TIDMAQT2 TIDMAQ2C
RNS Number : 2122E
Acuity VCT 2 PLC
16 December 2009
?
ACUITY VCT 2 PLC
Final Results for the Year Ended 30 September 2009
In accordance with DTR 6.3.5 the Final Results of Acuity VCT 2 Plc for the year
ended 30 September 2009 are made available below.
The full Annual Report and Accounts can be accessed via the website
www.acuitycapital.co.uk
References in this announcement to Acuity VCT 2 Plc have been abbreviated to
"the Company" or "the Fund". References to the Investment Manager, Acuity
Capital Management Limited, have been abbreviated to "Acuity Capital".
+---------------------------------------------+------------------+----------+
| Financial Highlights | | |
+---------------------------------------------+------------------+----------+
| Ordinary Shares | | |
+---------------------------------------------+------------------+----------+
| Year ended 30 September | 2009 | 2008 |
+---------------------------------------------+------------------+----------+
| Net assets | GBP28.0m | GBP29.6m |
+---------------------------------------------+------------------+----------+
| Net asset value per Ordinary Share | 88.5p | 93.6p |
+---------------------------------------------+------------------+----------+
| Dividend paid per Ordinary Share | 0.0p | 2.0p |
+---------------------------------------------+------------------+----------+
| Cumulative return to Ordinary Shareholders | | |
| since launch | | |
+---------------------------------------------+------------------+----------+
| Dividends paid per Ordinary Share | 4.5p | 4.5p |
+---------------------------------------------+------------------+----------+
| Net asset value plus dividends paid per | 93.0p | 98.1p |
| Ordinary Share | | |
+---------------------------------------------+------------------+----------+
+-----------------------------------------------------+----------+---------+
| C Shares | | |
+-----------------------------------------------------+----------+---------+
| Year ended 30 September | 2009 | 2008 |
+-----------------------------------------------------+----------+---------+
| Net assets | GBP0.7m | GBP0.7m |
+-----------------------------------------------------+----------+---------+
| Net asset value per C Share | 86.7p | 89.5p |
+-----------------------------------------------------+----------+---------+
| Dividend paid per C Share | 0.0p | 0.0p |
+-----------------------------------------------------+----------+---------+
| Cumulative return to C Shareholders since launch | | |
+-----------------------------------------------------+----------+---------+
| Dividends paid per C Share | 0.0p | 0.0p |
+-----------------------------------------------------+----------+---------+
| Net asset value plus dividends paid per C Share | 86.7p | 89.5p |
+-----------------------------------------------------+----------+---------+
+--------------------------------+-----------------------------------------------+
| Key Dates:- | 16 December 2009 |
| Results Announced | Wednesday 24 February 2010 at 10.15am |
| Annual General Meeting | Paternoster House, 65 St Paul's Churchyard, |
| Venue | London, EC4M 8AB |
| | |
+--------------------------------+-----------------------------------------------+
CHAIRMAN'S STATEMENT
Overview
During the year to 30 September 2009 the FTSE All Share Index increased by 7%
and the AIM market by 3%, with sharp falls in the first half followed by a
dramatic rebound.
Ordinary Shares
As at 30 September 2009 the Net Asset Value (NAV) per ordinary share was 88.5p.
When cumulative dividends of 4.5p are included, the total was 93.0p per ordinary
share, some 1 ½% less than the starting total of the Fund.
In such a volatile year, the management's priority was to support its portfolio
companies without neglecting any opportunities that arose. Throughout the period
the Company met the 70% VCT qualifying investment test.
C Shares
As at 30 September 2009 the NAV per C Share was 86.7p, a decline of 3% over the
year. The C Share pool continues to hold GBP0.5m in cash. As the VCT qualifying
tests are measured on the Company's overall position, the C Shares comfortably
meet those tests.
Co-Investment
As a result of co-investing alongside the other two VCTs managed by Acuity
Capital, the ability to support portfolio companies has been enhanced at a time
when access to capital has often been the decisive factor for companies'
survival.
Portfolio Activity
During the year the Fund invested GBP3.6m of the ordinary share pool of capital.
Details of these transactions are in the Investment Manager's review.
To finance these investments, the Company sold most of its holding in Electra
Private Equity Plc, a fund associated with the Investment Manager. As at 30
September 2009 this investment, together with an investment in CF Acuity Real
Active Management Fund, stood at GBP0.3m (30 September 2008: GBP4.2m). At year
end the Company had a cash balance of 0.4m.
Merger of the Company with Acuity VCT Plc
The boards of Acuity VCT Plc and Acuity VCT 2 Plc (which are both managed by the
Investment Manager) are pleased to announce that they have reached agreement in
principle on terms to merge the companies, subject to approval by shareholders
of both companies, to achieve cost savings for the benefit of all shareholders.
The intention is that this proposed Merger will be completed pursuant to a s.110
scheme of reconstruction under the Insolvency Act 1986. The assets and
liabilities of Acuity VCT Plc would be transferred to the Company in
consideration for new Acuity VCT 2 Plc Ordinary Shares. These would be issued to
Acuity VCT Plc Shareholders on a relative NAV basis. Such a merger on this basis
would be outside the provisions of The City Code on Takeovers and Mergers.
Formal proposals will be forwarded to shareholders of both VCTs shortly.
The main purpose of the proposed Merger is to create a single larger VCT that
will bring a number of benefits to both sets of shareholders:
* a reduction in the annual running costs of the combined VCT compared with the
total annual running
costs of the separate VCTs;
* the creation of a single VCT with a larger capital base over which to spread
administration, regulatory and
management costs;
* participation in a larger VCT with a more diversified portfolio, thereby
spreading the portfolio risk across a
broader range of investments and
businesses;
* increased potential to pay dividends and to reinstate a buy-back programme; and
* greater flexibility in meeting the qualifying VCT requirements.
If the shareholders of both VCTs approve the Merger, it is proposed that the
enlarged Acuity VCT 2 Plc will be renamed Acuity Growth VCT Plc.
Dividend
Although no dividends were paid in the year, total dividends paid to date to
ordinary shareholders have been 4.5p.
Share buy backs
In the light of market conditions, the Board suspended the buy back programme as
of 1 October 2008. The Board will continue to monitor the position closely and
will restore buy backs as and when conditions allow. In particular, the Board
will pay close attention to available liquidity, which should be enhanced if
shareholders approve the proposed Merger.
To facilitate a share buy back programme and to act as a market maker in the
shares, the Company has appointed Matrix Corporate Capital LLP as corporate
broker. It will take steps to reduce the difference between the price paid under
the buy back programme and the price received by a selling shareholder, as well
as matching buyers and sellers of the shares. The Company is unable to buy
shares directly from shareholders. If an investor wishes to sell shares, please
contact Matrix Corporate Capital on 0203 206 7176.
Top Up Offer
Shareholders will also be invited to participate in a Top Up Offer to improve
the overall liquidity of the enlarged VCT and to take advantage of more
favourable investment conditions. The Board will be writing to shareholders
early next year with details of the Offer.
Self Invested Pension Plan (SIPP) service
Working with Cavendish Ware, the Investment Manager has arranged for
shareholders to have the opportunity to place their VCT shares in a SIPP, which
offers additional tax benefits. It should be noted that moving VCT shares into a
SIPP is treated as a disposal for tax purposes, and so has implications for
investors sheltering CGT gains or whose VCTs have not yet reached the end of the
minimum holding period for income tax relief.
Details of this service are being sent to shareholders alongside this report.
Shareholder Communication
If shareholders have any general queries, they should contact the Investment
Manager by telephone or email. The Investment Manager's website provides
information on Acuity Capital and the Fund.
As the Investment Manager is keen to increase communication with shareholders,
its website (www.acuitycapital.co.uk) will include regular investment updates.
Shareholders are encouraged to register their email addresses with the
Investment Manager if they have not already done so.
We would encourage shareholders to come to the Annual General Meeting on 24
February 2010, when two of your portfolio companies will make presentations.
Over time, we intend to stage similar occasions for all the Company's principal
investments, giving shareholders a better insight into the potential of the
Company's portfolio.
Risks
Risks associated with the Company are set out in detail in the Report of the
Directors' and in Note 20 of the Notes to the Accounts. The Board recognises
that opportunities for selling both quoted and unquoted investments may have
been reduced by recent volatility in the financial markets. In addition, the
fair market value of its unquoted holdings may also suffer by reference to
comparable quoted companies and publicly announced transactions. However, the
Company considers that the portfolio has insignificant exchange risk and minor
credit or interest rate risk.
Outlook
As the UK economy starts to recover, it will help to ease the challenges faced
by smaller companies. With careful and supportive management, the portfolio
should be able to regain momentum.
Rupert Pennant-Rea
Chairman
15 December 2009
INVESTMENT STRATEGY
Investment Objective
In accordance with the Prospectus dated 6 October 2004, the Company's objective
is to achieve capital gains and maximise UK tax-free income to its shareholders
from dividends and capital distributions. It is intended that this objective is
to be achieved by investing the majority of the Company's funds in a portfolio
of Qualifying Investments as described under "Investment Strategy" below.
Investment Strategy
The Company offers investors the opportunity to gain access to the venture
capital market.
The investment focus of the Investment Manager has been to seek out established
companies, most of whom are cash positive, in preference to early stage
opportunities.
In addition, investments are normally structured as a mixture of equity and loan
stock. The loan stock represents the majority of the finance provided.
Typically, funds managed by Acuity Capital own a significant percentage of the
equity of the investee companies.
This investment focus, combined with a diversified sector strategy and the
typical investment structure, will, in the opinion of the Directors, contribute
materially to reducing the overall risk of investing in smaller companies.
As at 30 September 2009, the Company has invested in 23 qualifying companies and
4 non-qualifying companies that have been selected for their growth potential
and in a further five qualifying companies which are preparing to trade. The
Directors believe that current economic conditions favour opportunistic
investment and the use of companies preparing to trade allows for the
acquisition of qualifying trades on the most advantageous terms as they are
permitted an additional 18 months in which to identify the trades.
As at 30 September 2009, the Company has no bank indebtedness.
The Directors do not wish the Company to be restricted by having a fixed limit
on what exposure to gearing it may have, apart from the restriction in the
Company's Articles, which limits borrowing to an amount equal to its adjusted
capital and reserves.
Co-investment
The Company also invests alongside the other Acuity VCTs which enables
shareholders to participate in larger unquoted transactions, which tend to have
a lower risk profile than smaller venture capital investments.
Qualifying Investments
The Company intends to invest in companies that it believes have a high growth
potential. In the Directors' opinion, each of these companies should generally
reflect the following criteria:
* A well defined business plan and ability to demonstrate strong demand for its
products or services;
* Products or services that can be supplied at sustainable high margins and be
cash generative;
* Objectives of management and shareholders to be similarly aligned;
* Adequate capital resources or access to further resources to achieve the targets
set out in the business plan; and
* High calibre management teams.
The Company seeks to invest in a diversified portfolio of unquoted, PLUS traded
and AIM quoted companies and will not specialise unduly in any particular
industry sector. Unquoted investments will typically be in companies where the
Company believes that there are reasonable prospects of an exit through a trade
sale or flotation in the medium term.
There are no criteria set by the Directors regarding the size of the target
companies, except, with respect to each specific pool of capital, that an
investee company's gross assets must comply with current UK VCT legislation.
Investments in start-up companies where, in the opinion of the Company, levels
of risk are unacceptably high, in particular the technology sector, will
generally be avoided.
As at 30 September 2009, the Company has invested approximately 89% of its net
assets by valuation in a total of 22 qualifying companies. The average
investment size at cost is GBP0.9m.
Non-Qualifying Investments
Associated Funds
As at 30 September 2009, 1% of total assets by valuation of the Company was
invested in CF Acuity Real Active Management Fund.
Cash Management
In addition to investments held in associated funds, as at 30 September 2009, 3%
of its net funds by valuation of the Company were invested in cash deposits to
provide immediate liquidity, pending suitable qualifying investments being
identified.
Risk Management
Since the Company is flexible with regard to those areas in which it invests, it
aims to achieve a significant degree of diversification and to spread risk by
investing in unquoted, PLUS traded and AIM quoted companies.
In addition, there is no emphasis on any particular industry sector and even the
non-qualifying investments have quite a high level of in-built diversification.
The Company is restricted to investing no more than 15% of the value of its
total assets at the time of investment in any one individual qualifying
investment or non-qualifying investment.
Investment Portfolio
Ordinary Shares
The investment classification by value expressed as a percentage of the net
assets of the ordinary share pool as at 30 September 2009 was as follows:
By Sector
+-------------------------+------------+
| Business Services | 26% |
+-------------------------+------------+
| Consumer | 18% |
+-------------------------+------------+
| Media | 27% |
+-------------------------+------------+
| Manufacturing | 29% |
+-------------------------+------------+
By Asset Type
+-------------------------+------------+
| Unquoted - Loan Stock | 38% |
+-------------------------+------------+
| Unquoted - Ordinary and | 48% |
| Preference shares | |
+-------------------------+------------+
| Accrued Income | 5% |
+-------------------------+------------+
| AIM | 4% |
+-------------------------+------------+
| Creditors | 3% |
+-------------------------+------------+
| Associated Funds | 1% |
+-------------------------+------------+
| Cash | 1% |
+-------------------------+------------+
By Time Investments Held
+-------------------------+------------+
| Between 1 and 3 years | 78% |
+-------------------------+------------+
| Between 3 and 5 years | 21% |
+-------------------------+------------+
| Over 5 years | 1% |
+-------------------------+------------+
C Shares
As at 30 September 2009, GBP0.2m had been invested in ordinary shares in a
qualifying trade, Connect2Media, and the remainder was held in cash.
INVESTMENT MANAGER'S REVIEW
As set out in the Investment Strategy, our aim has been to concentrate our
investments in unquoted companies with significant existing revenues and profits
and to seek to add value through organic growth and "buy & build" strategies.
Access to these types of investment is enhanced through co-investing with the
other Acuity VCTs.
Ordinary Shares
During the year the main portfolio uplifts were in five unquoted companies where
your Company's holdings increased in value. These were The Fin Machine Company,
Loseley Dairy Ice Cream, Amber Taverns, Factory Media and Financial News
Publishing. The largest uplifts were The Fin Machine Company, Loseley Dairy Ice
Cream and Amber Taverns with a respective increase in value of GBP1.1m each. In
addition, Factory Media increased in value by GBP0.7m and Financial News
Publishing by a net GBP0.4m.
A supplier of capital equipment used to manufacture heat exchangers in the
automotive and air conditioning industries, The Fin Machine Company has entered
its new financial year with an order book representing 65% of budgeted revenues.
In 2009, the business opened a new factory in China and has benefited from
increased margins and greater access to a market with growth rates of over 8%
p.a. The potential for the company is significant with long-term forecasts
representing an increase in sales of over 100%.
You may recall that the Company had invested in Hill Station, the AIM listed
company, which was forced into administration in October 2008. However, we
decided that the business was worth supporting as a private equity investment
and, investing alongside its sister VCTs, the Company invested a total GBP0.8m
to acquire the assets and business from the Administrator, rename the business
Loseley Dairy Ice Cream, and support its development. We are pleased to note
that Loseley is beginning to show substantial traction which has allowed an
increase in its value over the year. We are hopeful that Loseley will attract
considerable levels of new business from the major retailers and a full recovery
of the Company's lost investment in Hill Station.
Over the year, Amber Taverns, memorably described by its chairman as the "Aldi
and Lidl of the pub market", acquired a portfolio of 23 pubs at distressed
prices and so increased the number of pubs under management after the sale of 8
unwanted units to a net 45. The acquisition of the additional pubs has been a
success with the retained units responding well to Amber Tavern's management
with its emphasis on the supply of competitively priced beer and a welcoming
modern décor in depressed or city centre locations. With its original portfolio
matching its budget, the overall performance of the company supported an
increase in value.
The strategy of investing heavily in Factory Media, a publisher of extreme
sports titles, digital offering through its central website, www.mpora.com, as
well as individual title websites, has reaped the benefits over the year with
total digital traffic now exceeding 1.7 million monthly unique users from a
comparison figure of 0.4 million last year. This break through in traffic has
permitted a substantial increase in the business' value.
During the second half of the year, we also took the decision to support the
restructuring of a long held investment called Sanastro Limited by placing the
business into administration and taking the calculated but successful risk of
backing the management with an offer to the Administrator. As a result, the
Company has increased materially its ownership of the business and seen a
significant reduction in the business' cost basis while the trading performance
of the business has not only not been damaged but seen an improvement. The new
business, renamed Financial News Publishing, provides newsletters and organises
conferences to the financial sector on such topics as prepaid cards, asset
leasing and accounting issues. After writing off the holding value of Sanastro,
we have been able to increase the value of the Company's holding in Financial
News Publishing by GBP0.4 million.
On the downward side, Target Entertainment Group saw a decrease in value of
GBP0.9m. There was also a reduction in value of GBP0.7m in the net holding value
of Future Noise Music (formerly the business of Acrobat Music Group).
Unfortunately the year also saw a full provision being made of GBP1.0m against
the investment in Emote Games.
Target Entertainment Group, one of the UK's leading television producers and
distributors, benefited from the production of the 7th season of Foyle's War but
the overall TV industry was weak leading to a lower than expected performance in
Target's distribution division. While expected to generate revenues of over
GBP20m, we reduced its holding value until we can see a rebound in the TV
industry.
In order to secure the Company's investment with a fixed charge over its music
catalogue, we restructured Acrobat Music Group with the business emerging as
Future Noise Music. The business also saw a decrease in its revenues as the
failure of Woolworths and Zavvi severely effected its historic distribution
channels. The company has worked hard at establishing new channels and signing
new artists, and we are hopeful that much of the value in the business can be
recovered.
We also made a full provision against the investment in Emote Games came as a
result of its inability to secure additional financing from other investors,
despite positive early data on the acceptance of its online game, The Hunter.
Unfortunately the estimated rates of growth did not materialise in the necessary
time frame and an expected US distribution deal was not secured.
As noted in the Chairman's statement, we sold almost the Company's entire
holding in Electra Private Equity plc over the year to provide liquidity and
support the investments made into unquoted companies.
Portfolio Summary
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Investments | Cost | Cost | Valuation | Valuation | Combined | Combined | % of |
| At 30 | | | Ord. | C Shares | Total | Valuation | Portfolio |
| September | Ord. | C | Shares | GBP'000 | GBP'000 | | by |
| 2009 | Shares | Shares | GBP'000 | | | movement | Value |
| | GBP'000 | GBP'000 | | | | in the | |
| | | | | | | year | |
| | | | | | | GBP'000 | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Acuity | 100 | - | 82 | - | 82 | (18) | 0.3 |
| Business | | | | | | | |
| Services | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Acuity Energy | 100 | - | 82 | - | 82 | (18) | 0.3 |
| | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Acuity | 100 | - | 87 | - | 87 | (13) | 0.3 |
| Manufacturing | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Acuity Rights | 100 | - | 77 | - | 77 | (23) | 0.3 |
| | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Acuity | 100 | - | 82 | - | 82 | (18) | 0.3 |
| Support | | | | | | | |
| Services | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Amber Taverns | 750 | - | 2,511 | - | 2,511 | 1,082 | 9.3 |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Brand | 1,511 | - | 1,488 | - | 1,488 | (23) | 5.5 |
| Acquisitions | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| CF Acuity | 246 | - | 223 | - | 223 | 2 | 0.8 |
| Real Active | | | | | | | |
| Management | | | | | | | |
| Fund | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Connect2Media | 1,276 | 200 | 1,403 | 220 | 1,623 | 128 | 6.0 |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Defaqto | 2,405 | - | 2,786 | - | 2,786 | (451) | 10.3 |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Electra | 92 | - | 122 | - | 122 | (1) | 0.5 |
| Private | | | | | | | |
| Equity Plc | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Emote Games | 1,173 | 23 | - | - | - | (1,043) | 0.0 |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Factory Media | 1,925 | - | 2,850 | - | 2,850 | 721 | 10.6 |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| The Fin | 2,150 | - | 5,814 | - | 5,814 | 1,115 | 21.5 |
| Machine | | | | | | | |
| Company | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Financial | 116 | - | 755 | - | 755 | 732 | 2.8 |
| News | | | | | | | |
| Publishing | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Future Noise | 796 | - | 766 | - | 766 | (30) | 2.8 |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Jelf Group | 250 | - | 142 | - | 142 | (229) | 0.5 |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Keycom | 496 | - | 153 | - | 153 | (51) | 0.6 |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Loseley Dairy | 900 | - | 1,947 | - | 1,947 | 1,047 | 7.2 |
| Ice Cream | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| MA Hubbards | 800 | - | 186 | - | 186 | (241) | 0.7 |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Managed | 888 | - | 169 | - | 169 | 18 | 0.7 |
| Support | | | | | | | |
| Services | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Mount Engineering | 391 | - | 324 | - | 324 | (22) | 1.2 |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Munro Global | 1,615 | - | 2,085 | - | 2,085 | (7) | 7.7 |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Red Reef | 813 | - | 559 | - | 559 | (254) | 2.1 |
| Media | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Sports Media | 500 | - | 27 | - | 27 | (80) | 0.1 |
| Group | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Target | 2,000 | - | 1,467 | - | 1,467 | (923) | 5.4 |
| Entertainment | | | | | | | |
| Group | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Zamano | 750 | - | 577 | - | 577 | 30 | 2.2 |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Total | 22,343 | 223 | 26,764 | 220 | 26,984 | 1,430 | 100.00 |
| Investments | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Other Assets | | | | | | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Cash | | | 391 | 469 | 860 | | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
| Total | 27,155 | 689 | 27,844 | |
+-------------------+---------+---------+-----------+-----------+----------+-----------+-----------+
INVESTMENT MANAGER
The Fund's investments are managed by Acuity Capital. Acuity Capital was
established in 1981 and is authorised and regulated by the Financial Services
Authority.
Acuity Capital has considerable expertise in quoted and unquoted investments and
has a well developed deal flow, including unquoted company proposals that
originate from its own contacts and network, pre-float finance opportunities and
broker led AIM flotations.
Acuity Capital is also the Investment Manager of Acuity VCT Plc, Acuity VCT 3
Plc and CF Acuity Real Active Management Fund, the successor fund to Electra
Active Management Plc.
The Investment Manager has established an Investment Committee comprising three
Acuity Capital executives and two independent members. The independent members
of the Investment Committee are Angela Lane and Tony Everett. After 18 years
working in private equity at 3i, Angela's final role was as a partner in 3i's
Growth Capital business managing the UK Portfolio. Tony has a background as an
entrepreneur and business owner and acts as a consultant to Fleming Family and
Partners Private Equity. In addition, the Investment Committee is chaired by
Hugh Mumford, a senior executive of Electra Partners Group. The Investment
Committee meets as required to consider and review investment proposals.
CO-INVESTMENT ARRANGEMENTS WITH OTHER ACUITY VCTS
The Directors welcome the fact that the Investment Manager has five VCT pools of
funds, Acuity VCT Plc Ordinary Share pool, Acuity VCT Plc 'C' Share pool, Acuity
VCT 2 Plc Ordinary Share pool, Acuity VCT 2 Plc 'C' Share pool and Acuity VCT 3
Plc (together "the Acuity VCTs"), it can use for co-investment. This allows each
fund to spread its investment risk and gain access to larger investments than it
could do on its own. Where a co-investment opportunity arises between the
Company and one or more of the other funds, the Company will invest in an agreed
and consistent proportion, on the same terms and in the same securities as the
funds with which it co-invests. Costs associated with any such investment will
be borne by each fund pro-rata to its investment.
In more detail, the Board has adopted a set of guidelines on its co-investment
arrangements with the Acuity VCTs and the Investment Manager as follows:-
* Other than as set out below, investments will be allocated between the Company
and the Acuity VCTs by reference to the size of each fund and to each fund's
available cash resources.
* Where an opportunity arises for a second or subsequent round of investment in a
company in which one of the Acuity VCTs has invested at an earlier stage, the
fund holding the existing investment will have a preferential right to take up
any pro-rata entitlement it may have in the new financing round. The amount it
invests on this basis will not be taken into account in determining its
co-investment share thereafter.
* The Company will make an investment in which one or more of the Acuity VCTs have
existing investments only when the Board considers that to be in the best
interests of the Company.
* Any potential conflict of interest in a proposed investment by one or more of
the Acuity VCTs will be referred by the Investment Manager to the Board of the
Company and the other relevant Boards.
* In the event of a possible conflict of interest between the Investment Manager
and the Company, the matter will be decided by those Directors who are
independent of the Investment Manager.
The Board of the Company acknowledges that the Investment Manager may
occasionally recommend an allocation of investments on a different basis from
the one described above. For example, an exception may be made to ensure that
one or more of the Company, Acuity VCT Plc or Acuity VCT 3 Plc maintain their
status as a HMRC approved VCT, or in the interests of balancing their
portfolios. A different basis may also be necessary to meet the requirements of
potential investee companies. In these cases the Directors may use their
judgement.
LARGEST 10 INVESTMENTS
The Fin Machine Company
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP2,150,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP5,814,000 | Year Ended 30 | 2008 | 2007 |
| | | September | GBPm | GBPm |
| | | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/EBITDA | Sales | 19.5 | 17.0 |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 19.5% | Profit before tax | 2.8 | 1.0 |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Specialist | Retained profit | 2.1 | 0.7 |
| | Engineering | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT, | Net assets | 4.4 | 2.3 |
| Investing | Acuity VCT 3 | | | |
+-------------------------+----------------+----------------------+--------+--------+
Factory Media
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP1,925,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP2,850,000 | Year Ended 31 | 2008 | 2007 |
| | | December | GBPm | GBPm |
| | | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/Sales | Sales | 8.4 | 7.5 |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 24.9% | Loss before tax | (0.5) | (0.3) |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Sports | Retained loss | (0.5) | (0.3) |
| | Publishing | | | |
| | Company | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT 3 | Net | (0.2) | 0.3 |
| Investing | | (liabilities)/assets | | |
+-------------------------+----------------+----------------------+--------+--------+
Defaqto Group
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP2,405,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP2,786,000 | Year Ended 31 March | 2009 | 2008 |
| | | | GBPm | GBPm |
| | | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/Sales | Sales | 8.3 | 7.8 |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 16.4% | Loss before tax | (0.4) | (1.8) |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Financial | Retained loss | (0.5) | (1.7) |
| | product data | | | |
| | provider | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT, | Net liabilities | (8.1) | (7.9) |
| Investing | Acuity VCT 3 | | | |
+-------------------------+----------------+----------------------+--------+--------+
Amber Taverns
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP750,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP2,511,000 | Year Ended 31 | 2009 | 2008 |
| | | January | GBPm | GBPm |
| | | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/Sales | Sales | 7.0 | 3.7 |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 16.5% | Profit before tax | 0.1 | 0.0 |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Pub Chain | Loss after tax | 0.0 | (0.1) |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT, | Net assets | 0.6 | 0.6 |
| Investing | Acuity VCT 3 | | | |
+-------------------------+----------------+----------------------+--------+--------+
Munro Global
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP1,615,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP2,085,000 | Year Ended 31 July | 2008 | 2007 |
| | | | GBPm | GBPm |
| | | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/EBITDA | Sales | 10.2 | 8.0 |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 24.8% | Profit before tax | 0.0 | 0.1 |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Market | Profit after tax | 0.0 | 0.1 |
| | Research | | | |
| | Company | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT 3 | Net assets | 0.6 | 0.6 |
| Investing | | | | |
+-------------------------+----------------+----------------------+--------+--------+
Loseley Dairy Ice Cream
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP900,000 | No Audited Financial | | |
| | | Information yet | | |
| | | produced | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP1,947,000 | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/Sales | | | |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 34.6% | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Fine Ice Cream | | | |
| | Manufacturer | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT, | | | |
| Investing | Acuity VCT 3 | | | |
+-------------------------+----------------+----------------------+--------+--------+
Connect2Media
+------------------------+------------------+----------------------+--------+
| Cost | GBP1,476,000 | Audited Financial | |
| | | Information | |
+------------------------+------------------+----------------------+--------+
| Valuation | GBP1,623,000 | Period 16 June 2008 | 2008 |
| | | to 31 December 2008 | GBPm |
+------------------------+------------------+----------------------+--------+
| Basis of Valuation | EV/Sales | Sales | 2.4 |
| | Multiple | | |
+------------------------+------------------+----------------------+--------+
| Equity held | 12.9% | Loss before tax | (0.7) |
+------------------------+------------------+----------------------+--------+
| Business | Developer and | Retained loss | (0.7) |
| | global publisher | | |
| | and distributor | | |
| | for digital | | |
| | entertainment | | |
+------------------------+------------------+----------------------+--------+
| Other Acuity Funds | Acuity VCT, | Net assets | 3.8 |
| Investing | Acuity VCT 3 | | |
+------------------------+------------------+----------------------+--------+
Brand Acquisitions
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP1,511,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP1,488,000 | Period Ended 31 | Year | 3 |
| | | January | ended | months |
| | | | 2009 | ended |
| | | | GBPm | 2008 |
| | | | | GBPm |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/EBITDA | Sales | 11.3 | 1.1 |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 16.6% | Profit/(Loss) before | 0.3 | (0.3) |
| | | tax | | |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Branded | Profit/(loss) after | 0.2 | (0.2) |
| | Menswear | tax | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT, | Net | 0.7 | (0.5) |
| Investing | Acuity VCT 3 | assets/(liabilities) | | |
+-------------------------+----------------+----------------------+--------+--------+
Target Entertainment Group
+-------------------------+----------------+----------------------+--------+--------+
| Cost | GBP2,000,000 | Audited Financial | | |
| | | Information | | |
+-------------------------+----------------+----------------------+--------+--------+
| Valuation | GBP1,467,000 | Year Ended 31 | 2007 | 2006 |
| | | December | GBPm | GBPm |
| | | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Basis of Valuation | EV/Sales | Sales | 17.1 | 10.3 |
| | Multiple | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Equity held | 13.3% | Loss before tax | (0.5) | (0.3) |
+-------------------------+----------------+----------------------+--------+--------+
| Business | Television | Retained loss | (0.3) | (0.4) |
| | Distribution | | | |
| | Company | | | |
+-------------------------+----------------+----------------------+--------+--------+
| Other Acuity Funds | Acuity VCT, | Net liabilities | (0.5) | (1.8) |
| Investing | Acuity VCT 3 | | | |
+-------------------------+----------------+----------------------+--------+--------+
Future Noise
+------------------------+------------------+--------------------+
| Cost | GBP796,000 | No Audited |
| | | Financial |
| | | Information yet |
| | | produced |
+------------------------+------------------+--------------------+
| Valuation | GBP766,000 | |
+------------------------+------------------+--------------------+
| Basis of Valuation | EV/Sales | |
| | Multiple | |
+------------------------+------------------+--------------------+
| Equity held | 42.5% | |
+------------------------+------------------+--------------------+
| Business | Music Master | |
| | Rights | |
+------------------------+------------------+--------------------+
| Other Acuity Funds | Acuity VCT, | |
| Investing | Acuity VCT 3 | |
+------------------------+------------------+--------------------+
Note:-
In many cases, the qualifying investment is made substantially in the form of
loan notes which both carry a high interest rate and are treated as debt for
statutory purposes. Shareholders should therefore be advised that often the
investee companies report both retained losses and net liabilities as a result.
BOARD OF DIRECTORS
Rupert Pennant-Rea, Chairman
Appointed a Director on 7 September 2004. He is a former Deputy Governor of
the Bank of England and Editor of The Economist. He is currently Chairman of
Henderson and a Director of Go-Ahead and a number of other companies. He is
Chairman of the Nomination Committee.
David Donnelly*
Appointed a Director on 7 September 2004. He is Chairman of Caithness
Petroleum. Previously he was CEO of the Private Equity business of Fleming
Family & Partners. Previous directorships included Highland Participants
(Chairman and Chief Executive), a listed exploration company and R&W Hawthorn
Leslie & Co (Executive Director), a publicly quoted shipbuilding and repair
company. He was formerly a member of the London Stock Exchange. He is Chairman
of the Remuneration Committee.
Catrina Holme*
Appointed a Director on 26 February 2009. She has had extensive experience in
the venture capital and private equity industry. Initially a private equity
lawyer, she has held both Executive, Non-Executive and Investment roles in the
sector. Previously a member of Cazenove Private Equity and Partner at DFJEsprit,
she is currently a Venture Partner at Fidelity Ventures and runs a consulting
business, Investor Inside, working with technology companies to maximise their
investment success.
Nicholas Ross
Appointed a Director on 7 September 2004. He is a founding member of Acuity
Capital LLP, prior to the Management buy-out he had been at Electra Quoted
Management since 1993. Previously he had several years in investment analysis
and fund management. He has been responsible for the launch of the three Acuity
VCT funds. He is a Managing Partner of Acuity Capital LLP and a Director of
Acuity Capital and all three Acuity VCT funds. He also sits on a number of
investee company boards.
David Sebire*
Appointed a Director on 7 September 2004. He is a Chartered Accountant with
extensive industrial and corporate finance experience. Previous chairmanships
have included Bridport, PTS and Clearspeed Technology. He is Chairman of
PegasusBridge Fund Management and a number of private companies. He has been
nominated the Senior Independent Director under the Combined Code on Corporate
Governance and is additionally Chairman of the Audit Committee.
All Directors are also Directors of Acuity VCT.
* Member of the Audit, Remuneration and Nomination Committees
REPORT OF THE DIRECTORS
To the Members of Acuity VCT 2 Plc
The Directors present the audited Accounts of the Company for the year ended 30
September 2009 and their Report on its affairs.
Investment Company Status
Throughout the year under review the Company was an investment company as
defined under Section 833 of the Companies Act 2006
VCT Status
HM Revenue and Customs has granted the Company approval under Section 274 of the
Income Tax Act 2007 (ITA 2007) as a VCT, the approval being effective from the
first day on which the Company's ordinary shares were listed on the London Stock
Exchange (being 3 December 2004). The Board continues to direct the affairs of
the Company to enable it to maintain approval as a VCT.
Business Review
Objective and Investment Strategy
A review of the Company's Objective and Investment Strategy is detailed above in
this announcement.
Current and Future Development
A review of the main features of the year is contained in the Chairman's
Statement and the Investment Manager's Review.
The Board regularly reviews the development and strategic direction of the
Company. The Board's main focus continues to be on the Company's long-term
investment return. Attention is paid to the integrity and success of an
investment process and on factors which may have an impact on this approach. Due
regard is given to the marketing and promotion of the Company, including
effective communication with shareholders and other external parties.
Social, Community, Employee and Environmental Issues
In carrying out its activities and in relationships with the community, the
Company aims to conduct itself responsibly, ethically and fairly. The Company
has no employees and the Board is comprised entirely of Non-Executive Directors.
The Company has no direct impact on the environment, however, the Company
believes that it is in the shareholders interests to consider environmental,
social and ethical factors when selecting and retaining investments. Further
details of how the Company views socially responsible investment is set out
below in this announcement.
Performance
A detailed review of performance during the year under review is contained in
the Investment Manager's Review above in this announcement.
A number of performance measures are considered by the Board and Investment
Manager in assessing the Company's success in achieving its objectives.
The key performance indicators ('KPIs') used to measure the progress and
performance of the Company are established industry measures and are as
follows:-
* The movement in net asset value per share
* The movement in share price
* The movement of net asset value and share price performance compared to the FTSE
All-Share Index
Details of the KPIs are shown in the Financial Highlights and through a graph
comparing the Company's total return on a share price and net asset value basis
over the period since shares were first issued with the FTSE All-Share Index
total return over the same period as set out in the Directors' Remuneration
Report.
The Board recognises that it is in the long term interests of shareholders to
reduce discount volatility and believes that the prime driver of discounts over
the longer term is performance. As outlined in the Report of the Directors, the
Board intends to seek renewal of its annual share buy-back authority at the
Company's Annual General Meeting in 2010. As noted in the Chairman's Statement,
due to the recent market turbulence, the Board has temporarily suspended the
share buy back programme but are monitoring the position closely and will
restore share buy backs when conditions allow.
Risk Management
Since the Company is flexible with regard to those areas in which it invests, it
aims to achieve a significant degree of diversification and to spread risk by
investing in unquoted, PLUS traded and AIM quoted companies. In addition, there
is no emphasis on any particular industry sector and even the non-qualifying
investments have quite a high level of in-built diversification. The Company is
restricted to investing no more than 15% of the value of its total assets at the
time of investment in any one individual qualifying investment or non-qualifying
investment.
The key risks facing the Company include Market Risk, Interest Rate Risk, Credit
Risk and Liquidity Risk as further detailed in Note 20 of the Notes to the
Accounts.
In addition the Company is also focused on the following key risks:-
Macroeconomic risks
The performance of the Company's underlying investment portfolio is principally
influenced by a combination of economic growth, interest rates, the availability
of well-priced debt finance, the number of active trade and private equity
buyers and the level of merger and acquisition activity. All of these factors
have an impact on the Company's ability to invest and on the Company's ability
to exit from its underlying portfolio or on the levels of profitability achieved
on exit.
Long-term strategic risk
The Company is subject to the risk that its long-term strategy and its level of
performance fails to meet the expectations of its shareholders. The Company
constantly monitors the level of discount of its Net Asset Value to its share
price and considers the most effective methodologies to keep this at a minimum
including its share buy-back policy. The Company has in the last year
repurchased shares within parameters set by the Board and subject to shareholder
authority.
In addition the Company regularly reviews its Objectives and Investment Strategy
in light of prevailing investor sentiment to ensure the Company remains
attractive to its shareholders
Government policy and regulation risk
The Company carries on business as a VCT under section 274 of the Income Tax Act
2007 (ITA 2007). Continuation of this status is subject to the Company directing
its affairs in line with the relevant requirements of the legislation.
Anticipated and actual changes in government policy and related tax treatment of
VCTs are closely monitored, as are other changes which could affect results of
operations or financial position.
Acuity Capital is an authorised person under the Financial Services and Markets
Act 2000 and regulated by the FSA. Changes to the regulatory framework under
which Acuity Capital operates are closely monitored by Acuity Capital and
reported upon as necessary by Acuity Capital to the Company.
Socially Responsible Investment
The Company believes that high standards of corporate social responsibility
('CSR') make good business sense and have the potential to protect and enhance
investment returns. Consequently, the investment process takes social,
environmental and ethical issues into account when, in the Company's view, these
have a material impact on either investment risk or return.
The Company recognises and supports the view that social, environmental and
ethical best practice should be encouraged. It favours investing in companies
committed to high standards of CSR and to the principles of sustainable
development.
The Company does not screen out companies from its investment universe purely on
the grounds of poor social, environmental or ethical performance. Instead, it
adopts a positive engagement approach whereby, if it is appropriate, it
discusses these issues with the management of the companies in which it invests.
The information gathered during these meetings is used both to assist the
Company's investment decisions and also to encourage investee company management
to improve procedures and attitudes. The Company strongly believes that this is
the most effective way to improve the CSR polices of the businesses in which it
invests and the Board endorses this view.
Investment risks
The Company operates in a very competitive market. Changes in the number of
market participants, the availability of funds within the market, the pricing of
assets, or in the ability of Acuity Capital to access deals on a proprietary
basis, could have a significant effect on the Company's competitive position and
on the sustainability of returns.
In order to source and execute good quality investments the Company is primarily
dependent on Acuity Capital having the ability to attract and retain people with
the requisite investment experience and whose compensation is in line with the
Company's objectives.
Once invested, the performance of the Company's portfolio is dependent upon a
range of factors. These include but are not limited to: (i) the quality of the
initial investment decision described above; (ii) the ability of the portfolio
company to execute successfully its business strategy; and (iii) actual outcomes
against the key assumptions underlying the portfolio company's financial
projections. Any one of these factors could have an impact on the valuation of a
portfolio company and upon the Company's ability to make a profitable exit from
the investment within the desired timeframe.
A rigorous process is put in place by Acuity Capital for managing the
relationship with each investee company for the period prior to anticipated
realisation. This includes regular asset reviews and, in many cases, board
representation by one of Acuity Capital's executives.
The Company reviews both the performance of Acuity Capital and its incentive
arrangements on a regular basis to ensure that both are appropriate to the
objectives of the Company.
Operational risks
The Company's investment management, custody of assets and all administrative
systems are provided or arranged for the Company by Acuity Capital. Therefore
the Company is exposed to a range of operational risks at Acuity Capital which
can arise from inadequate or failed processes, people and systems or from
external factors affecting these.
The Company's system of internal control mainly comprises the monitoring of the
services provided by Acuity Capital, including the operating controls
established by them to ensure they meet the Company's business objectives. This
is further detailed below in this announcement.
Share Capital
The current authorised share capital of the Company is GBP1,125,000 divided into
85 million ordinary shares of 1p each, 25 million C Shares of 1p each and 25
million deferred shares of 0.1p each. The ordinary shares and C Shares have
voting rights attached, holders are entitled to receive notice of and attend
shareholder meetings and to receive dividends once declared and approved. The
other rights and obligations attaching to the ordinary shares, C Shares and
deferred shares are set out in the Company's Articles of Association.
The Company did not issue any ordinary shares, C Shares or deferred shares
during the year under review.
Authority to make Market Purchases of Shares
At the Annual General Meeting of the Company held on 26 February 2009, authority
was given to make market purchases of up to 3,162,631 of the Company's issued
ordinary share capital and up to 77,758 of the Company's issued C Share capital.
To date, no C Shares have been repurchased for cancellation.
The Company does not hold any shares in treasury.
Accordingly, at 30 September 2009, authority remained to repurchase a further
3,162,631 ordinary shares and 77,758 C Shares.
At 30 September 2009 a total of 31,626,320 (2008: 31,626,320) ordinary shares of
1p each (representing 98% of the total issued share capital) and 777,589 (2008:
777,589) C Shares of 1p each (representing 2% of the total issued share capital)
were in issue.
Results and Dividend
Revenue returns/(losses) attributable to Ordinary shareholders amounted to
GBP56,000 (2008: GBP131,000) and the Revenue returns attributable to C
Shareholders amounted GBP(10,000) (2008: GBP(7,000)). Capital (losses)/returns
attributable to ordinary shareholders amounted to GBP(1,685,000) (2008:
GBP(2,209,000)) and to C Share shareholders of GBP(12,000) (2008: GBP(7,000)).
The Directors do not recommend the payment of a final dividend in respect of the
year ended 30 September 2009 (2008: GBPnil).
Directors
The current Directors of the Company are listed above in this announcement. Mr
RL Pennant-Rea, Mr DJ Donnelly, Mr NRW Ross and Mr DJ Sebire all served as
Directors throughout the financial year ended 30 September 2009. Mr M Broke
resigned during the year and Ms C Holme was appointed on the same day. Ms C
Holme and Mr N Ross will retire at the Annual General Meeting in 2010 and, being
eligible, offer themselves for re-election. Short biographical details of all
the Directors are provided above in this announcement. Following performance
appraisals of all of the Directors, details of which are to be found below in
this announcement, the Board considers that the performance of each Director
retiring at the Annual General Meeting and offering himself for re-election
continues to be effective and that each Director continues to show commitment to
his role. Accordingly, the Board recommends that those Directors retiring at the
Annual General Meeting in 2010 and offering themselves for re-election be
re-elected.
Directors' Interests
The beneficial interests of the Directors in the ordinary shares of the Company
are shown below. Save as disclosed, no Director had any notifiable interest in
the securities of the Company.
No Director bought or sold any ordinary shares or any C Shares of the Company
during the year under review. There have been no changes in the interests of any
of the Directors in the ordinary shares of the Company between 1 October 2009
and 15 December 2009. No options over shares in the capital of the Company have
been granted to the Directors.
+----------------+---------------------+------------------------+
| 30 September 2009 | 1 October 2008 |
| Ordinary Shares of 1p | Ordinary Shares of 1p |
| each | each |
+--------------------------------------+------------------------+
| RL Pennant-Rea | 102,000 | 102,500 |
| DJ Donnelly | - | - |
| C Holme | - | - |
| NRW Ross* | 103,100 | 103,100 |
| DJ Sebire | - | - |
+----------------+---------------------+------------------------+
No Director holds C Shares in the Company.
* NRW Ross also has an interest in GBP6,332 of the 4% Loan Notes issued by the
Company.
Directors' Remuneration Report
An Ordinary Resolution to approve the Directors' Remuneration Report will be put
to the Annual General Meeting in 2010.
Contracts with Directors
No Director has a service contract with the Company. As a result of being a
Partner of Acuity Capital LLP, Mr NRW Ross is deemed to have an interest in the
Management Contract between the Company and Acuity Capital.
Directors' and Officers' Liability Insurance
Directors' and Officers' Liability Insurance is maintained on behalf of the
Directors in respect of their positions as Directors of the Company.
Substantial Shareholders
At 15 December 2009 the Directors had not been notified of any interests of 3%
or more in the Company's issued share capital.
Independent Auditors
A resolution to appoint KPMG Audit Plc as Auditors to the Company will be
proposed at the Annual General Meeting in 2010. A separate resolution will be
proposed at the Annual General Meeting in 2010 authorising the Directors to fix
the remuneration of the Auditors.
The Directors confirm that so far as each Director is aware, there is no
relevant audit information of which the Company's auditors are unaware and that
each Director has taken all the steps that he ought to have taken as a Director
in order to make himself aware of any relevant audit information and to
establish that the Company's auditors are aware of that information.
Creditor Payment Policy
The Company agrees the terms of payment with its suppliers when agreeing the
terms of each agreement. Suppliers are aware of the terms of payment and the
Company abides by the terms of payment. The Company's average creditor payment
period at 30 September 2009 was one day.
Investment Manager
Acuity Capital Management Limited was the Investment Manager of the Company
during the year under review. The Board regularly reviews the performance of the
Investment Manager and as a result believes the continuing appointment of the
Investment Manager on the terms agreed is in the interests of the Company's
shareholders as a whole.
Management Fees and Arrangements
Acuity Capital was appointed as Investment Manager under an agreement dated 6
October 2004, later superseded by an updated Management Agreement dated 18
October 2007. The agreement is for an initial period of five years and
thereafter until terminated by not less than one year's notice. Fees are paid
quarterly in arrears, as a percentage of net assets (less a rebate of fees
suffered in investments in funds managed by Acuity Capital), at the following
annual rates:
Period ended 30 June 2005 1.5%
Year ended 30 June 2006 2.0%
Year ended 30 June 2007 and thereafter 2.5%
Annual running expenses of the Fund are capped at 3.6% of the net asset value as
at 30 September 2009. Any excess will be reduced against the management fee
payable to the Investment Manager.
Incentive Schemes
Certain persons engaged in, the business of the Investment Manager will be
entitled to receive a performance fee based upon returns to shareholders of both
Ordinary and C Shares. The incentives are designed to encourage significant
dividend payments to shareholders and a Net Asset Value performance that would
equate to a historic top quartile industry ranking, before any performance fee
payment is made. Therefore, if, by the end of a financial year, aggregate
distributions of 30p per share have been declared and if the Performance Value,
which is equal to the Net Asset Value plus distributions, at that date exceeds
130p per share, then the beneficiaries will be entitled to a performance fee
equal to 20% of the excess of such Performance Value over 100p per share. If, on
a subsequent financial year end, the performance of the Company falls short of
the performance of the Company on the previous financial year end, the
beneficiaries will not be entitled to any incentive.
If, on a subsequent financial year end, the performance of the Company exceeds
the previous financial year's performance of the Company, the beneficiaries will
be entitled to 20% of such excess. To give effect to this performance fee, Loan
Notes have been issued by the Company to certain persons engaged in the business
of the Investment Manager. No Loan Notes have been issued directly to the
Investment Manager. Further details of the terms of the Loan Notes are set out
in Note 13 of the accounts. At 30 September 2009, there was no amount due under
this incentive scheme.
Going Concern
The Directors believe that it is appropriate to continue to adopt the going
concern basis in preparing the Accounts as the Company has adequate resources to
continue in operational existence for the foreseeable future. The board took
into consideration cashflow forecasts and that there was no debt at the year end
when arriving at this conclusion.
Annual General Meeting
The Annual General Meeting of the Company will be held on 24 February 2010. In
addition to the ordinary business, the following special business will be
considered:-
Authority to allot shares: Resolution 7
An Ordinary Resolution will be proposed at the Annual General meeting in 2010 to
grant the Directors authority under section 551 of the Companies Act 2006 to
allot shares up to a maximum aggregate nominal value of GBP108,013.08 being one
third of the nominal value of the issued share capital of the Company at the
date of this Directors' Report. The authority will expire at the conclusion of
the Company's Annual General Meeting in 2011. This Ordinary Resolution will also
remove the concept of an authorised share capital from the Company's articles of
association, in accordance with the provisions of the Companies Act 2006. Apart
from the top up offer referred to above in this anouncement, the Directors have
no present intention of exercising this authority. The Directors recommend
shareholders to vote in favour of this Ordinary Resolution.
Disapplication of pre-emption rights: Resolution 8
A Special Resolution will be proposed at the Annual General Meeting in 2010 to
grant the Directors authority to allot equity securities for cash without first
offering the securities to existing shareholders in connection with the
allotment of up to 10% of the nominal value of the issued share capital of the
Company from time to time. The Directors' authority under this resolution will
expire at the conclusion of the Company's Annual General Meeting in 2011. The
Directors recommend shareholders to vote in favour of this Special Resolution.
Authority to Make Market Purchases of Shares: Resolution 9
As set out in the Chairman's Statement, in the interest of all the Company's
shareholders the Board suspended the Company's buy back programme temporarily
because of the exceptional economic circumstances. Nevertheless the Board wishes
to have in place the authority to purchase the Company's own shares so that the
buy back programme can be re-instated as and when conditions permit.
Accordingly, a Special Resolution will be proposed to renew, for one year, the
Board's authority to make market purchases of ordinary shares and/or C Shares
provided that such authority is limited to the purchase of 14.9% of the issued
ordinary share capital and/or 14.9% of the issued C Share capital of the Company
from time to time, subject to the constraints set out in the Special Resolution.
Should any shares be purchased under this authority, it is the intention of the
Board that they be cancelled and not held as treasury shares.
The Directors do not intend to use this authority to purchase shares unless this
would result in an increase in the net asset value per ordinary and/or C Share
as applicable and would be in the best interests of shareholders generally. The
Directors recommend shareholders to vote in favour of this Special Resolution.
Corporate Governance
Arrangements in respect of corporate governance, appropriate to a venture
capital trust, have been made by the Board. The Board has considered the
principles and recommendations of the Association of Investment Companies' Code
of Corporate Governance issued in March 2009 ('AIC Code') by reference to the
AIC Corporate Governance Guide for Investment Companies ('AIC Guide'). The AIC
Code, as explained by the AIC Guide, addresses all the principles set out in
Section 1 of the Combined Code on Corporate Governance issued by the Financial
Reporting Council ('FRC') ('the Combined Code'), as well as setting out
additional principles and recommendations on issues which are of specific
relevance to the Company. The FRC confirmed in February 2009 that it remained
their view that the AIC Guide was appropriate and that investment companies may
report against the AIC Code.
The Board considers that reporting against the principles and recommendations of
the AIC Code, and by reference to the AIC Guide (which incorporates the Combined
Code) will provide better information to shareholders.
Except as disclosed below, the Company complied throughout the year with the
recommendations of the AIC Code and the relevant provisions of Section 1 of the
Combined Code. Since all the Directors are non-executive the provisions of the
Combined Code in respect of the role of the chief executive are not relevant to
the Company and, likewise, the provisions of the Combined Code relating to
Directors' remuneration are not relevant except in so far as they relate
specifically to non-executive Directors. For the reasons set out in the AIC
Guide, and in the preamble to the Combined Code, the Board considers that these
provisions are not relevant to the Company, being an externally managed venture
capital trust. The Company has therefore not reported further in respect of
these provisions.
The Directors confirm that during the year under review the Company has complied
with Section 1 of the Combined Code on Corporate Governance ("the Code") issued
by the Financial Reporting Council in June 2008.
Directors' Attendance at Scheduled Meetings of the Board and Committees of the
Board
+-------------+------+----------+------+----------+------+----------+------+----------+
| | Board | Audit | AGM/EGM | Nomination |
| | | Committee | | Committee |
+-------------+-----------------+-----------------+-----------------+-----------------+
| |Held |Attended |Held |Attended |Held |Attended |Held |Attended |
+-------------+------+----------+------+----------+------+----------+------+----------+
| Rupert | 4 | 4 | 2 | 2 | 2 | 2 | 1 | 1 |
| Pennant-Rea | | | | | | | | |
+-------------+------+----------+------+----------+------+----------+------+----------+
| Michael | 4 | 2 | 2 | 1 | 2 | 1 | n/a | n/a |
| Broke | | | | | | | | |
+-------------+------+----------+------+----------+------+----------+------+----------+
| David | 4 | 3 | 2 | 2 | 2 | 2 | 1 | 1 |
| Donnelly | | | | | | | | |
+-------------+------+----------+------+----------+------+----------+------+----------+
| Catrina | 4 | 2 | 2 | 1 | 2 | 2 | n/a | n/a |
| Holme | | | | | | | | |
+-------------+------+----------+------+----------+------+----------+------+----------+
| Nick | 4 | 4 | 2 | 2 | 2 | 2 | 1 | 1 |
| Ross | | | | | | | | |
+-------------+------+----------+------+----------+------+----------+------+----------+
| David | 4 | 3 | 2 | 2 | 2 | 2 | 1 | 1 |
| Sebire | | | | | | | | |
+-------------+------+----------+------+----------+------+----------+------+----------+
In addition, a number of Directors attended further Board meetings at short
notice to address specific issues.
The Board of Directors
The Board, which meets regularly, comprised five Directors at 30 September 2009,
all of whom were non-executive. All of the Directors who held office at 30
September 2009, apart from Mr NRW Ross, have been considered by the Board to be
independent from the Investment Manager. The Board has nominated Mr DJ Sebire as
the Senior Independent Director.
All of the Directors of the Company are also Directors of Acuity VCT Plc which
was launched in 2001 and which is also managed by Acuity Capital. The Board has
considered the question of the independence of each Director in light of the
Code's provisions on that subject.
The Board believes that each of the Company's Directors, apart from Mr NRW Ross,
continues to be wholly independent under the Code notwithstanding the
cross-directorships detailed above. Independence is a state of mind and the
character and judgement which accompany this are distinct from and, in the
Board's opinion, are not compromised by having cross directorships with other
Directors.
The Board has agreed a schedule of matters reserved for its specific approval,
which includes a regular review of the Company's Management Agreement with
Acuity Capital, together with the monitoring of the performance thereunder. The
Management Agreement sets out the matters over which Acuity Capital has
authority in accordance with the policies and directions of the Board. The Board
Meetings consider as appropriate such matters as overall strategy, investment
performance, share price performance, share price discount and communication
with shareholders. The Board considers that it meets sufficiently regularly to
discharge its duties effectively. The numbers of scheduled meetings of the Board
and the Audit Committee are shown in the table above. All of the Directors
attended the Annual General Meeting.
The Board receives information that it considers to be sufficient and
appropriate to enable it to discharge its duties. Each Director receives board
papers several days in advance of each scheduled Board meeting and is able to
consider in detail the Company's performance and any issues to be discussed at
the relevant meeting.
The Directors believe that the Board has the balance, skills and experience
which enable it to provide effective strategic leadership and proper governance
of the Company. Information about the Directors, including their relevant
experience, can be found above in this announcement.
Performance Appraisal
The Board carried out a formal appraisal process of its own and of its
Committees' operation and performance during the year under review. This was
implemented by means of questionnaires circulated to the Directors, the results
of which were then reviewed by the Board. Issues covered included board
composition, meeting arrangements and communication. The process was considered
by the Board to be constructive in identifying areas for improving the
functioning and performance of the Board and of its Committees. The Board
concluded that its performance and that of its Committees was satisfactory.
The Chairman carried out a formal appraisal of each of the Directors during the
year under review and the Board, under the leadership of the Senior Independent
Director, similarly appraised the Chairman. Relevant matters considered included
the attendance and participation at Board and Committee meetings, commitment to
Board activities and the effectiveness of the contribution made by the relevant
Director. As a result of this process the Chairman has confirmed that the
performance of each of the Directors being proposed for re-election continues to
be effective and that each of them continues to show commitment to his role. The
Senior Independent Director has also confirmed the continuing effectiveness and
commitment of the Chairman.
Re-election of Directors
In accordance with the Code's provisions or the Company's Articles, Ms C Holme
and Mr NRW Ross will retire at the Annual General Meeting to be held in 2010 and
offer themselves for re-election. Mr MHA Broke has retired.
Independent Professional Advice
Individual Directors may seek independent professional advice in furtherance of
their duties at the Company's expense within certain parameters. All Directors
have access to the advice and services of the Company Secretary. Any appointment
or removal of the Company Secretary would be a matter for consideration by the
entire Board.
The Audit Committee
The Board has an Audit Committee established in compliance with the Code. It
comprises all the Directors other than the Chairman of the Board and Mr NRW
Ross, with Mr DJ Sebire as Chairman of the Committee. The Board has taken note
of the suggestion that at least one member of the Committee should have recent
and relevant experience and is satisfied that the Committee is properly
constituted in this respect. Its authority and duties are clearly defined in its
written terms of reference which is available on Acuity Capital's website.
The Committee's Responsibilities include:
* monitoring and reviewing the integrity of the financial statements, the internal
financial controls and the independence, objectivity and effectiveness of the
external auditors;
* making recommendations to the Board in relation to the appointment of the
external auditors and approving the remuneration and terms of their engagement;
* developing and implementing the Company's policy on the provision of non-audit
services by the external auditors;
* reviewing the arrangements in place within Acuity Capital whereby their staff
may, in confidence, raise concerns about possible improprieties in matters of
financial reporting or other matters insofar as they may affect the Company and
* considering annually whether there is a need for the Company to have its own
internal audit function.
The Committee has reviewed the provision of non-audit services provided by the
external auditors and believes them to be cost effective and not an impediment
to the external auditors' objectivity and independence. It has been agreed that
all non-audit work to be carried out by the external auditors, must be approved
by the Audit Committee and that any special projects must be approved in
advance.
The Committee annually reviews the performance of KPMG Audit Plc, the Company's
external auditor. In doing so, the Committee considers a range of factors
including the quality of service, the auditor's specialist expertise and the
level of audit fees. There are no contractual obligations restricting the choice
of external auditor. Under Company Law the reappointment of the external auditor
is subject to shareholder approval at the AGM.
Internal Audit
Following the review carried out by the Audit Committee as to whether there is a
need for the Company to have its own internal audit function, the Board has
considered and continues to believe that the internal control systems in place
within Acuity Capital provide sufficient assurance that a sound system of
internal control, which safeguards shareholders' investment and the Company's
assets is maintained. An internal audit function, specific to the Company, is
therefore considered unnecessary.
The Remuneration Committee
During the year under review the Remuneration Committee comprised all the
Directors of the Company other than the Chairman of the Board and Mr NRW Ross,
with Mr DJ Donnelly as Chairman of the Committee. There were no meetings of the
Remuneration Committee during the year. The Committee has written terms of
reference which are available on Acuity Capital's website. Full details of its
role are set out in the Directors' Remuneration Report. The standard directors
fees were unchanged during the year and therefore no meeting was held.
The Nomination Committee
The Nomination Committee meets on an ad hoc basis to consider suitable
candidates for appointment as Director. It comprises all the Directors apart
from Mr NRW Ross, with Mr RL Pennant-Rea as Chairman of the Committee. The board
considered several candidates and after conducting interviews, the Nomination
Committee unanimously agreed to appoint Ms C Holme as a director on 26 February
2009. The Committee has written terms of reference which are available on Acuity
Capital's website. The Committee is responsible for identifying and nominating,
for the approval of the Board, candidates to fill board vacancies to maintain a
balanced Board.
Letters of appointment, which specify the terms of appointment, are issued to
new Directors.
The current Directors of the Company were appointed with regard to their
independence, suitability for the position and their experience in related
business areas.
Induction and Training
New Directors are provided with an induction programme which is tailored to the
particular circumstances of the appointee and which includes being briefed fully
about the Company by the Chairman and senior executives of Acuity Capital.
Following appointment, Directors continue to receive other relevant training and
advice as necessary to enable them to discharge their duties.
The Company's Relationship with its Shareholders
The Company places great importance on communication with the Company's
shareholders. In addition to the Annual and Interim Reports, shareholders will
be sent regular newsletters from the Investment Manager.
At the Annual General Meeting all shareholders are welcome to attend and have
the opportunity to put questions to the Board.
The notice of the Annual General Meeting and related papers are sent to
shareholders at least 20 working days before the meeting.
A separate resolution is proposed on each substantially separate issue including
the annual report and accounts.
All proxy votes are counted and, except where a poll is called, the level of
proxies lodged for each resolution is announced at the Meeting and is published
on Acuity Capital's website.
The Chairman and the Senior Independent Director can always be contacted either
through the Company Secretary or care of the Company's registered office at
Paternoster House, 65 St Paul's Churchyard, London EC4M 8AB.
Internal Control
The Code requires the Directors to review the effectiveness of the Company's
system of internal control and report to shareholders that they have done so.
The Code extended the earlier reporting requirements and now includes financial,
operational and compliance controls and risk management.
The Board confirms that it has an ongoing process for identifying, evaluating
and managing the significant risks faced by the Company. This process has been
in place throughout the year and has continued since the year end and up to the
date of this report. It is reviewed at regular intervals by the Board and
accords with the Financial Reporting Council's 'Internal Control: Revised
Guidance for Directors on the Combined Code'.
The Board is responsible for the Company's system of internal control and it has
reviewed its effectiveness for the year ended 30 September 2009. The system of
internal control is designed to manage, rather than eliminate, the risk of
failure to achieve business objectives and can only provide reasonable and not
absolute assurance against material misstatement or loss.
Since investment management, custody of assets and all administrative services
are provided or arranged for the Company by Acuity Capital, the Company's system
of internal control mainly comprises the monitoring of services provided by
Acuity Capital, including the operating controls established by them, to ensure
they meet the Company's business objectives. The key elements designed to
provide effective internal control for the Company are as follows:
* Financial Reporting - Regular and comprehensive review by the Board of key
investment and financial data including management accounts, revenue
projections, analyses of transactions and performance comparisons.
* Investment Strategy - Agreement by the Board of the Company's investment
strategy and monitoring of all large investments.
* Management Agreements - The Board regularly monitors the performance of Acuity
Capital to ensure that the Company's assets and affairs are managed in
accordance with the guidelines determined by the Board.
* Investment Performance - The investment transactions and performance of the
Company's assets and affairs are managed in accordance with the guidelines
determined by the Board.
* Management Systems - Acuity Capital's system of internal control includes clear
lines of responsibility, delegated authority, control procedures and systems.
Acuity Capital's compliance department monitors compliance with the Financial
Services Authority rules.
The Board keeps under review the effectiveness of the Company's system of
internal control by monitoring the operation of key controls of Acuity Capital
as follows:
* The Board reviews the terms of the Management Agreement and receives regular
reports from Acuity Capital executives.
* The Board reviews the certificates provided by Acuity Capital on a six monthly
basis, verifying compliance with documented controls.
Voting Policy
The Company's investee companies are principally a mixture of quoted and
unquoted companies in which the Company is a significant shareholder and the
Company is usually a party to all issues requiring shareholder approval. The
Company has given discretionary voting power to Acuity Capital to vote on its
behalf.
Acuity Capital's voting policy as agent for the Company has adopted and applies
the Statement of Principles drawn up by the Institutional Shareholders Committee
when it considers these in its reasonable judgement to best serve the financial
interests of the Company's shareholders. Acuity Capital's voting policy has been
reviewed and endorsed by the Board.
Acuity Capital Management Limited
Secretary
Registered Office:
Paternoster House
65 St Paul's Churchyard
London EC4M 8AB
15 December 2009
Statement of Directors' Responsibilities in respect of the Annual Report, the
Directors Remuneration Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and the Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law they have elected to prepare the Financial
Statements in accordance with UK Accounting Standards and applicable law (UK
Generally Accepted Accounting Practice).
The Financial Statements are required by law to give a true and fair view of the
state of affairs of the Company and of the profit or loss of the Company for
that period.
In preparing these Financial Statements, the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and estimates that are reasonable and prudent;
* state whether applicable UK Accounting Standards have been followed, subject to
any material departures disclosed and explained in the Financial Statements; and
* prepare the Financial Statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that its Financial Statements comply with the
Companies Act 2006. They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the Company and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible for
preparing a Directors' Report and Directors' Remuneration Report that complies
with that law and those regulations.
The accounts of the Company are published on www.acuitycapital.co.uk which is a
website maintained by the Company's Investment Manager, Acuity Capital.
The Directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Management Company's website.
Legislation in the UK governing the preparation and dissemination of Financial
Statements may differ from legislation in other jurisdictions.
In accordance with the FSA's Disclosure and Transparency Rules, the Directors
confirm to the best of their knowledge that:-
(a)the accounts, prepared in accordance with applicable accounting standards,
give a true and fair view of the assets, liabilities, financial position and
profit or loss of the Company; and
(b)the Report of the Directors includes a fair review of the development and
performance of the business and position of the Company together with a
description of the principal risks and uncertainties that it faces.
By order of the Board of Directors
Rupert Pennant-Rea, Chairman
Registered Office:
Paternoster House
65 St Paul's Churchyard
London EC4M 8AB
15 December 2009
Directors' Remuneration Report
The Directors submit this report in accordance with the requirements of Schedule
3 of the Small Companies and Groups (Accounts and Directors' report) Regulations
2008. An Ordinary Resolution for the approval of this report will be put to
members at the forthcoming Annual General Meeting. The law requires the
Company's Auditors to audit certain of the disclosures provided. Where
disclosures have been audited they are indicated as such.
Remuneration Committee
During the year under review the Remuneration Committee comprised all the
Directors of the Company other than the Chairman of the Board and Mr NRW Ross.
Mr DJ Donnelly was Chairman of the Remuneration Committee throughout the year.
It was not necessary to hold any meetings of the Committee during the year.
There was no change to the remuneration of the Directors during the year. The
current annual fee rates are GBP20,000 for the Chairman and GBP15,000 for each
of the Directors, apart from Mr DJ Sebire who is paid an additional GBP5,000 per
annum in respect of further duties undertaken in relation to the production of
the Company's Report and Accounts, and Mr NRW Ross who receives no remuneration
from the Company. During the year, in anticipation of the proposed Merger set
out in the Chairman's Statement, the Remuneration Committee were provided with
preliminary advice from Opus Executive Partners in respect of current levels of
Directors' remuneration.
Policy of Directors Remuneration
Subject to the overall limit of the aggregate remuneration of the Directors set
out in the Articles of Association of the Company as may from time to time be
determined by an Ordinary Resolution of the Company, the Remuneration
Committee's policy is that remuneration of non-executive Directors should be
sufficient to attract and retain the Directors needed to oversee the Company and
reflect the specific circumstances of the Company, the duties and
responsibilities of the Directors and the value and amount of time committed to
the Company's affairs. Non-executive Directors are not eligible to receive
bonuses, pension benefits, share options and other benefits.
Directors' Service Contracts
None of the Directors has a service contract with the Company. No arrangements
have been entered into between the Company and the Directors to entitle any of
the Directors for compensation for loss of office.
Performance Graph
Pursuant to the Directors' Remuneration Report Regulations 2002, the Company is
required to show a graph of total shareholder return against a suitable
benchmark index in its Directors' Remuneration Report for the last five
financial years.
The table below shows the Company's performance being measured in terms of its
Total Shareholder Return and its Net Asset Value per share since the date on
which the shares were first issued, being 25 November 2004, against the Total
Shareholder Return of the FTSE All-Share Index.
The table has incorporated the change in net asset value per share because
changes in net asset value per share relative to the FTSE All-Share Index are an
important indicator of the performance of the Company's assets.
The Directors consider that since the Company invests in a broad range of
commercial sectors, the FTSE All-Share Index is the most appropriate index
against which to compare the Company's performance.
Acuity VCT 2 Share Price Total Return v Acuity VCT 2 Net Asset Value v FTSE
All-Share Index (Total Return) - Ordinary and C Share
+-------------------+-------------------+-------------------+-------------------+
| Date | NAV Total Return | FTSE All-Share | Share Price |
| | (gross dividend) | Index | |
| | | Total Return | |
+-------------------+-------------------+-------------------+-------------------+
| 25/11/2004 | 100.00 | 100.00 | 100.00 |
+-------------------+-------------------+-------------------+-------------------+
| 31/03/2005 | 94.67 | 102.21 | 100.00 |
+-------------------+-------------------+-------------------+-------------------+
| 30/09/2005 | 96.96 | 113.61 | 90.00 |
+-------------------+-------------------+-------------------+-------------------+
| 31/03/2006 | 100.70 | 131.09 | 88.00 |
+-------------------+-------------------+-------------------+-------------------+
| 30/09/2006 | 109.02 | 133.91 | 87.00 |
+-------------------+-------------------+-------------------+-------------------+
| 31/03/2007 | 121.59 | 143.08 | 92.00 |
+-------------------+-------------------+-------------------+-------------------+
| 30/09/2007 | 103.30 | 147.28 | 108.00 |
+-------------------+-------------------+-------------------+-------------------+
| 31/03/2008 | 96.60 | 132.18 | 95.00 |
+-------------------+-------------------+-------------------+-------------------+
| 30/09/2008 | 93.50 | 107.04 | 75.00 |
+-------------------+-------------------+-------------------+-------------------+
| 31/03/2009 | 80.00 | 84.61 | 45.00 |
+-------------------+-------------------+-------------------+-------------------+
| 30/09/2009 | 88.55 | 112.35 | 38.00 |
+-------------------+-------------------+-------------------+-------------------+
Directors' Remuneration for the Year (audited)
The Directors who served during the year received the following emoluments in
the form of fees:
+-----------------------------------------+-----------------+------------------+
| For the year ended | For the year |
| 30 September 2009 | ended 30 |
| GBP'000 | September 2008 |
| | GBP'000 |
+-----------------------------------------------------------+------------------+
| RL Pennant-Rea(Chairman & joint highest | 20 | 20 |
| paid Director) | 8 | 15 |
| M Broke (resigned 26 February 2009) | 15 | 15 |
| DJ Donnelly | 7 | - |
| Catrina Holme (appointed 26 February | - | - |
| 2009) | 20 | 20 |
| NRW Ross | | |
| DJ Sebire (Joint highest paid Director) | | |
+-----------------------------------------+-----------------+------------------+
| Total | 70 | 70 |
+-----------------------------------------+-----------------+------------------+
As a former executive of the Electra Partners Group and as a current executive
of Acuity Capital, NRW Ross has an interest in the Management Contract between
the Company and Acuity Capital (formerly Electra Quoted Management). NRW Ross
has waived his right to receive directors fees from the Company.
By order of the Board of Directors
Mr DJ Donnelly,
Chairman of the Remuneration Committee, Registered Office:
Paternoster House, 65 St Paul's Churchyard. London EC4M 8AB
15 December 2009
Income Statement
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| For | | Ordinary Shares | C Shares | Total |
| the | | | | |
| year | | | | |
| ended | | | | |
| 30 | | | | |
| September | | | | |
| 2009 | | | | |
+----------------+--------+-----------------------------+-----------------------------+-----------------------------+
| | | Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | Notes | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Realised | 9 | - | (94) | (94) | - | - | - | - | (94) | (94) |
| (losses) | | | | | | | | | | |
| on | | | | | | | | | | |
| investments | | | | | | | | | | |
| sold | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Investment | 9 | - | (1,139) | (1,139) | - | (3) | (3) | - | (1,142) | (1,142) |
| holding | | | | | | | | | | |
| gains/(losses) | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Income | 1 | 563 | - | 563 | - | - | - | 563 | - | 563 |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Recoverable | 2 | 32 | 98 | 130 | - | - | - | 32 | 98 | 130 |
| VAT | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | 595 | (1,135) | (540) | - | (3) | (3) | 595 | (1,138) | (543) |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Investment | 2 | (217) | (620) | (837) | (4) | (13) | (17) | (221) | (633) | (854) |
| management | | | | | | | | | | |
| fees | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Other | 3 | (265) | 45 | (220) | (5) | 4 | (1) | (270) | 49 | (221) |
| expenses | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | (482) | (575) | (1,057) | (9) | (9) | (18) | (491) | (584) | (1,075) |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Return/(Loss) | | | | | | | | | | |
| on Ordinary | | | | | | | | | | |
| Activities | | | | | | | | | | |
| before | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| interest | | 113 | (1,710) | (1,597) | (9) | (12) | (21) | 104 | (1,722) | (1,618) |
| and | | | | | | | | | | |
| Taxation | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Finance | 4 | (32) | - | (32) | (1) | - | (1) | (33) | - | (33) |
| Cost | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Return/(Loss) | | | | | | | | | | |
| on Ordinary | | | | | | | | | | |
| Activities | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| before | | 81 | (1,710) | (1,629) | (10) | (12) | (22) | 71 | (1,722) | (1,651) |
| taxation | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Tax on | 6 | (25) | 25 | - | - | - | - | (25) | 25 | - |
| ordinary | | | | | | | | | | |
| activities | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Net | | | | | | | | | | |
| Return/(Loss) | | | | | | | | | | |
| on Ordinary | | | | | | | | | | |
| Activities | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| after | | 56 | (1,685) | (1,629) | (10) | (12) | (22) | 46 | (1,697) | (1,651) |
| Taxation | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Return/(Loss) | | | | | | | | | | |
| | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| per | 7 | 0.2p | (5.4)p | (5.2)p | (1.3)p | (1.5)p | (2.8)p | | | |
| Share | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
The total column of this statement represents the Company's Income Statement,
prepared in accordance with UK GAAP. The revenue return and capital return
columns are supplementary to this and are prepared under guidance published by
the Association of Investment Companies. All revenue and capital items in the
above statement derive from continuing operations. No operations were acquired
or discontinued in the year. A Statement of Total Recognised Gains and Losses is
not required as all gains and losses of the Company have been reflected in the
above statement.
Income Statement
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| For | | Ordinary shares | C Shares | Total |
| the | | | | |
| year | | | | |
| ended | | | | |
+----------------+--------+-----------------------------+-----------------------------+-----------------------------+
| 30 | | Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
| September | | | | | | | | | | |
| 2008 | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | Notes | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Realised | | | | | | | | | | |
| (losses) | | - | (996) | (996) | - | - | - | - | (996) | (996) |
| on | | | | | | | | | | |
| investments | | | | | | | | | | |
| sold | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Investment | | | | | | | | | | |
| holding | | - | (839) | (839) | - | - | - | - | (839) | (839) |
| gains/(losses) | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Income | 1 | 781 | - | 781 | - | - | - | 781 | - | 781 |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | 781 | (1,835) | (1,054) | - | - | - | 781 | (1,835) | (1,054) |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Investment | | | | | | | | | | |
| management | 2 | (197) | (592) | (789) | (3) | (8) | (11) | (200) | (600) | (800) |
| fees | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Other | 3 | (293) | 100 | (193) | (3) | - | (3) | (296) | 100 | (196) |
| expenses | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | (490) | (492) | (982) | (6) | (8) | (14) | (496) | (500) | (996) |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Return/(Loss) | | | | | | | | | | |
| on Ordinary | | | | | | | | | | |
| Activities | | | | | | | | | | |
| before | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| interest | | | | | | | | | | |
| and | | 291 | (2,327) | (2,036) | (6) | (8) | (14) | 285 | (2,335) | (2,050) |
| Taxation | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Finance | 4 | (42) | - | (42) | - | - | - | (42) | - | (42) |
| Cost | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Return/(Loss) | | | | | | | | | | |
| on Ordinary | | | | | | | | | | |
| Activities | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| before | | 249 | (2,327) | (2,078) | (6) | (8) | (14) | 243 | (2,335) | (2,092) |
| taxation | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Tax on | | | | | | | | | | |
| ordinary | 6 | (118) | 118 | - | (1) | 1 | - | (119) | 119 | - |
| activities | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Net | | | | | | | | | | |
| Return/(Loss) | | | | | | | | | | |
| on Ordinary | | | | | | | | | | |
| Activities | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| after | | 131 | (2,209) | (2,078) | (7) | (7) | (14) | 124 | (2,216) | (2,092) |
| Taxation | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| Return/(Loss) | | | | | | | | | | |
| | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| per | | | | | | | | | | |
| Ordinary | 7 | 0.4p | (6.7)p | (6.3)p | (0.9)p | (0.9)p | (1.8)p | | | |
| Share | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
| | | | | | | | | | | |
+----------------+--------+---------+---------+---------+---------+---------+---------+---------+---------+---------+
Reconciliation of Movements in Shareholders' Funds
+-----------------------------+----------+---------+---------+----------+---------+---------+
| | For the year ended 30 | For the year ended 30 |
| | September 2009 | September 2008 |
+-----------------------------+------------------------------+------------------------------+
| | Ordinary | C | Total | Ordinary | C | Total |
| | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
| | | | | | | |
+-----------------------------+----------+---------+---------+----------+---------+---------+
| Total Return on Ordinary | (1,629) | (22) | (1,651) | (2,078) | (14) | (2,092) |
| Activities after Taxation | - | - | - | (668) | - | (668) |
| Dividends on Ordinary | - | - | - | (1,848) | - | (1,848) |
| Shares | - | - | - | - | (14) | (14) |
| Repurchase of Ordinary | - | - | - | - | 724 | 724 |
| Shares | | | | | | |
| Share issue expenses | | | | | | |
| Issue of C Shares | | | | | | |
+-----------------------------+----------+---------+---------+----------+---------+---------+
| Movements in Total | (1,629) | (22) | (1,651) | (4,594) | 696 | (3,898) |
| Shareholders' Funds | | | | | | |
| | | | | | | |
+-----------------------------+----------+---------+---------+----------+---------+---------+
| Total Shareholders' Funds | 29,611 | 696 | 30,307 | 34,205 | - | 34,205 |
| at start of year | | | | | | |
+-----------------------------+----------+---------+---------+----------+---------+---------+
| Total Shareholders' Funds | 27,982 | 674 | 28,656 | 29,611 | 696 | 30,307 |
| at the end of the Year | | | | | | |
+-----------------------------+----------+---------+---------+----------+---------+---------+
Balance Sheet
+------------------------+-------+------------+---------+---------+------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+-------+--------------------------------+--------------------------------+
| | Notes | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+-------+------------+---------+---------+------------+---------+---------+
| Fixed Assets | 9 | 26,764 | 220 | 26,984 | 27,560 | 200 | 27,760 |
| Investments held at | | | | | | | |
| fair value | | | | | | | |
+------------------------+-------+------------+---------+---------+------------+---------+---------+
| Current Assets | 10 | 1,610 | 2 | 1,612 | 1,284 | - | 1,284 |
| Debtors | 11 | - | - | - | 210 | - | 210 |
| Other investments | | 391 | 469 | 860 | 1,101 | 520 | 1,621 |
| Cash at Bank | | | | | | | |
| | | | | | | | |
+------------------------+-------+------------+---------+---------+------------+---------+---------+
| | | 2,001 | 471 | 2,472 | 2,595 | 520 | 3,115 |
+------------------------+-------+------------+---------+---------+------------+---------+---------+
| Current Liabilities | 12 | 441 | 4 | 445 | 119 | 12 | 131 |
| Creditors: amounts | | | | | | | |
| falling due within one | | | | | | | |
| year | | | | | | | |
| | | | | | | | |
+------------------------+-------+------------+---------+---------+------------+---------+---------+
| Net Current Assets | | 1,560 | 467 | 2,027 | 2,476 | 508 | 2,984 |
+------------------------+-------+------------+---------+---------+------------+---------+---------+
| Total assets less | 13 | 28,324 | 687 | 29,011 | 30,036 | 708 | 30,744 |
| current liabilities | | 342 | 13 | 355 | 425 | 12 | 437 |
| Creditors: amounts | | | | | | | |
| falling due after more | | | | | | | |
| than one year | | | | | | | |
| | | | | | | | |
+------------------------+-------+------------+---------+---------+------------+---------+---------+
| Net Assets | | 27,982 | 674 | 28,656 | 29,611 | 696 | 30,307 |
| | | | | | | | |
+------------------------+-------+------------+---------+---------+------------+---------+---------+
| Capital and Reserves | 15 | 317 | 8 | 325 | 317 | 8 | 325 |
| Called-up share | 16 | - | 702 | 702 | - | 702 | 702 |
| capital | 16 | 29,089 | - | 29,089 | 29,089 | - | 29,089 |
| Share Premium | 16 | 25 | - | 25 | 25 | - | 25 |
| Special Reserve | 16 | (1,805) | (19) | (1,824) | (120) | (7) | (127) |
| Capital redemption | 16 | 356 | (17) | 339 | 300 | (7) | 293 |
| reserve | | | | | | | |
| Capital reserve | | | | | | | |
| Revenue reserve | | | | | | | |
| | | | | | | | |
+------------------------+-------+------------+---------+---------+------------+---------+---------+
| Total Equity | | 27,982 | 674 | 28,656 | 29,611 | 696 | 30,307 |
| Shareholders' Funds | | | | | | | |
| | | | | | | | |
+------------------------+-------+------------+---------+---------+------------+---------+---------+
| Net Asset Value per | | 88.5 | 86.7 | | 93.6 | 89.5 | |
| Share | | | | | | | |
| | | | | | | | |
+------------------------+-------+------------+---------+---------+------------+---------+---------+
| Number of Shares in | | 31,626,320 | 777,589 | | 31,626,320 | 777,589 | |
| issue at end of year | | | | | | | |
| | | | | | | | |
+------------------------+-------+------------+---------+---------+------------+---------+---------+
The Financial Statements were approved and authorised for issue by the Board of
Directors on 15 December 2009 and were
signed on their behalf by:
RL Pennant-Rea
Chairman
Cash Flow Statement
+-----------------------------------+--------+-----------+-----------+-----------+-----------+-----------+-----------+
| | | For the year ended 30 September | For the year ended 30 September |
| | | 2009 | 2008 |
+-----------------------------------+--------+-----------------------------------+-----------------------------------+
| | Notes | Ordinary | C Shares | Total | Ordinary | C Shares | Total |
| | | Shares | GBP000 | GBP000 | Shares | GBP000 | GBP000 |
| | | GBP000 | | | GBP000 | | |
+-----------------------------------+--------+-----------+-----------+-----------+-----------+-----------+-----------+
| Operating Activities | | | | | | | |
| | | | | | | | |
| Investment income received | | 11 | - | 11 | 317 | - | 317 |
| Bank deposit interest received | | 6 | - | 6 | 52 | - | 52 |
| Investment management fees paid | | (460) | (23) | (483) | (905) | - | (905) |
| Other cash payments | | (351) | (5) | (356) | (435) | (4) | (439) |
| Other income (VAT Rebate) | | 140 | - | 140 | - | - | - |
| | | | | | | | |
+-----------------------------------+--------+-----------+-----------+-----------+-----------+-----------+-----------+
| Net Cash Outflow from Operating | 18 | (654) | (28) | (682) | (971) | (4) | (975) |
| Activities | | | | | | | |
| | | | | | | | |
| Capital Expenditure and Financial | | | | | | | |
| Investment | | | | | | | |
| | | | | | | | |
| Investing Activities | | | | | | | |
| Purchase of investments | | (2,821) | (23) | (2,844) | (9,469) | (200) | (9,669) |
| Sale of investments | | 2,384 | - | 2,384 | 12,541 | - | 12,541 |
| Co-investment receipt/(payment) | | | | | | | |
| to related party | | 167 | - | 167 | (167) | - | (167) |
| | | | | | | | |
+-----------------------------------+--------+-----------+-----------+-----------+-----------+-----------+-----------+
| Net Cash Inflow/(Outflow) from | | | | | | | |
| Investing Activities | | (270) | (23) | (293) | 2,905 | (200) | 2,705 |
| | | | | | | | |
| Equity Dividends Paid | | - | - | - | (668) | - | (668) |
| | | | | | | | |
+-----------------------------------+--------+-----------+-----------+-----------+-----------+-----------+-----------+
| | | | | | | | |
| Cash Inflow/(Outflow) before | | | | | | | |
| Financing and Management of | | (924) | (51) | (975) | 1,266 | (204) | 1,062 |
| Liquid Resources | | | | | | | |
| | | | | | | | |
+-----------------------------------+--------+-----------+-----------+-----------+-----------+-----------+-----------+
| Management of Liquid Resources | | | | | | | |
| | | | | | | | |
| Sales of current asset | | 214 | - | 214 | 135 | - | 135 |
| investments | | | | | | | |
| | | | | | | | |
+-----------------------------------+--------+-----------+-----------+-----------+-----------+-----------+-----------+
| Net Cash Inflow from Management | | | | | | | |
| of Liquid Resources | | - | - | - | 135 | - | 135 |
| | | | | | | | |
| Financing | | | | | | | |
| Issue of shares | | - | - | - | - | 778 | 778 |
| Share issue expenses | | - | - | - | - | (54) | (54) |
| Repurchase of ordinary shares | | - | - | - | (1,848) | - | (1,848) |
| | | | | | | | |
+-----------------------------------+--------+-----------+-----------+-----------+-----------+-----------+-----------+
| Net Cash (Outflow)/Inflow from | | | | | | | |
| Financing | | - | - | - | (1,848) | 724 | (1,124) |
| | | | | | | | |
+-----------------------------------+--------+-----------+-----------+-----------+-----------+-----------+-----------+
| (Decrease)/Increase in Cash for | | | | | | | |
| the Year | 19 | (710) | (51) | (761) | (447) | 520 | 73 |
| | | | | | | | |
+-----------------------------------+--------+-----------+-----------+-----------+-----------+-----------+-----------+
Statement of Accounting Policies
Basis of Accounting
The accounts are prepared on a going concern basis and on the historical cost
basis of accounting, modified to include the revaluation of fixed asset
investments, in accordance with the Companies Act 2006, United Kingdom Generally
Accepted Accounting Practice (UK GAAP) and the Statement of Recommended Practice
for Investment Trust Companies and Venture Capital Trusts issued by the
Association of Investment Companies in December 2005 and revised in January 2009
(the "SORP").
In order to reflect the activities of an investment company, supplementary
information which analyses the financial statements between items of a revenue
and capital nature has been presented alongside the financial statements. In
analysing total income between capital and revenue returns, the Directors have
followed the guidance contained in the SORP.
The management fee is allocated between revenue and capital in accordance with
the Board's expected long term split of returns, and other expenses are charged
to capital only to the extent that a clear connection with the maintenance or
enhancement of the value of investments can be demonstrated.
A summary of the principal accounting policies, all of which have been applied
consistently throughout the current year, follows:
Investments
Purchases and sales of quoted investments are recognised on the trade date where
a contract exists whose terms require delivery within a timeframe determined by
the relevant market. Purchases and sales of unlisted investments are recognised
when the contract for acquisition or sale becomes unconditional. Investments are
designated at fair value through profit and loss on investments recognised
(described in the Accounts as investments held at fair value) and are
subsequently measured at reporting dates at fair value. The fair value of direct
unquoted investments is calculated in accordance with the Principles of
Valuation of Investments below. Changes in the fair value of investments are
recognised in the income statement through the capital account.
Quoted Investments
Quoted investments are stated at the bid market prices on the balance sheet date
without discount.
Unquoted Investments
Unquoted investments are held at fair value through profit or loss. The fair
value is calculated in accordance with International Private Equity and Venture
Capital Valuation Guidelines issued in September 2009 following the methodology
outlined below.
Principles of Valuation of Investments
General
In valuing investments, the Directors follow the principles recommended in the
International Private Equity and Venture Capital Valuation Guidelines issued in
September 2009. Investments are valued at fair value at the reporting date.
Fair value represents the amount for which an asset could be exchanged between
knowledgeable, willing parties in an arm's length transaction. In estimating
fair value, the Directors use a methodology which is appropriate in light of the
nature, facts and circumstances of the investment. Methodologies are applied
consistently from one period to another except where a change results in a
better estimate of fair value. Because of the inherent uncertainties in
estimating the value of private equity investments, the Directors exercise
appropriate prudence in applying the various methodologies.
As part of the valuation process, the proposed valuations are reviewed by the
independent members of the Investment Committee before being examined by the
auditors and then approved by the Directors.
Unquoted Investments
The principal methodologies applied in valuing unquoted investments, including
PLUS investments (a UK market focussed on small and medium companies which the
Directors do not regard as an active market with sufficient liquidity), include
the following:
- Earnings multiple
- Price of recent investment
- Net assets
In applying the Earnings Multiple methodology, the Directors apply a market
based multiple that is appropriate and reasonable to the maintainable earnings
of the company. In the majority of cases the Enterprise Value of the underlying
business is derived by the use of an Earnings before Interest, Tax and
Depreciation multiple applied to current year's earnings where these can be
forecast with a reasonable degree of certainty and are deemed to represent the
best estimate of maintainable earnings. Where this is not the case, historic
earnings will generally be used in their place. In the case of unquoted
investments, fair value is established by using measurements of value such as
price of recent transaction, earnings multiple and net assets; where no reliable
fair value can be estimated using such techniques.
Where a recent investment has been made, either by the Company or by a third
party in one of Company's investments, this price will be used as the estimate
of fair value from the date on which the investment was made. One of the
principal methodologies, as above, may be used at any time if this is deemed to
provide a better assessment of the fair value of the investment. Unquoted
investments may be subject to an impairment adjustment to valuation where
necessary.
The fair value of an investment in a company will be arrived at through the
following process:
* The Enterprise Value of the underlying business will be calculated using one of
the above methodologies;
* The Enterprise Value of the underlying business will then be adjusted for
surplus assets or excess liabilities to arrive at an Enterprise Value for the
company; and
* The valuation of the Company's investment will be calculated from the Enterprise
Value for the company after deduction of prior ranking debt and other financial
instruments and an appropriate discount.
In terms of the discount, this will normally be in the range of 10-30% (in steps
of 5%) applied to the comparable multiple of the company.
The amount of the discount is a question of judgement and will reflect several
factors including the ability of the Company to influence the timing and nature
of any realisation. Where the Company has the ability to influence an exit, or
is part of a syndicate of like-minded investors who initiate the exit, a smaller
discount will be applied. This may vary according to market and investee company
circumstances. Where the likelihood of an exit is high, the discount is likely
to be lower. Where there is no ability to initiate an exit and exit is not under
discussion, the discount is likely to be higher. In cases where no exit is
contemplated by controlling shareholders, the investment may be valued by
discounting the cash flow from the investment itself.
Although the Company holds more than 20% of the equity of certain companies, it
is considered that the investments are held as part of the investment portfolio.
Accordingly, and as permitted by FRS 9 'Associates and joint ventures', their
value to the Company lies in their marketable value as part of that portfolio.
It is not considered that any of the holdings represent investments in
associated undertakings.
Under FRS 2 'Accounting for subsidiary undertakings' control is presumed to
exist when the parent owns, directly or indirectly more than half of the voting
power by a number of means. The Company does not hold more than 50% of the
equity of any of the companies within the portfolio. In addition, it does not
control any of the companies held as part of the investment portfolio. It is not
considered that any of the holdings represent investments in subsidiary
undertakings.
Income
Dividends receivable from equity investments are brought into account on the
ex-dividend date or, where no ex-dividend date is quoted, are brought into
account when the Company's right to receive payment is established. Fixed
returns on non-equity investments and on debt securities are recognised on an
effective interest rate basis. Where there is reasonable doubt that a return,
which falls within the accounting period, will actually be received by the
Company, the recognition of the return is deferred until the reasonable doubt
has been removed.
Interest receivable on cash deposits is accounted for on an accruals basis.
Expenses
All expenses are accounted for on an accruals basis. Expenses are charged
through the revenue account except for expenses in connection with the disposal
of fixed asset investments, which are deducted from the disposal proceeds of the
investment and investment management and incentive fees which are dealt with
below. A split of expenses is made between Ordinary and C Shares in proportion
to the Net Asset Value.
Investment Management and Incentive Fees
The investment management fees for the Investment Manager's services are charged
25% to the revenue account and 75% to the capital account. This is in line with
the Board's long-term expected split of returns from the investment portfolio of
the Company. Incentive fees are fully charged to the capital account. The
incentive fee on realisations in the period is charged to the realised capital
reserve and the incentive fee provision in respect of unrealised value growth in
the portfolio is charged to the unrealised capital reserve.
Revenue and Capital Reserves
The revenue return in the Income Statement is taken to the revenue reserve.
Gains and losses on the realisation of investments are taken to the realised
capital reserve. Gains and losses arising from changes in fair value are
considered to be realised only to the extent that they are readily convertible
to cash in full at the balance sheet date. Otherwise Gains and Losses are
treated as unrealised.
Taxation
The tax effects of different items in the Income Statement are allocated between
capital and revenue on the same basis as the particular item to which they
relate using the Company's effective rate of tax for the accounting period.
Due to the Company's status as a venture capital trust and the continued
intention to meet the conditions required to comply with Section 274 of the
Income Tax Act 2007 (ITA 2007), no provision for taxation is required in respect
of any realised or unrealised appreciation of the Company's investments.
Deferred tax is provided on all timing differences that have originated but not
reversed by the balance sheet date. Deferred tax assets are only recognised to
the extent that they are recoverable.
Dividends Payable
Dividend distributions to shareholders are recognised as a liability in the
period in which they are paid in respect of interim dividends or when approved
by members in respect of final dividends.
Foreign Currency
The Company does not hold any assets or liabilities denominated in foreign
currencies at the year end.
Trail Commission
The fair value of trail commission payable on new share issues is estimated on
the date the new shares are issued based on the net asset value of the trust at
that time, an estimate of annualised growth in NAV over the life of the contract
and an appropriate discount rate. Subsequent to initial recognition, changes in
the value of the creditor arising through the unwinding of the discount rate are
recognised in the revenue column of the Income Statement and movements in the
value of the creditor resulting from changes in assumptions are recognised in
the capital column of the Income Statement.
C Shares
Unless and until C Shares are converted into Ordinary Shares, all investments
and returns attributable to this class of share will be accounted separately for
ordinary shares identifiable from the existing Ordinary Shares. All residual
expenses will be allocated on the basis of total funds raised for each class of
share.
1 Income
+-----------------------+---+----------+---------+---------+-----------------+---------+---------+
| | | As at 30 September | As at 30 September 2008 |
| | | 2009 | |
+-----------------------+---+------------------------------+-------------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+-----------------------+---+----------+---------+---------+-----------------+---------+---------+
| Franked investment | | - | - | - | 204 | - | 204 |
| income* | | 3 | - | 3 | 58 | - | 58 |
| Income from liquidity | | 543 | - | 543 | 467 | - | 467 |
| funds# | | 6 | - | 6 | 52 | - | 52 |
| Unfranked investment | | 11 | | 11 | - | - | - |
| income* | | | | | | | |
| Investment from bank | | | | | | | |
| deposits# | | | | | | | |
| Interest on | | | | | | | |
| recoverable VAT# | | | | | | | |
+-----------------------+---+----------+---------+---------+-----------------+---------+---------+
| | | 563 | - | 563 | 781 | - | 781 |
+-----------------------+---+----------+---------+---------+-----------------+---------+---------+
*Denotes income arising from investments designated as fair value through the
profit or loss on initial recognition.
#Denotes Income arising on financial assets not designated as fair value through
profit or loss.
2 Investment Manager's Fees
+-----------------------+----+-------------+---------+---------+-----------------+---------+---------+
| | | As at 30 September | As at 30 September 2008 |
| | | 2009 | |
+-----------------------+----+---------------------------------+-------------------------------------+
| | | Revenue | Capital | Total | Revenue | Capital | Total |
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------+----+-------------+---------+---------+-----------------+---------+---------+
| Ordinary Shares | | | | | | | |
+-----------------------+----+-------------+---------+---------+-----------------+---------+---------+
| Acuity Capital | | 217 | 620 | 837 | 197 | 592 | 789 |
| | | | | | | | |
+-----------------------+----+-------------+---------+---------+-----------------+---------+---------+
| C Shares | | | | | | | |
+-----------------------+----+-------------+---------+---------+-----------------+---------+---------+
| Acuity Capital | | 4 | 13 | 17 | 3 | 8 | 11 |
| | | | | | | | |
+-----------------------+----+-------------+---------+---------+-----------------+---------+---------+
| Total | | 221 | 633 | 854 | 200 | 600 | 800 |
| | | | | | | | |
+-----------------------+----+-------------+---------+---------+-----------------+---------+---------+
The Management Fee includes irrecoverable VAT of GBPNil (2008: GBP119,000).
Acuity Capital also received an administration fee of GBP70,000 (2008:
GBP66,000), net of VAT, which increases each year in line with RPI. The
administration fee is included in the administration expenses of GBP156,000 in
Note 3.
HM Revenue & Customs has accepted that under European Union VAT law the
exemption of VCT management fees from VAT should have applied from January 1990
onwards and has indicated that claims may be made for repayment of VAT
previously suffered by VCTs on management fees, subject to such claims being
limited to a period of three years prior to the date of claim. During the year
ended 30 September 2009 the Company received a repayment of GBP130,000 in
respect of VAT previously suffered on management fees and this amount has been
recognised as a separate credit in the income statement, allocated between
revenue and capital return in the same proportion as that in which the
irrecoverable VAT was originally charged. The directors also agreed that the
Investment Manager would be refunded for the reduction in Management fees paid
during the same period as disclosed above.
Annual running expenses of the Fund are capped at 3.6% of the net asset value as
of 30 September 2009. Any excess will be reduced against the management fee
payable to the Investment Manager. An exceptional payment of GBP140,000 was made
to the Investment Manager in respect of unpaid Management Fees for past periods
on receipt of the VAT repayment referred to above.
Management Fees and Arrangements
Acuity Capital was appointed as Investment Manager under an agreement dated 6
October 2004, later superseded by an updated Management Agreement dated 18
October 2007. The Agreement is for an initial period of five years and
thereafter until terminated by not less than one year's notice to expire at any
time after the initial period. Fees for Ordinary and C Share pools are paid
quarterly in advance, as a percentage of net assets (less a rebate of fees
suffered in the investment in CF Real Active Management which is managed by
Acuity Capital), at the following annual rates:
Period ended 30 June 2005 1.5%
Year ended 30 June 2006 2.0%
Year ended 30 June 2007 and thereafter 2.5%
Incentive Schemes
Ordinary Shares
The Investment Manager will receive a performance fee based on returns to
Ordinary shareholders. If the Company's net asset value per share in a relevant
calculation period increases so that it exceeds GBP1, less the value of
distributions per share plus notional interest at 7% per annum compounded
annually, the Investment Manager will receive 20% of the excess. For ordinary
shares the first period expired on 30 September 2004. Subsequent periods are of
one year's duration. In the event that the performance of the Company falls
short of the target in any period the shortfall must be made up before the
Investment Manager is entitled to a performance fee for subsequent periods.
C Shares
Certain employees of, and persons engaged in, the business of the Investment
Manager, will be entitled to receive a performance fee based upon returns to
shareholders. The incentives are designed to encourage significant dividend
payments to shareholders and a NAV performance that would equate to a historic
top decile industry ranking, before any performance fee payment is made.
Therefore, if by the end of a financial year, aggregate distributions of 30p per
share have been declared and if the Performance Value, which is equal to the Net
Asset Value plus distributions, at that date exceeds 130p per share, then the
beneficiaries will be entitled to an incentive equal to 20% of the excess of
such Performance Value over 100p per share. If, on a subsequent financial year
end, the performance of the Company falls short of the performance of the
Company on the previous financial year end, the beneficiaries will not be
entitled to any incentive. If, on a subsequent financial year end, the
performance of the Company exceeds the previous performance of the Company, the
beneficiaries will be entitled to 20% of such excess.
At 30 September 2009 there was no amount due under the incentive schemes.
3 Other Expenses
+----------------------+---+----------+---------+---------+---------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+----------------------+---+------------------------------+-----------------------------------+
| | | Ordinary | C | | Ordinary | C | |
| | | Shares | Shares | Total | Shares | Shares | Total |
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------+---+----------+---------+---------+---------------+---------+---------+
| Directors' | | 68 | 2 | 70 | 69 | 1 | 70 |
| remuneration | | 7 | - | 7 | 5 | - | 5 |
| Employer's NIC | | | | | | | |
| Auditors' fees | | | | | | | |
| Audit:- | | 20 | - | 20 | 19 | - | 19 |
| KPMG | | - | - | - | 4 | - | 4 |
| PwC | | 15 | - | 15 | 13 | - | 13 |
| Non audit:- | | 2 | - | 2 | 1 | - | 1 |
| PwC - Tax Services | | (45) | | (49) | (100) | - | (100) |
| KPMG - Other | | 153 | (4) | 156 | 182 | 2 | 184 |
| services | | | 3 | | | | |
| Re-estimation of | | | | | | | |
| trail commission | | | | | | | |
| creditor | | | | | | | |
| Administration | | | | | | | |
| expenses | | | | | | | |
+----------------------+---+----------+---------+---------+---------------+---------+---------+
| | | 220 | 1 | 221 | 193 | 3 | 196 |
| | | | | | | | |
+----------------------+---+----------+---------+---------+---------------+---------+---------+
In addition to the audit fees above, an amount of GBP8,000 was settled by Acuity
Capital in relation to the period to 30 September 2008.
4 Finance Cost
+------------------------+--+----------+---------+---------+---------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+--+------------------------------+-----------------------------------+
| | | Ordinary | C | | Ordinary | C | |
| | | Shares | Shares | Total | Shares | Shares | Total |
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+--+----------+---------+---------+---------------+---------+---------+
| Deferred trail | | | | | | | |
| commission expense | | 32 | 1 | 33 | 42 | - | 42 |
| amortisation | | | | | | | |
| | | | | | | | |
+------------------------+--+----------+---------+---------+---------------+---------+---------+
| | | 32 | 1 | 33 | 42 | - | 42 |
| | | | | | | | |
+------------------------+--+----------+---------+---------+---------------+---------+---------+
5 Directors' Remuneration
Details of Directors' remuneration are shown in the table in the "Directors
Remuneration for the Year" section of the Directors' Remuneration Report.
The Company had no employees or employee costs in 2009 (2008: GBPnil).
6 Taxation of Ordinary Activities
+------------------------+--+----------+---------+---------+---------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+--+------------------------------+-----------------------------------+
| | | Ordinary | C | | Ordinary | C | |
| | | Shares | Shares | Total | Shares | Shares | Total |
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+--+----------+---------+---------+---------------+---------+---------+
| Analysis of charge in | | | | | | | |
| the period | | | | | | | |
| | | | | | | | |
| Current tax: | | | | | | | |
| UK Corporation tax at | | - | - | - | - | - | - |
| 21% (2008: 20.5%) | | | | | | | |
| | | | | | | | |
+------------------------+--+----------+---------+---------+---------------+---------+---------+
| Total Current Tax | | - | - | - | - | - | - |
| | | | | | | | |
+------------------------+--+----------+---------+---------+---------------+---------+---------+
| | | | | | | | |
| Factors affecting tax | | | | | | | |
| charge for the period | | | | | | | |
| Loss on ordinary | | (1,629) | (22) | (1,651) | (2,178) | (14) | (2,192) |
| activities before tax | | | | | | | |
+------------------------+--+----------+---------+---------+---------------+---------+---------+
| Revenue return | | | | | | | |
| multiplied by | | (342) | (5) | (347) | (436) | (3) | (439) |
| corporate tax rate | | | | | | | |
| Effects of: | | - | - | - | (41) | - | (41) |
| Dividend income not | | (3) | - | (3) | (15) | - | (15) |
| subject to tax | | | | | | | |
| Expenses not | | 259 | 1 | 260 | (168) | - | (168) |
| deductible for tax | | 86 | 4 | 90 | 660 | 3 | 663 |
| purposes | | | | | | | |
| Unrealised | | | | | | | |
| (losses)/gains on | | | | | | | |
| investments | | | | | | | |
| Unutilised tax losses | | | | | | | |
| arising in the year | | | | | | | |
+------------------------+--+----------+---------+---------+---------------+---------+---------+
| | | | | | | | |
| Total Current Tax | | - | - | - | - | - | - |
+------------------------+--+----------+---------+---------+---------------+---------+---------+
In light of the Company's status as a venture capital trust and the Directors'
intention to continue to meet the conditions necessary to obtain such approval
in the foreseeable future, the Company has not provided for deferred tax on any
capital gains and losses arising on the revaluation or disposal of investments.
There is no unprovided deferred tax liability at 30 September 2009. There has
been no recognition of an ordinary share deferred tax asset on ordinary shares
of GBP570,000 (2008: GBP161,000), and on C shares of GBP7,000 (2008: GBP2,000),
as the Directors do not anticipate these being used.
7 Return per Ordinary and C Share
The revenue (loss)/return per ordinary share is based on the net revenue from
ordinary activities after taxation of GBP56,000 (2008: GBP131,000) and on
31,626,320 (2008: 33,169,313) ordinary shares, being the weighted average number
of ordinary shares in issue during the year.
The capital loss per ordinary share is based on net capital losses of
GBP1,685,000 (2008: GBP2,209,000) and on 31,626,320 (2008: 33,169,313) ordinary
shares, being the weighted average number of ordinary shares in issue during the
year.
The revenue return per C Share is based on the net revenue losses from ordinary
activities after taxation of GBP10,000 (2008: GBP7,000) and on 777,589 (2008:
771,571) C Shares, being the weighted average number of ordinary shares in issue
during the year.
The capital loss per C Share is based on net capital losses of GBP12,000 (2008:
GBP7,000) and on 777,589 (2008: 771,571) C Shares, being the weighted average
number of C Shares in issue during the year.
8 Dividend
+------------------------+--+---------+---------+---------+---------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+--+-----------------------------+-----------------------------------+
| Ordinary Shares | | Revenue | Capital | Total | Revenue | Capital | Total |
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+--+---------+---------+---------+---------------+---------+---------+
| | | | | | | | |
| Recognised as | | | | | | | |
| distribution in the | | | | | | | |
| financial statements | | | | | | | |
| for the year | | - | - | - | 337 | - | 337 |
| | | | | | | | |
| First interim paid - | | | | | | | |
| GBPnil (2008: 1.0p) | | - | - | - | 331 | - | 331 |
| per share | | | | | | | |
| | | | | | | | |
| Second interim paid - | | | | | | | |
| GBPnil (2008: 1.0p) | | | | | | | |
| per share | | | | | | | |
+------------------------+--+---------+---------+---------+---------------+---------+---------+
| Total | | - | - | - | 668 | - | 668 |
| | | | | | | | |
+------------------------+--+---------+---------+---------+---------------+---------+---------+
+------------------------+--+---------+---------+---------+---------------+---------+--------------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+--+-----------------------------+----------------------------------------+
| Ordinary Shares | | Revenue | Capital | Total | Revenue | Capital | Total |
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+--+---------+---------+---------+---------------+---------+--------------+
| | | | | | | | |
| Paid and proposed in | | | | | | | |
| respect for the period | | | | | | | |
| | | | | | | | |
| First interim paid - | | - | - | - | 337 | - | 337 |
| GBPnil (2008: 1.0p) | | | | | | | |
| per share | | | | | | | |
| | | - | - | - | 331 | - | 331 |
| Second interim paid - | | | | | | | |
| GBPnil (2008: 1.0p) | | | | | | | |
| per share | | | | | | | |
+------------------------+--+---------+---------+---------+---------------+---------+--------------+
| Total | | - | - | - | 668 | - | 668 |
| | | | | | | | |
+------------------------+--+---------+---------+---------+---------------+---------+--------------+
There have been no dividends paid to C Share shareholders.
9 Investments
+----------------------+---------+----------+---------+------------+--------------+---------+
| | Qualifying Investments | Non-qualifying | |
| | | Investments | |
| | | | |
+----------------------+------------------------------+---------------------------+---------+
| Ordinary Shares | | | | | Closed-ended | |
| | Traded | | | Open-ended | Investment | |
| | on | | Traded | Investment | Company | |
| | PLUS | Unquoted | on | Company | GBP'000 | Total |
| | GBP'000 | GBP'000 | AIM | GBP'000 | | GBP'000 |
| | | | GBP'000 | | | |
+----------------------+---------+----------+---------+------------+--------------+---------+
| Costs at 1 October | 496 | 18,047 | 4,439 | 1,063 | 2,370 | 26,415 |
| 2008 | | | | | | |
| Investment holdings | (293) | 3,657 | (2,915) | (107) | 803 | 1,145 |
| gains/(losses) at 1 | | | | | | |
| October 2008 | | | | | | |
| | | | | | | |
+----------------------+---------+----------+---------+------------+--------------+---------+
| Valuation at 1 | 203 | 21,704 | 1,524 | 956 | 3,173 | 27,560 |
| October 2008 | | | | | | |
| | | | | | | |
+----------------------+---------+----------+---------+------------+--------------+---------+
| Purchases at cost | - | 3,584 | - | - | - | 3,584 |
| | | | | | | |
| Proceeds from sales | - | (763) | (56) | (638) | (1,690) | (3,147) |
| | | | | | | |
| Realised | - | (1,000) | 56 | 395 | 455 | (94) |
| losses/(gains) in | | | | | | |
| year | - | (1,137) | (1,661) | (574) | (1,043) | (4,415) |
| Unrealised losses | | | | | | |
| realised during the | | | | | | |
| year | (51) | 2,637 | 1,379 | 85 | (774) | 3,276 |
| | | | | | | |
| Investment holding | | | | | | |
| (losses)/ gains in | | | | | | |
| year | | | | | | |
| | | | | | | |
+----------------------+---------+----------+---------+------------+--------------+---------+
| Valuation at 30 | 152 | 25,025 | 1,242 | 224 | 121 | 26,764 |
| September 2009 | | | | | | |
| | | | | | | |
+----------------------+---------+----------+---------+------------+--------------+---------+
| Cost at 30 September | 496 | 18,731 | 2,778 | 246 | 92 | 22,343 |
| 2009 | | | | | | |
| | | | | | | |
| Investment holdings | (344) | 6,294 | (1,536) | (22) | 29 | 4,421 |
| (losses)/ gains at | | | | | | |
| 30 September 2009 | | | | | | |
| | | | | | | |
+----------------------+---------+----------+---------+------------+--------------+---------+
| Valuation at 30 | 152 | 25,025 | 1,242 | 224 | 121 | 26,764 |
| September 2009 | | | | | | |
| | | | | | | |
+----------------------+---------+----------+---------+------------+--------------+---------+
The purchases and sales proceeds figures above include transaction costs of
GBPnil (2008: GBPnil) and GBP5,000 (2008: GBP4,000) respectively.
All investments are designated as fair value through profit or loss on initial
recognition; therefore all gains and losses arise on investments designated as
fair value through profit or loss.
+-------------------------------------------------------------+-------------------+-------------------+
| | Qualifying |
| | Investments |
| | |
+-------------------------------------------------------------+---------------------------------------+
| C Shares | Unquoted | Total |
| | GBP'000 | GBP'000 |
+-------------------------------------------------------------+-------------------+-------------------+
| Costs at 1 October 2008 | 200 | 200 |
| Investment holding gains/(losses) at 1 October 2008 | - | - |
| | | |
+-------------------------------------------------------------+-------------------+-------------------+
| Valuation at 1 October 2008 | 200 | 200 |
| | | |
+-------------------------------------------------------------+-------------------+-------------------+
| Purchases at cost | 23 | 23 |
| | | |
+-------------------------------------------------------------+-------------------+-------------------+
| Investment holding loss in period | (3) | (3) |
| | | |
+-------------------------------------------------------------+-------------------+-------------------+
| Valuation at 30 September 2009 | 220 | 220 |
| | | |
+-------------------------------------------------------------+-------------------+-------------------+
| Cost at 30 September 2009 | 223 | 223 |
| Investment holding losses at 30 September 2009 | (3) | (3) |
| | | |
+-------------------------------------------------------------+-------------------+-------------------+
| Valuation at 30 September 2009 | 220 | 220 |
| | | |
+-------------------------------------------------------------+-------------------+-------------------+
10 Debtors
+-----------------------+--+----------+---------+---------+-------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+-----------------------+--+------------------------------+---------------------------------+
| | | Ordinary | C | | Ordinary | C | |
| | | Shares | Shares | Total | Shares | Shares | Total |
| | | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------+--+----------+---------+---------+-------------+---------+---------+
| Amounts receivable | | | | | | | |
| within one year: | | | | | | | |
| Receivable on Loan | | - | - | - | 8 | - | 8 |
| Notes issue | | - | - | - | 167 | - | 167 |
| Related party asset | | 5 | 2 | 7 | 34 | - | 34 |
| Other debtors | | | | | | | |
| | | | | | | | |
| Amounts receivable | | | | | | | |
| after one year: | | 1,605 | - | 1,605 | 1,075 | - | 1,075 |
| Accrued income | | | | | | | |
| | | | | | | | |
+-----------------------+--+----------+---------+---------+-------------+---------+---------+
| | | 1,610 | 2 | 1,612 | 1,284 | - | 1,284 |
| | | | | | | | |
+-----------------------+--+----------+---------+---------+-------------+---------+---------+
11 Other Investments
+------------------------+--+-----------------+-----------------+-----------------+-------------------+-----------------+-------------------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+--+-----------------------------------------------------+---------------------------------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+--+-----------------+-----------------+-----------------+-------------------+-----------------+-------------------+
| Liquidity Funds | | - | - | - | 210 | - | 210 |
| | | | | | | | |
+------------------------+--+-----------------+-----------------+-----------------+-------------------+-----------------+-------------------+
| | | - | - | - | 210 | - | 210 |
+------------------------+--+-----------------+-----------------+-----------------+-------------------+-----------------+-------------------+
12 Creditors: amounts falling due within one year
+------------------------+--+-------------------+-----------------+-------------------+-------------------+------------------+-------------------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+--+---------------------------------------------------------+----------------------------------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+--+-------------------+-----------------+-------------------+-------------------+------------------+-------------------+
| Due to Acuity Capital | | 336 | 4 | 340 | - | 10 | 10 |
| Deferred trail | | 70 | - | 70 | 74 | 2 | 76 |
| commission expenses | | 35 | - | 35 | 40 | - | 40 |
| Accrued expenses | | - | - | - | 5 | - | 5 |
| Other creditors | | | | | | | |
| | | | | | | | |
+------------------------+--+-------------------+-----------------+-------------------+-------------------+------------------+-------------------+
| | | 441 | 4 | 445 | 119 | 12 | 131 |
+------------------------+--+-------------------+-----------------+-------------------+-------------------+------------------+-------------------+
13 Creditors: amounts falling due after one year
+------------------------+--+-------------------+------------------+-------------------+-------------------+------------------+-------------------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+--+----------------------------------------------------------+----------------------------------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+--+-------------------+------------------+-------------------+-------------------+------------------+-------------------+
| Unsecured 4% Loan | | 21 | - | 21 | 21 | - | 21 |
| Notes | | 321 | 13 | 334 | 404 | 12 | 416 |
| Issued up to 30 | | | | | | | |
| September 2009 | | | | | | | |
| Deferred trail | | | | | | | |
| commission expenses | | | | | | | |
| | | | | | | | |
+------------------------+--+-------------------+------------------+-------------------+-------------------+------------------+-------------------+
| Issued at 30 September | | 342 | 13 | 355 | 425 | 12 | 437 |
| 2009 | | | | | | | |
| | | | | | | | |
+------------------------+--+-------------------+------------------+-------------------+-------------------+------------------+-------------------+
The Loan Notes are redeemable in certain circumstances at par including the
termination of the Investment Management Agreement with the Investment Manager.
They carry a 4% interest coupon and also the right to additional interest
payments under the terms of the incentive schemes set out in Note 2 to the
Financial Statements.
14 Significant Interests
At 30 September 2009 the Company held significant investments, amounting to 3%
or more of the equity capital in the following companies:-
+---------------------+------------+------------+-------------+-------------+------------+
| | Equity | Equity | Investments | Total | Percentage |
| | Investment | Investment | Loan Stock | Investments | Of |
| | (Ordinary | (C Shares) | And | GBP'000 | Investee |
| | Shares) | GBP'000 | Preference | | Company's |
| | GBP'000 | | Shares | | Total |
| | | | GBP'000 | | Equity |
| | | | | | % |
+---------------------+------------+------------+-------------+-------------+------------+
| Future Noise | 796 | - | - | 796 | 42.5 |
| Loseley Dairy Ice | 95 | - | 805 | 900 | 34.6 |
| Cream | 225 | - | 575 | 800 | 25.0 |
| Ma Hubbards | 192 | - | 1,733 | 1,925 | 25.0 |
| Factory Media | 162 | - | 1,453 | 1,615 | 24.8 |
| Munro | 27 | - | 89 | 116 | 21.7 |
| Financial News | 215 | - | 1,935 | 2,150 | 19.5 |
| Publishing | 200 | - | 1,311 | 1,511 | 16.6 |
| The Fin Machine | 241 | - | 2,164 | 2,405 | 16.4 |
| Company | 309 | - | 504 | 813 | 14.4 |
| Brand Acquisitions | 229 | - | 944 | 1,173 | 13.7 |
| Ltd | 533 | - | 1,467 | 2,000 | 13.3 |
| Defaqto | 225 | - | 525 | 750 | 13.2 |
| Red Reef Media Ltd | 1,276 | 200 | - | 1,476 | 13.0 |
| Emote Games | 750 | - | - | 750 | 3.9 |
| Target Group | | | | | |
| Amber Taverns | | | | | |
| Connect 2 Play | | | | | |
| Zamano | | | | | |
| | | | | | |
+---------------------+------------+------------+-------------+-------------+------------+
It is considered that, as permitted by FRS 9 "Associates and Joint Ventures",
the above investments are held as part of an investment portfolio and that,
accordingly, their value to the Company lies in their marketable value as part
of its portfolio. The percentages shown are the undiluted holdings of each
investee company.
In view of this, it is not considered that the above represent investments in
associated undertakings. The above companies are incorporated in the United
Kingdom, except for Zamano, which is incorporated in the Republic of Ireland.
15 Called Up Share Capital
+----------------------------+------------+------------+------------+------------+
| | | 2009 | | 2008 |
+----------------------------+------------+------------+------------+------------+
| | Number | GBP'000 | Number | GBP'000 |
+----------------------------+------------+------------+------------+------------+
| Authorised | 85,000,000 | 850 | 85,000,000 | 850 |
| Ordinary Shares of 1p each | | | | |
+----------------------------+------------+------------+------------+------------+
| | 85,000,000 | 850 | 85,000,000 | 850 |
+----------------------------+------------+------------+------------+------------+
+----------------------------+------------+------------+------------+------------+
| | | 2009 | | 2008 |
+----------------------------+------------+------------+------------+------------+
| | Number | GBP'000 | Number | GBP'000 |
+----------------------------+------------+------------+------------+------------+
| Authorised | 25,000,000 | 25 | 25,000,000 | 250 |
| C Shares of 1p each | | | | |
+----------------------------+------------+------------+------------+------------+
| | 25,000,000 | 25 | 25,000,000 | 250 |
+----------------------------+------------+------------+------------+------------+
+----------------------------+------------+------------+------------+------------+
| | | 2009 | | 2008 |
+----------------------------+------------+------------+------------+------------+
| | Number | GBP'000 | Number | GBP'000 |
+----------------------------+------------+------------+------------+------------+
| Authorised | 25,000,000 | 25 | 25,000,000 | 25 |
| Deferred Shares of 0.1p | | | | |
| each | | | | |
+----------------------------+------------+------------+------------+------------+
| | 25,000,000 | 25 | 25,000,000 | 25 |
+----------------------------+------------+------------+------------+------------+
+----------------------------+------------+------------+-------------+------------+
| | | 2009 | | 2008 |
+----------------------------+------------+------------+-------------+------------+
| | Number | GBP'000 | Number | GBP'000 |
+----------------------------+------------+------------+-------------+------------+
| Issued: | 31,626,320 | 317 | 33,926,696 | 340 |
| At 1 October 2008 | | | | |
| | | | | |
+----------------------------+------------+------------+-------------+------------+
| Ordinary Shares of 1p each | - | - | (2,300,376) | (23) |
| repurchased during the | | | | |
| year | | | | |
+----------------------------+------------+------------+-------------+------------+
| At 30 September 2009 | 31,626,320 | 317 | 31,626,320 | 317 |
+----------------------------+------------+------------+-------------+------------+
+----------------------------+------------+------------+------------+------------+
| | | 2009 | | 2008 |
+----------------------------+------------+------------+------------+------------+
| | Number | GBP'000 | Number | GBP'000 |
+----------------------------+------------+------------+------------+------------+
| Issued: | 777,589 | 8 | - | - |
| At 1 October 2008 | - | - | 777,589 | 8 |
| C Shares of 1p each issued | | | | |
| during the year | | | | |
+----------------------------+------------+------------+------------+------------+
| At 30 September 2009 | 777,589 | 8 | 777,589 | 8 |
+----------------------------+------------+------------+------------+------------+
+----------------------------+------------+------------+------------+------------+
| Issued: | - | - | - | - |
| At 1 October 2008 | - | - | - | - |
| Deferred Shares of 0.1p | | | | |
| each issued during the | | | | |
| year | | | | |
+----------------------------+------------+------------+------------+------------+
| At 30 September 2009 | - | - | - | - |
+----------------------------+------------+------------+------------+------------+
To date, no C Shares have been repurchased for cancellation. The Company does
not hold any shares in treasury.
During the year, the Company did not issue any shares.
C Shares
C Share issues are used for fund raisings by the Company in order to enable
shares to be issued at a consistent price to all applicants, rather than by
reference to a net asset value per share which may fluctuate over the period of
the offer; and ensure that existing ordinary shareholders are not disadvantaged
by the dilution of a mature investment portfolio through a large injection of
cash and near cash assets.
Management of Capital
The Capital of the Company is managed in accordance with the Company's
investment objective, detailed in the Investment Strategy.
The Company does not have any externally imposed capital requirements.
16 Reserves
+------------------------------+----------------------+------------------+----------------------+-------------------+
| Ordinary Shares | Special | Capital | Capital | Revenue |
| | Reserve | Redemption | Reserve | Reserve |
| | (Distributable) | Reserve | (Non | (Distributable) |
| | GBP'000 | (Non | distributable) | |
| | | distributable) | GBP'000 | GBP'000 |
| | | GBP'000 | | |
+------------------------------+----------------------+------------------+----------------------+-------------------+
| As at 1 October 2008 | | | (120) | |
| Loss on disposal on | 29,089 | 25 | | 300 |
| investments | - | - | (94) | - |
| Investment holding losses | - | - | | - |
| | | | ( | |
| | | | 1,139) | |
| | | | | |
+------------------------------+----------------------+------------------+----------------------+-------------------+
| Investment management fees | - | - | (497) | - |
| charged to capital account | | | | |
| (net of tax and VAT | | | | |
| recoverable) | | | | |
+------------------------------+----------------------+------------------+----------------------+-------------------+
| Re-estimation of trail | - | - | 45 | - |
| commission creditor charged | - | - | - | 56 |
| to capital account | | | | |
| Retained revenue for the | | | | |
| year | | | | |
| | | | | |
+------------------------------+----------------------+------------------+----------------------+-------------------+
| Valuation at 30 September | 29,089 | 25 | (1,805) | 356 |
| 2009 | | | | |
| | | | | |
+------------------------------+----------------------+------------------+----------------------+-------------------+
As at 30 September 2009, reserves distributable by way of a dividend amounted to
GBP29,445,000 (2008: GBP29,389,000), comprising the revenue reserve and special
reserve.
+------------------------------+-----------------+-------------------+--------------------+--------------------+
| C Shares | Special | Share | Capital | Revenue |
| | Reserve | Premium | Reserve | Reserve |
| | GBP'000 | GBP'000 | (Non | (Distributable) |
| | | | distributable) | |
| | | | GBP'000 | GBP'000 |
+------------------------------+-----------------+-------------------+--------------------+--------------------+
| As at 1 October 2008 | - | 702 | (7) | (7) |
+------------------------------+-----------------+-------------------+--------------------+--------------------+
| Investment management fees | - | - | (13) | - |
| charged to capital account | - | - | (3) | - |
| (net of tax relief) | | | | |
| Decrease In unrealised | | | | |
| appreciation | | | | |
+------------------------------+-----------------+-------------------+--------------------+--------------------+
| Deferred share issue expense | - | - | 4 | - |
| Dividends | - | - | - | - |
| Retained revenue for the | - | - | - | (10) |
| year | | | | |
| | | | | |
+------------------------------+-----------------+-------------------+--------------------+--------------------+
| Valuation at 30 September | - | 702 | (19) | (17) |
| 2009 | | | | |
| | | | | |
+------------------------------+-----------------+-------------------+--------------------+--------------------+
As at 30 September 2009 there were no reserves available to distribute as a
dividend (2008: nil).
17 Net Asset Value per Ordinary Share
Net asset value per Ordinary Share is based on net assets of GBP27,982,000 at 30
September 2009 (2008: GBP29,611,000), and on 31,626,320 (2008: 31,626,320)
Ordinary Shares, being the number of ordinary shares in issue on that date.
Net asset value per C Share is based on net assets of GBP674,000 at 30 September
2009 (2008: GBP696,000), and on 777,589 (2008: 777,589) C Shares, being the
number of C Shares in issue on that date.
18 Reconciliation of Net Revenue on Ordinary Activities Before Taxation to
Net Cash Outflow from Operating Activities
+------------------------+--+----------+---------+---------+------------+---------+---------+
| | | As at 30 September 2009 | As at 30 September 2008 |
+------------------------+--+------------------------------+--------------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+--+----------+---------+---------+------------+---------+---------+
| Return on ordinary | | (1,597) | (21) | (1,618) | (2,036) | (14) | (2,050) |
| activities before | | 1,233 | 3 | 1,236 | 1,835 | - | 1,835 |
| finance costs and | | (45) | - | (45) | (100) | - | (100) |
| taxation | | (493) | (2) | (495) | (612) | - | (612) |
| (Losses)/gains in | | 248 | (8) | 240 | (58) | 10 | (48) |
| investments | | | | | | | |
| Non cash movements | | | | | | | |
| Increase in debtors | | | | | | | |
| Increase/(decrease) in | | | | | | | |
| creditors and accruals | | | | | | | |
| | | | | | | | |
+------------------------+--+----------+---------+---------+------------+---------+---------+
| Net cash outflow from | | (654) | (28) | (682) | (971) | (4) | (975) |
| operating activities | | | | | | | |
| | | | | | | | |
+------------------------+--+----------+---------+---------+------------+---------+---------+
19 Analysis of Changes in Cash
+------------------------+--+----------+---------+---------+------+------+---------+---------+
| | | As at 30 September 2009 | As at 30 September |
| | | | 2008 |
+------------------------+--+-------------------------------------+--------------------------+
| | | Ordinary | C | Total | Ordinary | C | Total |
| | | Shares | Shares | GBP'000 | Shares | Shares | GBP'000 |
| | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 | |
+------------------------+--+----------+---------+---------+-------------+---------+---------+
| At beginning of period | | 1,101 | 520 | 1,621 | 1,548 | - | 1,548 |
| Net cash | | (710) | (51) | (761) | (447) | 520 | 73 |
| (outflow)/inflow | | | | | | | |
| | | | | | | | |
+------------------------+--+----------+---------+---------+-------------+---------+---------+
| At 30 September | | 391 | 469 | 860 | 1,101 | 520 | 1,621 |
| | | | | | | | |
+------------------------+--+----------+---------+---------+------+------+---------+---------+
20 Financial Instruments
Market Risk: Market Risk incorporates the possibility for losses and gains from
investments and encompasses interest rate risk and price risk.
Investment risk management is governed by the Investment Strategy of these
accounts and Market Risk is within that process. On a regular basis the
Investment Manager monitors the Company's market risk, in accordance with
policies and procedures documented in the Report of the Directors. The Board
meets regularly to review the Fund's market position.
Details of the nature of the Company's investment portfolio at the balance sheet
date can be found within the Portfolio Summary. The constituent parts of those
investments can be found in the table below.
The investment note, Note 9, details the split between listed and unlisted
investments, which shows that at the balance sheet date 7% was invested in
quoted stocks (2008: 21%). A 5% increase in the bid price of quoted stocks as at
the Balance Sheet date would have increased net assets and the total return for
the year by GBP87,000 (2008: GBP292,000); an equivalent change in the opposite
direction would have reduced net assets and the total return for the year by the
same amount. A 5% increase in the value of unquoted investments held at the
Balance Sheet date would have increased net assets and the total return for the
year by GBP1,262,000 (2008:GBP1,095,000); an equivalent change in the opposite
direction would have reduced net asset and the total return for the year by the
same amount.
Interest Rate Risk: A proportion of the Company's financial assets are interest
bearing, earning a fixed or a variable rate. Therefore, the Company has exposure
to fair value Interest Rate risk due to fluctuations in the market interest
rates.
The interest rate risk profile of the Company's financial assets at 30 September
2009 was:
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| | Financial | Fixed | Variable | Total | Weighted | Weighted |
| | Assets on | Rate | Rate | GBP'000 | Average | Average |
| | which no | Financial | Financial | | Interest | Period |
| | Interest | Assets | Assets | | Rates | for |
| | Paid | GBP'000 | GBP'000 | | % | which |
| | GBP'000 | | | | | rate is |
| | | | | | | fixed |
| | | | | | | (Years) |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| Ordinary Shares | 15,077 | - | - | 15,077 | - | - |
| Equity shares | - | 860 | - | 860 | 8.7 | - |
| Non equity shares | - | 10,827 | - | 10,827 | 8.6 | 2.6 |
| Loan stock | - | - | - | - | - | - |
| Liquidity Funds | - | - | 391 | 391 | 2.0 | - |
| Cash | 1,610 | - | - | 1,610 | - | - |
| Debtors | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| C Shares | 220 | - | - | 220 | - | - |
| Equity shares | - | - | - | - | - | - |
| Non equity shares | - | - | - | - | - | - |
| Loan stock | - | - | - | - | - | - |
| Liquidity Funds | - | - | 469 | 469 | 2.0 | - |
| Cash | 2 | - | - | 2 | - | - |
| Debtors | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| Total | 16,909 | 11,687 | 860 | 29,456 | - | - |
| | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
The only financial liabilities are the unsecured Loan Notes of GBP21,000 which
carry a 4% coupon and trail commission creditor of GBP404,000.
The interest rate risk profile of the Company's financial assets at 30 September
2008 was:
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| | Financial | Fixed | Variable | Total | Weighted | Weighted |
| | Assets on | Rate | Rate | GBP'000 | Average | Average |
| | which no | Financial | Financial | | Interest | Period |
| | Interest | Assets | Assets | | Rates | for |
| | Paid | GBP'000 | GBP'000 | | % | which |
| | GBP'000 | | | | | rate is |
| | | | | | | fixed |
| | | | | | | (Years) |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| Ordinary Shares | 14,234 | - | - | 14,234 | - | - |
| Equity shares | - | 1,486 | - | 1,486 | 8.0 | - |
| Non equity shares | - | 11,040 | 800 | 11,840 | 8.3 | 3.6 |
| Loan stock | - | - | 210 | 210 | 5.5 | - |
| Liquidity Funds | - | - | 1,101 | 1,101 | 3.5 | - |
| Cash | 1,284 | - | - | 1,284 | - | - |
| Debtors | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| C Shares | 200 | - | - | 200 | - | - |
| Equity shares | - | - | - | - | - | - |
| Non equity shares | - | - | 520 | 520 | - | - |
| Cash | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
| Total | 15,718 | 12,526 | 2,631 | 30,875 | - | - |
| | | | | | | |
+---------------------+-----------+-----------+-----------+---------+----------+----------+
The only financial liabilities are the unsecured Loan Notes of GBP21,000 (2008:
GBP21,000) which carry a 4% coupon and trail commission creditor of GBP492,000.
Fixed Rate Assets: Represent investments with predetermined yield targets. The
fixed rate investments are held for the medium term and have a predetermined
interest rate, in-line with their risk profile. Therefore a change of 25 basis
points in the interest rate at the balance sheet date would not have a
significant impact on the company's net assets.
Variable Rate Assets: Represent investments with interest rates linked, by
formula, to utilisation of company by investee companies.
Credit Risk: Credit risk is the risk that a counterparty to a financial
instrument is unable to discharge an obligation or commitment entered into with
the Company. The Investment Manager has in place a monitoring procedure in
respect of counterparty risk which is monitored on an ongoing basis. The
carrying amounts of financial assets best represent the maximum credit risk
exposure at the balance sheet date.
At the reporting date, the Company's financial assets exposed to credit risk
amounted to the following:
+------------------------------------------+--------------------+---------------+
| Credit Risk | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+------------------------------------------+--------------------+---------------+
| Investments in fixed interest | 11,687 | 12,526 |
| instruments | | |
+------------------------------------------+--------------------+---------------+
| Investments in variable interest | 860 | 2,631 |
| instruments (including cash) | | |
+------------------------------------------+--------------------+---------------+
| Interest, dividends and other | 1,612 | 1,284 |
| receivables | | |
+------------------------------------------+--------------------+---------------+
Credit risk on fixed interest instruments which are solely comprised of loan
stock is part of the Company's venture capital procedures and are managed within
the main investment management procedures.
Credit risk arising on floating rate instruments is mitigated by investing in
money market companies managed by JP Morgan and Scottish Widows. The board
regularly reviews this strategy and in accordance with that review has decided
to transfer those funds to HSBC Bank Plc post year end.
All the assets of the Company which are traded on a recognised exchange are held
in a secured facility on site. This mitigates the risk of a third party
custodian going into liquidation or becoming bankrupt.
Liquidity risk: The liquidity risk is the risk that the Company might encounter
difficulty in meeting its obligations arising from holding financial
instruments.
The Company's financial instruments also include investments in unlisted equity
investments which are not traded in an organised public Market and which
generally may be illiquid. As a result, the Company may not be able to liquidate
quickly some of its investments in these instruments at an amount close to their
value in order to meet its liquidity requirements, or to respond to specific
events such as deterioration in the creditworthiness of any particular issuer.
The Company's liquidity risk is managed on an ongoing basis by the Investment
Manager as presented in the Report of the Directors.
The Company maintains sufficient investments in cash to pay all accounts payable
and accrued expenses as they become due.
21 Post Balance Sheet Events
There were no significant post balance sheet events.
22 Geographical Analysis
The operations of the Company are wholly in the United Kingdom.
23 Transactions with the Investment Manager
During the year ended 30 September 2009 fees payable to Acuity Capital, the
Investment Manager, totalled GBP924,000 (2008: GBP866,000). At 30 September
2009, the Company owed GBP340,000 (2008: GBP10,000) to the Investment Manager.
Details of the Investment Manager's fee arrangements are included in Note 2.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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