TIDMFAME
Framlington AIM VCT PLC
Announcement of results for the year ended 30 September 2009
Chairman's Statement
During the year, your Company's net asset value has fallen by 7.1 per cent.
However, this figure masks the payment of a 7 pence dividend in February 2009
and also a significant turnaround since the end of the first half of the
financial year. Adding back the dividend paid during the year, the net asset
value has risen 6.9% over the financial year. The rise since 31 March 2009 has
been almost 37%.
The first half of the year was characterised by an extremely difficult and
illiquid AIM market. During the first six months, the FTSE AIM All Share Index
fell by 33.6%, whilst the Company's net asset value fell 32.1%. At this time,
investor interest hid within companies that had longer term track records,
where there was more belief in a recovery rather than looking at new young
entrants to the market. This situation was fully recognised by corporate
issuing houses and resulted in a lack of new listings.
A number of secondary offerings subsequently started to appear due to the lack
of available bank finance for smaller companies. Further to this there was a
substantial squeeze in the highly leveraged stocks, pushing their prices
substantially higher. The majority of this push was in the top end of the small
cap market place, leaving the AIM market lagging behind throughout the year.
The beginning of the second half of the year proved to be the low point for the
market as investors began to increase their appetite for risk. This trend
continued for the remainder of the period. However, many investors have been
chasing highly cyclical and highly geared companies rather than those sound
companies with strong management. The Company's portfolio has benefited during
this period from corporate takeover activity as well as an improvement in the
share prices of a number of our investments. Further comments on fund
performance and market conditions are presented in the Manager's Report.
I am pleased to report that the Board is recommending final dividends totalling
5.00 pence per share. This takes total dividends paid to shareholders by the
Company since launch to 25 pence per share. If approved by shareholders at the
annual general meeting ("AGM"), the dividend will be paid on 2 March 2010 to
shareholders on the register at 5 February 2010. Dividends paid by the Company
are exempt from income tax.
The AGM will be held at 12.30 pm on 25 February 2010 at the registered office,
155 Bishopsgate, London EC2M 3XJ. One of the items of special business to be
put to the shareholders at the AGM is a special resolution to adopt new
articles of association primarily to reflect the implementation of the
Shareholder Rights Directive in the UK in August 2009 and the remaining
provisions of the Companies Act 2006 in October 2009. Further details on this
and the other items of special business are contained in the Report of the
Directors and an explanation of the main changes between the proposed and the
new articles of association is set out in the Explanatory Notes to the Notice
of AGM contained in the Annual Report and Accounts.
Finally, I would like to express my gratitude to Brian Watson, your investment
manager, for his role since the launch of the Company. It was announced on 29
October 2009 that Brian had expressed his desire to retire from AXA
Framlington, and in so doing, as lead portfolio manager by 30 June 2010. The
Board is keen to ensure that there is an orderly transition of Brian's
investment management responsibilities for the Company. Although Brian has been
the lead manager, the AXA Framlington philosophy has always been centred on a
focused and now expanding team approach to its AIM listed securities.
Brian Watson will remain the portfolio manager of your Company until his
retirement next year. He will assist with the transition of management
responsibilities working closely with his colleagues, including George Luckraft
and Chris St. John who have been appointed as Head of Investment Trusts and
Head of UK Smaller Companies at AXA Framlington respectively. The investment
style adopted by the Company will remain the same, in essence, with the
management team seeking to identify companies with significant growth
prospects.
Tim How
Chairman
10 December 2009
Investment manager's report
Volatility and liquidity were the two main issues in equity markets over the
last twelve months within the UK domestic market and the AIM Market in
particular.
The Chairman reported at the interim stage that after a very poor first quarter
of the Company's year, a modicum of recovery was experienced within the second
quarter. March 2009 proved to be the low point for the market as investors'
appetite for risk became increasingly apparent. This appetite was not for
small, young and emerging businesses but for companies with over-stretched
balance sheets in the belief that the bankers would extend covenants and not
withdraw their credit. Notwithstanding this, it is pleasing to report that the
Company's net asset value has also rebounded from its March lows, although it
was down over the year as a whole.
During the twelve months the Company has benefited from corporate takeover
activity. Last year I reported in detail on our holding in Claimar Care Group,
which had been extremely disappointing. It is pleasing to report, therefore,
that retaining the holding at the depressed levels was subsequently vindicated
by a cash takeover at 39 pence per share. We also saw a healthy premium bid for
Concateno from Inverness Medical Innovations Inc. which was effective in August
and, shortly before our year end, a cash/share bid for Essentially Group by
Chime Communications. In late November, Astra 5.0 Limited announced a cash
offer for FDM Group, again at a premium.
It is also pleasing to note that a number of the holdings in the portfolio have
seen significant increases in their shares prices over the year, for example
Brooks Macdonald (+79%), System C Healthcare (+73%) and Vertu Motors (+83%).
As previously stated, investors' appetite during the year was focused on
recovery and not in taking on unproved assets, and so the primary market was
very flat. The secondary market, i.e. rights issues and placings, however was
much more active. Your managers strongly believe in a defensive culture in
managing your assets in this area of higher risk and therefore generally
refused to get involved in these issues. Many companies will have not been able
to raise sufficient funds over the medium term to stave off bankruptcy and it
must be remembered that more companies tend to go out of business on the upward
cycle of a recovery than the downward one.
Looking forward, we believe that as long as businesses can maintain efficiency
and can fund their work in progress, they should see some growth in their
earnings arising from a lower cost base and their share prices should also see
future growth as a direct result. As we have said before, it will be growth in
corporate earnings that will provide stimulus for the new and secondary
business market.
Brian Watson
AXA Framlington
10 December 2009
Income Statement
For the year ended 30 For the year ended 30
September 2009 September 2008
Revenue Capital Total Revenue Capital Total
Return Return Return Return
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
Realised (losses)/gains - (640) (640) - 1,672 1,672
Unrealised gains/ - 1,402 1,402 - (11,334) (11,334)
(losses)
Income 267 - 267 323 - 323
Investment management (46) (139) (185) (97) (290) (387)
fee
Refund of VAT 11 35 46 58 172 230
Other expenses (155) - (155) (177) - (177)
Net return/(loss) on 77 658 735 107 (9,780) (9,673)
ordinary activities
before taxation
Taxation on ordinary - - - (1) - (1)
activities
Return/(loss) on 77 658 735 106 (9,780) (9,674)
ordinary activities
after tax for the year
Return/(loss) per 0.33p 2.79p 3.12p 0.43p (39.94)p (39.51)p
ordinary share: Basic
and diluted
The total column of this statement represents the Company's Income Statement
account prepared in accordance with UK Accounting Standards.
All items in the above statement derive from continuing operations and the
Company has no other gains and losses, hence no Statement of Total Recognised
Gains and Losses is presented. No operations were acquired or discontinued in
the year.
The supplementary revenue and capital columns are both prepared on a memorandum
basis by applying the principles of the Statement of Recommended Practice
("SORP"), published by the Association of Investment Companies in January 2009.
Other than revaluation movements arising on investments held at fair value
through the Income Statement, there were no differences between the return/loss
as stated above and at historical cost.
Reconciliation of movement in shareholders' funds
Distributable Capital
Share Share Special Redemption Retained
Capital Premium Reserve Reserve Earnings Total
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
At 30 September 2,493 117 19,885 18 1,361 23,874
2007
Share buybacks (117) - (573) 117 - (573)
Transfer from - - (463) - 463 -
distributable
special reserve
Dividends paid in - - - - (1,745) (1,745)
respect of the year
ended 30 September
2007
Loss on ordinary - - - - (9,674) (9,674)
activities
At 30 September 2,376 117 18,849 135 (9,595) 11,882
2008
Share Buybacks (55) - (170) 55 - (170)
Transfer from - - (856) - 856 -
distributable
special reserve
Dividends paid in - - - - (1,663) (1,663)
respect of the year
ended 30 September
2008
Profit on ordinary - - - - 735 735
activities
At 30 September 2,321 117 17,823 190 (9,667) 10,784
2009
Balance sheet as at 30 September
2009 2008
GBP000s GBP000s
Non-current assets held at fair value through 9,941 10,178
profit or loss
Current assets
Debtors 408 284
Cash at bank 508 1,496
916 1,780
Creditors: amounts falling due within one year (73) (76)
Net current assets 843 1,704
Net assets 10,784 11,882
Capital and reserves
Called up share capital 2,321 2,376
Capital redemption reserve 190 135
Share premium account 117 117
Distributable special reserve 17,823 18,849
Retained earnings (9,667) (9,595)
Equity shareholders' funds 10,784 11,882
Net asset value per share
Basic and diluted 46.46p 50.02p
Cash Flow Statement
For the year For the year
ended 30 ended 30
September 2009 September 2008
GBP000s GBP000s
Operating activities
Cash received from investments 219 279
Interest received 38 43
Revenue investment management fee (46) (103)
Refund of VAT allocated to revenue 69 -
Cash paid to and on behalf of directors (44) (44)
Other cash payments (113) (136)
Net cash inflow from operating activities 123 39
Servicing of finance
Interest paid - -
Taxation
Taxation recovered - -
Capital expenditure and financial investment
Net sales of investments 655 3,269
Capital investment management fee (140) (311)
Refund of VAT allocated to capital 207 -
Equity dividends
Dividends paid (1,663) (1,745)
Net cash (outflow)/inflow before financing (818) 1,252
Financing
Cost of shares re-purchased (170) (573)
Net cash outflow from financing (170) (573)
(Decrease)/increase in cash (988) 679
Notes:
1 The financial information set out in the announcement does not constitute the
Company's statutory accounts for the years ended 30 September 2009 or 2008.
The statutory accounts for the year ended 30 September 2009 have been prepared
on the basis of the financial information presented by the directors in this
announcement and will be delivered to the Registrar of Companies following the
company's annual general meeting. The financial information for the year ended
30 September 2008 is derived from the statutory accounts for that year which
have been delivered to the Registrar of Companies. The auditors reported on
those accounts; their report was unqualified and did not contain any emphasis
of matter or a statement under s498 Companies Act 2006.
The financial information has been prepared on the basis of the accounting
policies set out in the Company's financial statements for the year ended 30
September 2008 which are also adopted in the financial statements for the year
ended 30 September 2009.
2 Income
Year ended Year ended
30 September 2009 30 September 2008
GBP000s GBP000s
Income from investments
UK Dividend income 143 179
Unfranked investment income 91 100
234 279
Other income
Interest earned 33 44
Total income 267 323
Income from investments
Listed UK - full listing 85 92
Listed UK - AIM listing 149 187
234 279
3 Investment management fee
Year ended Year ended
30 September 2009 30 September 2008
GBP000s GBP000s
Investment management fee 185 332
Irrecoverable VAT thereon - 55
185 387
Refund of VAT (46) (230)
Total investment management fee 139 157
Amount charged to revenue (25%) 35 39
Amount charged to capital (75%) 104 118
139 157
The management fees paid have been allocated 25% to revenue and 75% to capital.
The balance due to AXA IM UK at the year end was GBP20,000 (2008: GBP19,000 due to
FIM). No performance fee is payable in the period.
As reported in previous years, HM Revenue & Customs ("HMRC") confirmed that
venture capital trusts will not be liable to VAT on their management fees with
effect from 1 October 2008 and that it will meet claims for the repayment of
VAT paid by VCTs over the past three years. The Manager submitted a claim to
recover from HMRC the VAT charged to the Company on its management fees and
paid to HMRC since the launch of the Company. The Manager has now received from
HMRC and paid to the Company an amount of GBP276,000, plus interest on this
amount which is included in Interest earned (see note 2). No further payments
are expected.
4 The board recommend the payment of a final revenue dividend of 0.30 pence and
a final capital dividend of 4.70 pence per share, total dividend of 5.00 pence
per share in respect of the year ended 30 September 2009. Subject to approval
by shareholders at the annual general meeting on 25 February 2010, the dividend
will be paid on 2 March 2010 to shareholders on the register on 5 February
2010.
5 Return/(loss) per ordinary share
Year to Year to
30 September 2009 30 September 2008
Revenue return GBP77,000 GBP106,000
Capital return/(loss) GBP658,000 GBP(9,780,000)
Total return/(loss) GBP735,000 GBP(9,674,000)
Weighted average number of 23,607,707 24,486,730
ordinary shares in issue during
the period
Revenue return per ordinary share 0.33p 0.43p
Capital return/(loss) per ordinary 2.79p (39.94)p
share
Total return/(loss) per ordinary 3.12p (39.51)p
share
6 Called up share capital
During the twelve months ended 30 September 2009, the Company repurchased
543,000 shares for a total consideration of GBP170,000. The number of ordinary
shares in issue at 30 September 2009 was 23,212,028.
7 Net asset value per share
The net asset value per share and the net assets attributable to the ordinary
shares at the period end calculated in accordance with the Articles of
Association were as follows:
As at As at
30 September 2009 30 September 2008
GBP000s GBP000s
Net assets attributable to GBP10,784,000 GBP11,882,000
ordinary shareholders
Ordinary shares in issue 23,212,028 23,755,028
Net asset value per share 46.46p 50.02p
8 Related Parties Transactions
Under a management agreement dated 16 September 2004, AXA Framlington
Investment Management Limited ("FIM") was appointed as manager to manage and
advise the Company including the provision of accounting, secretarial, office
and administrative services. With effect from 1 June 2009, the contract was
novated to AXA Investment Managers UK Limited ("AXA IM UK"), another company
within the AXA Investment Managers Group. The terms of the contract were not
changed. The term "Manager" refers to FIM or AXA IM UK as appropriate.
The Manager is paid an investment management fee at the rate of 2.0% of the Net
Asset Value of the company accrued and calculated weekly but paid monthly. The
Manager is also paid a fee of 0.25% of the Net Asset Value in respect of
secretarial and administration fees.
A performance fee is payable in respect of any financial year of the Company in
respect of which aggregate dividends to Shareholders exceed five pence per
Share and is equal to 20 per cent of the excess so that for every 1p per Share
distributed over and above the hurdle of 5p per Share, 0.2p per Share shall be
paid by way of Performance Fee. However, (i) no Performance fee will be payable
in respect of the first three financial years of the Company, (ii) if and in so
far as dividends in respect of any previous years have been less than 5p per
Share, any shortfall must first be made up before calculating the excess in
respect of which a Performance fee is payable and (iii) no Performance fee will
be payable if, after adding back all the dividends previously made in respect
of each Share, the net asset value per Share would thereby be less than the
initial net asset value per Share of 95p.
The investment manager agreement is terminable on one year's notice.
As at 10 December 2009, the directors had the following interests in the
Company's shares:
T How 42,004
C Kay 20,600
C Marsh 31,503
There have not been any other related party transactions during the year.
9 Principal risks and uncertainties
The directors believe that the principal risk faced by the Company is the loss
of approval as a venture capital trust arising from a breach of the
requirements of Section 274 of the Income Taxes Act 2008. This would mean that
shareholders might have to repay the income tax relief they obtained on their
investment in the Company and that the Company would lose its exemption from
tax on any capital gains. The Manager reports to the board at each meeting on
the Company's compliance with Section 274 and the board is advised on VCT
issues by PricewaterhouseCoopers LLP.
Other significant risks include the risk of a serious or prolonged fall in the
stock market which would affect the Company's performance and value; consistent
underperformance by the Manager; and the Company's shares failing to achieve a
rating which reflects performance. The board seeks to mitigate these risks by
monitoring the Manager's performance at each board meeting and discussing
appropriate action where considered necessary. The board considers that the
most appropriate key performance indicators for the Company are its compliance
with the requirements of Section 274.
10 The 2009 annual report and accounts will be sent to all shareholders on the
share register. Copies of the annual report and accounts, the interim report
and accounts to 31 March 2009 and the interim management statements are
available from the Company's registered office, 155 Bishopsgate, London EC2M
3XJ and on the Manager's website at www.axaframlington.com
Statement under the Disclosure & Transparency Rules 4.1.12
The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority
require the Directors to confirm their responsibilities in relation to the
preparation and publication of the Report and Accounts.
The directors are responsible for preparing the directors' report, the
directors' remuneration report and the financial statements in accordance with
applicable law and regulations. They are also responsible for ensuring that the
annual report includes information required by the Listing Rules of the
Financial Services Authority.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors have elected to prepare the
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law).
Under company law, the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs 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 judgments and estimates that are reasonable and prudent;
* state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements;
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
The Directors confirm, to the best of their knowledge, that
the financial statements, which have been prepared in accordance with UK
Generally Accepted Accounting Practice, including the Statement of Recommended
Practice "Financial Statements of Investment Trust Companies and Venture
Capital Trusts" issued in January 2009, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company; and
the directors' report and other information cross-referenced from the business
review section of the directors' report include a fair review of the
development and performance of the business and the position of the Company,
together with a description of the principal risks and uncertainties that it
faces.
END
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