Unicorn AIM VCT II plc
19 February 2008
Preliminary results for the year ended 31 December 2007
Chairman's Statement
The Company has had a busy twelve months but encountered particularly difficult
market conditions in the final six months of the financial year. The Ordinary
Share Fund comfortably achieved its target of having over 70% of its capital
invested in VCT qualifying holdings prior to the deadline of 31 December 2007
as required under HM Revenue & Customs (HMRC) legislation. The C Share Fund was
also active in making new qualifying investments and continues to make good
progress towards attaining its required target prior to 31 December 2008. The
portfolios in each Fund performed adequately although it is disappointing to
have to report that the healthy gains generated in the first half were
completely reversed in the final months of the financial year as investor
sentiment towards smaller quoted companies deteriorated rapidly. As a result
the Net Asset Value (NAV), excluding dividends paid, of the Ordinary Share Fund
declined by 11.3%, whilst the NAV of the C Share Fund fell by 9.0% during the
period under review. As at 31 December 2007, the NAVs were 106.4 pence per
Ordinary Share and 91.8 pence per C Share.
It is reassuring to note that the vast majority of the falls in the underlying
investments were market related rather than as a consequence of stock specific
issues. To put this in perspective, only four of the companies held in the
Funds failed to deliver to expectations during the course of the year. In
difficult times, the typical lack of liquidity in smaller capitalised stocks
tends to be the main cause of disproportionately large share price falls. The
Investment Manager's continued focus on profitable, cash generative companies
combined with the increasingly diversified nature of the portfolios should
continue to act as an effective counter balance to both stock specific and
market risk over the longer term.
It has been a difficult period for UK smaller quoted companies. Confidence in
the outlook for the UK economy steadily weakened as the full implications of
the sub-prime debt crisis became clearer. The inevitable consequence on the
equity market was a general reappraisal of risk with investors seeking the
perceived safety of larger capitalised stocks. The FTSE Small Cap Index fell by
just under 20% in 2007, with declines accelerating in the second half of the
year. The FTSE AIM All-Share Index fared better, registering a fall of just
0.5% on the year. This seemingly anomalous performance is partly explained by
the significant exposure of the AIM Index to the Mining and Oil & Gas sectors,
which performed strongly during the year and which accounted for 32% of the
total value of the Index at year end. Your Company does not invest in
businesses operating in this area of the market since they tend to be early
stage and unprofitable. In addition, under existing HMRC legislation they
typically fail to achieve VCT qualifying status.
During the year, the Ordinary Share Fund crystallised significant capital gains
that had been achieved in prior years, through the sale of units in the
sub-funds of the Unicorn Open Ended Investment Company. The proceeds of these
disposals have been re-invested in a wide range of new VCT qualifying
opportunities. Of course, the capital profit on disposal of investments is
eligible for tax free distribution to Shareholders and it therefore gives me
pleasure to report that the Board is proposing a dividend of 5 pence per share
which, subject to approval, will be payable to holders of the Ordinary Shares
in respect of the financial year ended 31 December 2007. The investment phase
of the C Share Fund continues and as such this Fund has not yet generated
meaningful capital profits. However, the Board is nonetheless pleased to
propose a dividend of 1 penny per share, payable from the revenue return
achieved in this Fund.
It has been a busy period for both Funds in terms of new investment. In the
year to 31 December 2007 the Ordinary Share Fund made twenty-two new
investments in VCT qualifying companies at a total cost of over �10m. The C
Share Fund participated alongside the Ordinary Share Fund in sixteen of these
investments at a book cost of slightly under �4m. The Ordinary Share Fund ended
the year approximately 75% invested in VCT qualifying holdings comprising
thirty-eight AIM quoted companies and two unlisted investments. The C Share
Fund portfolio now consists of twenty-one AIM quoted companies and one unlisted
investment and has invested 42% of its total assets in VCT qualifying holdings
to date. Both the Board and the Investment Manager are confident that the 70%
qualifying target for the C Share Fund will be attained prior to the deadline
date of 31 December 2008. Further details on the performance of both Funds and
on the companies in which the Funds have invested can be found in the
Investment Manager's Review on pages 7-14.
In a difficult year for smaller quoted companies, the Board remains pleased
with the overall development of both Funds and is confident that the Investment
Manager's proven approach offers good prospects for delivering satisfactory
returns over the medium to long term. For this reason the Board is of the
opinion that the continued appointment of the Investment Manager is in the best
interests of Shareholders.
Peter Andrews
Chairman
Investment Manager's Review
Investment Policy
In order to achieve the Company's Investment Objective, the Board has agreed an
Investment Policy which requires the Investment Manager to identify and invest
in a diversified portfolio, predominantly of VCT qualifying companies quoted on
AIM, that displays a majority of the following characteristics:
- experienced and well-motivated management;
- products and services supplying growing markets;
- sound operational and financial controls; and
- good cash generation to finance ongoing development allied with a progressive
dividend policy.
Performance
The NAV of the Ordinary Share Fund as at 31 December 2007 was 106.4 pence per
share, representing a decrease of 11.3% over the previous year. Since the
Ordinary Shares were first listed at an initial NAV of 94.5 pence per share in
January 2005, the value of the Fund has increased by 13.6% after adding back
dividends paid.
The NAV of the C Share Fund was 91.8 pence per share, which represents a
decrease for the year of 9.0%. Since the C Shares were first listed at an
initial NAV of 94.5 pence per share in January 2006, the value of the Fund has
decreased by 1.8% after adding back dividends paid.
By way of comparison the FTSE Small Cap Index fell by 19.9% during 2007 whilst
the FTSE AIM All-Share Index decreased in value by only 0.5%. However, a
negative return of 0.5% represents a third consecutive year of
under-performance by the FTSE AIM All-Share Index relative to the FTSE
All-Share Index and highlights the greater volatility and risk associated with
investment in this area of the market.
Investment strategy
The strategy of investing in companies which have a demonstrable record of
profitability and positive cash generation remains unchanged. The Ordinary
Share Fund and the C Share Fund portfolios are now well diversified both by
sector and by number of investments held. The Ordinary Share Fund invested in
twenty-two new VCT qualifying opportunities over the past twelve months and
ended the year comfortably above the threshold required by HMRC to retain VCT
qualifying status (whereby a minimum of 70% of total assets must be invested in
VCT qualifying holdings). The C Share Fund also significantly increased the
number of new VCT qualifying investments and closed the year with approximately
42% of its total assets invested in qualifying holdings. The Investment Manager
will continue to adopt a highly selective approach to new investment
opportunities.
Alternative Investment Market review
In the twelve month period to 31 December 2007, the AIM performed well compared
to the FTSE Small Cap Index. However, as referred to earlier, the major
contributor to outperformance came from the Mining and Oil & Gas sectors which
rose by 21.8% and 6% respectively during the year and which account for almost
one third of the Index by value. Excluding these positive contributions, the
remainder of the AIM Index declined by 5.3%.
Clearly, a concentrated exposure to a particular sector increases the level of
risk in any given Index. Your Investment Manager has previously commented on
the dangers of the AIM's over-reliance on specific sectors and remains wary of
the possible implications to the Index as a whole, should the Mining sector
fall from grace.
One of the more immediate consequences of the recent crisis in the US sub-prime
mortgage market has been a `flight to quality', whereby equity investors seem
to have sought safety in larger capitalised companies. Liquidity at the
`junior' end of the market has deteriorated in recent months and as a result
many otherwise robust businesses have experienced significant share price
falls. In spite of this, the new issue market has remained relatively healthy
and the quality and pricing of UK businesses seeking an initial listing on AIM
appears to have improved.
Qualifying investments
From an operational perspective, a significant majority of the holdings in both
the Ordinary Share Fund and the C Share Fund performed to or ahead of
expectations during the period. However, as 2007 unfolded delivering share
price growth became increasingly difficult. Nevertheless, there are some
investments that are worthy of special mention.
Abcam, a rapidly growing bioscience company specialising in the manufacture and
distribution of therapeutic antibodies, enjoyed another successful year. In its
financial year ended 31 October 2007 pre-tax profits increased by over 18%,
triggering a 20% rise in the value of Abcam shares.
Mattioli Woods, the specialist pensions consultancy, continued to deliver
strong revenue and profit growth and its shares rose by a further 19% during
2007.
Concateno, one of Europe's leading `drugs of abuse' testing companies, has made
considerable progress in the past twelve months, including the successful
acquisition and integration of six complimentary businesses. Concateno is held
in both the Ordinary Share Fund and the C Share Fund and the value of its
shares rose by 14% in the period.
In contrast, there were four companies which failed to meet expectations and
whose share prices fell significantly as a result. Three of these investments
were held in the Ordinary Share Fund, whilst one was held in both Funds.
The Debt Adviser, a debt management and loan broking operation was forced into
administration in June 2007 after failing to secure further access to funding
or indeed a buyer for the business. Unfortunately, the Ordinary Share Fund's
investment in this business has had to be written down to nil. Clearly, this
outcome has proved costly for the Fund accounting for almost one third of the
negative contribution produced in the year.
Greatfleet, the specialist recruitment company, fell by 73% after a series of
disappointing trading updates. The carrying value of this investment as at 31
December 2007 was �62,000.
EG Solutions, a provider of specialist workflow software, continued to struggle
following an initial profit warning announced at the end of 2006. The carrying
value of the Fund's holding in EG Solutions at the period end was �65,000.
Access Intelligence is a group of companies delivering a range of business
critical support services to private and public sector organisations. The group
has grown by acquisition but remains sub-scale in terms of market value and
profile. For the six months to the 31 May 2007 Access Intelligence reported a
loss before tax of �323,000 citing contract delays and a drop in storage
solutions sales. The investments in Access Intelligence represented less than
0.5% of Net Assets in both the Ordinary Share Fund and the C Share Fund as at
31 December 2007.
Since the financial year end, both the investment climate and trading
conditions appear to have worsened. It is disappointing to have to report that
Maxima Holdings, which is held in the Ordinary Share Fund, recently issued an
unexpected profit warning based on the loss of a key client and delays to
signing new business.
Given the difficult market conditions and a deteriorating economic outlook the
Investment Manager has adopted an increasingly conservative approach to new
investments. However, the main focus throughout the past twelve months was
always to identify and invest in suitable VCT qualifying investments.
Therefore, in order to provide maximum protection to investor capital whilst
simultaneously meeting the target of having 70% of total assets invested in VCT
qualifying investments, the Investment Manager has assessed a large number of
possible investments over the past twelve months. The rejection rate has
remained as high as ever, whilst negotiations on price have been
uncompromising. The Ordinary Share Fund made new investments in twenty-two VCT
qualifying companies during the period under review and consisted of forty
qualifying holdings at the year end. The C Share Fund participated in sixteen
of these investments and held investments in twenty-two VCT qualifying
companies as at 31 December 2007.
New qualifying investments
Cantono recently raised �10m via a placing of new shares in order to finance
the development of state of the art data centre facilities. The supply of
operational data centre sites in the UK has declined significantly over the
past five years whilst demand for facilities with appropriate availability of
power and cooling continues to grow sharply. Current trading in Cantono's core
IT managed services operations is reported as being in line with management
expectations.
Claimar Care is one of the UK's leading providers of domiciliary care services
for the elderly and infirm throughout the Midlands and the North West. The
group has agreed to undertake its largest transaction to date with the �33.1m
acquisition of Complete Care Holdings (CCH). It is a major provider of bespoke
care packages to adults and children with severe disabilities and is based in
Telford, Shropshire. To help fund the transaction the company raised �23m via a
placing of 18.2m new shares at 137 pence per share.
Clerkenwell Ventures is a cash shell headed by David Page of Pizza Express
fame. The intention is to use funds raised to acquire established, successful
but privately owned restaurant brands. Possible targets have been identified
and the due diligence process is underway, but to date no announcement has been
released regarding specific acquisitions.
Fishworks is a specialist fish restaurant chain and currently has twelve
restaurants and fishmongers operating in the UK. The well known investors, Luke
Johnson and recruitment entrepreneur Gary Ashworth have invested in Fishworks
to help the business return to a stable footing. In addition a new Chief
Executive, Paul Goodale (formerly of Conran), has also recently been appointed.
A placing with institutional investors at 6 pence per share has raised �2.3m.
The funds will be used to strengthen the balance sheet and allow Fishworks to
more rapidly rollout new sites. Current trading is in line with expectations.
Fishworks is held in the C Share Fund only.
Hasgrove is a pan-European marketing and communication services group. The
strategy is to grow and develop key "best of breed" brands with a specific
focus on public relations, public affairs and digital communication. Through a
series of acquisitions the group has established the leading market position in
European Union public affairs consultancy together with a growing presence in
the fast emerging digital marketing sector. Recently released Interim Results
confirmed that the integration of acquisitions is progressing to plan. Turnover
rose by 115% in the six month period to 30 June 2007, with fully diluted
earnings per share growing by more than 25%. As is the case in businesses that
predominantly revolve around investment in human capital, the key risk is that
the group overpays for acquisitions only to see the `talent' walk away at a
later stage. To date, the principal vendors have all stayed with the enlarged
group and are heavily incentivised by long term earn outs to help ensure
success.
Hexagon Human Capital is a recruitment company specialising in Senior Interim
Management and Executive Search. In a recent trading update, the Board of
Hexagon confirmed that trading conditions in all market sectors in which the
Group operates were strong and expressed confidence that trading performance
will be in line with current market expectations for the full year to March
2008.
HML Holdings is aiming to create one of the UK's leading residential property
managers. HML has an established Greater London base but intends to expand
through acquisition. The plan is to improve its margins by selling higher
margin services to existing clients. HML provides management, insurance and
advisory services for the owners of residential property. HML has over 20,000
units under management. In August 2007, the group raised �1.9m at 27p a share
to fund future acquisitions. Shortly thereafter HML acquired WA Ellis Property
Management Ltd for a total of �1.3m. The deal is expected to be immediately
earnings enhancing and boosts HML's presence in Central London.
IDOX is a market leader in the design and implementation of document handling
and records management software. IDOX has a strong market position within the
planning departments of UK Local Authorities and is expanding to do more work
in other departments such as revenue and benefits. IDOX has agreed to pay �21m
for CAPS, a complementary provider of public sector software and services. CAPS
markets proprietary case management productivity software combined with an
Oracle database. This helps departments within UK Local Authorities
electronically store and map all data relating to land, people and property
within their region. The CAPS acquisition has been funded with existing cash of
c�3m, an estimated �7m of debt and �11m of new equity at 7.5 pence per share.
Invu develops, markets and sells software for the electronic management of all
types of information. Invu's software products have been sold to nearly 3,000
customers, representing approximately 54,000 licensed users. Invu has a proven
reseller business model and has established a network of more than 120 Value
Added Resellers. In June 2007, the group raised �4m at 30 pence per share. INVU
plans to use the funds to invest further in product development and sales &
marketing in order to accelerate future growth.
Melorio is a newly formed vehicle to consolidate the fragmented UK vocational
training market. The initial focus will be on acquiring training businesses in
the construction, utilities, logistics and care sectors. Vocational training
addresses the UK's skills deficit and the Government's policy for a fully
qualified workforce. Melorio intends to run its acquired businesses as
autonomous divisions and will retain successful management teams. The first
acquisition is Construction Learning World (CLW), a leading provider of on-site
assessment and training to the construction sector for �35m. CLW is a high
growth and high margin business generating profits of �2.6m on sales of �7.5m
in its last full financial year.
Mount Engineering is a manufacturer and distributor of equipment to the oil &
gas, petrochemical and other industrial process markets. Due to the niche
nature of many of its products Mount enjoys margins of over 40% and strong cash
generation. Customers include Shell, BP and ExxonMobil. Strong demand from the
oil & gas market is fuelling demand for its products. The Initial Public
Offering in June 2007 raised �12.5m at 70 pence per share.
Personnel Health & Safety Consultants (PHSC) is a leading provider of health
and safety advice and training to both public and private sector clients. The
range of services PHSC provides includes environmental management, food
hygiene, asbestos surveying and air monitoring. The main business driver is
enabling organisations to meet statutory legislation and civil liabilities.
Clients range from local authorities to Shell, The Royal Household and
Manpower. A recent placing of 1.9m shares at 53p a share raised �1m to fund
further expansion. In the year to 31 March 2007 the group achieved sales of �
4.6m, profits of �760,000 and earnings per share of 5.3p.
Kiotech manufactures and supplies high performance natural feed additives to
global agriculture and aquaculture markets. The Board and management of the
company were changed in June 2006. This change in management prompted a shift
in strategic direction. A fundraising was arranged to finance the acquisition
of an established, profitable and cash generative business in November 2006.
This acquisition stabilized the business and allowed the required development
work to enable commercialisation of the aquaculture product to continue on a
self-funding basis. This product has significant potential but is still some
way from being approved for commercial sale. The enlarged group was recently
able to report maiden profits since becoming a public company 10 years ago.
Optimisa provides high value, strategic marketing advice to a diverse client
base including Barclays, Hilton, Motorola and Centrica. Specialist analysis of
markets, customers and competitors is designed to allow clients to make better
informed decisions on their strategic direction. Optimisa has recently
completed the �7.4m acquisition of AIM listed rival EQ Group. The deal is
expected to be earnings enhancing in the first full financial year of
ownership. The transaction was partly funded through a �7.8m placing of new
shares. The acquisition effectively doubles the size of the group and
significantly broadens the product offer.
Pressure Technologies is the holding company for Chesterfield Special Cylinders
Ltd (CSC). CSC designs, manufactures and supplies a range of specialised high
pressure gas cylinders. The products are made of seamless steel and are capable
of withstanding massive pressures. The main applications for the cylinders are
in the fast growing global energy and defence markets. Pressure Technologies
was floated at an issue price of 150 pence per share raising �6m before
expenses. The proceeds will be used to fund the growth of the business both
organically and by acquisition.
Shieldtech is a specialist manufacturer of body armour systems which it sells
to the Armed Forces and Emergency Services in the UK and internationally. The
business has acquired a reputation for delivering high quality, high technology
solutions for safety critical applications. The business operates in areas that
offer high barriers to entry driven by regulatory requirements, technical
expertise and the need for total product integrity. Shieldtech is profitable,
cash generative and has significant opportunities to develop both organic and
acquisitive growth.
Snacktime is the UK's only national snack vending company. It claims to have a
unique business model. Machines are sited in the staff rooms and point of sale
areas of major UK retailers. Snacktime installs machines free of charge and
there are no rental, maintenance, servicing or replenishment costs payable by
the retailer. Machines are visited at least once a week by one of Snacktime's
team of self-employed merchandisers. The business generates 75% of its revenues
from the profit on branded product sales.. The remaining 25% of revenues comes
from marketing contributions made by Brand Partners (PepsiCo, Mars Snacks,
Walkers etc.) Over 5,500 machines have been installed to date into a
predominantly blue chip customer base (Argos, Homebase, Matalan, Currys etc.).
The order book is continuing to expand rapidly, however once the growth phase
has peaked the business should become significantly cash generative. The
company has recently raised �3m to help fund future growth.
Surgical Innovations specialises in the design and manufacture of innovative
devices for use in minimally invasive surgery and industrial markets. The
company has a dedicated manufacturing site and has secured representation for
its products in all major markets through specialised distribution. A placing
at 3.5p a share raised �4m to provide capital for US expansion and to fund
further product development.
Tangent is a technology led digital marketing group. The focus is on
demonstrating to clients that by using its technology they can acquire, retain
and communicate more effectively with their customers. Clients include Borders,
Wolseley, Sainsburys, Greene King and Procter & Gamble. To augment growth
Tangent has acquired Ravensworth, a market leader in digital printing. The
acquisition is expected to be earnings enhancing in its first full year of
ownership. To fund the deal Tangent raised �6m at 13 pence per share.
Tracsis is a provider of resource optimisation software used in the processing
of labour scheduling by passenger rail and bus service operators. Contracts
have been secured with rail and bus companies throughout the UK. Tracsis has
developed a technology platform that is both scaleable and transferable to
other industries and overseas markets. In the year to 31 July 2007 the group
achieved sales of �742,000 and profits of �422,000. Tracsis joined AIM in
November following a successful placing that raised �2m at 40 pence per share.
Vitesse Media is the parent company of a number of publications including
Growth Company Investor, Information Age, Business XL and SmallBusiness.co.uk.
Vitesse also operates website, events and research products. The intention is
to grow through the development of innovative products and the acquisition of
new titles in what remains a highly fragmented market place. To augment future
growth Vitesse has raised �750,000 at 25 pence per share to acquire Infoconomy,
a specialist Information Technology magazine publisher.
Vindon Healthcare designs, manufactures and sells environmental control
products to drug companies that include Astra Zeneca, Pfizer and
GlaxoSmithkline. Demand for Vindon's products and services is reported to be
strong across all areas and its market share in both the UK and Ireland is
significant. Almost two thirds of revenues are derived from stability storage
and related services. Given that these contracts are typically of 3 to 5 year
duration, there is good forward visibility. A placing of new shares in May 2007
raised �2m. The proceeds are to be used to build a purpose built facility to
replace Vindon's current premises and to increase capacity for future growth.
Non-qualifying portfolios
In the Ordinary Share Fund an early decision was taken to raise cash by selling
shares in the sub-funds of the Unicorn Investment Funds OEIC. The timely nature
of these disposals helped maximise the capital gain from the OEIC investments
whilst also releasing the cash required to invest in new qualifying
opportunities. In total over �7.7m was realised through the sale of OEIC
investments during the course of the year. The capital gains on these disposals
can be distributed to shareholders in the form of tax free dividends.
On average, the remainder of the OEIC investments in the Ordinary Share Fund
and the OEIC holdings in the C Share Fund fell in value by 10.3% over the
course of 2007. This performance, whilst disappointing, is nonetheless
significantly better than the return generated by the FTSE SmallCap Index.
The gradual process of distribution and recycling of capital will continue as
both Funds mature. It is therefore inevitable that the contribution from the
non-qualifying holdings in both Funds will be a smaller component of total
returns in future.
Prospects
It has been a mixed year for both Funds. The majority of holdings have
performed well operationally and yet have experienced significant de-ratings
due to falling equity markets. Almost inevitably, there have also been isolated
disappointments. The Investment Manager is confident that most, but not all, of
the companies which suffered setbacks over the past year will recover in due
course.
In uncertain times, there is obvious merit in pursing a policy which focuses on
investing in a diverse range of profitable, cash generative businesses with
strong balance sheets. The established and selective approach to new investment
will continue and the Manager is confident that this successful strategy will
deliver attractive returns for Shareholders over the longer term.
Non-Statutory Analysis between the Ordinary Share Fund and C Share Fund
1. Profit and Loss Account for the year ended 31 December 2007
Ordinary Share fund C Share fund
Revenue Capital Total Revenue Capital Total
� � � � � �
Net unrealised - (1,912,923) (1,912,923) - (1,046,169) (1,046,169)
losses on
investments
Realised losses on - (759,338) (759,338) - - -
investments
Income 342,086 - 342,086 297,689 - 297,689
Investment (99,099) (297,296) (396,395) (38,424) (115,273) (153,697)
management fees
Other expenses (266,476) - (266,476) (113,627) - (113,627)
------------ ------------ ------------ ------------ ------------ ------------
(Loss)/profit on (23,489) (2,969,557) (2,993,046) 145,638 (1,161,442) (1,015,804)
ordinary
activities before
taxation
Tax on ordinary - - - (13,418) 13,418 -
activities
------------ ------------ ------------ ------------ ------------ ------------
(Loss)/profit (23,489) (2,969,557) (2,993,046) 132,220 (1,148,024) (1,015,804)
attributable to
equity
shareholders
======= ======= ======= ======= ======= =======
(Loss)/profit per (0.10)p (12.88)p (12.98)p 1.06 p (9.18)p (8.12)p
ordinary share
(pence per share)
Average number of 23,057,594 12,499,807
shares in issue
Total of both funds
(per Statutory Profit and Loss
Account)
Revenue Capital Total
� � �
Net unrealised - (2,959,092) (2,959,092)
losses on
investments
Realised losses on - (759,338) (759,338)
investments
Income 639,775 - 639,775
Investment (137,523) (412,569) (550,092)
management fees
Other expenses (380,103) - (380,103)
------------ ------------ ------------
(Loss)/profit on 122,149 (4,130,999) (4,008,850)
ordinary
activities before
taxation
Tax on ordinary (13,418) 13,418 -
activities
------------ ------------ ------------
(Loss)/profit 108,731 (4,117,581) (4,008,850)
attributable to
equity
shareholders
======= ======= =======
2. Balance Sheets
as at 31 December 2007
Ordinary Share fund C Share fund Adjustments Balance Total of both (per
Statutory funds Sheet)
(see note
below)
� � � � � � �
Non-current Assets
Investments at 22,950,487 10,084,986 33,035,473
fair value
Current Assets
Debtors and 470,818 18,358 (10,005) 479,171
prepayments
Current 1,202,239 1,392,314 2,594,553
investments
Cash at bank 39,613 29,339 68,952
------------- ------------- ------------- -------------
1,712,670 1,440,011 (10,005) 3,142,676
Creditors: amounts (141,214) (50,276) 10,005 (181,485)
falling due within
one year
------------- ------------- ------------- ------------- ------------- ------------- -------------
Net current assets 1,571,456 1,389,735 2,961,191
------------- ------------- -------------
Net assets 24,521,943 11,474,721 35,996,664
------------- ------------- -------------
Capital
Called up share 230,506 124,998 355,504
capital
Capital redemption 400 - 400
reserve
Revaluation 1,759,469 (286,844) 1,472,625
reserve
Special 19,808,634 11,486,877 31,295,511
distributable
reserve
Profit and loss 2,722,934 149,690 2,872,624
account
------------- ------------- -------------
Equity 24,521,943 11,474,721 35,996,664
shareholders'
funds
------------- ------------- -------------
Number of shares 23,050,581 12,499,807
in issue:
Net asset value 106.38p 91.80p
per 1p share:
Note: The adjustment above nets off the inter-fund debtor and creditor
balances, so that the "Total of both funds" Balance Sheet agrees to the
Statutory Balance Sheet below
3. Reconciliation of movements in Shareholders Funds
For the year ended 31 December 2007
Ordinary Share C Share fund Total of both
fund funds
(per Statutory
Balance Sheet)
� � �
As at 1 January 2007 27,675,267 12,615,523 40,290,790
Net share capital (45,026) - (45,026)
bought back in the
year
Profit for the year (2,993,046) (1,015,804) (4,008,850)
Dividends paid (115,252) (124,998) (240,250)
--------------- --------------- ---------------
Closing 24,521,943 11,474,721 35,996,664
shareholders' funds
at 31 December 2007
======== ======== ========
Statutory Statements (with comparatives)
Profit and Loss Account
For the year ended 31 December 2007
31 December 2007 31 December 2006
Revenue Capital Total Revenue Capital Total
� � � � � �
Net unrealised - (2,959,092) (2,959,092) - 4,719,812 4,719,812
losses/(gains) on
investments
Realised losses on - (759,338) (759,338) - (1,304) (1,304)
investments
Income 639,775 - 639,775 804,824 - 804,824
Investment (137,523) (412,569) (550,092) (120,191) (360,575) (480,766)
management fees
Other expenses (380,103) - (380,103) (416,786) - (416,786)
------------ ------------ ------------ ------------ ------------ ------------
Profit/(loss) on 122,149 (4,130,999) (4,008,850) 267,847 4,357,933 4,625,780
ordinary activities
before taxation
Tax on ordinary (13,418) 13,418 - (22,100) 22,100 -
activities
------------ ------------ ------------ ------------ ------------ ------------
Profit/(loss) 108,731 (4,117,581) (4,008,850) 245,747 4,380,033 4,625,780
attributable to
equity shareholders
======= ======= ======= ======= ======= =======
Basic and diluted
earnings per Share
Ordinary shares (0.10)p (12.88)p (12.98)p 0.45p 16.15p 16.60p
C Shares 1.06p (9.18)p (8.12)p 1.40p 6.39p 7.79p
The total column is the profit and loss account of the Company. All revenue and
capital items in the above statement derive from continuing operations. No
operations were acquired or discontinued in the period.
Statement of Total Recognised Gains and Losses
for the year ended 31 December 2007
31 December 2007 31 December 2006
� �
Return on ordinary activities after (4,008,850) 4,625,780
taxation
Prior year adjustment arising from the - (52,950)
introduction of FRS 21 and FRS 26
----------------- -----------------
Total recognised (losses)/gains since (4,008,850) 4,572,830
last annual report
----------------- -----------------
Note of Historical Cost Profits and Losses
For the year ended 31 December 2007
31 December 2007 31 December 2006
� �
(Loss)/profit on ordinary activities (4,008,850) 4,625,780
before taxation
Less: unrealised losses/(gains) on 2,959,092 (4,719,812)
investments
Realisation of revaluation gains of 2,465,519 -
previous years
-------------- --------------
Historical cost profit/(loss) on ordinary 1,415,761 (94,032)
activities before taxation
-------------- --------------
Historical cost profit/(loss) for the year 1,175,511 (209,485)
after taxation and dividends
-------------- --------------
Balance Sheet
As at 31 December 2007
31 December 2007 31 December 2006
� �
Non-current assets
Investments at fair value 33,035,473 32,216,805
Current assets
Debtors and prepayments 479,171 78,521
Current investments 2,594,553 8,116,432
Cash at bank 68,952 78,931
--------------- ---------------
3,142,676 8,273,884
Creditors: amounts falling due within (181,485) (199,899)
one year
--------------- ---------------
Net current assets 2,961,191 8,073,985
--------------- ---------------
Net assets 35,996,664 40,290,790
========= =========
Capital and reserves
Called up share capital 355,504 355,904
Capital redemption reserve 400 -
Revaluation reserve 1,472,625 6,897,236
Special distributable reserve 31,295,511 33,305,137
Profit and loss account 2,872,624 (267,487)
--------------- ---------------
Equity Shareholders' funds 35,996,664 40,290,790
========= =========
Net asset value per Ordinary Share 106.38p 119.86p
Net asset value per C Share 91.80p 100.93p
Reconciliation of Movements in Shareholders' Funds
for the year ended 31 December 2007
31 December 2007 31 December 2006
� �
At 1 January 2007 40,290,790 23,957,249
Net share capital (bought back)/ (45,026) 11,823,214
subscribed for in the year
(Loss)/profit for the year (4,008,850) 4,625,780
Dividends paid (240,250) (115,453)
--------------- ---------------
Closing shareholders' funds at 31 35,996,664 40,290,790
December 2007
========= =========
Cash Flow Statement
for the year ended 31 December 2007
31 December 2007 31 December 2006
� � � �
Operating activities
Dividends received 642,706 768,674
Deposits and similar 8,308 13,046
interest
Investment management (550,092) (480,766)
fees paid
Other cash payments (417,975) (333,718)
--------------- --------------- --------------- ---------------
Net cash outflow from (317,053) (32,764)
operating activities
Investing activities
Acquisitions of (13,685,134) (12,226,741)
investments
Disposals of investments 8,755,605 -
--------------- --------------- --------------- ---------------
Net cash outflow from (4,929,529) (12,226,741)
investing activities
Dividends
Equity dividends paid (240,250) (115,453)
--------------- ---------------
Cash outflow before (5,486,832) (12,374,958)
financing and liquid
resource management
Management of liquid
resources
Decrease in current 5,521,879 591,609
investments
Financing
Share capital (bought (45,026) 12,499,807
back)/raised
Less issue costs of C - (676,593)
Shares
--------------- --------------- --------------- ---------------
Net cash (outflow)/inflow (45,026) 11,823,214
from financing
--------------- ---------------
Net (decrease)/increase (9,979) 39,865
in cash for the year
========= =========
Notes
1. The accounts have been prepared under UK Generally Accepted Accounting
Practice (UK GAAP) and, to the extent that it does not conflict with the
Companies Act 1985, the 2003 Statement of Recommended Practice, `Financial
Statements of Investment Trust Companies' (SORP), revised December 2005.
As a result of the Directors' decision to distribute capital profits by way of
a dividend, the Company revoked its investment company status as defined under
section 266 (3) of the Companies Act 1985, on 31 October 2007.
Consequently, these financial statements include a statutory profit and loss
account in accordance with Schedule 4 of the Companies Act 1985 and Financial
Reporting Standard 3 "Reporting Financial Performance". This has no effect on
the return or net assets per share. These statements, however, differ from
those previously presented in that unrealised gains on investments are now
reported within the revaluation reserve in the balance sheet, rather than
included in a separate unrealised capital reserve and realised gains are
included within the profit and loss reserve rather than a separate realised
capital reserve.
In order to better reflect the activities of a VCT and in accordance with the
SORP, supplementary information which analyses the Profit and Loss Account
between items of a revenue and capital nature has been presented alongside the
Profit and Loss Account. The net revenue is the measure the Directors believe
appropriate in assessing the Company's compliance with certain requirements set
out in section 274 Income Tax Act 2007.
2. Total losses after taxation for the Ordinary Share Fund for the period were
�2,993,046 (2006: return, �3,833,471). The basic losses per Ordinary Share
is based on the net loss from ordinary activities and on 23,057,594 (2006:
23,090,581) Ordinary Shares, being the weighted average number of Ordinary
Shares in issue during the period. Total losses after taxation for the C
Share Fund for the period were �1,015,804 (2006: return, �792,309). The
basic losses per C Share is based on the net losses from ordinary
activities and on 12,499,807 (2006: 10,170,982) C Shares, being the
weighted average number of C Shares in issue during the period.
The revenue loss per Ordinary Share is based on the net losses from ordinary
activities after taxation of �23,489 (2006: return, �103,279) and on 23,057,594
(2006: 23,090,581) Ordinary Shares, being the weighted average number of
Ordinary Shares in issue during the period. The revenue return per C Share is
based on the net revenue from ordinary activities after taxation of �132,220
(2006: �142,468) and on 12,499,807 (2006: 10,170,982) C Shares, being the
weighted average number of C Shares in issue during the period.
The capital loss per Ordinary Share is based on net realised capital losses of
�759,338 (2006: �1,304), net unrealised capital losses of �1,912,923 (2006:
gain, �3,960,487), net capital expenses of �297,296 (2006: �228,991) and
23,057,594 (2006: 23,090,581) Ordinary shares, being the weighted average
number of Ordinary Shares in issue during the period. The capital loss per C
Share is based on net realised capital losses of �nil (2006: �nil), net
unrealised capital losses of �1,046,169 (2006: gain, �759,325), net capital
expenses of �115,273 (2006: �131,584) and 12,499,807 (2006: 10,170,982) C
shares, being the weighted average number of C Shares in issue during the
period.
3. Final dividends of 5 pence per Ordinary Share and 1.0 pence per C Share
will be paid to Shareholders on 6 May 2008 to shareholders of each class on
the register on 11 April 2008. The total cost of the C Share dividend is �
124,998.
4. These are not full accounts in terms of section 240 of the Companies Act
1985. The Annual Report for the year to 31 December 2007 will be sent to
shareholders shortly and will then be available for inspection at One
Jermyn Street, London SW1Y 4UH, the registered office of the Company.
Statutory accounts will be delivered to the Registrar of Companies after
the Annual General Meeting. The audited accounts for the year ended 31
December 2007 contain an unqualified audit report.
5. The Annual General Meeting of the Company will be held at 12.00 pm on 16
April 2008 at One Jermyn Street, London SW1Y 4UH, followed by separate
meetings of the Ordinary Fund Shareholders and C Fund Shareholders to pass
and carry into effect the ordinary and special resolutions 8 - 10 of the
Company, as set out in the Notice of the Annual General Meeting.
END
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