TIDMLGIV
RNS Number : 3130N
Longbow Growth and Income VCT
31 August 2011
Longbow Growth and Income VCT plc
Half-yearly report
For the period ended 30 June 2011
Contents
Financial Summary & Investment Policy 1
Chairman's Statement 2
Directors' Responsibility Statement 3
Statement of Principal Risks and Uncertainties 3
Related Parties 4
Income Statement 6
Balance Sheet 7
Reconciliation of Movements in Shareholders' Funds 7
Cash Flow Statement 8
Notes to the Interim Financial Statements 9
Corporate Information 10
Financial Summary
30 June
Period ended 2011
------------------------------- -------------
Net assets GBP1,022,903
------------------------------- -------------
Net asset value per share 91.94p
------------------------------- -------------
Investment income GBPNil
------------------------------- -------------
Return on ordinary activities
before tax
------------------------------- -------------
- Revenue GBP(42,685)
------------------------------- -------------
- Capital GBP22,972
------------------------------- -------------
- Total GBP(19,713)
------------------------------- -------------
Return per share
------------------------------- -------------
- Revenue (3.84)p
------------------------------- -------------
- Capital 2.07p
------------------------------- -------------
- Total (1.77)p
------------------------------- -------------
Dividend per share declared
in respect of the period
------------------------------- -------------
- Revenue Nil
------------------------------- -------------
- Capital Nil
------------------------------- -------------
- Total Nil
------------------------------- -------------
Share price at end of period 100.00p
------------------------------- -------------
Investment Policy
The investment objective of Longbow Growth and Income VCT plc
("Longbow VCT" or "Company") is to provide its shareholders with
attractive returns over the medium to long term through investing
principally in unquoted UK developing companies with a focus on the
life enhancement and wellbeing sectors.
In order to achieve its objective, the Company will focus on
providing development and expansion funding to unquoted companies
within these sectors. Risk will be spread by investing in a
diversified range of companies from the life enhancement and
wellbeing sectors across the UK with a particular emphasis on
leveraging the Manager's existing relationship with Alliance
Boots.
The Company will, within a 3 year period from Admission, have
(and subsequently maintain) at least 70 per cent. of the value of
its investments represented by VCT-qualifying investments and the
maximum amount invested by the Company in any single company or
other listed closed ended investment fund will be limited to 15 per
cent. of the value of the Company's investments at the time of
investment.
The Company will also have the ability to invest in a range of
non VCT-qualifying investments.
The Company's investment manager is Longbow Capital LLP
("Longbow Capital" or "Investment Manager").
Chairman's Statement
On behalf of the board of directors, I should like to welcome
you as a shareholder of Longbow Growth and Income VCT plc ("Longbow
VCT" or "Company") and thank you for your investment in the
Company.
Offer for Subscription
Longbow VCT's offer for subscription closed on 30 June 2011
having raised GBP1.16million (of which GBP1.1m had been invested in
the Company's shares as at 30 June 2011 with the balance being
invested in the Company's shares on 5 July 2011) thereby achieving
the minimum subscription of GBP1million. Although we had hoped that
we would have raised more, it proved to be an unexpectedly
difficult year for VCT fundraising. Several VCT offers were
withdrawn because of a poor response and several others, including
a few from major players in the sector, raised a similar sum to
that which we raised.
Investment Activity
At time of writing, our investment manager, Longbow Capital LLP
("Longbow Capital"), has identified several investment
opportunities across the portfolio of companies in which other
Longbow funds have invested; due diligence is being undertaken now
on one of these opportunities which may lead to our first
investment being made before the end of the year. The other
opportunities, if supported, would result in the Company's funds
being substantially invested within the next two or three years. If
that were to happen, Longbow VCT would then hold a reasonably
mature portfolio with the prospect of successful realisations
significantly earlier than is usual in the VCT sector. It was this
possibility which contributed in large measure to our willingness
to commit to a minimum subscription of GBP1million for Longbow
VCT.
Against this potentially attractive outcome, our investment
manager has reported a reorganisation of its staff. This is an
unwelcome development: Longbow Capital has, however, assured the
Company's Board of Directors that there will be no weakening of the
investment management capacity. This development will be monitored
closely.
Outlook
As described above, the Investment Manager has presented a
programme of activity which is both encouraging and consistent with
the investment outlook presented in the prospectus for the offer
for subscription. That said, current market conditions and the
general economic outlook are challenging.
The prospectus also anticipated a second fundraising round in
the 2011/12 tax year which would look to build on the presentation
of the Company's investment proposition to the IFA community in tax
year 2010/11. That proposition was well received by VCT
commentators and a significant number of IFAs. The failure to
convert such support into applications to invest has been
attributed to the uncertainty of whether Longbow VCT would achieve
its minimum and thereby be launched. IFAs are understandably
reluctant to introduce their clients to a VCT which may not go
ahead. That bridge, however, has been crossed and the challenge now
is to determine whether a further fundraising may be undertaken
more successfully in 2011/12 or 2012/13. Much of the speculation
about investment appetite for tax-driven product in the current
year is centred on Enterprise Investment Schemes as a result of the
steps taken by the Government to improve the taxation profile of
such Schemes and there is a school of thought that 2011/12 may also
be a difficult fundraising year for VCTs. We continue to monitor
the market's discussions on this point as we consider our
fundraising plans and the best way to realise the full potential of
the Company given its current size.
Although our first annual general meeting is some way in the
future - May/June 2012 - I look forward to meeting you then and,
hopefully, reporting on the satisfactory execution of the
investment programme outlined by our investment manager.
Michael J Walker
Chairman 31 August 2011
Responsibility Statement of the Directors in respect of the
Half-Yearly Financial Report
We confirm that to the best of our knowledge:
-- The condensed set of financial statements has been prepared
in accordance with the Statement "Half-yearly financial reports"
issued by the UK Accounting Standards Board
-- The Chairman's Statement (constituting the interim management
report) includes a fair review of the information required by DTR
4.2.7R of the "Disclosure and Transparency Rules", being an
indication of important events that have occurred during the period
ended 30 June 2011 and their impact on the condensed set of
financial statements
-- The "Statement of Principal Risks and Uncertainties" on page
3 is a fair review of the information required by DTR 4.2.7R, being
a description of the principal risks and uncertainties for the
remaining six months of the year
-- The financial statements include a fair review of the
information required by DTR 4.2.8R of the "Disclosure and
Transparency Rules", being related party transactions that have
taken place in the period ended 30 June 2011 and that have
materially affected the financial position or performance of the
VCT during that period.
By Order of the Board
The City Partnership (UK) Limited
Company Secretary 31 August 2011
Statement of Principal Risks and Uncertainties
The Company's assets will consist of equities and fixed interest
investments, cash and liquid resources. Its principal risks will
be, therefore, market risk, interest rate risk, credit risk and
liquidity risk. All assets and liabilities are denominated in
sterling, hence there is no currency risk.
Market risk
The Board will manage the market risk inherent in the Company's
portfolio by maintaining an appropriate spread of market risk and
by ensuring full and timely access to relevant information from the
Investment Manager. The Investment Manager reviews the investment
performance and financial results, as well as compliance with the
Company's investment objectives. The Board will seek to ensure that
an appropriate proportion of the Company's portfolio is invested in
cash and readily realisable securities which are sufficient to meet
any funding commitments which may arise. The Company will not use
derivative instruments to hedge against market risk. It is highly
probable that the equity and fixed interest stocks of the Company's
unquoted investee companies will be very seldom traded and, as
such, their prices will be more uncertain than those of more
frequently traded stocks.
Interest rate risk
Some of the Company's financial assets will be interest bearing,
some of which are likely to be at fixed rates and some at variable.
As a result, the Company is exposed to interest rate risk due to
fluctuations in prevailing levels of market interest rates. The
Board will seek to mitigate this risk through regular monitoring of
the Company's interest bearing investments. The Company will not
use derivative instruments to hedge against interest rate risk.
Credit risk
Credit risk is managed by settling all transactions on the basis
of delivery against payment.
Liquidity risk
The investments in equity and fixed interest stocks of unquoted
companies that the Company will hold are not traded and thus are
not readily realisable. At times the Company may be unable to
realise its investments at their carrying values because of an
absence of willing buyers. The Company's ability to sell
investments may also be constrained by the requirements set down
for VCTs. To counter such liquidity risk, sufficient cash and money
market funds will be held to meet running costs and other
commitments. The Company aims to invest its surplus funds in high
quality liquidity funds which are all accessible on an immediate
basis.
Other risks faced by the Company include economic, investment,
financial and regulatory risks:
Economic risk - events such as a downturn in the life
enhancement and wellbeing sectors or a tightening of credit
facilities may adversely affect the Company's investee companies
and make successful divestments less likely.
Investment risk - the adoption of inappropriate investment
policies, sourcing too few investment opportunities of the required
standard, and taking investment decisions without having undertaken
sufficiently robust due diligence.
Financial risk - poor financial controls which may lead to the
misappropriation of assets or inappropriate financial decisions and
breaches of regulations through deficient financial reporting.
Regulatory risk - failure to comply with any of the regulations
to which the Company is subject which include the provisions of the
Companies Act 2006, the UKLA listing rules, applicable Accounting
Standards and HMRC VCT regulations.
The Board has adopted a risk management programme whereby it
continually identifies the principal risks faced by the Company and
reviews both the nature and effectiveness of the internal controls
adopted to protect the Company from such risks as far as is
possible.
Related Parties
Longbow Capital has been appointed as the Company's investment
manager and administrator. Longbow Capital receives (i) an annual
management fee of 2.00% of the net asset value of the Company, (ii)
an annual administration fee of 0.3 per cent. (plus VAT, if any, at
the applicable rate) of the gross amount raised under the Offer and
subject to a minimum annual fee of GBP45,000, to be increased
annually in line with the retail prices index and (iii) a
performance related incentive fee which is described in more detail
below. The Investment Manager also bears any excess of the total
modified annual running costs over a cap of 3.5% of the Company's
average net asset value.
Longbow Capital also agreed to underwrite all the costs of the
Offer in return for an initial fee of 5.5 per cent. of the gross
funds raised such that the initial net asset value per Ordinary
Share of the Company will be equal to 94.5p (excluding the impact
of any dilution attributable to the issue of additional Ordinary
Shares in relation to the early investor entitlements). Out of this
fee, Longbow will be responsible for paying all of the costs of the
Offer including any initial intermediary commissions and VAT but
excluding any trail commissions.
During the period ended 30 June 2011, the Company has incurred
investment management fees of GBP4,798 (exclusive of VAT),
administration fees of GBP10,356 (exclusive of VAT) and it is
estimated that the Investment Manager owes the Company GBP35,427
(exclusive of VAT) in respect of the cap on the Company's annual
running costs. Under the Company's agreement with the Investment
Manager, this sum is paid by deduction from the Investment
Manager's fee for the year ending 31 December 2012 (or, in the
event that the Investment Manager's fee will be insufficient, the
balance will be paid by the Investment Manager as soon as audited
accounts are available for the year ended 31 December 2011). The
Company also incurred a fee of GBP55,984 in respect of its
agreement with Longbow Capital whereby Longbow Capital would
underwrite all the costs of the Offer.
Performance Related Incentive Fee
After Distributions of 100p (per Ordinary Share issued under the
Offer and remaining in issue at the date of calculation) have been
paid to its shareholders by the Company, Longbow Capital will
become entitled to a performance related incentive fee which will
be calculated at the rate of 20 per cent. of Distributions in
excess of 100p until total Distributions reach 130p (per Ordinary
Share issued under the Offer and remaining in issue at the date of
calculation) and 30 per cent. above that level. No payment of the
performance related incentive fee will be made to Longbow Capital
until Distributions exceed 100p (per Ordinary Share issued under
the Offer and remaining in issue at the date of calculation). ( In
the foregoing, "Distributions" are amounts paid by way of
dividends, tender offers, share buybacks, proceeds on a sale or
liquidation of the Company, return of capital and any other
proceeds or value received, or deemed to be received, by the
Company's shareholders in respect of Ordinary Shares, excluding any
income tax relief on subscription.)
Income Statement (unaudited)
for the period ended 30 June 2011
Period ended 30 June
2011
---------------------------------- ------------------------------
Revenue Capital Total
---------------------------------- --------- -------- ---------
GBP GBP GBP
---------------------------------- --------- -------- ---------
Realised/unrealised movements on
investments - - -
---------------------------------- --------- -------- ---------
Income - - -
---------------------------------- --------- -------- ---------
Recovery from Investment Manager
re cap on annual running costs 8,856 26,571 35,427
---------------------------------- --------- -------- ---------
Investment Manager's fees (1,199) (3,599) (4,798)
---------------------------------- --------- -------- ---------
Other expenses (50,342) - (50,342)
---------------------------------- --------- -------- ---------
Return on ordinary activities
before tax (42,685) 22,972 (19,713)
---------------------------------- --------- -------- ---------
Taxation on ordinary activities - - -
---------------------------------- --------- -------- ---------
Return attributable to
equity shareholders (42,685) 22,972 (19,713)
---------------------------------- --------- -------- ---------
Transfer to reserves (42,685) 22,972 (19,713)
---------------------------------- --------- -------- ---------
Return (pence) per share (3.84) 2.07 (1.77)
---------------------------------- --------- -------- ---------
The total column of this statement represents the profit and
loss account of the Company. All revenue and capital items in the
above statement derive from continuing operations. The Company has
only one class of business and derives its income from investments
made in shares, securities and bank deposits. The Company has no
gains and losses other than those recognised in the Income
Statement above and has not therefore prepared a separate statement
of total recognised gains and losses.
Balance Sheet (unaudited)
as at 30 June 2011
30 June
2011
------------------------------ ----------
GBP
------------------------------ ----------
Fixed assets
------------------------------ ----------
Investments -
------------------------------ ----------
Current assets
------------------------------ ----------
Debtors 209,515
------------------------------ ----------
Liquidity funds and cash
at bank 855,267
------------------------------ ----------
Creditors: amounts falling
due within one year (41,879)
------------------------------ ----------
Net current assets 1,022,903
------------------------------ ----------
Net assets 1,022,903
------------------------------ ----------
Capital and reserves
------------------------------ ----------
Called up share capital 11,126
------------------------------ ----------
Share premium account 1,031,490
------------------------------ ----------
Capital reserve - realised 22,972
------------------------------ ----------
Capital reserve - unrealised -
------------------------------ ----------
Revenue reserve (42,685)
------------------------------ ----------
Total Equity shareholders'
funds 1,022,903
------------------------------ ----------
Net asset value per share,
pence 91.94
------------------------------ ----------
Reconciliation of Movements in Shareholders' Funds
(unaudited)
for the period ended 30 June 2011
Period ended
----------------------- -------------
30 June 2011
----------------------- -------------
GBP
----------------------- -------------
Opening shareholders'
funds 100
----------------------- -------------
Capital per share
issue 1,098,500
----------------------- -------------
Expenses of offer (55,984)
----------------------- -------------
Return for the period (19,713)
----------------------- -------------
Closing shareholders'
funds 1,022,903
----------------------- -------------
Cash Flow Statement (unaudited)
for the period ended 30 June 2011
Period ended 30 June
2011
GBP GBP
Operating activities
Investment income
received -
Interest received -
Investment manager's
fees paid (4,798)
Administration fees
paid (12,427)
Cash paid to and
on behalf of directors -
Other cash payments (24)
Net cash outflow
from operating activities (17,249)
Financial investment
Purchase of investments -
Sale of investments -
Net cash outflow
from financial
Investment -
Corporation tax
& dividends
Corporation tax
paid -
Equity dividends
paid -
---------
Net cash outflow
from tax & dividends -
Net cash outflow
before financing (17,249)
Financing
New share issue 928,500
Share issue expenses (55,984)
Cancellation of
share premium a/c
Net cash inflow
from financing 872,516
Increase/(decrease)
in cash 855,267
=========
Notes to the Interim Financial Statements
1. Accounting Policies
The financial information for the period ended
30 June 2011 has not been audited and comprises
non-statutory accounts as defined in sections
434 to 436 of the Companies Act 2006. Statutory
accounts will be prepared and audited for
the Company's first accounting reference period
ending 31 December 2011.
2. Return per Share
The return per share has been calculated based
on a weighted average number of shares in
issue for the period ended 30 June 2011 of
1,112,592.
3. Net Asset Value per Share
The net asset value per share has been calculated
based on 1,112,592 shares being the number
of shares in issue as at 30 June 2011.
4. During the period ended 30 June 2011 the Company
issued 1,112,592 Ordinary Shares - 100 on
incorporation and 1,112,492 in accordance
with the terms of the Public Offer. During
the period the Company did not buy back any
shares.
5. Copies of this half-yearly report will shortly
be mailed to shareholders and will be available
to the public at the Company's registered
office.
Corporate Information
Directors (all non-executive Longbow Growth and Income
& independent) VCT plc
----------------------------- --------------------------------------
Incorporated in England
and Wales
----------------------------- --------------------------------------
Michael J Walker (Chairman) with registered number:
7423739
----------------------------- --------------------------------------
Duncan Abbot
----------------------------- --------------------------------------
Peter Arthur Reporting Calendar
----------------------------- --------------------------------------
For the year ending 30 December
2011:
----------------------------- --------------------------------------
All of the registered
office:
----------------------------- --------------------------------------
Level 13 Results announced: Interim - August
Broadgate Tower 2011
20 Primrose Street Annual - March
London 2012
EC2A 2EW
----------------------------- ------------------- -----------------
Investment Manager Secretary
----------------------------- --------------------------------------
Longbow Capital LLP The City Partnership (UK)
Limited
----------------------------- --------------------------------------
27-28 Eastcastle Street Thistle House
----------------------------- --------------------------------------
London 21 Thistle Street
----------------------------- --------------------------------------
W1W 8DH Edinburgh
----------------------------- --------------------------------------
EH2 1DF
----------------------------- --------------------------------------
Telephone: 0131 243 7210
----------------------------- --------------------------------------
Auditors Registrars
----------------------------- --------------------------------------
Scott-Moncrieff The City Partnership (UK)
Limited
----------------------------- --------------------------------------
Chartered Accountants Thistle House
----------------------------- --------------------------------------
Exchange Place 3 21 Thistle Street
----------------------------- --------------------------------------
Semple Street Edinburgh
----------------------------- --------------------------------------
Edinburgh EH2 1DF
----------------------------- --------------------------------------
EH3 8BL Telephone: 0131 243 7210
----------------------------- --------------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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