TP70 2008(ii) VCT

Final Results

RNS Number : 0505G
TP70 2008 (ii) VCT PLC
25 June 2012
 



 

 

 

 

TP70 2008 (II) VCT plc

Final Results

 

 

TP70 2008 (II) VCT plc managed by Triple Point Investment Management LLP today announces the final results for the year ended 31 March 2012.

 

These results were approved by the Board of Directors on 20 June 2012.

 

You may view the Annual Report on the Triple Point website www.triplepoint.co.uk at http://www.triplepoint.co.uk/investment-products/venture-capital-trust/tp702008/.

 

About TP70 2008 (II VCT plc

 

TP70 2008 (II) VCT plc ("the Company") is a Venture Capital Trust ("VCT"). The investment manager is Triple Point Investment Management LLP. The Company was launched in November 2007 and raised £23 million (net of expenses) through an offer for subscription.

 

Details of the Fund's progress are discussed in the Chairman's Statement and Investment Manager's Review forming part of the extract from the Financial Statements which follows.

 

Venture Capital Trusts (VCTs)

 

VCTs were introduced in the Finance Act 1995 to provide a means for private individuals to invest in unlisted companies in the UK. Subsequent Finance Acts have introduced changes to VCT legislation. The tax benefits currently available to eligible new investors in VCTs include:

 

·      upfront income tax relief of 30%

·      exemption from income tax on dividends paid; and

·      exemption from capital gains tax on disposals of shares in VCTs

 

The Company has been provisionally approved as a VCT by HM Revenue & Customs. In order to maintain its approval, the Company must comply with certain requirements on a continuing basis. Above all, the Company is required at all times to hold  70% of its investments (as defined in the legislation) in VCT qualifying holdings, of which at least 30% must comprise eligible ordinary shares.

 

For this purpose, a 'VCT qualifying holding' consists of up to £1 million invested in any one year in new shares or securities of a UK unquoted company (which may be quoted on AIM) which is carrying on a qualifying trade, and whose gross assets at the time of investment do not exceed a prescribed limit. The definition of 'qualifying trade' excludes certain activities such as property investment and development, financial services and asset leasing. The Company will continue to ensure its compliance with these qualification requirements.

 

 

Report of the Directors - Financial Summary

Year ended


Year ended


31 March 2012


31 March 2011


£'000


£'000

Net assets

18,595


19,193

Net asset value per share

81.35p


83.96p

Net loss profit before tax

(216)


(287)

Loss per share

(1.07p)


(1.32p)

 

For a £1 investment per share investors with a sufficient income tax liability in the relevant year have already received a 30p tax credit and a first dividend of 1.76p, a second dividend of 1.23p and a third dividend of 1.54p which, taken together with the current NAV of 81.35p, totals 115.88p.

 

TP70 2008 (II) VCT plc ("the Company") is a Venture Capital Trust ("VCT"). The Investment Manager is Triple Point Investment Management LLP ("TPIM"). The Company was launched in November 2007 and raised £23.0 million through an offer for subscription. Initially 70% of the Company's net assets were to be invested in cash and liquid assets prior to investment in VCT qualifying holdings. The remaining 30% directly or indirectly of net assets were to be exposed to a leveraged version of GAM Diversity, a fund of hedge funds. The Company's qualifying investment holdings are in businesses with predictable revenue streams from financially sound customers and aim to generate an attractive income stream and modest growth for shareholders.

 

The Directors' Report on pages 12 to 16 and the Directors' Remuneration Report on pages 17 to 18 have each been drawn up in accordance with the requirements of English law and liability in respect thereof is also governed by English law. In particular, the responsibility of the Directors for these reports is owed solely to TP70 2008 (II) VCT plc.

 

The Directors submit to the members their Annual Report and Financial Statements for the Company for the year ended 31 March 2012. The Report of the Directors includes the Financial Summary, Chairman's Statement, Details of Advisers, Shareholder Information, Directors' Report, Directors' Remuneration Report and the Corporate Governance Statement.

 

Report of the Directors - Chairman's Statement

 

I am writing to present the audited Financial Statements for TP70 2008(II) VCT plc ("the Company") for the year ended 31 March 2012.

 

Results

 

At 31 March 2012 the Company had in place a diversified portfolio of VCT qualifying investments, representing 75% of the value of its investments. Further details of the portfolio are given in the Investment Manager's Review on page 6.

 

The Company's exposure to GAM Diversity 2.5XL now stands at 22% of net assets, which with leverage represents 54% of net assets. The performance of GAM is detailed in the Investment Manager's Review on page 6.

 

Over the year the Company made a loss before taxation of £216,000. This loss was partly attributable to GAM Diversity 2.5XL, which made a loss of £242,000, the realisations and revaluation of some qualifying investments contributed an additional loss of £105,000, offset by a profit of £131,000 for investment income net of operating expenses At the period end the Company's Net Asset Value per share stood at 81.35p.

 

Dividend

 

The Board has resolved to pay a dividend to shareholders of £307,000 or 1.34p per share on 19 October 2012 to shareholders on the register on 12 October 2012. This will bring the total distributed by dividend to shareholders to 5.87p per share.

 

 

Risks

 

The Board believes that the principal risks facing the Company are:

•      investment risk associated with exposure to GAM Diversity 2.5XL

•      investment risk associated with holding VCT qualifying investments

•      failure to maintain approval as a VCT

 

The Board and the Investment Manager continue to work to minimise either the likelihood or potential impact of the second and third risks which also follow from the Company's investment strategy.

 

Outlook

 

With its diversified qualifying investment portfolio now well established,  the Company will continue to focus on monitoring and managing performance.

 

30 April 2013 will mark the end of the Company's five year VCT holding period. In line with the Company's investment strategy, as the year progresses, the Investment Manager and the Company will begin to investigate the realisation of investments to enable the return of funds to shareholders after this date. We will keep shareholders informed of the Company's progress over the coming year.

 

If you have any queries or comments, please do not hesitate to telephone Triple Point Investment Management LLP on 020 7201 8989.

 

 

 

 

James Chadwick Murrin

Chairman

20 June 2012

 

 

 

 

 Investment Manager's Review

 

The Company's objective is to deploy at least 70% of its funds into VCT qualifying investments and, with the remainder of its funds, to offer leveraged exposure to GAM's fund of hedge funds, Diversity, via GAM Diversity GBP 2.5XL. 

 

VCT Qualifying Investments Portfolio

 

As at 31 March 2012 the Company had £14 million deployed in VCT qualifying investments. Some additional investment in VCT qualifying companies took place during the year and following the year end in order to replace realisations and loan repayments from other qualifying investments. The Company continues to exceed the 70% target, and VCT qualifying investments represent 78% of the value of its investments.

 

The portfolio of qualifying investments is split between seventeen companies across cinema digitisation, telecommunications, satellite capacity trading, crematorium management and renewable electricity generation from solar PV and anaerobic digestion. All of these investments are HMRC approved for VCT qualifying purposes.

 

Each of these investments meets Triple Point's investment criteria, with projected revenue generated by good quality customers and the potential for attractive returns. Investments in each sector are subject to rigorous selection criteria, including extensive due diligence and expert technical assessment.

 

Investment Programme Summary

 

The table below shows the changes in qualifying investments made during the year and since the year end in the portfolio.

 

Industry Sector

Cinema Digitisation

Communications

Satellite

Local Authority and NHS

Solar PV

Anaerobic Digestion

Total Qualifying Investments


£'000

£'000

£'000

£'000

£'000

£'000

£'000

Investments at          1 April 2011

8,400

871

871

1,660

1,563

1,000

14,365

Investments made during the year

1,000

-  

-  

-  

-  

500

1,500

Investment disposed of during the year

-  

(686)

(610)

(336)

-  

-  

(1,632)

Investments at        31 March 2012

9,400

185

261

1,324

1,563

1,500

14,233

Investments made since 31 March 2012

-  

-  

-  

-  

1,290

-  

1,290

Investments disposed of since   31 March 2012

-  

-  

-  

(564)


-  

(564)

Loan repayments since 31 March 2012

-  

-  

-  

-  

(140)

-  

(140)

Investments at the date of this report

9,400

185

261

760

2,713

1,500

14,819

 

 

During the year partial realisations were made from the medical gas companies, MGS West Midlands Ltd and MGS North West Ltd and we are pleased to report that following the year end trade sales were completed at a small premium to carrying value. Three of the Company's telecommunications investments successfully completed their contracts and a fourth telecommunications business was able to make repayments while continuing to provide services to its customers.

 

 

 

 

Investment Portfolio Summary

 

Anaerobic Digestion

 

The Company has investments in three companies pursuing opportunities in the generation of electricity from Anaerobic Digestion (AD). AD is the production of biogas through the biological treatment of organic materials using naturally occurring organisms. The businesses in which the Company has invested are engaged in farm-based AD, which is one of the most stable sub-sectors. The process takes place inside sealed tanks and principally produces methane, which is burned to generate electricity, which is then sold to utility companies via a National Grid connection, or to businesses located close to the generator. Income will be derived from the production and sale of electricity which will attract Feed-in Tariffs (FITs).  The technology used in AD is tried and tested. The equipment has been supplied by one of Europe's leading technology suppliers, Envitech.

 

Cinema Digitisation

 

The Company has six holdings in companies that deploy, maintain and operate digital equipment in cinemas in the UK and Continental Europe. The digitisation of cinema projection equipment has enabled significant industry wide print and distribution cost savings and has enhanced box office receipts through 3D technology. Digital cinema projection conversion is paid for under the globally recognised Virtual Print Fee model, through which Film Studios pay for the cost of the deployment over a number of years. The majority of the revenues are paid by the six major investment grade Hollywood Studios.

 

Crematorium Management

 

The Company has one investment in a business that provides crematory and mercury abatement services for the crematoria of a London Borough.

 

Solar PV

 

The Company has invested in three companies that own solar PV panels which are installed on residential properties. These were all installed and generating electricity before 12 December 2011, so they are in receipt of the higher Feed-in Tariffs (FITs) applicable to installations made before that date. These tariffs are index-linked and have been set for 25 years, providing the companies with a long term, predictable cash flow.

 

GAM review

 

Over the year to 30 March 2012, GAM Diversity 2.5XL lost 5.76%, the HFRX Global Hedge Fund index lost 6.34% and the FTSE All Share gained 1.39%.  

 

GAM report that 2011 was a difficult year for investors. Corporate earnings results were overshadowed by continuing fears of a European sovereign default and a slowdown in global growth and correlations both within asset classes and between different asset classes increased, reflecting the extent of political and central bank intervention in the world's economies.

 

Equity hedge managers found the volatile market conditions in 2011 difficult to navigate. As stock prices plummeted in July, managers reacted as expected by reducing long positioning and neutralising market exposures. Unfortunately, these actions were not completely successful in curtailing losses as the decline in long positions was not matched by gains in short investments. In late August and mid-September, the long/short managers only captured small fractions of the rallies and the biggest gains were the most heavily-shorted companies. The strongest returns came from European managers where depressed valuations offered opportunities for stock pickers, as good earnings numbers emerged in the fourth quarter.  Trading managers found the market conditions extremely difficult, and this was reflected in the average returns for this strategy. GAM therefore sought discretionary managers who would be far more short-term and tactical. There were mixed results over the year from the event driven book, as arbitrage strategies contributed the most, while special situations managers were affected with higher levels of market uncertainty and volatility. During the final quarter of 2011, event driven hedge funds were able to recoup a portion of third-quarter losses as market conditions gradually stabilised.

 

For the first quarter of 2012, GAM Diversity has returned 3.9%, outperforming the HFRI/HFRX Global Hedge Fund Index (GAM hedged) in sterling terms by 0.7%. Correspondingly GAM Diversity 2.5XL returned 8.8%, beating the FTSE All share which returned 6.1% and the HFRX Global hedge Fund Index which returned 3.1%.  Equity and credit markets were buoyed by waning macro concerns, recovering investor sentiment and corporate confidence levels, declining equity market volatility and improving market liquidity. GAM believe that 2012 could be an attractive risk-adjusted year for equity long/short, and have increased allocations in the discretionary macro book to more specialised managers who look at specific assets or regions. Trading allocations have been adjusted to increase weightings to those managers GAM expect to outperform in an uncertain environment.  

 

Outlook

 

The Company continues to maintain an active and diversified portfolio of VCT qualifying investments. Over the coming year we will continue to manage the performance of these businesses. We will also continue to monitor the performance of the Company's investments with GAM.

 

 

 

Claire Ainsworth

Managing Partner

for Triple Point Investment Management LLP

20 June 2012



 


Report of the Directors - Investment Portfolio 

 


31 March 2012


31 March 2011


        Cost 

     Valuation


        Cost 

     Valuation


£'000

£'000


£'000

£'000

Qualifying holdings

14,233

65.20

13,995

75.01


14,365

66.87

14,365

74.74

Non-qualifying holdings

3,746

17.16

2,039

10.93


3,308

15.39

2,158

11.23

Money market funds

-  

-  

-  

-  


398

1.85

398

2.07


17,979

82.36

16,034

85.94


18,071

84.11

16,921

88.04

Derivative

3,292

15.07

2,054

11.01


3,292

15.32

2,175

11.32

Fixed assets at fair value through profit or loss

21,271

97.43

18,088

96.95


21,363

99.43

19,096

99.36

Cash and cash equivalents

567

2.57

567

3.05


125

0.57

125

0.64


21,838

100.00

18,655

100.00


21,488

100.00

19,221

100.00











Unquoted Qualifying Holdings

£'000

£'000


£'000

£'000

Provision of satellite capacity








Satellite Broadband Access Solutions Ltd

261

1.20

-  

-  


871

4.05

871

4.53

Telecommunications










Per Port Services Ltd

185

0.85

185

0.99


310

1.44

310

1.61

WAN Solutions Ltd

-  

-  

-  

-  


184

0.86

184

0.96

Wide Area Network Services Ltd

-  

-  

-  

-  


231

1.08

231

1.20

Wide Area Network Solutions Ltd

-  

-  

-  

-  


146

0.68

146

0.76

Cinema digitisation










21st Century Cinema Ltd

2,000

9.16

2,000

10.72


2,000

9.31

2,000

10.41

Big Screen Digital Services Ltd

1,400

6.41

1,400

7.50


1,400

6.52

1,400

7.28

Cinematic Services Ltd

1,000

4.58

1,000

5.36


1,000

4.65

1,000

5.20

Digima Ltd

2,000

9.16

2,000

10.72


2,000

9.31

2,000

10.41

Digital Screen Solutions Ltd

2,000

9.16

2,000

10.72


2,000

9.31

2,000

10.41

Two For Joy Digital Ltd

1,000

4.58

1,000

5.36


-  

-  

-  

-  

Crematorium management








Furnace Management Services Ltd

760

3.48

760

4.07


910

4.23

910

4.73

Medical gas supplies










MGS North West Ltd

316

1.45

328

1.76


420

1.95

420

2.19

MGS West Midlands Ltd

248

1.14

259

1.39


330

1.54

330

1.72

Electricity generation










Solar










Green Energy for Education Ltd

500

2.29

500

2.68


500

2.33

500

2.60

Convertibox Services Ltd

500

2.29

500

2.68


500

2.33

500

2.60

Beam Carrier Ltd

563

2.58

563

3.02


563

2.62

563

2.93

Anaerobic digestion










Biomass Future Generation Ltd

500

2.29

500

2.68


500

2.33

500

2.60

GreenTec Energy Ltd

500

2.29

500

2.68


-  

-  

-  

-  

Katharos Organic Ltd

500

2.29

500

2.68


500

2.33

500

2.60


14,233

65.20

13,995

75.01


14,365

66.87

14,365

74.74

 

 

 

Financial assets are measured at fair value through profit or loss. The initial best estimate of fair value of these investments that are either quoted or not quoted on an active market is the transaction price (i.e. cost). The fair value of these investments is subsequently measured by reference to the enterprise value of the investee company, which is best deemed to reflect the fair value. Where the Board considers the investee company's enterprise value to remain unchanged since acquisition, investments continue to be held at cost less any loan repayments received.

 


31 March 2012


31 March 2011


        Cost 

     Valuation


        Cost 

     Valuation

Unquoted Non-qualifying Holdings

£'000

£'000


£'000

£'000

Investment holding










Lorngreen Limited *

3,319

15.20

2,038

10.92


3,308

15.39

2,158

11.23


3,319

15.20

2,038

10.92


3,308

15.39

2,158

11.23












        Cost 

     Valuation


        Cost 

     Valuation

Unquoted Non-qualifying Holdings (in liquidation) **

£'000

£'000


£'000

£'000

WAN Solutions Ltd

128

0.59

-  

-  


-  

-  

-  

-  

Wide Area Network Services Ltd

213

0.98

1

0.01


-  

-  

-  

-  

Wide Area Network Solutions Ltd

86

0.39

-  

-  


-  

-  

-  

-  


427

1.96

1

0.01


-  

-  

-  

-  











Money Market Funds








Deutsche Global Liquid Managed Sterling Fund

-  

-  

-  

-  


284

1.32

284

1.48

Ignis Liquidity Fund

-  

-  

-  

-  


114

0.53

114

0.59


-  

-  

-  

-  


398

1.85

398

2.07











 

 

* The 50% holding in Lorngreen has not been accounted for as a subsidiary as the Company does not have control over it, as described on page 32. In accordance with the exception within IAS 28, "Investments in Associates", those undertakings in which the Company holds more than 20% of the equity are not regarded as associated undertakings. They are instead treated as portfolio investments. Therefore these investments are measured at fair value in accordance with IAS 39, "Financial Instruments, Recognition and Measurement". Lorngreen holds 50% of the Company's exposure to GAM Diversity 2.5XL GBP.

 

** During the period these companies made realisations and are now in voluntary liquidation.

 

 

 


 

Report of the Directors - Investment Portfolio - Additional Information

 



31 March 2012

Investee Company Financial Statements




Equity held by TP70 2008 (II)  VCT plc **

Equity held by all funds managed by TPIM LLP

Ending in 2011**

Ending in 2010**


Initial Investment Date

Income recognised by TP70 2008(II) VCT plc for the year

Turnover

Profit/loss before interest and tax

Profit/loss before tax

Net assets before VCT loans

Net assets

Turnover

Profit/loss before tax

Net assets



£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Qualifying Holdings













Beam Carrier Ltd

02-Apr-09

22

28.10

78.00

1,249

260

201

983

202




Satellite Broadband Access Solutions Ltd

17-Mar-09

33

49.90

93.40

1,446

253

181

1,580

270

200

(16)

88

Per Port Services Ltd

17-Mar-09

7

47.50

95.00

229

17

4

471

99

229

(74)

95

WAN Solutions Ltd

17-Mar-09

-  

47.50

95.00

476

(56)

(94)

65

63

574

(12)

157

Wide Area Network Services Ltd

17-Mar-09

-  

49.97

49.97

319

(111)

(138)

19

1

385

(47)

138

Wide Area Network Solutions Ltd

17-Mar-09

-  

47.50

95.00

426

59

25

78

52

513

(92)

27

21st Century Cinema Ltd

31-Mar-09

99

24.52

98.08

297

(338)

(550)

5,418

378

-  

(725)

328

Big Screen Digital Services Ltd

31-Mar-09

67

18.77

97.91

275

(104)

(310)

5,379

1,179

-  

(318)

888

Cinematic Services Ltd

31-Mar-09

49

12.26

98.08

354

(273)

(483)

6,439

839

-  

(332)

721

Digima Ltd

31-Mar-09

98

24.52

98.08

380

(95)

(331)

5,355

1,155

-  

(318)

888

Digital Screen Solutions Ltd

31-Mar-09

98

24.52

98.08

438

(66)

(303)

5,386

1,186

-  

(165)

888

Two For Joy Digital Ltd

15-Feb-12

4

46.38

92.76

n/a

n/a

Furnace Management Services Ltd

17-Mar-09

54

24.50

49.00

284

102

(180)

1,679

182

285

149

415

MGS North West Ltd

23-Dec-08

3

24.49

48.98

705

214

168

988

781

639

166

613

MGS West Midlands Ltd

30-Oct-08

2

24.50

49.00

906

-33

(121)

670

507

769

286

628

Green Energy for Education Ltd

30-Mar-11

6

14.92

98.78

-  

(69)

(66)

3,244.00

927

n/a

Biomass Future Generations Ltd

30-Mar-11

4

12.52

96.44

-  

(51.00)

(53)

1,257

547

n/a

Convertibox Services Ltd

30-Mar-11

21

24.76

99.51

-  

(77)

(119)

2,837

737

n/a

Green Tec Energy Ltd

27-Feb-12

-  

-  

98.00

n/a

n/a

Katharos Organic Ltd

30-Mar-11

7

11.75

98.68

-  

(27.00)

(29)

521

136

n/a

 

The basis of valuation for all investments is the transaction price. Financial assets are measured at fair value.

* The equity held by the VCT is equal to their voting rights.

** Companies that were not incorporated until 2011 will not produce financial statements until accounting dates ending no earlier than in 2012.


Report of the Directors - Corporate Governance

 

The Board of TP70 2008 (II) VCT plc has considered the principles and recommendations of the Association of Investment Companies Code of Corporate Governance (AIC Code) by reference to the Association of Investment Companies Corporate Governance Guide for Investment Companies (AIC Guide).  The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code (June 2010), as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company.  The Board considers that reporting in accordance with principles and recommendations of the AIC Code, by reference to the AIC Guide which incorporates the UK Corporate Governance Code (June 2010), will provide better information to shareholders.

 

The Company is committed to maintaining high standards of corporate governance and has complied with the recommendations of the AIC Code and the relevant provisions of the UK Corporate Governance Code (June 2010), except as set out and explained at the end of this report in the Compliance Statement.

 

The Corporate Governance Report forms an integral part of the Report of the Directors.

 

Board of Directors

 

The Company has a Board of three Non Executive Directors. The Board regularly reviews the independence of its members and as a result of its review a decision was taken that the TPIM appointee should be replaced by a Director who is independent of TPIM. Therefore Peter Hargreaves resigned as a Director and Baroness Jo Valentine was appointed on 2 June 2011. Under the listing rules the majority of the Board is now considered independent of TPIM.

 

Since all Directors are non-executive and day-to-day management responsibilities are sub-contracted to the Investment Manager, the Company does not have a Chief Executive Officer.  The Directors have a range of business and financial skills which are relevant to the Company; these are described on page 3 of this report.  Directors are provided with key information on the Company's activities, including regulatory and statutory requirements by the Investment Manager.  The Board has direct access to company secretarial advice and compliance services provided by the Investment Manager, which is responsible for ensuring that Board procedures are followed and applicable regulations complied with.  All Directors are able to take independent professional advice in furtherance of their duties.

 

Any appointment of new Directors to the Board is conducted, and appointments made, on merit, with due regard for the benefits of diversity on the board, including gender. All directors are able to allocate sufficient time to the Company to discharge their responsibilities.

 

The Board meets regularly on a quarterly basis, and on other occasions as required, to review the investment performance and monitor compliance with the investment policy laid down by the Board. The Board has a formal schedule of matters specifically reserved for its decision and the agreement between the Company and the Investment Manager has authority and limits beyond which Board approval must be sought.

 

The Investment Manager has authority over the management of the investment portfolio, the organisation of custodial services, accounting, secretarial and administrative services. In practice the Investment Manager makes investment recommendations for the Board's approval. In addition all investment decisions involving other VCTs managed by the Investment Manager are taken by the Board rather than the Investment Manager. Other matters reserved for the Board include:

 

•     the consideration and approval of future developments or changes to the investment policy, including risk and asset allocation;

•     consideration of corporate strategy;

•     approval of the appropriate dividend and any return of capital to be paid to the shareholders;

•     the appointment, evaluation, removal and remuneration of the Investment Manager;

•     the performance of the Company, including monitoring the net asset value  per share; and

•    monitoring shareholder profiles and considering shareholder communications.

 

The Chairman leads the Board in the determination of its strategy and in the achievement of its objectives. The Chairman is responsible for organising the business of the Board, ensuring its effectiveness and setting its agenda, and has no involvement in the day to day business of the Company.  He facilitates the effective contribution of the Directors and ensures that they receive accurate, timely and clear information and that they communicate effectively with shareholders.

 

The Company Secretary is responsible for advising the Board through the Chairman on all governance matters.  All of the Directors have access to the advice and services of the Company Secretary, who has administrative responsibility for the meetings of the Board and its committees.  Directors may also take independent professional advice at the Company's expense where necessary in the performance of their duties. 

The Company's articles of association and the schedule of matters reserved to the Board for decision provide that the appointment and removal of the Company Secretary is a matter for the full Board.

 

The Company's articles of association require that one third of the Directors should retire by rotation each year and seek re-election at the Annual General Meeting, and that Directors newly appointed by the Board should seek re-appointment at the next Annual General Meeting.  The Board complies with the requirement of the UK Corporate Governance Code (June 2010) that all Directors are required to submit themselves for re-election at least every three years and where a Director is not considered to be independent submit themselves for re-election every year.

 

During the year ended 31 March 2012 the following meetings were held:

                                                                                                                     

Directors present

7 Board Meetings

2 Audit Committee Meetings

Chad Murrin (Chairman)

7

2

Michael Stanes (appointed 13 September 2010)

6 (of 7)

2

Peter Hargreaves (resigned 2 June 2011)

1 (of 1)

1 (of 1)

Baroness Jo Valentine (appointed 2 June 2011)

5 (of 6)

1 (of 1)




 

Audit Committee

 

The Board has appointed an Audit Committee, of which Chad Murrin is chairman, comprising the full Board, which deals with matters relating to audit, financial reporting and internal control systems. The committee meets as required and has direct access to Grant Thornton UK LLP, the Company's auditor.

 

The Audit Committee safeguards the objectivity and independence of the auditor by reviewing the nature and extent of non-audit services supplied by the external auditors of the Company, seeking to balance objectivity and value for money.

 

The Audit Committee's terms of reference include the following roles and responsibilities:

·   reviewing and making recommendations to the Board in relation to the Company's published Financial Statements and other formal announcements relating to the Company's financial performance;

·   reviewing and making recommendations to the Board in relation to the Company's internal control (including internal financial control) and risk management systems;

·   periodically considering the need for an internal audit function;

·   making recommendations to the Board in relation to the appointment, re-appointment and removal of and approving the remuneration and terms of engagement of the external auditor;

·   reviewing and monitoring the external auditor's independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional regulatory requirements;

·   monitoring the extent to which the external auditor is engaged to supply non-audit services; and

·   ensuring that the Investment Manager has arrangements in place for the investigation and follow-up of any concerns raised confidentially by staff in relation to propriety of financial reporting or other matters.

 

The committee reviews its terms of reference and effectiveness annually and recommends to the Board any changes required as a result of the review. The terms of reference are available on request from the Company Secretary

 

The Board considers that the members of the committee collectively have the skills and experience required to discharge their duties effectively, and that the chairman of the committee meets the requirements of the UK Corporate Governance Code (June 2010) as to relevant financial experience.

 

The Company does not have an independent internal audit function as it is not deemed appropriate given the size of the Company and the nature of the Company's business.  However, the committee considers annually whether there is a need for such a function and if so would recommend this to the Board.

 

During the year ended 31 March 2012, the audit committee discharged its responsibilities by:

·   reviewing and approving the external auditor's terms of engagement and remuneration;

·   reviewing the external auditor's plan for the audit of the Financial Statements, including identification of key risks and confirmation of auditor independence;

·   reviewing internal controls operated in relation to the Company's business and assessing those controls in minimising the impact of key risks;

·   reviewing periodic reports on the effectiveness of TPIM's compliance procedures;

·   reviewing the appropriateness of the Company's accounting policies;

 

Internal Control

 

The Directors have overall responsibility for keeping under review the effectiveness of the Company's systems of internal controls. The purpose of these controls is to ensure that proper accounting records are maintained, the Company's assets are safeguarded and the financial information used within the business and for publication is accurate and reliable; such a system can only provide reasonable and not absolute assurance against material misstatement or loss. The system of internal controls is designed to manage rather than eliminate the risk of failure to achieve business objectives. As part of this process an annual review of the internal control systems is carried out. The review covers all material controls including financial, operational and risk management systems. The Board regularly reviews financial results and investment performance with the Investment Manager.

 

The Directors have established an ongoing process designed to meet the particular needs of the Company in identifying, evaluating and managing risks to which it is exposed. The process adopted is one whereby the Directors identify all of the risks to which the Company is exposed including, among others, market risk, VCT qualifying investment risk and operational risks which are recorded on a risk register. The controls employed to mitigate these risks are identified and the residual risks are rated taking into account the impact of the mitigating factors. The risk register is updated once a year.

 

TPIM is engaged to provide administrative services including accounting services and retains physical custody of the documents of title relating to investments.

 

Internal control systems include the production and review of quarterly bank reconciliations and management accounts. The VCT is subject to a full annual audit. The auditors are the same auditors as used by other VCTs managed by the Investment Manager. The Audit Partner has access to the Directors of the VCT. The Investment Manager's procedures are subject to internal compliance checks.

 

Risk Management

 

TPIM carries out management of liquid funds in accordance with the policy guidelines laid down and regularly reviewed by the Board. In general the guidelines require that un-invested cash will be held in money market funds. The particular risks they have identified are detailed in the Directors' Report on page 14. The Company has entered into a derivative transaction, further details of which are given in the Chairman's Statement and in note 11 to the Financial Statements.

 

Going Concern

 

After making the necessary enquiries, the Directors confirm that they are satisfied that the Company has adequate resources to continue in business for the foreseeable future. The Directors therefore believe that it is appropriate to continue to apply the going concern basis in preparing the Financial Statements.  There are no borrowings or banking facilities in place nor are they anticipated to be required in future.

 

Relations with Shareholders

 

The Board recognises the value of maintaining regular communications with shareholders. In addition to the formal business of the Annual General Meeting, an opportunity is given to all shareholders to question the Board and the Investment Manager on matters relating to the Company's operation and performance. Proxy voting figures for each resolution will be announced at the Annual General Meeting.  The Board will also respond to any written queries made by shareholders during the course of the year and can be contacted at 4-5 Grosvenor Place, London, SW1X 7HJ. Alternatively, the Investment Manager may be contacted on 020 7201 8989.

 

Compliance Statement

 

The Listing Rules require the Board to report on compliance with the UK Corporate Governance Code (June 2010 provisions throughout the accounting year. With the exception of the limited items outlined and explained below, the Directors consider that the Company has complied throughout the year under review with the provisions set out in UK Corporate Governance Code (June 2010).

 

1.  Whilst there is a process for briefing new Directors they do not receive a full, formal and tailored induction on joining the Board. Such matters are addressed on an individual basis as they arise (B.4.1).

 

2.  Due to the size of the Board and the nature of the Company's business, a formal performance evaluation of the Board, its committees, the individual Directors and the Chairman has not been undertaken. Specific performance issues are dealt with as they arise (B.6, B.6.1).

 

3. The Company does not have a senior Independent Director. The Board does not consider such an appointment appropriate for the Company (A4.1).

 

4. The Company does not conduct a formal review as to whether there is a need for an internal audit function. The Directors do not consider that an internal audit would be an appropriate control for a Venture Capital Trust (C3 .5).

 

5.  As all the Directors are Non-Executive, it is not considered appropriate to appoint a Nomination or Remuneration Committee (D.2.1 and B.2.1).

 

6.  A smaller company should have at least two independent Non-Executive directors and the audit committee should consist of at least two independent Non Executive Directors.  The Board regularly reviews the independence of its members and as a result of their review a decision was taken that the TPIM appointee should be replaced by a Director who is independent of TPIM. (B.1.2, C.3.1)

 

On behalf of the Board

 

 

 

 

 

James Chadwick Murrin

Chairman

20 June 2012



 

 

Report of the Directors - Directors' Responsibility Statement

 

The Directors are responsible for preparing the Report of the Directors 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 elect to prepare the Financial Statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company for that period. In preparing these Financial Statements, the Directors are required to:

 

·      select suitable accounting policies and then apply them consistently;

·      make judgements and accounting estimates that are reasonable and prudent;

·      state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the Financial Statements;

·      prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They 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.

 

In so far as each of the Directors is aware:

 

·      there is no relevant audit information of which the Company's auditor is unaware; and

·      the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

The Company's Financial Statements are published on the TPIM website, www.triplepoint.co.uk. The maintenance and integrity of this website is the responsibility of TPIM and not of the Company. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

 

To the best of our knowledge:

 

·      the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

 

·      the Directors' Report includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces.

 

 

On behalf of the Board

 

 

 

 

 

James Chadwick Murrin

Chairman

20 June 2012

 

 

 

 

 



 

Independent Auditor's Report to the Members of TP70 2008 (II) VCT plc

 

We have audited the Financial Statements of TP70 2008(II) VCT plc for the year ended 31 March 2012 which comprise the Statement of Comprehensive Income, the Balance Sheet, the Statement of Changes in Shareholders' Equity, the Statement of Cash Flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

Respective responsibilities of Directors and auditor

As explained more fully in the Directors' Responsibilities Statement set out on page 23 the Directors are responsible for the preparation of the Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

 

Scope of the audit of the Financial Statements

A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/private.cfm.

 

Opinion on Financial Statements

In our opinion the Financial Statements:

·      give a true and fair view of the state of the Company's affairs as at 31 March 2012 and of its loss for the year then ended;

·      have been properly prepared in accordance with IFRS as adopted by the European Union; and

·      have been prepared in accordance with the requirements of the Companies Act 2006.

 

Opinion on other matters prescribed by the Companies Act 2006

In our opinion:

·      the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and

·      the information given in the Report of the Directors for the financial year for which the Financial Statements are prepared is consistent with the Financial Statements

 

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

 

Under the Companies Act 2006 we are required to report to you if, in our opinion:

·      adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

·      the Financial Statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or

·      certain disclosures of Directors' remuneration specified by law are not made; or

·      we have not received all the information and explanations we require for our audit

 

 

 

 

 

 

Independent auditor's report to the members of TP70 2008 (II) VCT plc

 

 

Under the Listing Rules, we are required to review:

·      the Directors' statement, set out on page 22, in relation to going concern;

·      the part of the Corporate Governance Statement relating to the Company's compliance with the nine provisions of the UK Corporate Governance Code (June 2010) specified for our review; and

·      certain elements of the report to the shareholders by the Board on Directors' remuneration.

 

 

                                                           

Tracey James

Senior Statutory Auditor

for and on behalf of Grant Thornton UK LLP

Statutory Auditor, Chartered Accountants

OXFORD

20 June 2012

 

 

 

 

 

Statement of Comprehensive Income

for the year ended 31 March 2012

 



Year ended


Year ended



31 March 2012


31 March 2011


Note

Revenue

Capital

Total


Revenue

Capital

Total



£'000

£'000

£'000


£'000

£'000

£'000










Investment income

4

575

-  

575


553

-  

553

Gain/(loss) arising on the disposal of investments


-  

559

559


-  

(5)

(5)

(Loss) arising on the revaluation of investments at the year end


-  

(795)

(795)


-  

(198)

(198)

(Loss) arising on the revaluation on derivative transactions at the year end


-  

(121)

(121)


-  

(186)

(186)

Investment return


575

(357)

218


(389)

164










Investment management fees

5

82

245

327


84

252

336

Financial and regulatory costs


25

-  

25


23

-  

23

General administration


9

-  

9


17

-  

17

Legal and professional fees

6

33

-  

33


34

-  

34

Directors' remuneration

7

40

-  

40


41

-  

41

Operating expenses


189

245

434


252

451

Profit/(loss) before taxation


386

(602)

(216)


354

(641)

(287)

Taxation charge/(credit)

8

79

(49)

30


68

(53)

15

Profit/(loss) after taxation


307

(553)

(246)


286

(588)

(302)

Profit and comprehensive income/(loss) for the year


307

(553)

(246)


286

(588)

(302)

Basic and diluted earnings/(loss) per share

9

1.35p

(2.42p)

(1.07p)


1.25p

(2.57p)

(1.32p)

 

 

The total column of this statement is the Statement of Comprehensive Income of the Company prepared in accordance with International Financial Reporting Standards (IFRS).  The supplementary revenue return and capital return columns have been prepared in accordance with the Association of Investment Companies Statement of Recommended Practice (AIC SORP).

 

All revenue and capital items in the above statement derive from continuing operations.

 

This Statement of Comprehensive Income includes all recognised gains and losses.

 

The accompanying notes are an integral part of this statement.

 



 

Balance Sheet

as at 31 March 2012

 

 


Note


31 March 2012


31 March 2011




£'000


£'000







Non current assets






Financial assets at fair value through profit or loss

10


18,088


19,096







Current assets






Receivables

12


15


46

Cash and cash equivalents

13


567


125




582


171







Total assets



18,670


19,267







Current liabilities






Payables and accrued expenses

14


46


53

Current taxation payable



29


21




75


74







Net assets


18,595


19,193







Equity attributable to equity holders






Share capital

15


229


229

Capital redemption reserve



2


2

Special distributable reserve



21,576


21,576

Capital reserve



(3,454)


(2,901)

Revenue reserve



242


287

Total equity



18,595


19,193







Net asset value per share

17


81.35p


83.96p







 

 

The statements were approved by the Directors and authorised for issue on 20 June 2012 and are signed on their behalf by:

 

 

 

 

 

James Chadwick Murrin

Chairman

20 June 2012

 

Company registration number: 6421355

 

The accompanying notes are an integral part of this statement.



 

Statement of Changes in Shareholders' Equity

for the year ended 31 March 2012

 


Issued Capital

Share Redemption Reserve

Special Distributable Reserve

Capital Reserve

Revenue Reserve

Total


£'000

£'000

£'000

£'000

£'000

£'000








Year ended 31 March 2012





Opening balance

229

2

21,576

(2,901)

287

19,193

Dividend paid

-  

-  

-  

-  

(352)

(352)

Transactions with owners

-  

-  

-  

-  

(352)

(352)

(Loss)/profit for the period

-  

-  

-  

(553)

307

(246)

Total comprehensive (loss)/ income for the period

-  

-  

-  

(553)

307

(246)

Balance at 31 March 2012

229

2

21,576

(3,454)

242

18,595

Capital reserve consists of:







Investment holding (losses)




(3,183)



Other realised losses


(271)







(3,454)










Year ended 31 March 2011







Opening balance

229

2

21,608

(2,313)

283

19,809

Purchase of own shares

-  

-  

(32)

-  

-  

(32)

Dividend paid

-  

-  

-  

-  

(282)

(282)

Transactions with owners

-  

-  

(32)

-  

(282)

(314)

(Loss)/profit for the period

-  

-  

-  

(588)

286

(302)

Total comprehensive (loss)/ income for the period

-  

-  

-  

(588)

286

(302)

Balance at 31 March 2011

229

2

21,576

(2,901)

287

19,193

Capital reserve consists of:







Investment holding (losses)




(2,267)



Other realised losses


(634)







(2,901)



 

The capital reserve represents the realised and unrealised gains/(losses) on holding investments and the proportion of Investment Management fees charged against capital. The special distributable reserve was created on court cancellation of the share premium account. The revenue and special distributable reserve are distributable by way of dividend.

 

The accompanying notes are an integral part of this statement.



 

Statement of Cash Flows

for the year ended 31 March 2012

 


Year ended

Year ended



31 March 2012


31 March 2011



£'000


£'000

Cash flows from operating activities





Loss before taxation


(216)


(287)

(Gain)/loss arising on the disposal of investments in the year


(559)


5

Loss arising on the revaluation of investments at the year end


916


384

Cash flow generated by operations


141


102

Decrease/(increase) in receivables


31


25

(Decrease) in payables


(7)


(286)

Taxation paid


(22)


(22)

Net cash flows from operating activities


143


(181)






Cash flow from investing activities





Purchase of financial assets at fair value through profit or loss


(2,011)


(6,563)

Proceeds of sale of financial assets at fair value through profit or loss account


2,662


5,690

Net cash flows from investing activities


651


(873)






Cash flows from financing activities





Purchase of own shares


-  


(32)

Dividends paid


(352)


(282)

Net cash flows from financing activities


(352)


(314)

Net Increase/(decrease) in cash and cash equivalents


442


(1,368)
















Reconciliation of net cash flow to movements in cash and cash equivalents





Opening cash and cash equivalents


125


1,493

Net Increase/(decrease) in cash and cash equivalents


442


(1,368)

Closing cash and cash equivalents


567


125

 

 

The accompanying notes are an integral part of this statement.

 

 

 

 

 

 

 

 

Notes to the Financial Statements

 

1.    Corporate Information  

                                                                                                                        

The Financial Statements of the Company for the year ended 31 March 2012 were authorised for issue in accordance with a resolution of the Directors on 20 June 2012.

 

The Company was admitted for listing on the London Stock Exchange on 6 February 2008.

 

The Company is incorporated and domiciled in Great Britain.  The address of its registered office, which is also its principal place of business, is 4-5 Grosvenor Place, London, SW1X 7HJ.

 

The Company's Financial Statements are presented in Pounds Sterling (£) which is also the functional currency of the Company.

 

The principal activity of the Company is investment.  The Company's investment strategy is to offer combined exposure to GAM Diversity 2.5XL (a leveraged version of GAM's fund of hedge funds) and venture capital investments focused on companies with contractual revenues from financially secure counterparties.

                                                                                                        

                                                                                        

2.   Basis of Preparation and Accounting Policies                                              

 

Basis of Preparation

 

After making the necessary enquiries, the Directors confirm that they are satisfied that the Company has adequate resources to continue in business for the foreseeable future. The Directors therefore believe that it is appropriate to continue to apply the going concern basis in preparing the Financial Statements.  There are no borrowings or banking facilities in place nor are they anticipated to be required going forward.

The Financial Statements of the Company for the year ended 31 March 2012 have been prepared in accordance with accounting policies consistent with International Financial Reporting Standards (IFRS) adopted for use in the European Union and therefore comply with the articles of the EU (IAS) regulation and with the Statement of Recommended Practice ("SORP"), "Financial Statements of Investment Trust Companies and Venture Capital Trusts" issued by the Association of Investment Companies ("AIC") in January 2009, in so far as this does not conflict with IFRS.

 

The Financial Statements have been prepared on a historical cost basis except that investments are shown at fair value through profit or loss.

 

The preparation of Financial Statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported values of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying value of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these judgements.

 

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities relate to:

·    the valuation of unlisted financial investments held at fair value through profit or loss, which are valued on the basis noted below (in the section headed Non-current asset investments).

·    the recognition or otherwise of accrued income on loan notes and similar instruments granted to investee companies, which are assessed in conjunction with the overall valuation of unlisted financial investments as noted above;

 

The appropriateness of the allocation of management expenses between revenue and capital, which is based on the split of the long-term anticipated return between revenue and capital of net income, will impact on the value of distributable reserves.

 

 

 

The key judgements made by Directors are in the valuation of non-current assets.  The estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects that period or in the period of revision and future periods if the revision affects both current and future periods. The carrying value of investments is disclosed in note 10.

 

Another key judgement made by the Board is that the Company owns 50% of the issued share capital of Lorngreen Ltd but does not have control over the company as it does not have influence over the Board. Therefore the Company does not consolidate the results of Lorngreen Ltd.

 

These Financial Statements have been prepared in accordance with the accounting policies set out below which are based on the recognition and measurement principles of IFRS in issue as adopted by the European Union (EU).

 

These accounting policies have been applied consistently for the purposes of preparation of these Financial Statements.

 

Standards Issued but not yet Effective

 

The following new standards, amendments to standards and interpretations are not yet effective for the year ended 31 March 2012, and have not been applied in preparing these Financial Statements. 

 

·           IFRS 9 Financial Instruments (effective 1 January 2015)

·           IFRS 13 Fair Value Measurement (effective 1 January 2013)

·           Presentation of Items of Other Comprehensive Income - Amendments to IAS 1 (effective 1 July 2012)

·           Disclosures - Offsetting Financial Assets and Financial Liabilities - Amendments to IFRS 7 (effective 1 January 2013)

·           Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32 (effective 1 January 2014)

·           Mandatory Effective Date and Transition Disclosures - Amendments to IFRS 9 and IFRS 7 (effective 1 January 2015)

 

These changes will be applied by the Company from the effective date but none of them is expected to have a significant impact on the Company's Financial Statements.

 

Presentation of the Statement of Comprehensive Income

 

In order better to reflect the activities of a Venture Capital Trust, and in accordance with the guidance issued by the Association of Investment Companies, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income.  Prior to 6 April 2012 in accordance with the Company's status as a UK Investment Company under S833 of the Companies Act 2006, net capital returns could not be distributed by way of dividend. This restriction has been removed which means that distributions can now be made from capital returns.

 

Capital Management

 

Capital management is monitored and controlled in accordance with the internal control procedures referred to on page 22. The capital being managed includes equity and fixed interest VCT qualifying investments, hedge fund exposure, cash balances and liquid resources including debtors and creditors.

 

The Company's objectives when managing capital are:

·      to safeguard its ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits for other stakeholders;

·      to ensure sufficient liquid resources are available to meet the funding requirements of its investments and to fund new investments where identified.

 

The Company has no external debt; consequently all capital is represented by the value of share capital, distributable and other reserves.  Total Shareholder equity at 31 March 2012 was £18.6 million (2011: £19.2 million).

 

Non Current Asset Investments

The Company invests in financial assets with a view to profiting from their total return through income and capital growth. These investments are managed and their performance is evaluated on a fair value basis in accordance with a documented investment strategy detailed on page 12, and information about the portfolio is provided internally on that basis to the Company's Board of Directors. Accordingly upon initial recognition the investments and loan notes are designated as "at fair value through profit or loss" ("FVTPL"). Investments are included initially at fair value which is taken to be their cost (excluding expenses incidental to the acquisition which are written off in the Statement of Comprehensive Income and allocated to "capital" at the time of acquisition).  Subsequently investments are valued at "fair value" which is measured as follows:

·    Unlisted investments are fair valued by the Directors in accordance with the International Private Equity and Venture Capital Valuation Guidelines and IAS 39. Fair value is established by using measurements of value such as price of recent transactions, earnings multiples and net assets.

·    Listed investments are fair valued at bid price on the relevant date.

                  

Where securities are designated upon initial recognition as at fair value through profit or loss, gains and losses arising from changes in fair value are included in the Statement of Comprehensive Income for the period as a capital item in accordance with the AIC SORP.  The profit or loss on disposal is calculated net of transaction costs of disposal.

 

Money market funds are designated as non-current asset investments at fair value through profit or loss due to the Company's investment policy of holding a combination of VCT qualifying holdings and monetary assets. Money market funds are valued based on the bid price quoted on the balance sheet date.

 

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 50% shareholding in Lorngreen has not been accounted for as a subsidiary as TP70 2008 (II) VCT plc does not have control over the company. In accordance with the exception within IAS 28, "Investments in Associates", those undertakings in which the Company holds more than 20% of the equity are not regarded as associated undertakings.  Therefore these investments are measured at fair value in accordance with IAS 39, "Financial Instruments, Recognition and Measurement".

 

Derivatives, comprising income swaps, are classified at fair value through profit or loss. Whether gains or losses on derivative transactions fall to be treated as capital or revenue will depend on the nature of the transaction. Both the underlying motives of the transaction and its circumstances are considered to be important in determining whether changes in its value are of a capital or revenue nature. In some circumstances gains or losses may have to be apportioned between capital and revenue to reflect the nature of the transaction.

 

Income

Investment income includes interest earned on bank balances and money market securities and includes income tax withheld at source. Dividend income is shown net of any related tax credit and is brought into account on the ex-dividend date.

 

Fixed returns on investment loans, debt and money market funds are recognised on a time apportionment basis so as to reflect the effective interest rate, provided there is no reasonable doubt that payment will be received in due course.

 

Expenses

All expenses are accounted for on the accruals basis. Expenses are charged to revenue with the exception of the investment management fee, which has been charged 25% to the revenue account and 75% to the capital account to reflect, in the Directors' opinion, the expected long term split of returns in the form of income and capital gains respectively from the investment portfolio.

 

Taxation

 

Corporation Tax payable is applied to profits chargeable to Corporation Tax, if any, at the current rate in accordance with IAS 12 "Income Taxes". The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue return on the "marginal" basis as recommended by the SORP.

 

In accordance with IAS 12, deferred tax is recognised using the balance sheet method providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. The Directors have considered the requirements of IAS 12 and do not believe that any provision should be made.

 

Financial Instruments

The Company's principal financial assets are its investments and the policies in relation to those assets are set out above.  Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities. Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity.

 

Provisions

A provision is recognised when the Company has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, expected future cash flows are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability.

                                                                                                                                          

Where the Company expects some or all of a provision to be reimbursed, for example under an insurance policy, the reimbursement is recognised as a separate asset but only when recovery is virtually certain. The expense relating to any provision is presented in the Statement of Comprehensive Income net of any reimbursement. Where discounting is used, the increase in the provision due to unwinding the discount is recognised as a finance cost.

      

Issued Share Capital

Ordinary shares are classified as equity because they do not contain an obligation to transfer cash or another financial asset.  Issue costs associated with the allotment of shares have been deducted from the share premium account in accordance with IAS 32, "Financial Instruments: Presentation".

 

Cash and Cash Equivalents

Cash and cash equivalents represent cash available at less than three months' notice and are classified as loans and receivable under IAS 39, "Financial Instruments: Recognition and Measurement"

 

Receivables

Receivables are classified as loans and receivable under IAS 39 and are recognised at fair value on initial recognition and subsequently at amortised cost.  An impairment loss is recognised whenever the carrying amount of an asset exceeds the receivable amount.  The recoverable amount is only determined when objective evidence of impairment exists.

 

Trade and Other Payables

Trade and other payables are included at fair value on initial recognition and subsequently at amortised cost. 

 

Reserves

 

The capital reserve represents the realised and unrealised gains/(losses) on holding investments and the proportion of Investment Management fees charged against capital. Neither The special distributable reserve was created on court cancellation of the share premium account. The revenue and special distributable reserve are distributable by way of dividend.

 

 

3.    Segmental reporting     

                             

The Company only has one class of business, being investment activity.  All revenues and assets are generated and held in the UK. 

 

4.    Investment Income


Year ended


Year ended


31 March 2012


31 March 2011


Revenue

Capital

Total


Revenue

Capital

Total


£'000

£'000

£'000


£'000

£'000

£'000

Loan stock interest

574

-  

574


537

-  

537

Income receivable on money market funds

1

-  

1


-  

16

Total

575

-  

575


553

-  

553

 

5.    Investment Management Fees

TPIM provides investment management and administration services to the Company under an Investment Management Agreement effective 6 February 2008 which runs until 6 February 2013 and may be terminated at any time thereafter by not less than twelve months' notice given by either party and which provides for an administration and investment management fee of 1.75% per annum of net assets payable quarterly in arrears. Should such notice be given the Investment Manager would continue to perform its duties under the investment management agreement and to receive its management fee during the notice period.

 

6. Legal and professional fees

Legal and professional fees include the following remuneration paid to the Company's auditor, Grant Thornton UK LLP:


Year ended


Year ended


31 March 2012


31 March 2011


Revenue

Capital

Total


Revenue

Capital

Total


£'000

£'000

£'000


£'000

£'000

£'000

Fees payable to the Company's auditor








·      for the audit of the Company accounts

18

-  

18


20

-  

20

·      Other services related to taxation

4

-  

4


4

-  

4


22

-  

22


24

-  

24

 

 

7.    Directors' Remuneration


Year ended


Year ended


31 March 2012


31 March 2011


Revenue

Capital

Total


Revenue

Capital

Total


£'000

£'000

£'000


£'000

£'000

£'000

Chad Murrin (Chairman)

15

-  

15


15

-  

15

Michael Stanes

13

-  

13


6

-  

6

Baroness Valentine

10

-  

10


-  

-  

-  

Peter Hargreaves

2

-  

2


6

-  

6

Sir John Lucas-Tooth

-  

-  

-  


8

-  

8

Robert Reid

-  

-  

-  


6

-  

6

Total

40

-  

40


41

-  

41

 

The only remuneration received by the Directors was their directors' fees. The Company has no employees other than the Non-Executive Directors. The average number of non-executive Directors in the year was 3. The Directors are considered to be the Company's key management personnel. Full disclosure of key management personnel's remuneration is included in the Directors' Remuneration Report.

 

8.      Taxation

 


Year ended


Year ended


31 March 2012


31 March 2011


Revenue

Capital

Total


Revenue

Capital

Total


£'000

£'000

£'000


£'000

£'000

£'000

Profit/(loss) on ordinary activities before tax

386

(602)

(216)


354

(641)

(287)









Corporation tax @ 20% (2011: 21%)

77

(120)

(43)


74

(135)

(61)

Effect of:








Non taxable (gains) / losses

-  

71

71


-  

82

82

Prior year adjustment

2

-  

2


(6)

-  

(6)









Tax charge/(credit) for the period

79

(49)

30


68

(53)

15









 

Capital gains and losses are exempt from Corporation Tax due to the Company's status as a Venture Capital Trust.

 

 

9.    Loss per share

The loss per share is based on the loss after tax of £246,000 (2011: £302,000 loss) and on the weighted average number of shares in issue during the period of 22,858,626 (2011: 22,894,571).

 

There are no potentially dilutive capital instruments in issue and, therefore, no diluted return per share figures are included in these financial statements.

 

10.  Financial Assets at Fair Value through Profit or Loss

 

The Board's assessment of the key financial instrument risks of the Company is disclosed on page 14 of the Directors' Report.

 

Investments

 

Fair Value Hierarchy:

Level 1: quoted prices on active markets for identical assets or liabilities. The fair value of financial instruments traded on active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the Company is the current bid price.

Level 2: the fair value of financial instruments that are not traded on active markets is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates.  If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: the fair value of financial instruments that are not traded in an active market (for example, investments in unquoted companies) is determined by using valuation techniques. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

 

There have been no transfers between these classifications in the period and the movement in Level 3 instruments is disaggregated below.  The change in fair value is recognised through the Statement of Comprehensive Income.

 

Further details of these investments are provided in the Investment Manager's Review and Investment Portfolio.

 

All items held at fair value through profit or loss were designated as such upon initial recognition.

 

Level 3 valuations include assumptions based on non-observable data, such as discounts applied either to reflect revaluation of the financial assets of the investee company, held at a price of recent investments, or valuations of investments based on their net asset values.

 

 

Movements in investments held at fair value through profit or loss during the year to 31 March 2012 and included in profit or loss were as follows:

 


Level 1

Level 2

Level 3




Money

Derivative

Unquoted


Total


Market Funds

Transaction

Investments


Investments

Year ended 31 March 2012

£'000

£'000

£'000


£'000

Opening cost

398

3,292

17,673


21,363

Opening investment holding losses

-  

(1,117)

(1,150)


(2,267)

Opening fair value at 1 April 2011

398

2,175

16,523


19,096

Purchases at cost

-  

-  

2,011


2,011

Disposal proceeds

(398)

-  

(2,264)


(2,662)

Realised gains

-  

-  

559


559

Investment holding gains/losses

-  

(121)

(795)


(916)

Closing fair value at 31 March 2012

-  

2,054

16,034


18,088

Closing cost

-  

3,292

17,979


21,271

Closing investment holding losses

-  

(1,238)

(1,945)


(3,183)




















Level 1

Level 2

Level 3




Money

Derivative

Unquoted


Total


Market Funds

Transaction

Investments


Investments

Year ended 31 March 2011

£'000

£'000

£'000


£'000

Opening cost

3,360

3,292

13,843


20,495

Opening investment holding losses

-  

(931)

(952)


(1,883)

Opening fair value at 1 April 2010

3,360

2,361

12,891


18,612

Purchases at cost

1,160

-  

5,403


6,563

Disposal proceeds

(4,122)

-  

(1,568)


(5,690)

Realised losses

-  

-  

(5)


(5)

Investment holding losses

-  

(186)

(198)


(384)

Closing fair value at 31 March 2011

398

2,175

16,523


19,096

Closing cost

398

3,292

17,673


21,363

Closing investment holding losses

-  

(1,117)

(1,150)


(2,267)

 

 

Included in the above is an investment of £2,053,527 (2011: £2,175,243) in the derivative transaction with Bank Julius Baer described in note 11.

 

Further details of these investments are provided in the Investment portfolio review.

 

All investments are designated as fair value through profit or loss at the time of acquisition and all capital gains or losses arising on investments are so designated.  Given the nature of the Company's venture capital investments, the changes in fair values of such investments recognised in these Financial Statements are not considered to be readily convertible to cash in full at the balance sheet date and accordingly any gains or losses on these items are treated as unrealised. The impact of reasonably possible changes to inputs in valuations has been considered.

 

The initial best estimate of fair value for the investments made during the year is the transaction price which is cost. The Investment Manager has considered the impact of the reasonably possible movement in key inputs on the fair value of its investments in Cinema Digitisation, based on another Company managed by them realising their investment in the same companies. The impact on the value was not material and therefore no adjustment has been made. The Company has an investment in Satellite Broadband Access Solutions Ltd, a company that provides satellite capacity. During the year the Company received realisations against its investment but it will not receive any further funds. Therefore a full provision for £182,000 has been made against the holding value of the remaining investment.

 

Money market funds are offshore funds which invest in money markets and distribute all net income.  The value of the investments remains constantly at par and they are realisable on demand.

 

11.    Derivative transaction

The Company has made a payment of £3,292,500 to Bank Julius Baer and in return will receive back an equivalent sum plus or minus the performance in the intervening time of GAM Diversity GBP 2.5XL. The transaction will run for a maximum of five years but may be terminated by the Company on three months' notice before the period expires. The loss on this investment in the year is deemed to be a capital item and is therefore included in the capital column of the income statement.

 

The value shown for the derivative transaction represents the amount payable to the Company if the derivative transaction were closed on the balance sheet date.

 

12.  Receivables

 


31 March 2012

31 March 2011



£'000


£'000

Receivables


1


44

Prepayments and accrued income


14


2

Total


15


46

 

13.    Cash and cash equivalents

Cash and cash equivalents comprise deposits with The Royal Bank of Scotland plc.

 

14.  Payables


31 March 2012

31 March 2011



£'000


£'000

Payables


21


35

Accrued expenses


25


18

Total


46


53

 

 

15. Share capital


31 March 2012

31 March 2011

Ordinary Shares of 1p





Authorised





No. Of Shares

50,000,000

50,000,000

Par Value £'000


500


500

Issued & Fully Paid





No. Of Shares

22,858,626

22,858,626

Par Value £'000


229


229

 

16.  Financial Instruments and Risk Management

 

The Company's financial instruments comprise VCT qualifying investments, exposure to a hedge fund, money market instruments, cash balances and liquid resources including debtors and creditors. The Company holds financial assets in accordance with its investment policy detailed in the Directors' Report on page 12

 

The following table discloses the financial assets and liabilities of the Company in the categories defined by

IAS 39, "Financial Instruments; Recognition & Measurement."


Total value

Held for Trading

Loan and receivables

Financial liabilities held at amortised cost

Designated at Fair value through profit or loss

2012






Assets:






Financial assets at fair value through profit or loss

16,034

-  

-  

-  

16,034

Derivative

2,054

2,054

-  

-  

-  

Receivables

1

-  

1

-  

-  

Cash and cash equivalents

567

-  

567

-  

-  


18,656

2,054

568

-  

16,034

Liabilities:






Other payables

21

-  

-  

21

-  

Taxation payable

29

-  

-  

29

-  

Accrued expenses

25

-  

-  

25

-  


75

-  

-  

75

-  







2011






Assets:






Financial assets at fair value through profit or loss

16,523

-  

-  

-  

16,523

Derivative

2,175

2,175

-  

-  

-  

Money market funds

398

-  

-  

-  

398

Receivables

44

-  

44

-  

-  

Cash and cash equivalents

125

-  

125

-  

-  


19,265

2,175

169

-  

16,921

Liabilities:






Other payables

35

-  

-  

35

-  

Taxation payable

21

-  

-  

21

-  

Accrued expenses

18

-  

-  

18

-  


74

-  

-  

74

-  







 

Fixed Asset Investments (see note 10) are valued at fair value. Unquoted investments are carried at fair value as determined by the Directors in accordance with current venture capital industry guidelines. The fair value of all other financial assets and liabilities is represented by their carrying value in the balance sheet. The Directors believe that the fair value of the assets at the year end is equal to their book value.

 

In carrying out its investment activities, the Company is exposed to various types of risk associated with the financial instruments and markets in which it invests. The Company's approach to managing its risks is set out below together with a description of the nature of the financial instruments held at the balance sheet date:

 

Market Risk

 

The Company's VCT qualifying investments are held in small and medium-sized unquoted investments which, by their nature, entail a higher level of risk and lower liquidity than investments in large quoted companies. The Directors and Investment Manager aim to limit the risk attached to the portfolio as a whole by careful selection and timely realisation of investments, by carrying out rigorous due diligence procedures and by maintaining a spread of holdings in terms of industry sector and geographical location. The Board reviews the investment portfolio with the Investment Manager on a regular basis. Details of the Company's investment portfolio at the balance sheet date are set out on page 9.

 

An increase of 1% in the value of investments would increase the capital profits for the period and the net asset value at 29 February 2012 by £180,000. A decrease of 1% would reduce the capital profits and net asset value by the same amount. A movement of 1% is used as it is easy to use this as a multiple to demonstrate the impact of varying changes on the capital profits and net asset value of the Company.

 

The Company has an investment in a leveraged note issued by Bank Julius Baer which, after leverage delivers exposure to GAM's fund of hedge funds.  This exposure is subject to market fluctuations affecting the underlying hedge fund investments. In turn the effect of such fluctuations is magnified by the leverage in the note. Both the Board and the Investment Manager receive regular written reports and oral briefings from GAM.

 

The Company through its subsidiary holding in Lorngreen has a direct holding in GAM Diversity 2.5XL, which carries the equivalent risks.

 

Interest Rate Risk

 

Some of the Company's financial assets are interest bearing, of which some are at fixed rates and some at variable rates. As a result, the Company is exposed to interest rate risk due to fluctuations in the prevailing levels of market interest rates.

 

Investments made into qualifying holdings are part equity and part loan.  The loan element is subject to a fixed interest rate for five years and therefore other than fair value risk there is not an interest rate risk associated with these loans.

 

The amounts held in variable rate investments at the balance sheet date are as follows:                                                                                                  


31 March 2012


31 March 2011


£'000


£'000

Cash on deposit

567


125

Money market funds

-  


398


567


523

                             

An increase in interest rates of 1% would not have a material effect on the revenue profits for the period and the net asset value at 31 March 2012. The Board believes that in the current economic climate a movement of 1% is a reasonable illustration.

 

 

Credit Risk

 

Credit risk is the risk that a counterparty will fail to discharge an obligation or commitment that it has entered into with the Company. The Investment Manager and the Board carry out a regular review of counterparty risk. The carrying value of the financial assets represent the maximum credit risk exposure at the balance sheet date.


31 March 2012

31 March 2011


£'000

£'000

Qualifying investments - loan element

9,159

9,662

Money market funds

-  

398

GAM Diversity 2.5XL

2,038

2,158

Bank Julius Baer note

2,054

2,175

Cash on deposit

567

125

Receivables

1

44


13,819

14,562

 

The Company's bank accounts are maintained with the Royal Bank of Scotland ("RBS"). Should the credit quality or financial position of RBS deteriorate significantly, the Investment Manager will move the cash holdings to another bank.

 

The Company is exposed to GAM Diversity GBP 2.5XL through its holding in Lorngreen Ltd.

Credit risk relating to listed money market funds is mitigated by the funds themselves investing in a portfolio of investment instruments of high credit quality.

 

Credit risk arising on unquoted loan stock held within unlisted investments is considered to be part of market risk as disclosed above.

 

The Company is exposed to the credit risk of the Bank Julius Baer through the leveraged note. Should the credit quality or financial position of the Bank Julius Baer deteriorate significantly the Investment Manager could (subject to notice periods) terminate the note.

 

Liquidity Risk

 

The Company's financial assets include investments in unquoted equity securities which are not traded on a recognised stock exchange and which are illiquid. As a result the Company may not be able to realise some of its investments in these instruments quickly at an amount close to their fair value in order to meet its liquidity requirements.

 

The Company's money market funds were considered to be readily realisable as they were of high credit quality as outlined above.

 

The GAM exposure may have redemption periods that result in investments being illiquid and not readily realisable, and which could result in the premature realisation of other investments of such GAM fund in order for the Company to meet its liquidity requirement.

 

The Company's liquidity risk is managed on a continuing basis by the Investment Manager in accordance with policies and procedures laid down by the Board. The Company's overall liquidity risks are monitored by the Board on a quarterly basis.

 

The Board maintains a capital management policy in which sufficient investments in cash and readily realisable money market funds will be available to pay expenses. At 29 February 2012 these amounted to £567,000 (28 February 2011 £523,000).

 

17.  Net asset value per share

 

The calculation of net asset value per share is based on Net Assets of £18,595,000 (2011: £19,193,000) divided by the 22,858,626 (2011: 22,858,626) Ordinary Shares in issue.

 

18.  Related party transactions

 

Peter Hargreaves, who was a Director of the Company, has an equity interest in TPIM. During the year TPIM provided investment management and administration services to the Company amounting to £327,000 (2011: £336,000). £3,000 was due to TPIM at 31 March 2012 (2011: £7,000).

 

19. Contingent liabilities

 

The Company has no outstanding contingent liabilities at 31 March 2012 or 31 March 2011.

 

20.    Capital commitments

 

The Company has no outstanding commitments other than the additional VCT qualifying investments detailed in the Investment Manager's Review on page 6.

 

21. Post balance sheet events

 

The additional VCT qualifying investments detailed in the Investment Manager's Review on page 6 are the only post balance sheet events.

 

22. Dividends

 

During the year a dividend of 1.54p per share was paid on 22,858,626 shares, which totalled £352,000. 

 

The Board has resolved to pay a dividend to shareholders of £307,000 or 1.34p per share on 19 October 2012 to shareholders on the register on 12 October 2012.

 

 

 


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FR FAMLTMBITMPT