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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Core Vct Ii | LSE:CR2 | London | Ordinary Share | GB00B03FJ606 | ORD 0.01P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 65.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMCR2
RNS Number : 3913R
Core VCT II PLC
29 April 2009
Core VCT II plc
Annual Financial Report Announcement
Investment Objective
Core VCT II plc ('Core VCT II or 'the Company') is a tax efficient listed
Company which aims to achieve long-term capital and income growth and to
distribute tax free dividends comprising realised gains and investors' capital
investment.
Investment Approach
We invest management buyout and development capital, typically in:
¦ Established, private companies, which show:
? sufficient operating critical mass, with an established economic model
? quality management teams with the key skills in place to deliver a
well-defined business model
¦ Amounts of GBP3 - GBP8 million in companies valued at GBP5 - GBP25 million.
Company Structure
Core VCT II is structured as follows:-
¦ No annual management fees
Only when Shareholders have received the first 60 pence of distributions, which
together with an assumed 40 pence of initial tax relief will have realised them
100 pence, will the Manager start to be entitled to 30% of distributions from
the Company (for further information please see Note 3 to the Accounts on page
27).
¦ Maximise distributions of income and capital
Core VCT II has a policy to distribute all proceeds from realised investments.
The Company has no fixed life but
intends to naturally liquidate and distribute its assets over time. The
Manager's incentives are structured to align their interests in delivering this
liquidity for Shareholders as well as maximising overall investment performance.
Investment Policy
Core VCT II seeks to achieve its overall Investment Objective, consistent with
maintaining its qualifying status as a VCT, by pursuing the following Investment
Policy:-
Asset Allocation
The Company may invest all its assets in private companies. These investments
are unquoted, and include, but are not limited to, Management Buy-Outs (MBOs)
and Development Capital for expansion or acquisition funding for established
businesses. After 31 December 2008, the Company must have in excess of 70% of
its assets invested in Qualifying Investments as defined for VCT purposes.
However, due to the nature of completing and realising such investments, and the
need to maintain some liquid reserves, there will inevitably be periods when a
proportion of assets are not held in Unquoted investments.
Risk Management
The Company's Asset Allocation includes a potentially large proportion of the
Company's assets to be held in Unquoted Investments. These investments are not
publicly traded and there is not a liquid market for them, and therefore these
investments may be difficult to realise.
The Company manages its investment risk within the restrictions of maintaining
its qualifying VCT status by using a number of methods commonly used in the
Private Equity industry, including :-
* The active monitoring of its investments by the Manager;
* Seeking the agreement of various rights associated with each investment, such as
board representation, information rights and veto rights;
* Seeking to hold larger investment stakes by co-investing with other companies
managed by the Manager, so as to gain more significant influence in the
investment and to facilitate investing in larger companies which may reduce the
risk compared to investing in smaller companies;
* Ensuring a spread of investments is achieved.
Gearing
The Company has the authority to borrow up to the amount paid on the issued
share capital and the amount standing to the credit of the reserves of the
Company but does not ordinarily take advantage of this authority.
As is common in the Private Equity industry, in many cases the Company makes
investments into Unquoted Companies which have, or may have, substantial
borrowings from third party lenders.
Performance Summary
+---------------------------+--------------+--------------+--------------+--------------+
| Ordinary Shares | 31 December 2008 | 31 December 2007 |
+---------------------------+-----------------------------+-----------------------------+
| | Ordinary | B Shares | Ordinary | B Shares |
| | Shares | | Shares | |
+---------------------------+--------------+--------------+--------------+--------------+
| Net asset value per share | 79.85 pence | 0.01 pence |102.55 pence | 0.01 pence |
+---------------------------+--------------+--------------+--------------+--------------+
| Total return per share1 | 83.35 pence | 0.01 pence |104.05 pence | 0.01 pence |
+---------------------------+--------------+--------------+--------------+--------------+
| Share price (mid-market) | 50.00 pence | 3.50 pence | 90.00 pence | 3.50 pence |
+---------------------------+--------------+--------------+--------------+--------------+
| Revenue return per share | 1.04 pence | - | 2.02 pence | - |
+---------------------------+--------------+--------------+--------------+--------------+
| (Decrease)/Increase in | (11.8%) | - | 10.11% | - |
| total return since | | | | |
| inception2 | | | | |
+---------------------------+--------------+--------------+--------------+--------------+
| Cumulative dividends paid | 16.50 pence | - | 3.50 pence | - |
| and proposed per share 3 | | | | |
+---------------------------+--------------+--------------+--------------+--------------+
| Total expense ratio4 | 1.87% | - | 1.45% | - |
+---------------------------+--------------+--------------+--------------+--------------+
1. Total return per share comprises closing net asset value per share plus
cumulative dividends per share paid to date.
2. Decrease in total return since inception compares total return per share to
opening net asset value.
3. Consists of proposed dividends of 13.0p (2007- 2.0p) and dividends paid to date
of 3.50p (2007 - 1.5p).
4. Total expense ratio has been calculated using total operating costs divided by
closing net assets.
Chairman's Statement
Results
The Net Asset Value (NAV) Total Return per Ordinary Share was 83.35p as at 31
December 2008, comprising a NAV per Ordinary Share of 79.85p and cumulative
dividends paid of 3.5p per Ordinary Share. This is a reduction from the NAV
Total Return to 31 December 2007 of 19.9%, compared to a 29.9% reduction in the
value of the FTSE All share index over the same period. A deficit of
GBP3,416,273 was recorded during the year ended 31 December 2008.
The major causes of the reduction in Net Asset Value over the year ended 31
December 2008 are:-
- An aggregate reduction in the valuation of the unquoted portfolio of 31%, or
some GBP2.45 million. Primarily, this
arises from the use of comparative quoted company earnings multiples in valuing
the portfolio reflecting the significant falls in the quoted markets over this
period; and
- The continuing capital losses on the financial instrument portfolio managed by
Credit Suisse, equivalent to 4.4 p per share.
The Managers' Review contains a more detailed analysis of the unquoted
investment portfolio. Overall, however, trading to date has held up well and in
many cases debt and gearing levels have been reduced, both of which have
contributed to a lower fall in NAV than experienced in the market comparatives
mentioned above.
Merger Proposal
Agreement has been reached with Core I and Core III to put proposals to
shareholders to merge the VCTs to achieve cost
efficiencies. The merger, if approved, would be effected on a relative net asset
basis by Core I and Core II being placed in members' voluntary liquidations
pursuant to section 110 of the Insolvency Act 1986 and their assets and
liabilities transferred to Core III in consideration for new shares in Core
III. Shareholders should note that a merger on this basis will be outside the
provisions of the Takeover Code. Documents setting out the full details of the
proposal to merge the VCTs will be circulated to shareholders shortly.
Each of these VCTs has completed its initial investment programme, and following
the completion of the merger, all
shareholders would benefit from the following:-
- An increased ability to pay larger dividends to shareholders;
- Reduced proportionate operating costs following the merger;
- Enhanced investment flexibility by virtue of the larger overall size of funds
managed in a single listed VCT.
We urge all shareholders to read the shareholder documentation and approve the
proposals.
Dividends
Core VCT II is structured to maximise distributions of both capital and income
to Shareholders over the life of the Company. Now that the investment programme
has achieved the basis for establishing the associated tax reliefs, we are
working as a priority towards returning the proportion of the Company we do
not intend to invest into unquoted private equity investments, approximating to
30p per share of the original capital raised. However, the following issues have
reduced or delayed our ability to do this so far in the life of the Company:
- Firstly, the performance since inception of the portfolio managed by Credit
Suisse as described above has produced a total return of -8.95% (compared to
our expectation of a 5% pa return). This underperformance is the subject of
ongoing discussions with Credit Suisse;
- We currently have an amount of 21.1p per share of liquid assets. Of this
amount, it is proposed that 13p is paid out to shareholders in dividends as
explained in more detail below. Given the sharply reduced availability of
banking finance to our investee companies, the remainder will be reserved to
support existing portfolio investments should that be necessary, and also to
provide working capital for the future running costs of the merged VCT;
- It will be also observable that the level of merger and acquisition activity
in the UK, which could have reasonably
been expected to permit exits from investments, is sharply reduced.
In relation to the year ended 31 December 2008 we are recommending an income
dividend of 1p, subject to shareholder approval, payable on 30 June 2009 to
shareholders on the register at 12 June 2009. In addition, we are recommending
a special dividend of 12p to be paid which does not require shareholder approval
but is conditional upon the merger being effected (leading to the benefits as
described above). The payment date for this dividend will be set out in the
merger documentation. These dividends bring the cumulative dividends paid to
16.5p per share which amounts to a net annual yield of 7.9% on the net cost
of subscription after tax relief.
Investments
In line with the completion of the Company's investment programme last year, no
new investments were made. We must however, be prepared to support the existing
investments with further capital if required, and a net GBP1.26 million was
invested in the year in this way. A substantial amount of work has gone
into preparing the portfolio for the recession which we are now experiencing.
The Manager's Review refers in more detail to the prospects of the investment
portfolio, which now comprises 10 investments with a cost of GBP11.04 million
and a valuation of GBP9.7 million.
Share Price and Share buy backs
Both the Ordinary Shares (CR2) and the B Shares (CR2.B) are fully listed shares.
Prices are available on www.londonstockexchange.com and the Ordinary Share price
is published daily in the Financial Times. Shareholders are
reminded that their holding of B Shares forms an integral part of their
investment along with their holding of Ordinary Shares.
We are conscious that the mid price of the shares is at a discount to the Net
Asset Value. This discount has widened over recent months, as it has for many
other VCTs, which simply reflects the lack of liquidity in the secondary market.
In addition, whilst Core VCT II does have the ability to buy back shares, we are
not anticipating making any share buy backs for the foreseeable future so that
we are best placed as a Company to maximise distributions made to all
shareholders, as referred to above. Communications from a number of our
shareholders has expressed their support for this approach. We would also
remind shareholders that we view the NAV Total Return, rather than the share
price, as the preferred measure of performance, as it encompasses the value of
the current portfolio and the amount of cash distributed to shareholders over
the life of their investment.
Information for Shareholders
The Board supports open communication with investors and welcomes any comments
or questions you may have, and full contact details are provided at the back of
this Report.
Outlook
The current economic and investment outlook remains very uncertain, and 2009 is
set to be a challenging year. Our investments cannot be immune from these
economic pressures, although the active management that goes into the
portfolio has prepared us as far as possible to withstand at least
those pressures that we can reasonably foresee.
Overall the stocks in the portfolio were from the outset deliberately selected
to represent a portfolio of trades with
below average exposure to consumer discretionary expenditure economic cycles,
although that does not guarantee that they are unaffected or exempt from the
firm-specific risk profiles which are a feature of the small unlisted corporate
sector. Whilst the Company does not plan to make new investments, there will
be opportunities for our existing investments to make acquisitions at lower
prices and so take advantage of these conditions.
Peter Smaill
Chairman
29 April 2009
Manager's Review
Investment Highlights
- Investment Portfolio comprises 10 investments with a cost of GBP11.04 million
and a value of GBP9.7 million;
- The Company was 73% invested in qualifying companies as at 31 December 2008,
exceeding the required minimum to
be over 70% invested for VCT purposes;
- In aggregate, trading has held up across the portfolio, exceeding the levels
achieved in 2007. Valuations, however, have fallen, primarily as a result of
the reductions in earnings multiples used from comparative quoted companies;
- No new trading investments were completed, and a net GBP1.26 million was
invested into existing portfolio
investments during the year.
New Investments
As we have stated in our previous reports, we have taken a cautious approach in
assessing new investment opportunities,
and we completed no new investments in 2008. This means we have some GBP3.4
million in available cash and cash equivalents to be invested alongside a
similar amount in Core VCT III. Whilst there is no shortage of companies seeking
funding, we have not yet seen quality businesses reflecting reduced valuations
fully. We anticipate that this will change during 2009 and we will
find opportunities that may be amongst the most attractive we have seen for
several years.
Matching these timescales to the investment requirements of VCTs does require
careful planning, and we have established three new companies which are actively
seeking acquisitions in their chosen sectors.
Existing Investments
For a substantial proportion of 2007 and almost all of 2008, most of our time
has been spent managing the existing investment portfolio. Wherever possible, we
have sought to prepare for the downturn that is now evident - reducing costs
early, and where possible repaying or restructuring bank debt. In this climate,
maintaining sales and profit levels means gaining market share; in aggregate, we
are pleased that turnover and profits in 2008 are actually ahead of last year.
We are also continuing to pursue an acquisition led growth strategy for many of
our larger businesses; pricing is more attractive, risk can be shared with or
laid off to previous owners, and opportunities will be plentiful over the next 1
- 2 years. A further GBP1.4 million was invested into 3 companies during
the year and it is important that we continue to support the most successful
management teams and businesses to take advantage of these opportunities.
Valuations have fallen by 31% over the year. In most cases, this is due to the
reductions in comparative earnings multiples of quoted companies. Whilst
earnings have risen in many instances in our portfolio, this has not been enough
to overcome such significant scale of de-rating. This also underlines an
obvious consequence of the downturn, in that we are not planning to seek exits
for any of our investments for the foreseeable future. Our strategy is to hold,
support and grow our investments through well structured and selective
acquisitions in order to grow scale and lay the foundations for profit growth in
the future.
Collectively, this means a delay to the realisation of returns and the
distributions of proceeds to our shareholders. However, we believe this approach
will ultimately produce the returns we are working to achieve.
Each investment is described below:
* Kelway Holdings Limited
* Cost GBP1,952,000, Valuation: GBP2,680,000
Kelway is a fast growing IT reseller targeting organisations with 250 to 1,000
employees. Turnover was GBP98 million in the year ended 31 March 2008, and is
forecast to exceed this in the current year. The company repaid all its bank
debt this year. Kelway completed a major acquisition in 2007 and is actively
exploring a number of opportunities currently.
* Pureleaf Limited (Baxters International)
* Cost GBP1,819,000, Valuation: GBP1,318,000
Baxters is a long established removals and storage business with substantial
freehold property and a long standing relationship with the Ministry of Defence,
for whom Baxters carries out a significant amount of long term storage. After a
difficult start to this investment in 2007, we settled our substantial claims
against the vendors and Baxters now has a strong balance sheet with substantial
net assets, unencumbered freehold assets and no senior bank debt. Substantial
new commercial contracts have been won which will start to add to the
profitability of the business, and a small acquisition was completed in 2008.
* SPL Services Limited
* Cost GBP2,114,000,Valuation: GBP1,250,000
SPL Services is a specialist logistics business servicing the pharmaceutical
sector. This investment had a difficult start in 2007 but we have worked hard to
restore value and the prospects for growth, and invested further to support the
business. Management has been strengthened, new overseas operations have been
established in India and Singapore, and we have restructured the senior bank
debt position so that we have created significant headroom to complete
a turnaround. The business is now making good progress, has won some major
contracts, is exceeding its budget and has returned to profitability. We are
hopeful that this business will now be in a position to make a strong recovery.
* Blanc Brasseries Holdings plc
* Cost GBP1,000,000, Valuation: GBP800,000
Brasserie Blanc now operates 8 units, and will open its 9th unit in Portsmouth
in April. Despite the obvious risks to consumer spending, Blanc is trading ahead
of expectations, and particularly well in the 6 units opened or refurbished
since the business was acquired in 2006. Bank gearing is modest, with
substantial undrawn facilities. Whilst we are not committing to opening new
sites in the current climate, there will be a time to accelerate our growth
through the acquisition or development of new units at lower cost than has been
possible to date. This is likely to require further capital from ourselves,
other shareholders and management. In the meantime, the business has now
achieved the scale to be profitable and cash generative.
·Colway Limited (trading as Red Box)
·Cost GBP1,000,000, Valuation: GBP458,000
Colway is a long established office and graphic supplies business, with three
principal divisions - Business, Systems, and Retail. Turnover has grown from
GBP15.5m to approximately GBP20m and whilst turnover growth has slowed, it is
still forecast to be maintained at the levels achieved last year. Having
completed five acquisitions since the date of our investment, the latest one in
February 2009, we anticipate completing further acquisitions during 2009.
* Adapt Group Limited
* Cost GBP124,000, Valuation: GBP158,000
Adapt is a virtual network operator (VNO) providing telecoms solutions to small
and medium sized businesses. This business continues to grow turnover and
EBITDA, and has significant further growth potential. Our investment is
structured as a high yielding investment, and we have received GBP23,000 since
inception in addition to the valuation increase over cost as detailed above.
* Augentius Fund Administration LLP
* Cost GBP35,000, Valuation: GBP35,000
Augentius is a leading onshore administrator of private equity funds and was
formerly Ansbacher Fund Services. The business operates from London, Guernsey,
New York, Hong Kong and Singapore, and provides out-sourced administration
services to many leading private equity and property funds.
This small investment has a cash yield of 9.5%. The business is trading
strongly, but we have made no increase in the valuation given the immaterial
size of this investment.
Investment Portfolio Summary
+--------------------------+------------+----------+-----------+---------+-----------+
| | Date of |Bookcost |Valuation | % of | % of net |
| | initial | GBP'000 | GBP'000 | equity |assets by |
| |investment | | | held | value |
+--------------------------+------------+----------+-----------+---------+-----------+
| | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Qualifying Investments | | | | | |
| (unquoted) | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Kelway Holdings Limited | November | 1,952 | 2,680 | 9.5% | 20.3% |
| | 2006 | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| IT Services | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Pureleaf Limited | January | 1,819 | 1,318 | 24.1% | 10.0% |
| (Baxters International) | 2007 | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Removal Company | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| SPL Services Limited | July 2007 | 2,114 | 1,250 | 25.9% | 9.5% |
+--------------------------+------------+----------+-----------+---------+-----------+
| Specialist courier | | | | | |
| company focusing on the | | | | | |
| medical industry | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Blanc Brasseries |April 2006 | 1,000 | 800 | 11.9% | 6.1% |
| Holdings plc | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Premium casual dining | | | | | |
| brasseries | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Colway Limited (trading | May 2006 | 1,000 | 458 | 21.5% | 3.5% |
| as Red Box) | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Office and graphics | | | | | |
| supplies | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Adapt Group Limited | June 2006 | 124 | 158 | 0.5% | 1.2% |
+--------------------------+------------+----------+-----------+---------+-----------+
| Internet connections and | | | | | |
| co-location services | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| | | 8,009 | 6,664 | | 50.6% |
+--------------------------+------------+----------+-----------+---------+-----------+
| Other Qualifying | | | | | |
| Investments | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| BRG Trading Limited | December | 1,000 | 1,000 | 49.9% | 7.6% |
| | 2008 | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Syncap Management | December | 1,000 | 1,000 | 49.9% | 7.6% |
| Limited | 2008 | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| CP Newco Limited | December | 1,000 | 1,000 | 49.9% | 7.6% |
| | 2008 | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Total qualifying | | 11,009 | 9,664 | | 73.4% |
| investments | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Non-qualifying | | | | | |
| investments | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Listed Securities, Funds | | 718 | 179 | | 1.4% |
| and Trusts | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Fixed Interest | | 1,511 | 1,512 | | 11.4% |
| Securities | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Augentius Fund | October | 35 | 35 | | 0.3% |
| Administration LLP | 2006 | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Fund administrator | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Total non-qualifying | | 2,264 | 1,726 | | 13.1% |
| investments | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| | | | | | |
+--------------------------+------------+----------+-----------+---------+-----------+
| Total investments | | 13,273 | 11,390 | | 86.5% |
+--------------------------+------------+----------+-----------+---------+-----------+
| Other assets | | | 1,928 | | 14.6% |
+--------------------------+------------+----------+-----------+---------+-----------+
| Current liabilities | | | (143) | | (1.1)% |
+--------------------------+------------+----------+-----------+---------+-----------+
| Net assets | | | 13,175 | | 100.0% |
+--------------------------+------------+----------+-----------+---------+-----------+
10 Largest Investments
+-----------------------------------+-------------+---------------+--------------+
| | Bookcost | Valuation | % of nets |
| | GBP'000 | GBP'000 | assets by |
| | | | value |
+-----------------------------------+-------------+---------------+--------------+
| Kelway Holdings Limited | 1,952 | 2,680 | 20.3% |
+-----------------------------------+-------------+---------------+--------------+
| Pureleaf Limited | 1,819 | 1,318 | 10.0% |
+-----------------------------------+-------------+---------------+--------------+
| SPL Services Limited | 2,114 | 1,250 | 9.5% |
+-----------------------------------+-------------+---------------+--------------+
| BRG Trading Limited | 1,000 | 1,000 | 7.6% |
+-----------------------------------+-------------+---------------+--------------+
| Syncap Management Limited | 1,000 | 1,000 | 7.6% |
+-----------------------------------+-------------+---------------+--------------+
| CP Newco Limited | 1,000 | 1,000 | 7.6% |
+-----------------------------------+-------------+---------------+--------------+
| Blanc Brasseries Holdings plc | 1,000 | 800 | 6.1% |
+-----------------------------------+-------------+---------------+--------------+
| Treasury 4% 2009 | 511 | 510 | 3.9% |
+-----------------------------------+-------------+---------------+--------------+
| Colway Limited | 1,000 | 458 | 3.5% |
+-----------------------------------+-------------+---------------+--------------+
| Rexam Plc 7.125% | 276 | 277 | 2.1% |
+-----------------------------------+-------------+---------------+--------------+
| Total of 10 largest investments | 11,672 | 10,293 | 78.2% |
+-----------------------------------+-------------+---------------+--------------+
Income Statement
+-------------------------+-----------+--------------+-------------+-----------+-----------+------------+
| | Year ended | Year ended |
| | 31 December 2008 | 31 December 2007 |
+-------------------------+ + +
| | | |
+-------------------------+----------------------------------------+------------------------------------+
| | Revenue | Capital | Total | Revenue | Capital | Total |
+-------------------------+-----------+--------------+-------------+-----------+-----------+------------+
| | GBP | GBP | GBP | GBP | GBP | GBP |
+-------------------------+-----------+--------------+-------------+-----------+-----------+------------+
| Unrealised | - | (2,798,826) |(2,798,826) | - | 785,618 | 785,618 |
| (losses)/gains on | | | | | | |
| investments | | | | | | |
+-------------------------+-----------+--------------+-------------+-----------+-----------+------------+
| Realised losses on | - | (741,353) | (741,353) | - | 96,446 | 96,446 |
| investments | | | | | | |
+-------------------------+-----------+--------------+-------------+-----------+-----------+------------+
| Income | 450,064 | - | 450,064 | 489,711 | - | 489,711 |
+-------------------------+-----------+--------------+-------------+-----------+-----------+------------+
| Transaction costs and | (3,191) | (60,302) | (63,493) | (5,761) |(102,884) | (108,645) |
| investment management | | | | | | |
| expenses | | | | | | |
+-------------------------+-----------+--------------+-------------+-----------+-----------+------------+
| Other expenses |(235,367) | - | (235,367) |(137,162) | - | (137,162) |
+-------------------------+-----------+--------------+-------------+-----------+-----------+------------+
| Return on ordinary | 211,506 | (3,600,481) |(3,388,975) | 346,788 | 779,180 | 1,125,968 |
| activities before | | | | | | |
| taxation | | | | | | |
+-------------------------+-----------+--------------+-------------+-----------+-----------+------------+
| Tax on ordinary | (39,365) | 12,067 | (27,298) | (13,223) | 13,017 | (206) |
| activities | | | | | | |
+-------------------------+-----------+--------------+-------------+-----------+-----------+------------+
| Return attributable to | 172,141 | (3,588,414) |(3,416,273) | 333,565 | 792,197 | 1,125,762 |
| equity shareholders | | | | | | |
+-------------------------+-----------+--------------+-------------+-----------+-----------+------------+
| Return per Ordinary | 1.04p | (21.75)p | (20.71)p | 2.02p | 4.80p | 6.82p |
| Share | | | | | | |
+-------------------------+-----------+--------------+-------------+-----------+-----------+------------+
No operations were acquired or discontinued in the year.
All revenue and capital items in the above statement derive from continuing
operations.
The revenue column is the profit and loss account of the Company.
There were no other gains or losses in the year ended 31 December 2008
Balance Sheet
As at 31 December 2008
+---------------------+------------+-------------+-----------+--------------+
| | Year ended | Year ended |
| | 31 December 2008 | 31 December 2007 |
+---------------------+--------------------------+--------------------------+
| | GBP | GBP | GBP | GBP |
+---------------------+------------+-------------+-----------+--------------+
| Non-current assets | | | | |
+---------------------+------------+-------------+-----------+--------------+
| Investments at fair | | - | | 15,357,867 |
| value | | | | |
+---------------------+------------+-------------+-----------+--------------+
| | | | | |
+---------------------+------------+-------------+-----------+--------------+
| Current assets | | | | |
+---------------------+------------+-------------+-----------+--------------+
| Investments at fair |11,389,521 | | - | |
| value | | | | |
+---------------------+------------+-------------+-----------+--------------+
| Debtors and | 1,466,531 | |1,571,266 | |
| prepayments | | | | |
+---------------------+------------+-------------+-----------+--------------+
| Cash at bank | 461,527 | | 138,712 | |
+---------------------+------------+-------------+-----------+--------------+
| | | 13,317,579 | | 1,709,978 |
+---------------------+------------+-------------+-----------+--------------+
| Creditors: amounts falling due | | | |
| within one year | | | |
+----------------------------------+-------------+-----------+--------------+
| Corporation tax | (27,298) | | (20) | |
+---------------------+------------+-------------+-----------+--------------+
| Accruals | (115,229) | |(146,955) | |
+---------------------+------------+-------------+-----------+--------------+
| | | ( 142,527) | | (146,975) |
+---------------------+------------+-------------+-----------+--------------+
| Net current assets | | 13,175,052 | | 1,563,003 |
+---------------------+------------+-------------+-----------+--------------+
| Net assets | | 13,175,052 | | 16,920,870 |
+---------------------+------------+-------------+-----------+--------------+
| | | | | |
+---------------------+------------+-------------+-----------+--------------+
| Capital and | | | | |
| reserves | | | | |
+---------------------+------------+-------------+-----------+--------------+
| Called up Ordinary | | 1,649 | | 1,649 |
| Share capital | | | | |
+---------------------+------------+-------------+-----------+--------------+
| Called up B Share | | 2,474 | | 2,474 |
| Capital | | | | |
+---------------------+------------+-------------+-----------+--------------+
| Capital Redemption | | 2 | | 2 |
| Reserve | | | | |
+---------------------+------------+-------------+-----------+--------------+
| Share premium | | 7,802,214 | | 7,802,214 |
| account | | | | |
+---------------------+------------+-------------+-----------+--------------+
| Capital reserve - | | (747,602) | | 41,986 |
| realised | | | | |
+---------------------+------------+-------------+-----------+--------------+
| Capital reserve - | |(1,883,739) | | 915,087 |
| unrealised | | | | |
+---------------------+------------+-------------+-----------+--------------+
| Special | | 7,788,558 | | 7,788,558 |
| distributable | | | | |
| reserve | | | | |
+---------------------+------------+-------------+-----------+--------------+
| Revenue reserve | | 211,496 | | 368,900 |
+---------------------+------------+-------------+-----------+--------------+
| Total equity | | 13,175,052 | | 16,920,870 |
| shareholders' funds | | | | |
+---------------------+------------+-------------+-----------+--------------+
| | | | | |
+---------------------+------------+-------------+-----------+--------------+
| Net asset value per | | 79.85p | | 102.55p |
| 0.01p Ordinary | | | | |
| Share | | | | |
+---------------------+------------+-------------+-----------+--------------+
| Net asset value per | | 0.01p | | 0.01p |
| 0.01p B Ordinary | | | | |
| Share | | | | |
+---------------------+------------+-------------+-----------+--------------+
Cash Flow Statement
For the Year ended 31 December 2008
+-----------+---------------------+-------------+-----------+-------------+-----------+
| | Year Ended 31 | Year Ended 31 |
| | December 2008 | December 2007 |
+---------------------------------+-------------------------+-------------------------+
| | GBP | GBP | GBP | GBP |
+---------------------------------+-------------+-----------+-------------+-----------+
| Operating activities | | | | |
+---------------------------------+-------------+-----------+-------------+-----------+
| Investment income received | 249,338 | | 411,460 | |
+---------------------------------+-------------+-----------+-------------+-----------+
| Investment management fees paid | (14,395) | | (28,954) | |
+---------------------------------+-------------+-----------+-------------+-----------+
| Other cash payments | (264,292) | | (213,680) | |
+---------------------------------+-------------+-----------+-------------+-----------+
| Net cash (outflow)/inflow from | | (29,349) | | 168,826 |
| operating activities | | | | |
+---------------------------------+-------------+-----------+-------------+-----------+
| | | | | | |
+-----------+---------------------+-------------+-----------+-------------+-----------+
| Taxation | | | | | |
+-----------+---------------------+-------------+-----------+-------------+-----------+
| UK Corporation tax paid | | - | | (44,917) |
+---------------------------------+-------------+-----------+-------------+-----------+
| | | | | |
+---------------------------------+-------------+-----------+-------------+-----------+
| Investing activities | | | | |
+---------------------------------+-------------+-----------+-------------+-----------+
| Acquisition of investments |(8,826,114) | |(7,372,147) | |
+---------------------------------+-------------+-----------+-------------+-----------+
| Disposal of investments | 9,507,823 | | 7,128,267 | |
+---------------------------------+-------------+-----------+-------------+-----------+
| Net cash inflow/(outflow) from | | 681,709 | |(243,880) |
| financial investment | | | | |
+---------------------------------+-------------+-----------+-------------+-----------+
| | | | | | |
+-----------+---------------------+-------------+-----------+-------------+-----------+
| Equity dividends paid | |(329,545) | |(247,386) |
+---------------------------------+-------------+-----------+-------------+-----------+
| | | | | | |
+-----------+---------------------+-------------+-----------+-------------+-----------+
| Net cash inflow/(outflow) | | 322,815 | |(367,357) |
| before financing | | | | |
+---------------------------------+-------------+-----------+-------------+-----------+
| | | | | | |
+-----------+---------------------+-------------+-----------+-------------+-----------+
| Financing | | | | |
+---------------------------------+-------------+-----------+-------------+-----------+
| Buy back of ordinary shares | - | | | (13,658) |
+---------------------------------+-------------+-----------+-------------+-----------+
| Net cash outflow from financing | | - | | (13,658) |
+---------------------------------+-------------+-----------+-------------+-----------+
| Increase/(decrease) in cash for | | 322,815 | |(381,015) |
| the year | | | | |
+-----------+---------------------+-------------+-----------+-------------+-----------+
Reconciliation of Movements in Shareholders' Funds
For the Year ended 31 December 2008
+---------------------+--------------------------+------------------------+
| | Year Ended 31 December |Year Ended 31 December |
| | 2008 | 2007 |
+---------------------+--------------------------+------------------------+
| | GBP | GBP |
+---------------------+--------------------------+------------------------+
| Opening balance at | 16,920,870 | 16,056,152 |
| beginning of year | | |
+---------------------+--------------------------+------------------------+
| Net share capital | - | (13,658) |
| bought back for in | | |
| the year | | |
+---------------------+--------------------------+------------------------+
| (Loss)/profit for | (3,416,273) | 1,125,762 |
| the year | | |
+---------------------+--------------------------+------------------------+
| Dividends paid - | (329,545) | (247,386) |
| revenue | | |
+---------------------+--------------------------+------------------------+
| Closing | 13,175,052 | 16,920,870 |
| Shareholders' funds | | |
| at 31 December 2008 | | |
+---------------------+--------------------------+------------------------+
Accounting policies
A summary of the principal accounting policies, all of which have been applied
consistently throughout the current and prior year, is set out below:
a)Basis of accounting
The accounts have been prepared under the fair value rules of the Companies Act
1985, and in accordance with applicable accounting standards and the 2003
Statement of Recommended Practice, 'Financial Statements of Investment Trust
Companies', revised December 2005.
Agreement has been reached with Core I and Core III to put proposals to
shareholders to merge the VCTs to achieve cost efficiencies. The merger, if
approved, would be effected on a relative net asset basis by Core I and Core II
being placed in members' voluntary liquidations pursuant to section 110 of the
Insolvency Act 1986 and their assets and liabilities transferred to Core III in
consideration for new shares in Core III. As a consequence of the proposed
merger, it is expected that the Company will cease to operate in the foreseeable
future, and the accounts have been prepared on a break-up basis. Investments
have been treated as current assets and continue to be stated at their fair
value with no additional provision for impairment. The comparative figures were
prepared on a going concern basis.
b)Presentation of the Income Statement
In order to better reflect the activities of a VCT and in accordance with the
SORP, supplementary information which analyses the Income Statement between
items of a revenue and capital nature has been presented alongside the total
column. 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.
c) Investments
All investments held by the Company are classified as at "fair value through
profit and loss". For investments actively traded in organised financial
markets, fair value is generally determined by reference to
Stock Exchange market quoted bid prices at the close of business on the balance
sheet date.
Unquoted investments are valued by the Directors in accordance with the
following rules, which are consistent with the International Private Equity
Venture Capital Valuation (IPEVCV) guidelines published in 2005:
(i) Investments which have been made in the last 12 months are at fair value,
which unless another methodology gives a better indication of fair value, will
be at cost. Investments are recognised and de-recognised on a date where
the purchase or sale of an investment is under a contract whose terms require
the delivery or settlement of the investment. The Company manages its
investments with a view to profiting from the receipt of dividends and changes
in fair value of equity investments.
(ii) Investments in companies at an early stage of their development are also
valued at fair value, which unless another methodology gives a better indication
of fair value, will be at cost.
(iii) Where investments have gone beyond the stage in their development in (ii)
above, the shares may be valued, in the absence of overriding factors, by
applying a suitable price-earnings ratio to that company's maintainable earnings
(the ratio used being based on a comparable listed company or sector but the
resulting value being discounted to reflect lack of marketability). Where
overriding factors apply, alternative methods of valuation will be used. These
may include the application of a material arms length transaction by an
independent third party, cost, cost less provision for impairment, discounted
cash flow, or a net asset basis.
(iv) Where a value is indicated by a material arms-length transaction by a third
party in the shares of a company, this value will be used.
(v) Where a company's underperformance against plan indicates a permanent
diminution in the value of the investment, this amount is transferred to the
realised reserve from the unrealised reserve.
(vi) When the fair value of an asset is below cost the asset will be impaired.
d)Income
Dividends receivable on quoted equity shares are brought into account on the
ex-dividend date. Dividends receivable on unquoted equity shares are brought
into account when the Company's right to receive payment is established and
there is no reasonable doubt that payment will be received. Fixed returns on
non-equity are recognised on a time-apportioned basis so as to reflect the
effective yield, provided there is no reasonable doubt that payment will be
received in due course. Fixed returns on debt securities are recognised on a
time-apportioned basis so as to reflect the effective yield.
e)Transaction costs and investment management expense
The Company is responsible for any external costs such as legal or accounting
fees incurred on transactions that do not
proceed to completion. Such transaction costs are charged 100% against
capital. 75% of the investment management expense is charged against capital.
This is in line with the Board's expected long term split of returns from the
investment portfolio of the Company.
f) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged wholly
to revenue, with the exception of expenses incidental to the acquisition or
disposal of an investment, which are charged to the capital column of the Income
Statement.
g)Taxation
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax in the future or a right to
pay less tax in the future have occurred at the balance sheet date. Timing
differences are differences between the Company's taxable profits and its
results as stated in the financial statements.
Deferred tax is measured at the average tax rates that are expected to apply
in the years in which timing differences are expected to reverse based on tax
rates and laws that have been enacted or substantially enacted at the balance
sheet date. Deferred tax is measured on a non-discounted basis.
Any tax relief obtained in respect of management fees allocated to capital is
reflected in the capital reserve - realised and a corresponding amount is
charged against revenue. The tax relief is the amount by which corporation tax
payable is reduced as a result of these capital expenses.
Income
+-------------------------------+---------+-----------+
| Income from investments | 2008 | 2007 |
| | GBP | GBP |
+-------------------------------+---------+-----------+
| - from loan stock |235,753 | 145,826 |
+-------------------------------+---------+-----------+
| - from dividends | 99,905 | 289,564 |
+-------------------------------+---------+-----------+
| - from fixed and variable | 99,251 | 37,546 |
| interest securities | | |
+-------------------------------+---------+-----------+
| |434,909 | 472,936 |
+-------------------------------+---------+-----------+
| Interest income | | |
+-------------------------------+---------+-----------+
| Bank interest | 15,155 | 16,775 |
+-------------------------------+---------+-----------+
| Total income |450,064 | 489,711 |
+-------------------------------+---------+-----------+
| | | |
+-------------------------------+---------+-----------+
| Total income | | |
+-------------------------------+---------+-----------+
| Dividends | 99,905 | 289,564 |
+-------------------------------+---------+-----------+
| Interest |350,159 | 200,147 |
+-------------------------------+---------+-----------+
| |450,064 | 489,711 |
+-------------------------------+---------+-----------+
| Income from investments | | |
| comprises | | |
+-------------------------------+---------+-----------+
| Listed UK Securities | 99,251 | 327,110 |
+-------------------------------+---------+-----------+
| Funds and Trusts | 99,905 | - |
+-------------------------------+---------+-----------+
| Unlisted UK securities |235,753 | 145,826 |
+-------------------------------+---------+-----------+
| |434,909 | 472,936 |
+-------------------------------+---------+-----------+
Investments
+--------------------------+-------------+-------------+-----------+----------------+-------------+-------------+--------------+
| | Listed | Unlisted | Loan |Investments in | Fixed | Fund and | Total |
| | Funds | Ordinary | Stock | Associated | and | Trusts | |
| | and | Shares | | Companies | Variable | | |
| | Trusts | | | | Interest | | |
| | | | | | Securities | | |
+--------------------------+ + + + + + + +
| | | | | | | | |
+--------------------------+ + + + + + + +
| | | | | | | | |
+--------------------------+-------------+-------------+-----------+----------------+-------------+-------------+--------------+
| | | GBP | GBP | GBP | GBP | GBP | GBP |
+--------------------------+-------------+-------------+-----------+----------------+-------------+-------------+--------------+
| Cost at 31 December 2007 | 3,324,954 | 1,841,543 |4,947,387 | 2,958,605 | - | 1,370,291 | 14,442,780 |
+--------------------------+-------------+-------------+-----------+----------------+-------------+-------------+--------------+
| Re-allocation | 1,370,291 | - | - | - | - |(1,370,291) | - |
+--------------------------+-------------+-------------+-----------+----------------+-------------+-------------+--------------+
| Unrealised | (150,043) | 1,463,969 |(356,000) | (42,839) | - | - | 915,087 |
| (losses)/gains at 31 | | | | | | | |
| December 2007 | | | | | | | |
+--------------------------+-------------+-------------+-----------+----------------+-------------+-------------+--------------+
| Valuation at 31 December | 4,545,202 | 3,305,512 |4,591,387 | 2,915,766 | - | - | 15,357,867 |
| 2007 | | | | | | | |
+--------------------------+-------------+-------------+-----------+----------------+-------------+-------------+--------------+
| Purchases at cost | 255,807 | 4,120,760 | 265,336 | - | 5,533,251 | - | 10,175,154 |
+--------------------------+-------------+-------------+-----------+----------------+-------------+-------------+--------------+
| Sales proceeds |(3,888,097) | - |(124,729) | (2,564,258) |(4,026,237) | - |(10,603,321) |
+--------------------------+-------------+-------------+-----------+----------------+-------------+-------------+--------------+
| Realised (losses)/gains | (345,354) | - | (6,521) | (394,347) | 4,869 | - | (741,353) |
+--------------------------+-------------+-------------+-----------+----------------+-------------+-------------+--------------+
| (Decrease) in unrealised | (389,138) |(1,982,419) |(470,052) | 42,839 | (56) | - | (2,798,826) |
| appreciation | | | | | | | |
+--------------------------+-------------+-------------+-----------+----------------+-------------+-------------+--------------+
| Closing valuation at 31 | 178,420 | 5,443,853 |4,255,421 | - | 1,511,827 | - | 11,389,521 |
| December 2008 | | | | | | | |
+--------------------------+-------------+-------------+-----------+----------------+-------------+-------------+--------------+
| Cost at 31 December 2008 | 717,601 | 5,962,303 |5,081,473 | - | 1,511,883 | - | 13,273,260 |
+--------------------------+-------------+-------------+-----------+----------------+-------------+-------------+--------------+
| Unrealised losses at 31 | (539,181) | (518,450) |(826,052) | - | (56) | - | (1,883,739) |
| December 2008 | | | | | | | |
+--------------------------+-------------+-------------+-----------+----------------+-------------+-------------+--------------+
| Valuation at 31 December | 178,420 | 5,443,853 |4,255,421 | - | 1,511,827 | - | 11,389,521 |
| 2008 | | | | | | | |
+--------------------------+-------------+-------------+-----------+----------------+-------------+-------------+--------------+
Share Capital and Reserves
+----------------+---------+---------+------------+-----------+------------+--------------+---------------+-----------+-------------+
| | Called | Called | Capital | Share | Capital | Capital | Special | Revenue | Total |
| | up | up B |Redemption | Premium | reserve | reserve |distributable | reserve | |
| | Share | Share | Reserve | account |(realised) |(unrealised) | reserve | | |
| |Capital |Capital | | | | | | | |
+----------------+ + + + + + + + + +
| | | | | | | | | | |
+----------------+ + + + + + + + + +
| | | | | | | | | | |
+----------------+---------+---------+------------+-----------+------------+--------------+---------------+-----------+-------------+
| | GBP | GBP | GBP | GBP | GBP | GBP | GBP | GBP | GBP |
+----------------+---------+---------+------------+-----------+------------+--------------+---------------+-----------+-------------+
| | | | | | | | | | |
+----------------+---------+---------+------------+-----------+------------+--------------+---------------+-----------+-------------+
| As at 1 | 1,649 | 2,474 | 2 |7,802,214 | 41,986 | 915,087 | 7,788,558 | 368,900 | 16,920,870 |
| January 2008 | | | | | | | | | |
+----------------+---------+---------+------------+-----------+------------+--------------+---------------+-----------+-------------+
| Realised | - | - | - | | (741,353) | | - | - | (741,353) |
| losses | | | | | | | | | |
+----------------+---------+---------+------------+-----------+------------+--------------+---------------+-----------+-------------+
| Unrealised | - | | - | - | - | (2,798,826) | - | - |(2,798,826) |
| losses | | | | | | | | | |
+----------------+---------+---------+------------+-----------+------------+--------------+---------------+-----------+-------------+
| Capitalised | - | - | - | - | (48,235) | - | | - | (48,235) |
| expenses less | | | | | | | | | |
| tax credit | | | | | | | | | |
+----------------+---------+---------+------------+-----------+------------+--------------+---------------+-----------+-------------+
| Dividends | - | - | - | - | - | - | - |(329,545) | (329,545) |
+----------------+---------+---------+------------+-----------+------------+--------------+---------------+-----------+-------------+
| Return for | - | - | | - | - | - | - | 172,141 | 172,141 |
| year | | | | | | | | | |
+----------------+---------+---------+------------+-----------+------------+--------------+---------------+-----------+-------------+
| At 31 December | 1,649 | 2,474 | 2 |7,802,214 | (747,602) | (1,883,739) | 7,788,558 | 211,496 | 13,175,052 |
| 2008 | | | | | | | | | |
+----------------+---------+---------+------------+-----------+------------+--------------+---------------+-----------+-------------+
Net Asset value per share
The net asset values per share, as disclosed in the balance sheet, are based on
attributable assets at the date of the balance sheet and assume that no break-up
of the Company will occur - the "attributed basis". The Board considers that the
Articles basis reflects the attribution of assets between the two classes of
shares that would occur in the event that a liquidation of the Company took
place. On liquidation, B Shareholders could be entitled to up to 60% of the
assets remaining after Ordinary Shareholders first recover their
effective initial cost of 60 pence per share plus the annual hurdle rates due to
both share classes, achieved up to the date of liquidation.
At this early stage in the Company's life, the Board considers that liquidation
is unlikely, and that attributing to the B Shares purely the capital contributed
of 0.01 penny per share reflects the Board's best estimate at 31 December 2008
of the B Shares' entitlement to assets at 31 December, given the inherent
uncertainties in projecting the investment performance of the Manager (which
will ultimately determine the B Shares' entitlement to the Company's assets).
The net asset values per share have been calculated by reference to the numbers
of shares in issue at 31 December 2008, being 16,497,230 Ordinary Shares of
0.01p each and 24,738,570 B Shares of 0.01p each
Financial Instruments
The main risks arising from the Company's financial instruments are due to
fluctuations in market prices (market price risk), credit risk and interest rate
risk, although liquidity risk and currency risk are also discussed below. The
Board regularly reviews and agrees policies for managing each of these risks and
they are summarised below. These have been in place throughout the current
and preceding periods.
Market price risk
Market price risk arises from uncertainty about the future prices of financial
instruments held in accordance with the Company's investment objectives. It
represents the potential gain or loss that the Company might benefit or suffer
from through holding market positions in the face of market movements.
The investments in equity and fixed interest stocks of unquoted companies that
the Company holds are not traded and as such the prices are more uncertain than
those of more widely traded securities. As, in a number of cases, the unquoted
investments are valued by reference to price earnings ratios prevailing in
quoted comparable sectors, their valuations are exposed to changes in the
price earnings ratios that exist in the quoted markets.
The Board's strategy in managing the market price risk inherent in the Company's
portfolio of equities and loan stock investments is determined by the
requirement to meet the Company's investment objective, as set out above. As
part of the investment process, the Board seeks to maintain an appropriate
spread of market risk, and also has full and timely access to relevant
information from the Investment Manager. No single investment is permitted to
exceed 15% of total investment assets at the point of investment. The Board
meets regularly and reviews the investment performance and financial results, as
well as compliance with the Company's objectives. In the case of the Credit
Suisse portfolio, derivative instruments are often used to hedge against market
risk.
Market price risk sensitivity
The Board believes that the Company's assets are mainly exposed to market price
risk, as the Company is required to hold most of its assets in the form of
sterling denominated investments in small companies, and holds the remainder in
a portfolio of equity instruments managed by Credit Suisse.
All of the investment made by the Manager in unquoted companies, irrespective of
the instruments the Company actually holds, (whether shares or loan stock) carry
a full market risk, even though some of the loan stocks may be secured on
assets, but behind any prior ranking bank debt in the investee company.
The Board considers that the values of investments in unquoted equity and loan
stock instruments are ultimately sensitive to changes in quoted share prices,
insofar as such changes eventually affect the enterprise value of unquoted
companies. The impact on net assets of unquoted investments if there were to be
a 15% movement in overall share prices for the year would have been an
increase or decrease of GBP1,454,891 (2007:GBP1,184,535). The impact on net
assets if there were to be a 15% movement in overall share price for listed
quoted securities for the year would have been an increase or decrease of
GBP253,537 (2007:GBP681,780).
The impact of a change of 15% has been selected as this is considered reasonable
given the current level of volatility observed both on a historical basis and
market expectations for future movement. The range in equity prices is
considered reasonable given the historic changes that have been observed.
Credit risk
Credit risk is the risk that a counterparty will fail to discharge an obligation
or commitment that it has entered into with the Company. The Company's maximum
exposure to credit risk is:
+----------+---------+---------+---------+-----------+-----------+
| | | | | 2008 | 2007 |
+----------+---------+---------+---------+-----------+-----------+
| Financial assets | | | GBP | GBP |
+--------------------+---------+---------+-----------+-----------+
| Debt Securities | | |1,511,827 | - |
+--------------------+---------+---------+-----------+-----------+
| Loan stock | | |4,255,421 |7,475,300 |
| investments | | | | |
+--------------------+---------+---------+-----------+-----------+
| Called Up share | | |1,400,000 |1,400,000 |
| capital unpaid | | | | |
+--------------------+---------+---------+-----------+-----------+
| Accrued Income | | 50,657 | 155,163 |
+------------------------------+---------+-----------+-----------+
| Other debtors | | | 15,874 | 6,636 |
| (including | | | | |
| prepayments) | | | | |
+--------------------+---------+---------+-----------+-----------+
| Cash and cash equivalents | | 461,527 | 138,712 |
+------------------------------+---------+-----------+-----------+
| Total | | | |7,695,306 |9,175,811 |
+----------+---------+---------+---------+-----------+-----------+
The Company has an exposure to credit risk in respect of the loan stock
investment it has made into an investee company, which has little security
attached to it, and where it does, such security ranks beneath any bank debt
that an investee company may owe.
GBP43,363 of the accrued income shown above was due within 12 months of the
year-end. The balance of GBP7,294 is due upon repayment of the loans, which
could be in up to 5 years time.
The following table shows the maturity of the loan stock and debt securities
referred to above.
+-----------+-------+-----------+-----------+
| | | 2008 | 2007 |
+-----------+-------+-----------+-----------+
| | | GBP | GBP |
+-----------+-------+-----------+-----------+
| Repayable within | | |
+-------------------+-----------+-----------+
| Less than | |1,511,827 | - |
| 1 year | | | |
+-----------+-------+-----------+-----------+
| 3 to 4 | |1,380,885 | 888,000 |
| years | | | |
+-----------+-------+-----------+-----------+
| 4 to 5 | |1,318,286 |4,899,800 |
| years | | | |
+-----------+-------+-----------+-----------+
| More than | |1,556,250 |1,687,500 |
| 5 years | | | |
+-----------+-------+-----------+-----------+
| Total | |5,767,248 |7,475,300 |
+-----------+-------+-----------+-----------+
These loan stock investments are made as part of the qualifying investment
within the investment portfolio, and the risk management processes applied to
loan stock investments have already been set out under market price risk above.
Called up share capital unpaid is supported by bank guarantees, so is credited
to be low credit risk.
There could also be a failure by counterparties to deliver securities which the
Company has paid for, or pay for securities which the Company has delivered.
This risk is considered to be small as most of the Company's investment
transactions are in unquoted investments, where investments are conducted
through solicitors, to ensure that payment matches delivery. In respect of any
quoted investment transactions that are undertaken, the Company uses brokers
with a high credit quality, and these trades usually have a short settlement
period. Accordingly, counterparty risk is considered to be relatively low.
There are no assets that are past due repayment dates.
Interest rate risk
The Company's fixed and floating rate interest securities, its equity
investments and net revenue may be affected by interest rate movements.
Investments are often in relatively small businesses, which are relatively high
risk investments sensitive to interest rate fluctuations.
Due to the short time to maturity of some of the Company's floating rate
investments, it may not be possible to re-invest in assets which provide the
same rates as those currently held.
The Company's assets include fixed and floating rate interest instruments, as
shown below. The rate of interest earned is regularly reviewed by the Board, as
part of the risk management processes applied to these instruments, already
disclosed under market price risk above.
The interest rate profile of the Company's financial net assets at 31 December
2008 was:
+------------+---------+-----------+------------+-----------+------------+----------+----------+
| | |Financial | Fixed | Floating | |Weighted | Average |
| | |assets on | rate | rate | | average | period |
| | | which no | financial |financial | |interest | to |
| | | interest | assets | assets | | rate |maturity |
| | | paid | | | | | |
+------------+---------+ + + +------------+ + +
| | | | | | | | |
+------------+---------+ + + +------------+ + +
| | | | | | | | |
+------------+---------+ + + +------------+ + +
| | | | | | | | |
+------------+---------+ + + +------------+ + +
| | | | | | Total | | |
+------------+---------+-----------+------------+-----------+------------+----------+----------+
| | | GBP | GBP | GBP | GBP | % | (years) |
+------------+---------+-----------+------------+-----------+------------+----------+----------+
| Equity | |5,622,273 | - | - | 5,622,273 | | |
+------------+---------+-----------+------------+-----------+------------+----------+----------+
| Debt | | - | 1,248,299 | 263,528 | 1,511,827 | 5.75 | 0.39 |
| securities | | | | | | | |
+------------+---------+-----------+------------+-----------+------------+----------+----------+
| Loan stock | - | 4,255,421 | - | 4,255,421 | 5.02 | 5.90 |
+----------------------+-----------+------------+-----------+------------+----------+----------+
| Cash | | - | - | 461,527 | 461,527 | | |
+------------+---------+-----------+------------+-----------+------------+----------+----------+
| Debtors | |1,466,531 | - | - | 1,466,531 | | |
+------------+---------+-----------+------------+-----------+------------+----------+----------+
| Creditors | |(142,527) | - | - | (142,527) | | |
+------------+---------+-----------+------------+-----------+------------+----------+----------+
| Total | |6,946,277 | 5,503,720 | 725,055 |13,175,052 | | |
+------------+---------+-----------+------------+-----------+------------+----------+----------+
The interest rate profile of the Company's financial net assets at 31 December
2007 was:
+-----------+---------+-----------+------------+-----------+------------+----------+----------+
| | |Financial | Fixed | Floating | Total |Weighted | Average |
| | |assets on | rate | rate | | average | period |
| | | which no | financial |financial | |interest | to |
| | | interest | assets | assets | | rate |maturity |
| | | paid | | | | | |
+-----------+---------+ + + + + + +
| | | | | | | | |
+-----------+---------+ + + + + + +
| | | | | | | | |
+-----------+---------+ + + + + + +
| | | | | | | | |
+-----------+---------+ + + + + + +
| | | | | | | | |
+-----------+---------+-----------+------------+-----------+------------+----------+----------+
| | | GBP | GBP | GBP | GBP | % | (years) |
+-----------+---------+-----------+------------+-----------+------------+----------+----------+
| Equity | |7,882,567 | - | - | 7,882,567 | | |
+-----------+---------+-----------+------------+-----------+------------+----------+----------+
| Loan stock | - | 7,475,300 | - | 7,475,300 | 5.47 | 5.60 |
+---------------------+-----------+------------+-----------+------------+----------+----------+
| Cash | | - | - | 138,712 | 138,712 | | |
+-----------+---------+-----------+------------+-----------+------------+----------+----------+
| Debtors | |1,571,266 | - | - | 1,571,266 | | |
+-----------+---------+-----------+------------+-----------+------------+----------+----------+
| Creditors | |(146,975) | - | - | (146,975) | | |
+-----------+---------+-----------+------------+-----------+------------+----------+----------+
| Total | |9,306,858 | 7,475,300 | 138,712 |16,920,870 | | |
+-----------+---------+-----------+------------+-----------+------------+----------+----------+
Floating rate cash earns interest based on LIBOR rates.
The Company's investments in equity shares and similar instruments have been
excluded from the interest rate risk profile as they have no maturity date and
would thus distort the weighted average period information.
Interest rate sensitivity
Although the Company holds investments in loan stocks that pay interest, the
Board does not believe that the income of these instruments is interest rate
sensitive, as the majority of the loan is at a fixed rate of interest. The Board
does not consider that the impact of interest rate changes materially affects
the value of the loan portfolio in isolation, other than the consequent impact
that interest rate changes have upon movements in share prices, discussed under
equity price risk above.
Liquidity risk
The investment in equity and fixed interest stocks of unquoted companies that
the Company holds are not traded. They are not readily realisable. The ability
of the Company to realise the investments at their carrying value may at times
not be possible if there are no willing purchasers. The Company's ability to
sell investments may also be constrained by the requirements set down by
VCTs. The maturity profile of the Company's loan stock investments disclosed
within the consideration of credit risk above indicates that these assets are
also not readily realisable until dates up to 5 years or more from the year end.
To counter these risks to the Company's liquidity, the Manager maintains
sufficient ready realisable investments within the Credit Suisse portfolio to
meet running costs and other commitments.
All creditors and accruals are due within one year and are comfortably covered
by funds within the Credit Suisse portfolio and short term debtors.
Currency risk
All assets and liabilities are denominated in sterling and therefore there is no
currency risk.
Other information
The Annual General Meeting of the Company will be held on 18 June 2009,
commencing at 10.45 a.m at the offices of Core Capital LLP, 103 Baker Street,
London, W1U 6LN. The Annual Report and Financial Statements for the year ended
31 December 2008 will be printed and issued to Shareholders in due course and
will shortly be available on the website of Core Capital www.core-cap.com.
The financial information contained within this announcement does not constitute
the Company's statutory financial statements as defined in Section 240 of the
Companies Act 1985 and has not been delivered to the Registrar of Companies.
Statutory financial statements will be filed with the Registrar of Companies in
due course. The financial information for 2007 is derived from the statutory
accounts for 2007 which have been delivered to the Registrar of Companies. The
independent auditors' report on the financial statements under section 235 of
the Companies Act 1985 is unqualified and does not contain a statement under
section 237(2) or (3) of the Companies Act 1985. The statutory financial
statements for the year ended 31 December 2007 contains an audit report which
was unqualified and did not contain statements under Sections 237(2) or (3) of
the Companies Act 1985, and have been delivered to the Registrar of Companies.
Copies of this announcement will be available to the public at the office of
Aberdeen Asset Managers Limited, 149 St Vincent Street, Glasgow and at the
registered office of the Company, One Bow Churchyard, Cheapside, London;
Directors' responsibility statement
The Directors confirm that, to the best of their knowledge:
* the Financial Statements have been prepared in accordance with the applicable
accounting standards and give a true and fair view of the assets, liabilities
and financial position of the Company as at 31 December 2008 and for the year to
that date; and
* the Directors' Report includes a fair review of the development and performance
of the Company, together with a description of the principal risks and
uncertainties that it faces.
By Order of the Board
Aberdeen Asset Management PLC
Secretary
29 April 2009
Contact
Graeme McDonald
Aberdeen Asset Management plc
0141 306 7121
This information is provided by RNS
The company news service from the London Stock Exchange
END
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