RNS Number:4510G
Close Second AIM VCT PLC
26 October 2007
CLOSE SECOND AIM VCT PLC
HALF-YEARLY FINANCIAL RESULTS
26 October 2007
Announcement of half-yearly financial results for the six months ended 31 August
2007. This announcement constitutes the Half-yearly Financial Report and copies
can also be accessed via www.closeventures.co.uk
Close Second AIM VCT PLC (the "Company"), which invests in companies listed on
the Alternative Investment Market, across a variety of sectors, today announces
the half-yearly financial results for the six months ended 31 August 2007. This
Half-yearly Financial Report was approved by the Board on 25 October 2007.
Financial Highlights
Six months to Six months to Year ended
31 August 2007 31 August 2006 28 February 2007
Total return
- Ordinary shares #(335,000) #(76,000) #561,000
- C & D shares #413,000 #(1,000) #568,000
Movement in FTSE AIM Index 0.5% (11.13)% (4.20)%
Shareholder return per share since launch
Ordinary
Shares C Shares D Shares
Pence per Pence per Pence per
share share share
Total dividends paid during the period to 28 February 2002 - - -
Total dividends paid during the year to 28 February 2003 1.60 - -
Total dividends paid during the year to 29 February 2004 - - -
Total dividends paid during the year to 28 February 2005 - - -
Total dividends paid during the year to 28 February 2006 1.00 - -
Total dividends paid during the year to 28 February 2007 7.00 0.75 0.75
Total dividends paid during the period to 31 August 2007 10.00 1.21 1.21
Total dividends (capital and revenue) 19.60 1.96 1.96
Net asset value as at 31 August 2007 48.65 97.20 97.20
Total cumulative return as at 31 August 2007 68.25 99.16 99.16
Total cumulative return as at 28 February 2007 72.57 98.32 98.32
Ordinary Shares
The Board has declared an interim dividend from realised capital profits of 1 pence per share. This dividend
is subject to approval by HM Revenue & Customs. The record date and payment date of this dividend will be
announced on the London Stock Exchange RNS service.
C&D Shares
The Board has declared an interim dividend from revenue of 1 pence per share. This will be paid on 7 December
2007 to shareholders on the register on 9 November 2007.
The Board would like to notify all shareholders that this report and all future announcements will be made
available on the London Stock Exchange RNS service and at www.closeventures.co.uk (Our Funds/Close Second AIM
VCT)
Interim Management Report
Over the six month period, the AIM Index increased marginally by 0.5 % and the
Net Asset Values ("NAV") of the Ordinary share portfolio fell by 7.5% and the C
and D share portfolio increased by 1.7% after adding back the dividend paid
during the period in both cases.
The six months to 31 August 2007 proved to be a challenging and volatile time
for stock markets as a whole. Inevitably, this reduced risk appetite which
affected the performance of the smaller company markets in general, particularly
AIM. The AIM Index peaked at the end of July and then fell by around 15% as the
market slowed down for the summer and as global credit woes hit the headlines.
Although the AIM Index has recovered from its low in the middle of August, the
recovery is mainly attributable to a bounce in resource and mining stocks (which
still account for a third of AIM), as commodity and oil prices remained high.
Although the companies in which your VCT can invest did not see their share
prices recover in the same way, the Investment Manager has generally been
encouraged by the positive trading results reported by many companies within the
portfolios over the last few months.
Dividends
Ordinary shares
In accordance with our stated policy of paying dividends to Ordinary
shareholders with each set of interim results, the Board has declared an interim
dividend of 1p per Ordinary share out of realised capital gains.
The dividend paid out of realised capital profit is subject to HM Revenue &
Customs approval. The record date and the payment date of this dividend will be
announced on the London Stock Exchange RNS service.
C and D shares
As noted in the prospectus, the C and D share portfolio, being mainly invested
in interest bearing non-qualifying investments during the period under review
must pay out most of the income it receives as dividends. Therefore, the Board
has declared an interim dividend of 1p per C and D share payable on 7 December
2007 to shareholders on the register at 9 November 2007.
Market Background
It is fair to say that since the end of June stock markets have been volatile.
Since the summer, the fallout from the US sub-prime mortgage sector and related
credit markets appears to be hurting the financial markets. Moreover, in
September, the Northern Rock saga "rocked" public confidence in the UK banking
system. Although the notable US Fed interest rate reduction in September, and
the Monetary Policy Committee's decision to keep UK interest rates at 5.75% have
calmed some fears, confidence in the credit markets will only return when more
banks announce the extent of their subprime related exposure and subsequent
losses. Until that point, the impact on the wider financial equity markets will
remain unclear.
Unfortunately, this has not and will not help market sentiment in the short
term. Smaller company share prices have continued to be hit by uncertain market
conditions, which has caused investors to reappraise their appetite for risk and
has reduced liquidity. Although market uncertainty is not helpful to share
prices (and therefore the performance of your VCT) in the short-term, the
Investment Manager has been encouraged by the fact that results announced over
the last six months have generally been positive. It would be unrealistic to
think that all the turmoil of recent months will not have any lasting effect on
the consumer and the economy. However, your Board maintains that the companies,
in which VCTs invest, are small companies within niche sectors that are still
likely to grow even in a less benign economic environment.
Performance
Ordinary share portfolio
Over the period the NAV per Ordinary share fell by 7.5% which is disappointing.
The performance of the portfolio was undoubtedly affected by market sentiment.
The reduced appetite for risk in the market resulted in some of the larger
holdings in particular seeing a fall in ratings, despite reporting good trading
figures. This includes Clapham House, Mears Group, Claimar Care Group and
Concateno.
However, there are a few stocks that have underperformed over the period due to
poor trading results. Research Now's share price was hit over the period after
the company announced a reduction in profits due to increased costs as a result
of expansion in new territories and poor financial controls. The company has
since announced the appointment of a new Finance Director and trading appears to
be on track. Pilat Media issued a downbeat second quarter trading statement due
to two contract delays over the period. The share price has come down
significantly over the last few months. However, the company is still expecting
to sign new contracts and the coming period is expected to see several existing
contracts "go live" which will prove that the growth story still remains intact.
Imprint has had a very disappointing year. Two bids for the company (including
one by the management team) have failed to materialise and trading appears to be
weaker than expected. The company is undergoing a management change and is now
trading at a large discount to its peers, which suggests it is still an
attractive takeover target. The small holding in Accuma was sold, as the future
of the IVA market began to look less certain.
On a more positive note, there are several companies within the portfolio that
have issued encouraging announcements over the last few months. Brooks MacDonald
continues to increase funds under management, which has been helped by the
growth in the SIPP market. Bond International issued a strong set of interim
results confirming that both the order book and pipeline remains strong. Pipex
announced the sale of its broadband business. Mattioli Woods continues to trade
well and the acquisition of Pension Consulting Limited is on track.
C and D share portfolio
Over the period, the NAV increased by 1.7%. Although uncertain market conditions
have not helped the share prices of companies within the portfolio, we have been
encouraged by the positive trading updates of various holdings within the
portfolio. The market for new issues has remained slow. However, we have managed
to make 7 new investments in the portfolio over the period under review. These
are described below:
Neuropharm Group
Neuropharm Group is a UK based pharmaceutical company focussed on the
development of products that treat conditions affecting the brain and nerves,
mainly autism.
Claimar Care Group
Claimar Care Group, a provider of domiciliary care services across the UK, was
an existing holding in the Ordinary share portfolio.
BGlobal
BGlobal provides smart metering and data retrieval services for electricity,
natural gas and water utilities.
IDOX
IDOX develops integrated and adaptable software systems for document, content
and information management.
Pressure Technologies
Pressure Technologies designs, manufactures and provides testing services for a
range of niche high pressure and seamless steel gas cylinders.
Mount Engineering
Mount Engineering manufactures and distributes a range of valves and thread
conversion components to the oil & gas and other process markets.
Clerkenwell Ventures
Clerkenwell Ventures is a cash shell seeking to acquire businesses within the
restaurant sector. It was an existing holding in the Ordinary share portfolio.
At the end of August, the C and D share portfolio was 31% invested in qualifying
companies.
Share buy-back policy and discount
The Company has a share buy-back policy for shareholders wishing to sell their
shares.
During the period under review, the Company repurchased 94,848 Ordinary shares
at an average price of 58p. The total value of the shares repurchased over the
period was #55,056. At the end of August 2007, the discount of the share price
to NAV per Ordinary share was approximately 9% compared to 8% at the end of
February 2007. The Company will endeavour to maintain the discount at around
10%.
Over the period, there were no C and D shares repurchased.
Shareholders intending to sell their shares might wish to contact the Investment
Manager, Close Investments Limited.
Outlook
Uncertainty created by credit market fears appears still to be hurting financial
markets. However, confidence in the credit markets is unlikely to return until
the market is aware of the extent of subprime related losses on the global
banking system. In the UK, economic growth forecasts are already being reined in
on the back of negative financial market conditions. However, the UK economy is
still growing which should provide a basis for progress from many of the
holdings in the portfolios.
The new issues pipeline remains slow. However, the Investment Manager continues
to make new investments in the portfolios that fit the investment criteria. Over
the period, 7 new investments were made in the C and D share portfolio, and 2
more have been made since the period end. The Ordinary share portfolio remains
fully invested and the C and D share portfolio is now approximately 36% invested
in qualifying companies which the Investment Manager believes is a satisfactory
level.
Elizabeth Kennedy
Chairman
25 October 2007
Portfolio of Investments
as at 31 August 2007
Ordinary shares
Company Fair value % of total Original cost
investments and
#'000 cash #'000
Bond International Software 223 5.95 43
The Clapham House Group 207 5.52 63
Cello Group 203 5.41 145
Mattioli Woods 200 5.33 97
Brooks MacDonald Group 188 5.01 100
Zetar 181 4.83 65
Vertu Motors 160 4.27 150
Mears Group 153 4.08 130
Research Now 151 4.03 73
Imprint Search & Selection 149 3.99 124
Pipex Communications 125 3.33 22
Atlantic Global 120 3.20 188
Clerkenwell Ventures 113 3.01 123
Concateno 108 2.88 77
Datong Electronics 86 2.29 100
Win 82 2.19 87
Dowlis Corp Solutions 80 2.13 100
Brulines (Holdings) 80 2.13 68
Pilat Media Group 77 2.05 88
Medical House 70 1.88 167
Playgolf (Holdings) 65 1.73 150
Media Square 51 1.36 108
Petards Group 49 1.31 70
Strategic Thought Group 25 0.67 54
Independent Media Support 25 0.67 150
Zenith Hygiene Group 15 0.40 67
2,986 79.65 2,609
Floating rate notes 300 8.00 300
Total investments 3,286 87.65 2,909
Cash 463 12.35 463
Total investments and cash 3,749 100.00 3,372
Portfolio of Investments
as at 31 August 2007
C & D shares
Company Fair value % of total Original cost
investments and
#'000 cash #'000
Close Special Situations Fund (Acc) 1,217 6.02 1,000
Neuropharm Group 730 3.61 502
Vertu Motors 641 3.17 601
Clerkenwell Ventures 550 2.71 550
Claimar Care Group 531 2.63 401
Hexagon Human Capital 528 2.61 507
Mount Engineering 412 2.04 431
Pressure Technologies 390 1.92 300
Twenty 375 1.85 500
Hatpin 350 1.73 247
BBI Holdings 265 1.31 171
Individual Restaurant Group 252 1.25 175
IDOX 252 1.25 189
Brulines (Holdings) 240 1.19 204
BGlobal 177 0.88 151
Telephonetics 137 0.68 364
7,047 34.85 6,293
Floating rate notes 9,979 49.35 10,004
Total investments 17,026 84.20 16,297
Cash 3,195 15.80 3,195
Total investments and cash 20,221 100.00 19,492
Responsibility Statement
The Directors have chosen to prepare the financial statements for the Company in
accordance with United Kingdom Generally Accepted Accounting Practice
("UK GAAP")
In preparing these summarised financial statements for the period to 31 August
2007, we the Directors, confirm that to the best of our knowledge:
(a) the summarised set of financial statements has been prepared in accordance
with pronouncement on interim reporting issued by Accounting Standards Board;
(b) the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first six
months and description of principal risks and uncertainties for the remaining
six months of the year);
(c) the summarised set of financial statements give a true an fair view in
accordance with UK GAAP of the state of affairs of the Company and of the profit
and loss of the Company for that period and comply with UK GAAP and Companies
Act 1985 and;
(d) the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions and changes
therein).
The Half-yearly Financial Report has not been audited or reviewed by the
auditors.
By order of the Board
Elizabeth Kennedy
Chairman
25 October 2007
Summary Income Statement
Ordinary Shares
Unaudited
Unaudited Six months to Audited
Six months to 31 August 2006 Year to
31 August 2007 28 February 2007
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
(Losses)/gains on 4 - (334) (334) - (31) (31) - 623 623
investments
Investment income 3 34 - 34 34 - 34 62 - 62
Investment management (13) (38) (51) (14) (43) (57) (29) (87) (116)
fee
Other expenses (14) - (14) (37) - (37) (55) - (55)
Return/(loss) on 7 (372) (365) (17) (74) (91) (22) 536 514
ordinary activities
before tax
Tax credit on ordinary 5 1 29 30 7 8 15 10 37 47
activities
Return/(loss) 8 (343) (335) (10) (66) (76) (12) 573 561
attributable to equity
shareholders
Basic and diluted
return/(loss) per
share (pence) 7 0.10 (4.44) (4.34) (0.13) (0.82) (0.95) (0.15) 7.35 7.20
The accompanying notes are an integral part of this half-yearly financial
report.
All of the Company's activities derive from continuing operations.
The Company has no recognised gains or losses other than those disclosed above;
accordingly a statement of total recognised gains and losses is not required.
The Total column of the Income Statement represents the profit and loss of the
Ordinary shares. The supplementary revenue return and capital return columns
have been prepared in accordance with the Association of Investment Companies'
Statement of Recommended Practice.
Comparative figures have been extracted from the accounts for the period ended
31 August 2006 and the statutory accounts for the year ended 28 February 2007.
Summary Income Statement
C & D Shares
Unaudited
Unaudited Six months to Audited
Six months to 31 August 2006 Year to
31 August 2007 28 February 2007
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Gains/(losses) on 4 - 313 313 - (48) (48) - 423 423
investments
Investment income 3 421 - 421 340 - 340 760 - 760
Investment management (58) (176) (234) (56) (167) (223) (113) (338) (451)
fee
Other expenses (57) - (57) (55) - (55) (117) - (117)
Return/(loss) on 306 137 443 229 (215) 14 530 85 615
ordinary activities
before tax
Tax (charge)/credit on 5 (77) 47 (30) (53) 38 (15) (130) 83 (47)
ordinary activities
Return/(loss) 229 184 413 176 (177) (1) 400 168 568
attributable to equity
shareholders
Basic and diluted
return/(loss) per
share (pence) 7 1.13 0.91 2.04 1.04 (1.04) - 2.15 0.90 3.05
The accompanying notes are an integral part of this half-yearly financial
report.
All of the Company's activities derive from continuing operations.
The Company has no recognised gains or losses other than those disclosed above;
accordingly a statement of total recognised gains and losses is not required.
The Total column of the Income Statement represents the profit and loss of the
C& D shares. The supplementary revenue return and capital return columns have
been prepared in accordance with the Association of Investment Companies'
Statement of Recommended Practice.
Comparative figures have been extracted from the accounts for the period ended
31 August 2006 and the statutory accounts for the year ended 28 February 2007.
Summary Income Statement
Total
Unaudited Unaudited
Six months to Six months to Audited
31 August 2007 31 August 2006 Year to
28 February 2007
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
(Losses)/gains on 4 - (21) (21) - (79) (79) - 1,046 1,046
investments
Investment income 3 455 - 455 374 - 374 822 - 822
Investment (71) (214) (285) (70) (210) (280) (142) (425) (567)
management fee
Other expenses (71) - (71) (92) - (92) (172) - (172)
Return/(loss) on 313 (235) 78 212 (289) (77) 508 621 1,129
ordinary activities
before tax
Tax (charge)/credit 5 (76) 76 - (46) 46 - (120) 120 -
on ordinary
activities
Return/(loss) 237 (159) 78 166 (243) (77) 388 741 1,129
attributable to
equity shareholders
The accompanying notes are an integral part of this half-yearly financial
report.
All of the Company's activities derive from continuing operations.
The Company has no recognised gains or losses other than those disclosed above;
accordingly a statement of total recognised gains and losses is not required.
The Total column of the Income Statement represents the profit and loss of the
Company. The supplementary revenue return and capital return columns have been
prepared in accordance with the Association of Investment Companies' Statement
of Recommended Practice.
Comparative figures have been extracted from the accounts for the period ended
31 August 2006 and the statutory accounts for the year ended 28 February 2007.
Summary Balance Sheet
Ordinary Shares
Unaudited Unaudited Audited
Notes 31 August 31 August 28 February
2007 2006 2007
#'000 #'000 #'000
Fixed asset investments
at fair value through profit or loss
Qualifying investments 2,816 3,813 3,910
Non-qualifying investments 470 355 353
Total fixed asset investments 3,286 4,168 4,263
Current assets
Debtors 14 9 55
Cash at bank 463 749 581
477 758 636
Creditors: (32) (46) (10)
amounts falling due within one year
Net current assets 445 712 626
Net assets 3,731 4,880 4,889
Capital and reserves
Called up share capital 8 383 395 388
Special reserve 7,333 7,470 7,388
Capital redemption reserve 61 49 56
Realised capital reserve (4,014) (3,370) (3,511)
Unrealised capital reserve 377 751 985
Revenue reserve (409) (415) (417)
Equity shareholders' funds 3,731 4,880 4,889
Net asset value per share (pence) 48.65 61.73 62.97
Comparative figures have been extracted from the accounts for the period ended
31 August 2006 and the statutory accounts for the year ended 28 February 2007.
Summary Balance Sheet
C & D Shares
Unaudited Unaudited Audited
31 August 31 August 28 February
Notes 2007 2006 2007
#'000 #'000 #'000
Fixed asset investments
at fair value through profit or loss
Qualifying investments 5,819 977 3,013
Non-qualifying investments 11,207 14,998 16,161
Total fixed asset investments 17,026 15,975 19,174
Current assets
Debtors 110 164 133
Cash at bank 3,195 3,019 286
3,305 3,183 419
Creditors: (658) (31) (88)
amounts falling due within one year
Net current assets 2,647 3,152 331
Net assets 19,673 19,127 19,505
Capital and reserves
Called up share capital 8 1,012 1,012 1,012
Share premium - 18,116 -
Special reserve 18,077 - 18,077
Realised capital reserve (377) (111) (237)
Unrealised capital reserve 729 (66) 405
Revenue reserve 232 176 248
Equity shareholders' funds 19,673 19,127 19,505
Net asset value per share (pence) 97.20 94.50 96.36
Comparative figures have been extracted from the accounts for the period ended
31 August 2006 and the statutory accounts for the year ended 28 February 2007.
Summary Balance Sheet
Total
Unaudited Unaudited Audited
31 August 31 August 28 February
Notes 2007 2006 2007
#'000 #'000 #'000
Fixed asset investments
at fair value through profit or loss
Qualifying investments 8,635 4,790 6,923
Non-qualifying investments 11,677 15,353 16,514
Total fixed asset investments 20,312 20,143 23,437
Current assets
Debtors 124 173 188
Cash at bank 3,658 3,768 867
3,782 3,941 1,055
Creditors: (690) (77) (98)
amounts falling due within one year
Net current assets 3,092 3,864 957
Net assets 23,404 24,007 24,394
Capital and reserves
Called up share capital 8 1,395 1,407 1,400
Share premium - 18,116 -
Special reserve 25,410 7,470 25,465
Capital redemption reserve 61 49 56
Realised capital reserve (4,391) (3,481) (3,748)
Unrealised capital reserve 1,106 685 1,390
Revenue reserve (177) (239) (169)
Equity shareholders' funds 23,404 24,007 24,394
Comparative figures have been extracted from the accounts for the period ended
31 August 2006 and the statutory accounts for the year ended 28 February 2007.
Unaudited Summary Reconciliation of Movements in Shareholders' Funds
Ordinary Shares
Share Special Capital Realised Unrealised Revenue Total
capital reserve redemption capital capital reserve
reserve reserve reserve
#'000 #'000 #'000 #'000 #'000 #'000 #'000
As at 28 February 2007 388 7,388 56 (3,511) 985 (417) 4,889
Net return after taxation for the
period - - - 265 (608) 8 (335)
Dividends - - - (768) - - (768)
Shares purchased for cancellation (5) (55) 5 - - - (55)
As at 31 August 2007 383 7,333 61 (4,014) 377 (409) 3,731
As at 28 February 2006 404 7,564 40 (3,849) 1,296 (405) 5,050
Net return after taxation for the
period - - - 479 (545) (10) (76)
Shares purchased for cancellation (9) (94) 9 - - - (94)
As at 31 August 2006 395 7,470 49 (3,370) 751 (415) 4,880
As at 28 February 2006 404 7,564 40 (3,849) 1,296 (405) 5,050
Net return after taxation for the
year - - - 884 (311) (12) 561
Dividends - - - (546) - - (546)
Shares purchased for cancellation (16) (176) 16 - - - (176)
As at 28 February 2007 388 7,388 56 (3,511) 985 (417) 4,889
Unaudited Summary Reconciliation of Movements in Shareholders' Funds
C & D Shares
Share Share Special Realised Unrealised Revenue Total
capital premium reserve capital capital reserve
reserve reserve
#'000 #'000 #'000 #'000 #'000 #'000 #'000
As at 28 February 2007 1,012 - 18,077 (237) 405 248 19,505
Net return after taxation for the
period - - - (140) 324 229 413
Dividends - - - - - (245) (245)
As at 31 August 2007 1,012 - 18,077 (377) 729 232 19,673
As at 28 February 2006 - - - - - -
Net return after taxation for the
period - - (111) (66) 176 (1)
Issue of shares net of expenses 1,012 18,116 - - - - 19,128
As at 31 August 2006 1,012 18.,116 - (111) (66) 176 19,127
As at 28 February 2006 - - - - - - -
Net return after taxation for the
year - - - (237) 405 400 568
Dividends - - - - - (152) (152)
Issue of shares net of expenses 1,012 18,115 - - - - 19,127
Transfer of reserves* - (18,115) 18,115 - - - -
Costs of cancelling share premium - - (38) - - - (38)
As at 28 February 2007 1,012 - 18,077 (237) 405 248 19,505
* The transfer arises from the Court approval to cancel the share premium account on 19 September 2006.
Unaudited Summary Reconciliation of Movements in Shareholders' Funds
Total
Share Share Special Capital Realised Unrealised Revenue Total
capital premium reserve redemption capital capital reserve
reserve reserve reserve
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
As at 28 February 2007 1,400 - 25,465 56 (3,748) 1,390 (169) 24,394
Net return after taxation for
the period - - - - 125 (284) 237 78
Dividends - - - - (768) - (245) (1,013)
Shares purchased for (5) (55) 5 - - - (55)
cancellation
As at 31 August 2007 1,395 - 25,410 61 (4,391) 1,106 (177) 23,404
As at 28 February 2006 404 - 7,564 40 (3,849) 1,296 (405) 5,050
Net return after taxation for
the period - - - - 368 (611) 166 (77)
Issue of shares net of expenses 1,012 18,116 - - - - - 19,128
Shares purchased for
cancellation (9) - (94) 9 - - - (94)
As at 31 August 2006 1,407 18,116 7,470 49 (3,481) 685 (239) 24,007
As at 28 February 2006 404 - 7,564 40 (3,849) 1,296 (405) 5,050
Net return after taxation for
the year - - - - 647 94 388 1,129
Dividends - - - - (546) - (152) (698)
Issue of shares net of expenses 1,012 18,115 - - - - - 19,127
Transfer of reserves - (18,115) 18,115 - - - - -
Costs of cancelling share
premium - - (38) - - - - (38)
Shares purchased for
cancellation (16) - (176) 16 - - - (176)
As at 28 February 2007 1,400 - 25,465 56 (3,748) 1,390 (169) 24,394
Summary Cash Flow Statement
Ordinary Shares
Unaudited Unaudited
Six months to Six months to Audited
31 August 31 August Year to
2007 2006 28 February
#'000 #'000 2007
Note #'000
Operating activities
Dividend income received 10 13 17
Investment income received 8 7 14
Deposit interest received 12 13 28
Investment management fees paid (49) (70) (129)
Other cash payments (15) (90) (105)
Net cash outflow from operating activities 9 (34) (127) (175)
Investing activities
Purchase of qualifying investments - (60) (321)
Purchase of non-qualifying investments - - (1)
Disposal of qualifying investments 691 808 1
Disposal of non-qualifying investments 1 - 1,629
Net cash inflow from investing activities 692 748 1,308
Equity dividends paid
Capital dividends paid (768) - (546)
Total equity dividends paid (768) - (546)
Net cash (outflow)/inflow before financing (110) 621 587
Financing
Intercompany account movement 47 43 -
Cancellation of shares (55) (92) (183)
Net cash outflow from financing (8) (49) (183)
Decrease/(increase) in cash (118) 572 404
Summary Cash Flow Statement
C & D Shares
Unaudited Unaudited
Six months to Six months to Unaudited
31 August 31 August Year to
2007 2006 28 February
#'000 #'000 2007
Note #'000
Operating activities
Dividend income received 22 - 7
Investment income received 390 148 522
Deposit interest received 33 73 110
Investment management fees paid (198) (217) (443)
Other cash payments (61) (41) (93)
Net cash inflow/(outflow) from operating 9 186 (37) 103
activities
Investing activities
Purchase of qualifying investments (1,970) (1,199) (2,926)
Purchase of non-qualifying investments (13) (15,008) (16,008)
Disposal of qualifying investments - 184 184
Disposal of non-qualifying investments 4,993 - -
Net cash inflow/(outflow) from investing 3,010 (16,023) (18,750)
activities
Equity dividends paid
Revenue dividends paid (245) - (152)
Total equity dividends paid (245) - (152)
Net cash inflow/(outflow) before financing 2,951 (16,060) (18,799)
Financing
Intercompany account movement (47) (43) -
Issue of share capital (net of expenses) 5 19,122 19,085
Net cash (outflow)/inflow from financing (42) 19,079 19,085
Increase in cash 2,909 3,019 286
Summary Cash Flow Statement
for the six months to 31 August 2007
Total
Unaudited Unaudited
Six months to Six months to Audited
31 August 31 August Year to
2007 2006 28 February
#'000 #'000 2007
Note #'000
Operating activities
Dividend income received 32 13 24
Investment income received 398 155 536
Deposit interest received 45 86 138
Investment management fees paid (247) (287) (572)
Other cash payments (76) (131) (198)
Net cash inflow/(outflow) from operating 9 152 (164) (72)
activities
Investing activities
Purchase of qualifying investments (1,970) (1,259) (3,247)
Purchase of non-qualifying investments (13) (15,008) (16,009)
Disposal of qualifying investments 691 992 185
Disposal of non-qualifying investments 4,994 - 1,629
Net cash inflow/(outflow) from investing 3,702 (15,275) (17,442)
activities
Equity dividends paid
Revenue dividends paid (245) - (152)
Capital dividends paid (768) - (546)
Total equity dividends paid (1,013) - (698)
Net cash inflow/(outflow) before financing 2,841 (15,439) (18,212)
Financing
Issue of share capital (net of expenses) 5 19,122 19,085
Cancellation of shares (55) (92) (183)
Net cash (outflow)/inflow from financing (50) 19,030 18,902
Increase in cash 2,791 3,591 690
Notes to the Summarised set of Financial Statements
for the six months to 31 August 2007
The principal activity of the Company is that of a Venture Capital Trust. It has
been approved by HM Revenue & Customs as a Venture Capital Trust under Section
842AA of the Income and Corporation Taxes Act 1988.
1. Accounting convention
The financial statements have been prepared under the historical cost
convention, as modified by the revaluation of certain financial instruments, in
accordance with applicable law and United Kingdom Accounting Standards, and with
the Statement of Recommended Practice "Financial Statements of Investment Trust
Companies" ("SORP") issued by the Association of Investment Trust Companies ("
AITC") in January 2003 and revised in December 2005.
True and fair override
The Company is no longer an investment company within the meaning of Section 266
of the Companies Act 1985. However it conducts its affairs as a Venture Capital
Trust for taxation purposes under Section 842AA of the Income and Corporation
Taxes Act 1988.
The absence of Section 266 status does not preclude the Company from presenting
its accounts in accordance with the AITC's SORP, and furthermore the Directors
consider it appropriate to continue to present the accounts in this manner as it
is consistent with the sector within which it operates.
The Directors therefore consider that the departures from accounting standards
and the specific provisions of Schedule 4 of the Companies Act relating to the
form and content of accounts for companies other than investment companies are
necessary to give a true and fair view. The departures have no effect on the
total return or balance sheet.
2. Accounting policies
The accounting policies used in the Half-yearly financial report are consistent
with the accounting policies adopted at the year end.
The principal accounting policies are described below:
a) Investments
In accordance with FRS 26 "Financial Instruments: Measurement", equity
investments are designated as fair value through profit or loss ("FVTPL"). The
total column of the Income Statement represents the Company's profit and loss
account. Investments listed on recognised exchanges are valued at the closing
bid prices at the end of the accounting period. Fair value movements on equity
investments and gains and losses arising on the disposal of investments are
reflected in the Capital column of the Income Statement in accordance with the
AITC's SORP.
Investments are recognised as financial assets on legal completion of the
investment contract and are de-recognised on legal completion of the sale of an
investment.
The Directors are conscious of the fact that because shares are traded on AIM
this does not guarantee their liquidity. The nature of AIM investments is such
that the prices can be volatile and realisation may not achieve current book
value, especially when such a sale represents a significant proportion of that
Company's market capital. Nevertheless, on the grounds that the investments are
not intended for immediate realisation, they regard bid-market price as the most
objective and appropriate method of valuation.
b) Investment income
Dividends receivable on quoted equity shares are taken to revenue on an
ex-dividend basis. Returns on listed fixed interest securities are recognised on
a time apportionment basis from the date of purchase so as to reflect the
effective yield on the securities.
c) Investment management fees and other expenses
All expenses are accounted for on an accruals basis. Expenses are charged
through the income statement except as follows:
* expenses which are incidental to the acquisition of an
investment are included within the cost of the investment;
* expenses which are incidental to the disposal of an investment
are deducted from the disposal proceeds of the investment; and
* expenses are allocated between capital and revenue where a
connection with maintenance or enhancement of the value of the investments held
can be demonstrated. In respect of the Investment Manager's fee, 75% has been
allocated to capital reserve (realised) and 25% to revenue in the Income
Statement, in order to reflect the Directors' expected long-term view of the
nature of the investment return of the Company.
d) Taxation
Taxation is applied on a current basis in accordance with FRS 16 "current tax".
Taxation associated with capital expenses is applied in accordance with the
SORP. In accordance with FRS 19 "deferred tax", deferred taxation is provided in
full on timing differences that result in an obligation at the balance sheet
date to pay more tax or a right to pay less tax, at a future date, at rates
expected to apply when they crystallise based on current tax rates and law.
Timing differences arise from the inclusion of items of income and expenditure
in taxation computations in periods different from those in which they are
included in the financial statements. Deferred tax assets are recognised to the
extent that it is regarded as more likely than not that they will be recovered.
The Directors have considered the requirements of FRS 19 and do not believe that
any provision should be made.
e) Debtors and creditors
* Debtors do not carry any interest and are short term in nature and are
accordingly stated at their nominal value as reduced by appropriate
allowances for estimated irrecoverable amounts. The Directors consider that
the carrying amount of debtors approximates to their fair value.
* Creditors are non-interest bearing and are stated at their nominal value.
The Directors consider that the carrying amount of creditors approximate to
their fair value.
f) Reserves
The realised capital reserve contains gains and losses on the realisation of
investments, capital dividends paid to shareholders and investment management
fees allocated to the capital reserve and taxation thereon. The unrealised
capital reserve contains increases and decreases in the valuation of investments
held at the period end.
The special reserve is distributable and is primarily used for the cancellation
of the Company's share capital.
The capital redemption reserve accounts for amounts by which the issued capital
is diminished through the repurchase of the Company's own shares.
g) Dividends
In accordance with FRS 21 "Events after the balance sheet date", interim
dividends are not accounted for until paid, and final dividends are accounted
for when approved by shareholders at an Annual General Meeting.
h) C & D shares
Until such time that C & D shares are converted into Ordinary shares in 2009,
all investments are returns attributable to this class of share will be
separately identifiable from the existing Ordinary shares. All residual expenses
will be allocated on the basis of total funds raised for each class of share.
3. Investment income
Six months to 31 August 2007 Six months to 31 August 2006 Year to 28 February 2007
Ordinary C & D Ordinary C & D Ordinary C & D
shares shares Total shares shares Total shares shares Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Income from investments
UK franked investment income 10 22 32 11 - 11 19 7 26
UK unfranked investment income 9 361 370 7 257 264 15 641 656
19 383 402 18 257 275 34 648 682
Other income
Deposit interest 15 38 53 16 83 99 28 112 140
Total income 34 421 455 34 340 374 62 760 822
4. (Losses)/gains on investments
Six months to 31 August 2007 Six months to 31 August 2006 Year to 28 February 2007
Ordinary C & D Ordinary C & D Ordinary C & D
shares shares Total shares shares Total shares shares Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Realised gains/(losses) 274 (11) 263 221 18 239 934 18 952
Unrealised (losses)/ gains (608) 324 (284) (252) (66) (318) (311) 405 94
(334) 313 (21) (31) (48) (79) 623 423 1,046
5. Tax credit/(charge) on ordinary activities
The tax charge for the half-year is nil (31 August 2006: nil, 28 February 2007:
nil) based on an estimated effective tax rate of 0% for the year ending 28
February 2008. The estimated effective tax rate is 0% as investment gains are
exempt from tax owing to the Company's status as a Venture Capital Trust and
there is expected to be an excess of management expenses over taxable income.
6. Dividends
The amounts recognised as distributions to equity shareholders in the period
were as follows:
Six months to 31 August 2007 Six months to 31 August 2006 Year to 28 February 2007
Ordinary C & D Ordinary C & D Ordinary C & D
shares shares Total shares shares Total shares shares Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Dividends paid per - 768 768 - - - - 546 546
Ordinary share
Dividends paid per 245 - 245 - - - 152 - 152
C & D share
245 768 1,013 - - - 152 546 698
Ordinary shares
The Board has declared an interim dividend from realised capital profits of 1
pence per share. This dividend is subject to approval by HM Revenue & Customs.
The record date and payment date of this dividend will be announced on the
London Stock Exchange RNS service.
C & D shares
The Board has declared an interim dividend from revenue of 1 pence per share.
This will be paid on 7 December 2007 to shareholders on the register on 9
November 2007.
7. Basic and diluted return per share
Return per share has been calculated on 7,709,176 (2006: 8,005,007) Ordinary
shares and 20,240,793 (2006: 16,993,107) C & D shares being the weighted average
number of shares in issue for the period.
There are no convertible instruments derivatives or contingent share agreements
in issue for Close Second AIM VCT PLC hence there are no dilution effects to the
return per share. The basic return per share is therefore the same as the
diluted return per share.
8. Called up share capital
31 August 31 August 28 February
2007 2006 2007
#'000 #'000 #'000
Authorised
36,000,000 Ordinary shares of 5p each 1,800 1,800 1,800
25,000,000 C Ordinary shares of 5p each 1,250 1,250 1,250
20,000,000 D Ordinary shares of 5p each 1,000 1,000 1,000
4,050 4,050 4,050
Allotted called up and fully paid
7,669,349 Ordinary shares of 5p each 383 395 388
8,214,295 C Ordinary shares of 5p each 411 411 411
12,026,498 D Ordinary shares of 5p each 601 601 601
1,395 1,407 1,400
The Company repurchased for cancellation 94,848 Ordinary shares during the
period at a cost of #55,056. This represented approximately 1.22% of the
Ordinary shares as at 31 August 2007.
9. Reconciliation of net return before taxation to net cash outflow from
operating activities
Six months to 31 August 2007 Six months to 31 August 2006 Year to 28 February 2007
Ordinary C & D Ordinary C & D Ordinary C & D
shares shares Total shares shares Total shares shares Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Net return/(loss) before 7 306 313 (17) 229 212 (22) 530 508
taxation
Investment management fee (38) (176) (214) (43) (167) (210) (87) (338) (425)
charged to capital
(Increase)/decrease in (5) 20 15 (3) (130) (133) (2) (130) (132)
other debtors
Increase/(decrease) in 2 36 38 (64) 31 (33) (64) 41 (23)
other creditors
Net cash (outflow)/inflow (34) 186 152 (127) (37) (164) (175) 103 (72)
from operating activities
10. Related party transactions
Close Investments Limited, as Investment Manager of the Company, is considered
to be a related party by virtue of its management contract with the Company.
During the period, services of a total value of #285,000 (31 August 2006:
#280,000, 28 February 2007: #567,000) were purchased by the Company from Close
Investments Limited. At the 31 August 2007, the amount due to Close Investments
Limited disclosed under creditors was #48,000.
As at 31 August 2007, the Company held an investment in the C & D share
portfolio in Close Special Situations Fund, a unit trust which is also managed
by Close Investments Limited. This investment was valued at #1,217,000 (31
August 2006: nil, 28 February 2007: #1,157,000)
No Director has, or during the period had, a contract of service with the
Company. Elizabeth Kennedy is a divisional Director of Brewin Dolphin Limited,
the Company's brokers. Subject to these exceptions, no Director was party to, or
had an interest in, any contract or arrangement with the Company at any time
during the period under review or as at the date of this report.
11. Other information
The information set out in this Half-yearly Financial Report does not constitute
the Company's statutory accounts within the terms of Section 240 of the
Companies Act 1985 for the period ended 31 August 2007 and 31 August 2006, and
is unaudited. The information for the year ended 28 February 2007 does not
constitute statutory accounts within the terms of Section 240 of the Companies
Act 1985 and is derived from the statutory accounts for the financial year,
which have been delivered to the Registrar of Companies. The auditors reported
on those accounts; their report was unqualified and did not contain a statement
under Section 237(2) or (3) of the Companies Act 1985.
12. Publication
This Half-yearly Financial Report is being sent to shareholders and copies will
be made available electronically at www.closeventures.co.uk. The Half-yearly
Financial Reports will also be made available to the public at the registered
office of the Company and at Companies House.
For further information, please contact:
Andrew Buchanan / Kate Tidbury Karen Wagg
Close Investments Limited Polhill Communications
Tel: 020 7426 4000 Tel: 020 7655 0540
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LQLFLDBBXFBV
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