Final Results
Close Brothers Aim Vct PLC
30 May 2006
CLOSE BROTHERS AIM VCT PLC
ANNUAL RESULTS
30 May 2006
Close Brothers AIM VCT PLC ('the Company'), which invests in companies listed on
the Alternative Investment Market, across a variety of sectors, today announces
annual results for the year ended 28 February 2006. This announcement was
approved 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 28
February 2006.
As reported in my interim statement, your Company continued to develop and good
progress was made in the year under review. The D share offer for the 2004/5 tax
year raised the full £15m by its final closing. The total fund value at the end
of the financial year was £46.4m.
During the year your Manager has concentrated on investing the proceeds of the D
share issue and of the top up issues of Ordinary shares, as well as replacing
some of the older investments in the Ordinary portfolio. This was helped by a
buoyant new issues market and in the period under review a total of £10.6m was
invested across the two portfolios in qualifying investments. This puts the
Company comfortably on target to meet its HM Revenue & Customs requirements,
with the Ordinary Portfolio 74% invested at the end of the period and the D
share portfolio 40% invested. The latter has two more years within which to
achieve the 70% threshold.
In the Interim Report last November I referred to a resumption in the payment of
a dividend out of realised capital profits for Ordinary shareholders. It is the
Board's intention that, subject to HM Revenue & Customs approval, twice yearly
dividends will become a regular feature for Ordinary shareholders. D
shareholders, who are invested in a much less mature portfolio will continue to
earn income dividends from non-qualifying investments, and this will be
supplemented by dividends paid out of realised capital as and when profits are
made and realised.
Changes in accounting standards
During the year your Company adopted new Financial Reporting Standards issued by
the Accounting Standards Board as part of the convergence process with
International Reporting Standards for which last year's accounts have been
restated. Net Asset Values are now calculated using bid prices rather than mid
market prices. This has had the initial effect of reducing the reported Net
Asset Value figure by around 2%. Furthermore dividends will in future appear in
the accounts in the period in which they are paid. Thus, the dividends being
declared in respect of these results do not actually feature in the accounts
themselves, 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 was
particularly 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 a
total return (ie: change in NAV plus total dividends of 2.15p paid out in the
year) of 8.2%. This compares favourably with a total return for the AIM Index
for the period of 4.2%.
D Share Portfolio
The D share portfolio performed well in the period, giving its shareholders a
total 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 to
a performance fee if Net Asset Value growth in a year exceeds the average base
rate of The Royal Bank of Scotland plus 2%. I am glad to be able to report that
the outperformance referred to above in respect of both the Ordinary and D share
portfolio has triggered the payment of such a fee. The payments which will be
made in cash will be charged 100% to the capital account and are included in
these results. They amount to £9,267 and £50,309 for the Ordinary share and D
share portfolios respectively.
Dividends
Ordinary Shares
The Board has declared a second interim dividend out of realised capital profits
of 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 in
November 2005 this will make a total distribution of 3.4p per Ordinary share in
respect of the year to 28 February 2006 (2005: 0.7p). The total distribution is
made 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 of
1.0p revenue dividend and 1.0p dividend paid out of realised capital profits;
the latter is subject to HM Revenue & Customs approval. Together with the
dividends declared last November this makes a total distribution of 4.0p per D
share in respect of the year to 28 February 2006. The total distribution is made
up of a revenue dividend of 1.5p and a dividend paid out of realised capital
profits 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 to
manage the discount to NAV at which the shares trade with a view to maintaining
it as close to 8% as possible. During the year under review your Board exercised
its power to buy back for cancellation 1,537,521 Ordinary shares. It also bought
in 8,450 D shares for cancellation. Unfortunately, following the introduction of
the Market Abuse Directive the publication of a weekly Net Asset Value is no
longer sufficient to enable the Company to buy in its own shares during close
periods. This means that for the eight week period before results are published
in May and October the Company is unable to purchase its own shares. I would
like to re-iterate that shareholders wishing to sell at any other time should
first contact the Manager, Close Investment Limited, in the interests of
achieving a reasonable price.
New VCT Tax Rules
Shareholders may have read about the changes in tax rules relating to new
investment in Venture Capital Trusts announced in this year's Budget. This
reduces 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 five
years. For funds raised by future VCTs, the maximum gross assets of a company
before an investment is made will be reduced from £15m to £7m, concentrating new
VCT capital into smaller companies. None of these changes are retrospective, and
they apply only to funds raised after 6 April 2006. They do not therefore
directly impact shareholders in your Company. They are likely, however to shrink
the 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 be
in competition to invest with all existing VCT funds, the pool of VCT money
seeking to invest in companies with gross assets of between £7m and £15m is now
limited following these recent changes.
Outlook
During the first quarter of 2006 there was an increase in the Net Asset Value of
both the Ordinary and D share portfolios. However, more recently the NAV has
weakened in more turbulent market conditions. UK economic growth is expected to
be strong again this year, making a generally favourable background for
investors in small companies. It is, however expected to lag the growth in the
world economy and for this reason mainstream investors are likely to search for
investment opportunities among large companies first, which could leave some
smaller company share prices behind.
The Ordinary and D share portfolios both have money to invest and the pipeline
of new issues is still flowing, although not nearly as strongly as it was in the
final quarter of 2005. After a record fundraising tax year for VCTs, the
challenge for the Manager is not to be forced into paying too high a price for
investments. However, the changes in tax rules referred to above should help, as
all future funds raised will have to abide by the new £7m gross assets rule
rather than the existing less restrictive £15m one. A slight cooling in the new
issue market is not seen as a great concern as it is likely to give the Manager
the chance to make investments at more attractive valuations. Both portfolios
have benefited from the subsequent appreciation of investments made in slower
markets 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 the
year as set out above, accordingly a statement of total recognised gains or
losses is not required.
The total column of the income statement represents the profit and loss account
of the Company. The supplementary revenue return and capital return columns have
been 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 the
year as set out above, accordingly a statement of total recognised gains or
losses is not required.
The total column of the income statement represents the profit and loss account
of the Company. The supplementary revenue return and capital return columns have
been 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 assets
Investments 26,539 4,880 31,419
Current assets
Debtors 193 110 303
Cash at bank 220 119 339
413 229 642
Creditors:
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 reserves
Called up share capital 16,330 2,324 18,654
Share premium 1,449 2,112 3,561
Special reserve 9,691 (66) 9,625
Capital redemption reserve 2,001 38 2,039
Realised 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 28,256
previously stated
Adjustment as required by - - - - - (918) - (918)
the adoption of FRS 26
Adjustment as required by - - - - - - 124 124
the adoption of FRS 21
As at 29 February 2004 as 14,898 - 13,308 157 (1,555) 437 217 27,462
restated
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. Close
Investment Limited is authorised and regulated by the Financial Services
Authority and is a subsidiary of Close Brothers Group plc.
2. Statutory accounts
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the year ended 28 February 2006 or 28 February
2005 but is derived from those accounts. The financial information for the year
ended 28 February 2005 is derived from the statutory accounts delivered to the
Registrar of Companies. This financial information has been restated in order to
comply with the new financial reporting standards as detailed in note 4 below.
The financial information for the year ended 28 February 2006 has been derived
from the statutory accounts for the year which will be delivered to the
Registrar of Companies in due course. The auditors reported on both of these
accounts; their reports were unqualified and did not contain statements under
either 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 capital
transactions with the owners and distributions to owners.
4. Changes in accounting policies
This financial information is prepared on the basis of the accounting policies
as stated in the previous year's statutory accounts with the exception of the
changes as detailed below.
With effect from 1 March 2005, the Company adopted the new Financial Reporting
Standards ('FRS') 21-26 that have been issued by the Accounting Standards Board
as part of the convergence process between United Kingdom Generally Accepted
Accounting Practice ('UK GAAP') with International Financial Reporting Standards
('IFRS'). The effects of the relevant accounting policies and the comparative
figures are detailed below.
Investments
In accordance with FRS 26 'Financial Instruments: Measurement', equity
investments are designated as fair value through profit or loss. The total
column of the Income Statement represents the Company's profit and loss account.
Investments listed on recognised exchanges are valued at the closing bid prices
at the end of the accounting period. 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.
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.
The Directors are conscious of the fact that because shares are traded on AIM
this does not guarantee their liquidity. The nature of AIM investments is such
that the prices can be volatile and realisation may not achieve current book
value, especially when such a sale represents a significant proportion of that
Company's market capital. Nevertheless, on the grounds that the investments are
not intended for immediate realisation, they regard bid-market price as the most
objective and appropriate method of valuation.
Dividends
In accordance with FRS 21 'Events after the balance sheet date', interim
dividends are not accounted for until paid, and final dividends are accounted
for when approved by the shareholders at annual general meeting. Capital
dividends are charged to the realised capital reserve.
Restatement of revenue and unrealised capital reserves
In accordance with FRS 26 'Financial Instruments: Measurement', comparatives for
unrealised capital reserves have been restated in recognition of the change in
accounting policy.
In accordance with FRS 21 'Events after the balance sheet date', comparatives
for revenue reserves have been restated in recognition of the change in
accounting policy.
The effect of FRS 26 as at 28 February 2005 and 29 February 2004 is a decrease
in the unrealised capital reserves as a result of revaluing investments from mid
to bid prices.
The effect of FRS 21 as at 28 February 2005 and 29 February 2004 is a decrease
in the distribution liability as a result of the de-recognition of proposed
dividends thereon and an increase in the revenue reserves.
A reconciliation of reserves incorporating the adjustments and restatements
required 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 £'000
Reconciliation 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 ordinary
activities after taxation of £109,000 (2005: £155,000) whilst the capital return
is 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 32,030,767
Ordinary Shares (2005 32,445,353 Shares) being the weighted average number of
shares in issue during the year.
The diluted return for the year ended 28 February 2005 is based upon the
exercise of the Manager's option, thus assuming a further 3,266,036 shares were
in issue throughout the year. The Manager's share option scheme was replaced
with an incentive fee scheme effective from 1 March 2005. Therefore, there are
no dilutive elements affecting the basic return per Ordinary Share for the year
ended 28 February 2006.
D shares
The revenue return per D Share is based on the revenue return on ordinary
activities after taxation of £293,000 (2005: £36,000) whilst the capital return
is 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 issue
during the year.
The diluted return for the year ended 28 February 2005 is based upon the
exercise of the Manager's option, thus assuming a further 464,799 shares were in
issue throughout the year. The Manager's share option scheme was replaced with
an incentive fee scheme effective from 1 March 2005. Therefore, there are no
dilutive elements affecting the basic return per D Share for the year ended 28
February 2006.
6. Net asset value per share
Ordinary Shares
The net asset value per share is based on net assets attributable to Ordinary
shareholders 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 D
shareholders 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
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