608) 1,091 1,102 (555) 547
The total column of this Income Statement represents the profit and loss account
of the Company. The supplementary revenue and capital columns have been prepared
in accordance with the Association of Investment Trust Companies' Statement of
Recommended Practice.
All revenue and capital items in the above statement derive from continuing
operations.
There are no recognised gains or losses other than the results for the year
disclosed above. Accordingly a statement of total recognised gains and losses is
not required.
Balance sheet
Ordinary shares
As at As at
Note 31 December 31 December
2007 2006
£'000 £'000
Fixed Assets
Qualifying 10,688 10,965
Non-qualifying 444 2,332
Total fixed asset investments 11,132 13,297
Current assets
Debtors 223 23
Cash at bank 4,056 2,486
4,279 2,509
Creditors: amounts falling due (218) (321)
within one year 4,061 2,188
Net current assets 15,193 15,485
Net assets
Capital and reserves:
Called up share capital 6,795 6,795
Share premium 165 165
Special reserve 5,554 5,554
Capital redemption reserve 400 400
Own treasury shares reserve (282) (56)
Realised capital reserve 4,067 3,432
Unrealised capital reserve (2,092) (1,276)
Revenue reserve 586 471
Equity shareholders' funds 15,193 15,485
Net asset value per Ordinary share (pence) 8 114.1 114.4
C shares
As at As at
Note 31 December 31 December
2007 2006
£'000 £'000
Fixed Assets
Qualifying 14,193 3,116
Non-qualifying 14,967 28,430
Total fixed asset investments 29,160 31,546
Current assets
Debtors 136 332
Cash at bank 4,229 2,145
4,365 2,477
Creditors: amounts falling due (650) (344)
within one year 3,715 2,133
Net current assets 32,875 33,679
Net assets
Capital and reserves:
Called up share capital 17,740 17,740
Special reserve 15,768 15,768
Realised capital reserve (745) (505)
Unrealised capital reserve (600) 190
Revenue reserve 712 486
Equity shareholders' funds 32,875 33,679
Net asset value per C share (pence) 8 92.7 94.9
Combined
As at As at
Note 31 December 31 December 2006
2007
£'000 £'000
Fixed Assets
Qualifying 24,881 14,081
Non-qualifying 15,411 30,762
Total fixed asset investments 40,292 44,843
Current assets
Debtors 359 355
Cash at bank 8,285 4,631
8,644 4,986
Creditors: amounts falling due (868) (665)
within one year 7,776 4,321
Net current assets 48,068 49,164
Net assets
Capital and reserves:
Called up share capital 24,535 24,535
Share premium 165 165
Special reserve 21,322 21,322
Capital redemption reserve 400 400
Own treasury shares reserve (282) (56)
Realised capital reserve 3,322 2,927
Unrealised capital reserve (2,692) (1,086)
Revenue reserve 1,298 957
Equity shareholders' funds 48,068 49,164
Reconciliation of movements in shareholders' funds
Ordinary shares
Called up Capital Own Realised Unrealised
share Share Special redemption Treasury capital capital Revenue
capital premium reserve reserve shares reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 January 2006 6,908 165 5,785 287 - 4,311 (1,027) 235 16,664
Net realised gains on - - - - - 246 - - 246
investments in the year
Capitalised investment - - - - - (351) - - (351)
management fees
Tax relief on costs charged - - - - - 114 - - 114
to capital
Share redemptions (113) - (231) 113 - - - - (231)
Purchase of own treasury - - - - (56) - - - (56)
shares
Movement in unrealised - - - - - - (249) - (249)
appreciation
Revenue return attributable - - - - - - - 439 439
to shareholders
Dividends - - - - - (888) - (203) (1,091)
As at 31 December 2006 6,795 165 5,554 400 (56) 3,432 (1,276) 471 15,485
Net realised gains on - - - - - 1,480 - - 1,480
investments in the year
Capitalised investment - - - - - (340) - - (340)
management fees
Tax relief on costs charged - - - - - 99 - - 99
to capital
Purchase of own treasury - - - - (226) - - - (226)
shares
Movement in unrealised - - - - - - (816) - (816)
appreciation
Revenue return attributable - - - - - - - 586 586
to shareholders
Dividends - - - - - (604) - (471) (1,075)
As at 31 December 2007 6,795 165 5,554 400 (282) 4,067 (2,092) 586 15,193
C shares
Called up Realised Unrealised
share Share Special capital capital Revenue
capital premium reserve reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 January 2006 - - - - - - -
Net realised gains on investments in the - - - 12 - - 12
year
Capitalised investment management fees - - - (738) - - (738)
Tax relief on costs charged to capital - - - 221 - - 221
Issue of share capital 17,740 17,740 - - - - 35,480
Issue costs - (1,952) - - - - (1,952)
Cancellation of share premium account - (15,788) 15,788 - - - -
Cost of cancellation of share premium - - (20) - - - (20)
account
Movement in unrealised appreciation - - - - 190 - 190
Revenue return attributable to - - - - - 663 663
shareholders
- - - - - (177) (177)
Dividends
As at 31 December 2006 17,740 - 15,768 (505) 190 486 33,679
Net realised gains on investments in the - - - 274 - - 274
year
Capitalised investment management fees - - - (725) - - (725)
Tax relief on costs charged to capital - - - 211 - - 211
Movement in unrealised appreciation - - - - (790) - (790)
Revenue return attributable to - - - - - 1,113 1,113
shareholders
- - - - - (887) (887)
Dividends
As at 31 December 2007 17,740 - 15,768 (745) (600) 712 32,875
Cash flow statement
Ordinary shares
Year ended Year ended
31 December 2007 31 December 2006
Note £'000 £'000
Operating activities 566 621
Investment income
Deposit interest received 166 102
Investment management fees paid (460) (534)
Other cash payments (72) (259)
Intercompany account movement (100) 114
Net cash inflow from operating activities 9 100 44
Taxation (67) (46)
Capital expenditure and financial investment
Purchase of investments (1,709) (2,073)
Disposal of investments 4,547 1,185
Net cash inflow/(outflow) from investing 2,838 (888)
activities
Equity dividends paid 6 (1,075) (1,091)
Dividends paid
Net cash inflow/(outflow) before financing 1,796 (1,981)
Financing
Purchase of own shares (226) (287)
Net cash (outflow) from financing (226) (287)
Cash inflow/(outflow) in the year 1,570 (2,268)
C shares
Year ended Year ended
31 December 2007 31 December 2006
Note £'000 £'000
Operating activities
Investment income 1,605 750
Deposit interest received 203 314
Investment management fees paid (983) (735)
Other cash payments (141) (109)
Intercompany account movement 288 (114)
Net cash inflow from operating activities 9 972 106
Taxation (61) -
Capital expenditure and financial investment
Purchase of investments (11,900) (31,594)
Disposal of investments 13,960 297
Net cash inflow/(outflow) from investing activities 2,060 (31,297)
Equity dividends paid 6 (887) (177)
Dividends paid
Net cash inflow/(outflow) before financing 2,084 (31,368)
Financing
Issue of share capital (net of costs) - 33,513
Net cash inflow from financing - 33,513
Cash inflow in the year 2,084 2,145
Combined
Year ended Year ended
31 December 2007 31 December 2006
Note £'000 £'000
Operating activities
2,171 1,371
Investment income
Deposit interest received 369 416
Investment management fees paid (1,443) (1,269)
Other cash payments (213) (368)
Intercompany account movement 188 -
9 1,072 150
Net cash inflow from operating activities
Taxation (128) (46)
Capital expenditure and financial investment
Purchase of investments (13,609) (33,667)
Disposal of investments 18,507 1,482
Net cash inflow/(outflow) from investing activities 4,898 (32,185)
Equity dividends paid 9 (1,962) (1,268)
Dividends paid
Net cash inflow/(outflow) before financing 3,880 (33,349)
Financing
Purchase of own shares (226) 33,513
Issue of share capital (net of costs) - (287)
Net cash (outflow)/inflow from financing (226) 33,226
Cash inflow/(outflow) in the year 3,654 (123)
Notes to the financial statements
for the year ended 31 December 2007
1. Accounting convention
The financial statements have been prepared in accordance with the historical
cost convention, modified to include the revaluation of investments, in
accordance with applicable United Kingdom law and accounting standards and with
the Statement of Recommended Practice 'Financial Statements of Investment Trust
Companies' ('SORP') issued by the Association of Investment Trust Companies ('
AITC') in January 2003 and revised in December 2005. Accounting policies have
been applied consistently in current and prior periods.
True and fair override
The Company is no longer an investment company within the meaning of s266, of
the Companies Act 1985. However, it conducts its affairs as a venture capital
trust for taxation purposes under Part 6 of the Income Taxes Act 2007.
The absence of Section 266 status does not preclude the Company from presenting
its accounts in accordance with the AITC's SORP and furthermore the Directors
consider it appropriate to continue to present the accounts in accordance with
the SORP. Under the SORP, the financial performance of the Company is
presented in an Income Statement in which the total column is the profit and
loss account of the Company.
In the opinion of the Directors the presentation adopted enables the Company to
report in a manner consistent with the sector within which it operates. The
Directors therefore consider that these departures from the specific provisions
of Schedule 4 of the Companies Act 1985 relating to the form and content of
accounts for companies other than investment companies and these departures from
accounting standards are necessary to give a true and fair view. The departures
have no effect on the total return or balance sheet.
2. Accounting policies
Investments
Quoted and unquoted equity investments
In accordance with FRS 26 'Financial Instruments Measurement', quoted and
unquoted equity investments are designated as fair value through profit or loss
('FVTPL'). Investments listed on recognised exchanges are valued at the closing
bid prices at the end of the accounting period. Unquoted investments' fair
value is determined by the Directors in accordance with the International
Private Equity and Venture Capital Valuation Guidelines (IPEVCV guidelines).
Fair value movements on equity investments and gains and losses arising on the
disposal of investments are reflected in the capital column of the Income
Statement in accordance with the AITC SORP and realised gains or losses on the
sale of investments will be reflected in the realised capital reserve, and
unrealised gains or losses arising from the revaluation of investments will be
reflected in the unrealised capital reserve.
Unquoted loan stock
Unquoted loan stock is classified as loans and receivables in accordance with
FRS 26 and carried at amortised cost using the Effective Interest Rate method ('
EIR') less impairment. Movements in the amortised cost relating to interest
income are reflected in the revenue column of the Income Statement, and hence
are reflected in the Revenue reserve, and movements in respect of capital
provisions are reflected in the capital column of the Income Statement and are
reflected in the Realised capital reserve following sale, or in the Unrealised
Capital reserve on revaluation. Loan stocks which are not impaired or past due
are considered fully performing in terms of contractual interest and capital
repayments and the Board does not consider that there is a current likelihood of
a shortfall on security cover for these assets. For unquoted loan stock, the
amount of the impairment is the difference between the asset's carrying value
and the present value of estimated future cash flows, discounted at the
effective interest rate.
Floating rate notes
In accordance with FRS 26 'Financial Instruments Measurement', floating rate
notes are designated as fair value through profit or loss ('FVTPL'). Floating
rate notes are valued at market bid price at the balance sheet date.
Warrants, convertibles and unquoted equity derived instruments
Warrants, convertibles and unquoted equity derived instruments are only valued
if their exercise or contractual conversion terms would allow them to be
exercised or converted as at the balance sheet date, and if there is additional
value to the Company in exercising or converting as at the balance sheet date.
Otherwise these instruments are held at nil value. The valuation techniques used
are those used for the underlying equity investment.
Investments are recognised as financial assets on legal completion of the
investment contract and are de-recognised on legal completion of the sale of an
investment.
Dividend income is not recognised as part of the fair value movement of an
investment, but is recognised separately as investment income through the
revenue reserve when a share becomes ex-dividend.
Loan stock accrued interest is recognised in the Balance Sheet as part of the
carrying value of the loans and receivables at the end of each reporting period.
It is not the Company's policy to exercise control or significant influence over
investee companies. Therefore in accordance with the exemptions under FRS 9 '
Associates and joint ventures', those undertakings in which the Company holds
more than 20 per cent. of the equity are not regarded as associated
undertakings.
Investment income
Quoted and Unquoted equity income
Dividend income is included in revenue when the investment is quoted
ex-dividend.
Unquoted Loan stock income
The fixed returns on non-equity shares and debt securities are recognised on a
time apportionment basis using an effective interest rate over the life of the
financial instrument.
Bank interest income
Interest income is recognised on an accrual basis using the rate of interest
agreed with the bank.
Floating rate note income
Floating rate note income is recognised on an accrual basis using the interest
rate applicable to the floating rate note at that time..
Investment management fees and other expenses
All expenses have been accounted for on an accruals basis. Expenses are charged
through the Revenue account except the following which are charged through the
realised capital reserve:
• 75 per cent. of Management fees are allocated to the capital
account to the extent that these relate to an enhancement in the value of the
investments and in line with the Board's expectation that over the long term 75
per cent. of the Company's investment returns will be in the form of capital
gains; and
• expenses which are incidental to the purchase or disposal of an
investment are charged through the realised capital reserve.
Under the terms of the Management Agreement, total expenses including management
fees and excluding performance fees will not exceed 3.5 per cent. of net asset
value at the year end.
Taxation
Taxation is applied on a current basis in accordance with FRS 16 'Current tax'.
Taxation associated with capital expenses is applied in accordance with the
SORP. In accordance with FRS 19 'Deferred tax', deferred taxation is provided
in full on timing differences that result in an obligation at the balance sheet
date to pay more tax or a right to pay less tax, at a future date, at rates
expected to apply when they crystallise based on current tax rates and law.
Timing differences arise from the inclusion of items of income and expenditure
in taxation computations in periods different from those in which they are
included in the financial statements. Deferred tax assets are recognised to the
extent that it is regarded as more likely than not that they will be recovered.
The specific nature of taxation of venture capital trusts means that it is
unlikely that any deferred tax will arise. The Directors have considered the
requirements of FRS 19 and do not believe that any provision should be made.
Performance incentive fee
In the event that a performance incentive fee crystallises, the fee will be
allocated between revenue and realised capital reserves based upon the
proportion to which the calculation of the fee is attributable to revenue and
capital returns.
Reserves
Realised capital reserves
The following are disclosed in this reserve:
• gains and losses compared to cost on the realisation of investments;
• expenses, together with the related taxation effect, charged in
accordance with the above policies;
• realised exchange differences of a capital nature; and
• dividends paid to equity holders.
Unrealised capital reserves
The following are disclosed to this reserve:
• increases and decreases in the valuation of investments against cost held
at the period end; and
• unrealised exchange differences of a capital nature.
Special reserve
This reserve is distributable and is primarily used for the cancellation of the
Company's share capital.
Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is
diminished through the repurchase of the Company's own shares.
Own shares held reserve
This reserve accounts for amounts by which the distributable reserves of the
Company are diminished through the repurchase of the Company's own shares for
Treasury.
Share premium reserve
This reserve accounts for the difference between the price paid for shares and
the nominal value of the shares less, issue costs and transfers to the special
reserve.
Dividends
In accordance with FRS 21 'Events after the balance sheet date', dividends
declared by the Company are accounted for in the period in which the dividend
has been paid or approved by shareholders in an Annual General Meeting.
Foreign currency
Transactions denominated in foreign currencies are recorded in the local
currency at the actual exchange rates as at the date of transaction. Monetary
assets and liabilities denominated in foreign currencies at the year end are
reported at the rates of exchange prevailing at the year end. Any gain or loss
arising from a change in exchange rates subsequent to the date of the
transaction is included as an exchange gain or loss in the capital reserve or in
the revenue account depending on whether the gain or loss is of a capital or
revenue nature respectively.
C Shares
Until such time that C shares are converted into Ordinary shares in 2011, 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.
3. Gains/(losses) on investments
Year ended Year ended
31 December 2007 31 December 2006
Ordinary C Ordinary C
Shares Shares Total Shares Shares Total
£'000 £'000 £'000 £'000 £'000 £'000
Unrealised (losses)/gains on
investments held at fair (711) (760) (1,471) (260) 190 (70)
value through profit and
loss account
Unrealised (impairments)/
gains on investments held at (105) (30) (135) 13 22 35
amortised cost
Unrealised (losses)/gains
sub total (816) (790) (1,606) (247) 212 (35)
Realised gains on 1,487 282 1,769 297 - 297
investments held at fair
value through profit and
loss account
Realised impairments on
investments held at - - - - - -
amortised cost
Realised gains sub total 1,487 282 1,769 297 - 297
Net movement on foreign
exchange on investments hald 3 4 7 (42) 1 (41)
at fair value through profit
or loss account
Commission on purchase and
disposal on investments held (10) (13) (23) (11) (11) (22)
at fair value through profit
or loss account (7) (9) (16) (53) (10) (63)
Total 664 (517) 147 (3) 202 199
Investments valued on amortised cost basis are unquoted loan stock
investments.
4. Investment Year ended Year ended
income
31 December 2007 31 December 2006
Ordinary C Ordinary C
Shares Shares Total Shares Shares Total
£'000 £'000 £'000 £'000 £'000 £'000
Income recognised on
investments held at fair
value through profit and
loss
UK dividend income 17 73 90 8 - 8
Foreign investment income - - - 8 - 8
Management fees received 14 - 14 7 - 7
from equity investments
Floating rate note
interest - 1,037 1,037 - 889 889
Bank deposit interest 172 211 383 105 318 423
203 1,321 1,524 128 1,207 1,335
Income recognised on
investments held at
amortised cost
Return on loan stock
investments 729 643 1,372 704 115 819
932 1,964 2,896 832 1,322 2,154|
Interest income earned on impaired investments at 31 December 2007 for Ordinary
shares amounted to £86,000 (2006: £46,000 ) and for C shares amounted to £32,000
(2006: £nil). These investments are all held at amortised cost.
5. Tax charge/(credit) on
ordinary activities
Ordinary Shares Year ended Year ended
31 December 2007 31 December 2006
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Return before taxation 738 324 1,062 658 (354) 304
Tax on profit at the standard
rate of 30% 221 97 318 197 (106) 91
Over accrual in previous year (2) - (2) 27 (8) 19
219 97 316 224 (114) 110
Factors affecting the charge
Non-taxable gains - (199) (199) - - -
Tax attributable to capitalised
expenses 99 (99) - 114 (114) -
Expenses charged to capital (99) 99 - (114) 114 -
Non-taxable income (5) - (5) (5) - (5)
Consortium relief (56) - (56) - - -
Adjustment for effectve rate of
tax (6) 3 (3) - - -
152 (99) 53 219 (114) 105
C Shares Year ended Year ended
31 December 2007 31 December 2006
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Return before taxation 1,538 (1,242) 296 947 (536) 411
Tax on profit at the standard
rate of 30% 461 (373) 88 284 (161) 123
Over accrual in previous year (2) - (2) - - -
459 (373) 87 284 (161) 123
Factors affecting the charge
Non-taxable gains - 155 155 - (60) (60)
Tax attributable to capitalised
expenses 211 (211) - 221 (221) -
Expenses charged to capital (211) 211 - (221) 221 -
Non-taxable income (23) - (23) - - -
Adjustment for effectve rate of
tax (11) 7 (5) - - -
425 (211) 214 284 (221) 63
The tax charge for the year for Ordinary shares is lower than the standard rate
of corporation tax of 30 per cent., and higher for C shares. The differences are
explained above.
Notes
(i) Venture Capital Trusts are not subject to corporation tax on capital
gains.
(ii) Tax relief on expenses charged to capital has been determined by
allocating tax relief to expenses by reference to the applicable corporation tax
rate of 30 per cent. and allocating the relief between revenue and capital in
accordance with the SORP.
(i) No deferred tax asset or liability has arisen in the year.
6. Dividends
Ordinary shares Year ended 31 December 2007 Year ended 31 December 2006
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Dividend of 4.0p
(capital) per share - - - - 550 550
paid on 26 May 2006
Dividend of 4.0p
(1.5p revenue and - - - 203 338 541
2.5p capital) per
share paid on 3
November 2006
Dividend of 4.0p
(1.5p revenue and 204 337 541 - - -
2.5p capital) per
share paid on 25 May
2007
Dividend of 4.0p
(2.0p revenue and 267 267 534 - - -
2.0p capital) per
share paid on 2
November 2007
471 604 1,075 203 888 1,091
C shares Year ended 31 December 2007 Year ended 31 December 2006
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Revenue dividend of
0.5p per share paid - - - 177 - 177
on 3 November 2006
Revenue dividend of
1.0p per share paid 355 - 355 - - -
on 25 May 2007
Revenue dividend of
1.5p per share paid 532 - 532 - - -
on 2 November 2007
887 - 887 177 - 177
In addition to the dividends summarised above, the Directors have declared a
first dividend of 4.0 pence per Ordinary share and 1.5 pence per C share to be
paid on 30 May 2008 to shareholders on the register at 2 May 2008.
7. Basic and diluted return per share
Year ended Year ended
31 December 2007 31 December 2006
Revenue Capital Total Revenue Capital Total
Ordinary shares (pence per
share) 4.4 3.2 7.6 3.2 (1.8) 1.4
C shares (pence per share) 3.1 (2.9) 0.2 2.3 (1.1) 1.2
Ordinary shares
Revenue return per Ordinary share is based upon the net revenue return
attributable to shareholders for the year of £586,000 (2006: £439,000) in
respect of the weighted average number of shares in issue during the year, being
13,438,783 (2006: 13,661,733).
Capital return per Ordinary share is based upon the net capital profit
attributable to shareholders for the year of £423,000 (2006: loss £240,000) in
respect of the same weighted average number of shares as for the revenue return
above.
C shares
Revenue return per C share is based upon the net revenue return attributable to
shareholders for the year of £1,113,000 (2006: £663,000) in respect of the
weighted average number of shares in issue during the year, being 35,479,122
(2006: 35,479,122).
Capital return per C share is based upon the net capital loss attributable to
shareholders for the year of £1,031,000 (2006: loss £315,000) in respect of the
same weighted average number of shares as for the revenue return above.
8. Net asset value per share
The net asset values per share at the year end calculated in accordance with the
Articles of Association were as follows, based upon the shares in issue, less
the treasury shares of 13,317,542 Ordinary Shares and 35,479,122 C Shares in
issue at 31 December 2007, (2006: 13,534,404 Ordinary Shares and 35,479,122 C
Shares).
31 December 2007 31 December 2006
Ordinary C Ordinary C
shares shares shares shares
Net asset value per share attributable 114.1 92.7 114.4 94.9
(pence)
9. Reconciliation of net return on ordinary activities before taxation to net cash inflow from operating
activities
Year ended Year ended
31 December 2007 31 December 2006
Ordinary C Ordinary C
Shares Shares Shares Shares
£'000 £'000 £'000 £'000
Revenue return on ordinary 738 1,538 658 947
activities before taxation
Investment management fee (340) (725) (351) (738)
charged to capital
Movement in accrued amortised (196) (202) (106) (88)
loan stock interest
Decrease/(increase) in debtors (12) 40 32 (180)
(Decrease)/increase in creditors 10 33 (303) 279
Intercompany account movement (100) 288 114 (114)
Net cash inflow/(outflow) from 100 972 44 106
operating activities
10. Post balance sheet events
Since 31 December 2007 the Company has completed the following investments:
• Investment in Blackbay Limited of £85,000
• Investment in Consolidated Communications Management Limited of £33,000
• Investment in Opta Sportsdata Limited of £625,000
• Investment in Rostima Limited of £138,000
• Sale of Abbey National FRN for £5,001,000
• Proposal of Dividend Reinvestment Scheme as described in the Chairman's
Statement
11. Related party transactions
The Manager, Close Ventures Limited, is considered to be a related party by
virtue of the fact that it is party to a management contract from the Company.
During the year, services of a total value of £1,426,000 (2006:£1,452,000) were
purchased by the Company from Close Ventures Limited. At the financial year end,
the amount due to Close Ventures Limited disclosed as accruals and deferred
income was £347,000 (2006: £364,000).
Buy-backs of Ordinary shares during the period were transacted through
Winterflood Securities Limited, a subsidiary of Close Brothers Group plc. A
total of 216,862 shares were purchased for cancellation at an average price of
99.4 pence per share.
12. Financial Information
The information set out in this announcement does not constitute the Company's
statutory accounts within the terms of Section 240 of the Companies Act 1985 for
the year ended 31 December 2007 and 31 December 2006, but is derived from those
statutory accounts. Statutory accounts for the year ended 31December 2006 have
been delivered to the Registrar of Companies and those for the year ended 31
December 2007 will be delivered following the Company's Annual General Meeting.
The auditors reported on those accounts; their report was unqualified and did
not contain a statement under Section 237(2) or (3) of the Companies Act 1985.
Whilst the financial information included in this preliminary announcement has
been computed in accordance with United Kingdom Generally Accepted Accounting
Practice (UK GAAP), this announcement does not itself contain sufficient
information to comply with UK GAAP. The Company expect to publish full financial
statements that comply with UK GAAP.
13. Publication
The full Report and Financial Statements is being sent to shareholders and
copies will be made available electronically at www.closeventures.co.uk. The
full Report and Financial Statements will also be made available to the public
at the registered office of the Company, Companies House and via the FSA viewing
facility.
For further information, please contact:
Patrick Reeve
Close Ventures Limited
020 7422 7830
This information is provided by RNS
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