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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Neptune-Calc | LSE:NEP | London | Ordinary Share | GB00B0523M32 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 22.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMNEP TIDMTTM
RNS Number : 1058I
Neptune-Calculus Income &Growth VCT
20 March 2015
Neptune-Calculus Income and Growth PLC Final Results for the year ended 31 December 2014
Financial highlights
Hot Features
Premium
Year ended
31 December
Ordinary Shares 2014
Return per share 6.1p
Net asset value per share 51.6p
Cumulative dividends paid to 31 December 2014 25.5p
Accumulated shareholder value(OHM>) 77.1p
Special interim dividend paid 10 March 2015 5.0p
Recommended final dividend 2.0p
(OHM>) Accumulated shareholder value represents net asset value per share plus cumulative dividends paid per share.
As at
28 February
2015 *
Unaudited net asset value per share 52.3p
-------------------------------------------- --------------
* Being the latest practicable date prior to publication.
Including current year revenue.
CHAIRMAN'S STATEMENT
The results for the year ended 31 December 2014 showed a considerable uplift in the net assets per Ordinary Share of 6.4 per cent to 51.6 pence. The main reason for this performance can be attributed to Waterfall Services Limited ("Waterfall") which was sold on 22 December 2014 generating a gain of approximately GBP1.3m, equivalent to approximately 12p per share, compared with the carrying value of GBP570,000 in the Company's half yearly report for the six months to 30 June 2014.
The movement also reflects the dividends of 3 pence per share that were paid to shareholders during 2014, bringing the total accumulated shareholder value (comprising net asset value per share plus cumulative dividends paid to 31 December 2014) to 77.1 pence per Ordinary Share. As mentioned below, a special dividend of 5p per share was paid on 10 March 2015 bringing cumulative dividends to date to 30.5p.
Investment performance (Qualifying Investments)
The Company continues to meet its requirements to qualify as a VCT. Our qualifying investments are managed by Calculus Capital Limited and are in a combination of unquoted and AIM companies.
During the year the Company sold a number of its investments. Waterfall was sold at a total return representing 5.3 times the Company's original investment and MicroEnergy Generation Services Limited ("MicroEnergy") redeemed GBP70,000 of its loan stock at par in February 2014. Several holdings carried at low valuations were also sold during the year and a small amount was received as a distribution from the administrator to Secure Electrans Limited.
The Company invested a further GBP25,000 in Dryden Human Capital Limited ("Dryden"), an international recruitment firm which specialises in the actuarial, insurance, compliance and wealth management markets in London and Hong Kong and also made available a loan facility of GBP135,000 to low carbon based building materials manufacturer, Limetec Limited ("Lime"). Unquoted portfolio investments held at 31 December 2013 increased in value by 27.0 per cent over the twelve months to 31 December 2014 (with sold investments valued at proceeds received). This performance is largely due to the sale of Waterfall mentioned above.
The overall value of the quoted portfolio, which is composed entirely of AIM companies, decreased by 18.3 per cent over the last twelve months on a like for like basis which was in line with the FTSE AIM All-Share Index which also fell 17.5 per cent over the year. The reduction is almost entirely attributable to the investment in EpiStem Holdings plc ("EpiStem") which saw its share price drop 15.6 per cent despite successfully completing its Genedrive(R) Indian clinical evaluation study in October 2014. The Board remains optimistic about EpiStem's prospects and attributes the fall in share price to market conditions. EpiStem is currently awaiting approval from the Indian regulator for a license to import and sell its first major infectious disease assay for TB, which is anticipated early in 2015.
A more detailed analysis of investment performance can be found in the Investment Manager's Review that follows this statement.
Investment performance (Non-Qualifying Investments)
Our non-qualifying investments comprise holdings in the Neptune Income Fund, the Neptune Quarterly Income Fund and liquidity funds. Our investments in the Neptune Income Fund decreased by 3.1 per cent and in the Neptune Quarterly Income Fund by 2.2 per cent over the year, compared to a decrease of 2.7 per cent in the FTSE 100 Index. During the year the Company sold GBP60,000 of its holding in the Neptune Income Fund and GBP60,000 of its holding in the Neptune Quarterly Income Fund to raise cash in order to pay the interim dividend.
Share buyback
No share buybacks were carried out during the year but in line with its policy of returning cash to shareholders, the Company may carry out limited share buybacks in the future if it considers it to be in the best of interests of all shareholders.
Dividends
The Company paid an interim dividend for 2014 of 1 penny per Ordinary Share in October 2014. The Company also paid the 2013 final dividend of 2 pence per share in June 2014. Since the year end, the company announced that it was returning some of the proceeds of the disposal of Waterfall to shareholders and declared a special dividend of 5p per share which was paid on 10 March 2015. The total dividends paid to an ordinary shareholder to date are 30.5p.
The directors are also pleased to propose a final dividend for 2014 of 2 pence per Ordinary Share which, subject to shareholder approval, will be payable on 5 June 2015 to shareholders on the register on 1 May 2015.
Outlook
The UK economy has improved over the past twelve months but public markets remain volatile and susceptible to economic shocks. The 2015 election provides uncertainty, but continuing GDP growth is forecast and the VCT is well positioned to benefit from the strong growth momentum.
Philip Stephens
Chairman
INVESTMENT MANAGER'S REVIEW (QUALIFYING INVESTMENTS)
Calculus Capital Limited manages the Company's qualifying portfolio.
Market commentary
The FTSE 100 fell by 2.7 per cent during 2014. It outperformed the AIM All-Share Index, which fell by 17.5 per cent over the same period.
Portfolio developments
At the year end, the portfolio of qualifying investments comprised 13 companies, made up of both unquoted and AIM stocks.
The quoted portfolio, which consists entirely of AIM companies, has shown an overall decrease in value for the year of 18.3 per cent. At 31 December 2014, the quoted portfolio was valued at GBP560,000 compared with GBP681,000 on a like for like basis as at 31 December 2013. The decrease can be mainly attributed to the fall in the AIM market. During the year the Company made no new quoted investments. The Company sold a small holding in Expansys at a discount to cost.
Personalised medicine and biotechnology company, EpiStem, announced in October 2014 that it successfully completed Genedrive(R) Indian clinical evaluation study and the regulatory submission with the Drug Controller General of India (DCGI) of its first test for the diagnosis of Tuberculosis and Rifampicin antibiotic resistance (TB). The company is currently awaiting approval from the Indian regulator for a license to import and sell its first major infectious disease assay for TB, which is anticipated early in 2015. Genedrive's(R) advantage is its ability to deliver an industry leading speed to result, high levels of molecular accuracy and simplicity of use at low cost in remote/non laboratory-based settings, making it suitable for tackling disease in low-income countries and developing nations. India is the highest TB burden country in the world with World Health Organisation statistics for 2011 giving an estimated incidence figure of 2.2 million cases of TB for India out of a global incidence of 8.7 million cases. EpiStem's Indian distributor partner Xcelris Lab is preparing for the launch of its TB test which will then enable the company to develop rapid, mobile tests for other major diseases.
Infrastrata plc ("Infrastrata") is an independent petroleum exploration and gas storage company. The company has three key projects: exploration and gas storage in Northern Ireland, and exploration in Dorset. Significant unrisked P50 prospective resources of 450 million barrels have been identified at the Larne-Lough Neagh basin in Northern Ireland (PL1/10) in which InfraStrata has a 33 per cent per cent interest. Recent parliamentary discussions on the need to increase the UK's gas storage capacity are encouraging and although the oil price fell substantially in 2014, the medium term outlook for Infrastrata's exploration interests is positive.
Including the proceeds from the sale of investments during the year, the unquoted portfolio has shown an increase in value of 30.0 per cent: the unquoted portfolio was valued at GBP4,612,000 at 31 December 2014 compared with GBP3,560,000 at 31 December 2013. A new qualifying investment of GBP25,000 was made during the year in Dryden loan stock. The Company also made follow on investments of GBP135,000 in secured Lime loan stock. The section on unquoted portfolio companies in the Report and Accounts contains further information.
Waterfall, which provides catering services to the aged care and education markets, was sold on 22 December 2014 to a company owned by the existing management team and backed by LDC. The Company received cash proceeds for its equity holding of approximately GBP1.9m. The Company originally paid GBP50,129 for the equity in Waterfall and GBP450,000 for preference shares and loan stock which were redeemed in 2011 and 2013 respectively. This realisation results in total cash being received for equity, preference shares and loan stock (including dividends and interest) of approximately GBP2.6m by the Company over the life of the investment, representing 5.3 times the Company's original investment of GBP0.5m.
Dryden is headquartered in the UK and specialises in the actuarial, insurance and compliance recruitment sector across the UK, Europe and the Far East. The group has been through a period of significant change in the year. The company has appointed an Executive Chairman with extensive experience not only in recruitment, but also in change management and business improvement. A firm-wide recruitment and training programme is being initiated and new systems and processes are being put in place for the business to leverage. After a turbulent few years for the company, the business is now establishing a strong platform for growth. The company remains subject to the close attention of Calculus Capital Limited during this period of transformational change.
Human Race Group Limited ("Human Race") owns and operates over 60 events in triathlon, cycling, running, duathlon, aquathlon, and open water swimming for over 90,000 participants of all abilities and ages. This makes the business the largest owner and deliverer of mass participation events in the UK. The portfolio of events includes the London Winter Run, Windsor Triathlon, Wiggle Dragon Ride, Run or Dye series, Tour de Yorkshire Ride (alongside ASO), Cycletta, the Eton Triathlon Super Sprints, Kingston Breakfast Run, and an off Road Winter Series.
A greater emphasis is being put on the larger flagship events likely to attract maximum interest and drive growth through larger scale and profit. This is bearing fruit with the launch of the London Winter Run - the largest inaugural 10k run ever in the UK with 14,000 entries in year one. A roll out of the Winter Run concept is now planned throughout the UK and beyond. In addition, an exciting partnership is being forged with ASO (owners of the Tour de France) with a venture alongside the Tour de Yorkshire (a pro ride over 3 days) and the acquisition of a smaller established sportive called the Lionheart Ride. Other concepts are also being looked at for 2016.
Terrain Energy Limited ("Terrain") has interests in nine petroleum licences; Keddington, Kirklington, Dukes Wood and Burton on the Wolds in the East Midlands, Larne and an offshore licence to the north of Larne in Northern Ireland, Brockham in Surrey and Egmating and Starnberger See in Germany. Terrain is currently producing from wells at Keddington and Brockham. On average 70 barrels of oil per day (bopd) and 40,000 standard cubic feet of gas per day are being produced (gross). In late 2014 an exploration well was drilled on the Burton-on-the-Wolds licence which was unsuccessful although the licence still has shale potential. The company plans to drill an appraisal well at its Larne licence in 2015 and also drill sidetracks to increase production at its producing assets. The company has applied for another licence under the UK 14th Onshore licencing round. Terrain continues to acquire data on its licences in Bavaria with the intention to identify a potential drilling location for 2016. Although the oil price fell substantially in 2014, capacity is disappearing quickly from global oil supplies and we believe the medium to longer term outlook is supportive. Opportunities for acquiring interests at attractive prices in the current market may also exist.
In February 2014, the Company made available to low carbon based building materials manufacturer, Lime, a GBP100,000 loan facility to fund operational improvements and working capital. This loan facility was increased by GBP35,000 in July 2014. Negotiations are taking place to replace this facility with a qualifying loan note. 2014 was a challenging year for the company. Some management changes were implemented and a new turnaround specialist was put in place. Since his appointment, costs have been cut (including a renegotiation and reduction of rent), the sales force has been strengthened, margins have increased and management are now in a better position to bring the company into profitability in 2015.
MicroEnergy Generation Services Limited ("MicroEnergy") owns and operates a fleet of small onshore wind turbines (<5kW). The fleet has 153 turbines installed on farm land in East Anglia and Yorkshire. Revenues from the fleet of installed turbines come from two sources, both of which are inflation protected, being directly linked to RPI. First, there is the Government backed feed-in tariff (FIT) paid by the electricity suppliers for every kilowatt of electricity generated for twenty years. Secondly there is an export tariff for any surplus electricity not used by the site owner that is exported to the grid. In 2014 the operation and maintenance ("O&M") provider went into administration and there were some delays transferring the contract to the new O&M provider. These have now been resolved and the company is set up to have a successful operating year in 2015.
Founded in the 1970's, Hampshire Cosmetics Limited ("Hampshire") is an established company which develops and manufactures a comprehensive range of products covering fragrances, body treatments, skincare and shampoos. The original investment was part of a turnaround led by an experienced management buy-in team. This has progressed well to date, with an improvement in revenue and profitability. In the year ahead the key objectives for the business are to grow and diversify further the revenue base. The company has identified additional opportunities for further product diversification which will be implemented during the coming year. A new acquisition was integrated into the group in 2014 and, while this process has taken longer than management initially planned, it is expected to make a significant contribution to profits and growth in the current year.
The holding of ordinary shares and preference shares in Triage were sold in July 2014 and GBP10,000 of its loan facility was repaid for a consideration slightly ahead of carrying value. The remaining loan facility will be repaid in two equal annual tranches in 2015 and 2016.
The Company maintained its holding in RMS Group Holdings Limited ("RMS") of 85,166 shares. RMS provides port services from six locations on the Humber Estuary, the UK's busiest trading estuary. The group's services cover shipping, stevedoring, storage/warehousing and support logistics for import and export cargoes moving between Northern Europe, the Baltic, Russia, the Iberian Peninsula and the Mediterranean. In 2014, activity levels returned to pre-recession levels as UK economic growth continues and are expected to be exceeded in 2015.
Developments since the year end
Other than disclosed, there have been no developments since the year end.
John Glencross
Calculus Capital Limited
20 March 2015
INVESTMENT PORTFOLIO
The ten largest holdings by value are included below:
Cost Valuation Percentage
GBP GBP %
AIM investments (quoted equity)
EpiStem Holdings plc* 251,261 545,840 13.8%
Other AIM investments* 450,939 13,679 0.4%
Unquoted equity investments 0.0%
Terrain Energy Limited* 413,633 771,706 19.5%
RMS Group Holdings Limited 100,044 598,717 15.2%
Limetec Limited* 234,285 32,365 0.8%
Human Race Group Limited 100,000 100,000 2.5%
Hampshire Cosmetics Limited 25,000 27,950 0.7%
Dryden Human Capital Group Limited 100,000 37,500 1.0%
Other unquoted equity investments* 1,212,493 28,350 0.7%
Unquoted bonds
Human Race Group Limited loan stock 300,000 300,000 7.6%
Hampshire Cosmetics Limited loan
stock 75,000 75,000 1.9%
Limetec Limited loan stock(#) 486,544 364,908 9.2%
Triage Holdings Limited loan stock
(OHM>) 64,280 64,280 1.6%
Dryden Human Capital Group Limited
loan stock 25,000 25,000 0.6%
Other unquoted loan notes 696,436 0 0.0%
Non-qualifying equity investments
and loan stocks* (# OHM>) (537,692) (219,769) (5.6%)
Total qualifying investments 3,997,223 2,765,526 69.9%
Quoted funds
Neptune Quarterly Income Fund Income
Units 431,435 484,280 12.3%
Neptune Income Fund Income A Class 444,327 475,797 12.1%
Money market funds 3,150 3,150 0.1%
Non-qualifying equity investments
and loan stock* (#) 537,692 219,769 5.6%
Total non-qualifying investments 1,416,604 1,182,996 30.1%
Total investments 5,413,828 3,948,522 100.0%
* The valuations of certain investments include small purchases made which are non-qualifying investments. These cost GBP12,750 and are valued at GBP8,081.
# The valuation of Limetec Limited loan stock includes rolled up interest that is non-qualifying. This cost GBP16,544 and is valued at GBP12,408.
The valuation of other unquoted loan notes includes rolled up interest for Heritage House Media Limited which is non-qualifying. This cost GBP309,118 and is valued at GBPnil.
(OHM>) The Triage Holdings Limited loan stock and GBP135,000 of the Limetec loan stock is non-qualifying.
UNQUOTED PORTFOLIO COMPANIES
The following unquoted investments are included in the investment portfolio at the balance sheet date. Further details of these companies are provided below:
RMS Group Holdings Limited Operator of Port Facilities
RMS is a Humberside based port operator, and provides customers with shipping, stevedoring and storage warehousing. The group also has a national logistics division.
Latest audited results
(group): GBP'000 GBP'000 Investment information: GBP'000
Year ended 31 December 2013 2012 Total cost 100
Income recognised
Turnover 28,968 28,595 in year -
Profit after tax 1,080 1,559 Equity valuation 599
Net Assets 8,074 6,993 Voting rights 4.5 per cent
Valuation basis: Earnings
Multiple
Terrain Energy Limited Oil and Gas Production
Terrain was established by Calculus Capital Limited in 2009 to develop a portfolio of onshore oil and gas producing assets in the UK.
Latest audited results: GBP'000 GBP'000 Investment information: GBP'000
Year ended 31 December 2013 2012 Total cost 414
Income recognised
Turnover 237 246 in year
Pre-tax loss 768 66 Equity valuation 772
Net Assets 7,168 3,670 Voting rights 6.2 per cent
Valuation basis: Reserves
multiple
Other funds managed by Calculus Capital Limited have invested in this company and have combined voting rights of 5.4 per cent.
Limetec Limited Construction
Lime is a leading provider of innovative and sustainable lime-based building materials based in Abingdon. Limetec offers low carbon mortars, renders & plasters and external & internal wall insulation to the mainstream construction industry. Through its subsidiary, HemBuild (formerly Hemp Technology), it also supplies sustainable, energy efficient hemp-based wall panels, which significantly reduce energy bills.
Latest results (group): GBP'000 GBP'000 Investment information: GBP'000
Year ended 31 October 2014 * 2013 * Total cost 721
Income recognised in
Turnover 6,079 5,254 year -
Pre-tax loss 871 6,985 Equity valuation 32
Net Liabilities 150 584 Loan stock valuation 365
Valuation basis: Last investment price 1.7 per
(July 2014) Voting rights cent
* The Lime group accounts are not required to be audited. These figures are derived from an aggregation of the Limetec Limited, Hemcrete Projects Limited and HemBuild management accounts which are subject to finalisation.
MicroEnergy Generation Services Limited Renewable Energy
MicroEnergy is a company set up by Calculus Capital Limited in 2012 to acquire renewable, microgeneration facilities.
Latest audited results: GBP'000 GBP'000 Investment information: GBP'000
Period ended 31 March 2014 2013 Total cost 30
Income recognised in
Turnover 212 117 year -
Pre-tax loss 28 84 Equity valuation 28
Net Assets 2,714 2,739 Loan stock valuation -
Valuation basis: Discounted
cash flow Voting rights 1.0 per cent
Hampshire Cosmetics Limited Cosmetics Manufacturing
Founded in the 1970s, Hampshire develops and manufactures a comprehensive range of products covering fragrances, body treatments, skincare and shampoos.
Latest audited results (group): GBP'000 GBP'000 Investment information: GBP'000
Period ended 31 Dec 2013 2012 Total cost 100
Income recognised in
Net Assets 2,592 1,773 year 6
Equity valuation 28
Loan stock valuation 75
Valuation basis: Comparable listed company Voting rights 0.9 per
analysis and precedent transaction multiple cent
Human Race Group Limited Mass Participation Sports
Human Race own and operate over 60 mass participation sports events including triathlon, cycling, running, duathlon, aquathlon and open water swimming.
Latest results (group): GBP'000 GBP'000 Investment information: GBP'000
Year ended 31 Dec 2013 2012 Total cost 400
Income recognised in
Turnover 2,628 2,261 year 24
Pre-tax loss 495 487 Equity valuation 87
Net Assets 1,800 2,292 Loan stock valuation 300
Valuation basis: Sales multiple Voting rights 1.9 per cent
Dryden Human Capital Limited Recruitment
Dryden is headquartered in the UK and specialises in the actuarial, insurance and compliance recruitment sector across UK, Europe and the Far East.
Latest results (group): GBP'000 GBP'000 Investment information: GBP'000 Year ended 31 Mar 2014 2013 Total cost 125 Turnover 2,278 3,959 - Pre-tax loss 1,683 3,581 Equity valuation 38 Net liabilities 3,984 2,281 Loan stock valuation 25 Valuation basis: Sales multiple Voting rights 3.7 per cent
Other funds managed by Calculus Capital Limited have invested in this company and have combined voting rights of 4.1 per cent.
STRATEGIC REPORT
This report has been prepared by the directors in accordance with the requirements of Section 414A of the Companies Act 2006. The Company's independent auditor is required by law to report on whether the information given within the strategic report is consistent with the financial statements.
Activities, status and investment objective
Neptune-Calculus Income and Growth VCT ("the Company") is a Venture Capital Trust listed on the London Stock Exchange. The principal activity of the Company is investing in unquoted or AIM traded companies in the UK with the objective of generating long term capital growth and tax free dividends for investors. The Company is managed as a VCT in order that shareholders may benefit from the tax reliefs available.
Business model
The Board of directors is responsible for the overall stewardship of the Company including investment, dividend, borrowing and purchase of own shares policies, corporate strategy and governance and risk management. All the directors are non-executive. The Board has appointed Calculus Capital Limited to manage its qualifying portfolio and to provide certain administrative services. Details of the management agreement are set out under "Management" in the Directors' Report. Calculus Capital Limited engages with companies invested in by the Company on corporate governance matters to encourage good practice. This includes engagement on significant social and environmental issues where these may impact shareholder value.
Investment and co-investment policies
The investment policy is to invest approximately 75 per cent of the Company's funds in a diversified portfolio of holdings in qualifying investments, whether unquoted or traded on AIM. Investments are made selectively across a diverse range of sectors in companies which have the potential to generate growth and enhance their value. The balance of approximately 25 per cent of the Company's funds can be invested in a combination of Neptune Income Funds, a portfolio of income generating UK quoted shares, and money market instruments.
The Company may co-invest with other funds managed and advised by Calculus Capital Limited. The allocation between different funds takes into account such factors as the funds available for investment and the time horizon of these funds, the size of a potential investment, and the existing sector exposure of the various funds.
Policy on qualifying investments
The qualifying investments in a particular company may be made in equity shares, loan stocks and/or preference shares where it is felt this would enhance shareholder return. It is intended that no one company shall represent more than 10 per cent of the portfolio and no sector shall represent more than 20 per cent of the total portfolio, in both cases at the date of investment. The Company's policy is not to invest in start-up or seed capital situations. To meet the requirements of a VCT qualifying investment, at least 10 per cent by value of the total investments in any one qualifying company must be in ordinary shares which carry no preferential rights. In addition, the companies in which qualifying investments are made must be UK companies that have no more than GBP15 million of gross assets at the time of investment (or GBP7 million if the funds being invested were raised after 5 April 2006).
VCT regulation
The Company's investment policy is designed to ensure that it continues to meet the requirements for approved VCT status. Amongst other conditions, the Company may not invest more than 15 per cent, by value at the time of investment, in a single company and must have at least 70 per cent by value of its investments throughout the period in shares or securities in qualifying holdings, of which 30 per cent by value must be ordinary shares which carry no preferential rights.
Borrowing powers
To give a degree of investment flexibility and to meet short term liquidity requirements, borrowing is permitted by the Company's Articles of a sum which does not exceed 10 per cent of the Company's share capital and reserves. The Company has not utilised these powers to date and does not plan to utilise this ability at the current time.
Principal risks and uncertainties and management of risk
The Company is exposed to a variety of risks and the principal risks identified by the Board are noted below.
Regulatory
The Company is required at all times to observe the conditions within the Income Tax Act 2007 for the maintenance of approved VCT status. This involves compliance with a number of tests which, if not met, could result in the loss of a number of tax reliefs which are currently available to both the Company and its shareholders under its VCT status. The tests are under continual review by Calculus Capital Limited, the administrator and (qualifying) investment manager of the Company. The Board keeps these matters under continual review through the provision of monthly management information and quarterly board meetings. The board has also retained the services of a VCT consultant to undertake an independent monitoring role.
Investment and liquidity risk
The majority of the Company's investments are in small and medium size companies as these meet the VCT qualifying holdings rules. These companies may not be publicly traded or freely marketable and realisations of such investments can be difficult and can take a considerable amount of time. They also, by their nature, tend to carry higher risk than a larger or longer established business. This risk is in part mitigated by diversifying the investments and maintaining around 25 per cent of the Company's portfolio in liquid assets to enable any short term cash requirements to be met.
Market price risk
In addition, the Company is subject to other price risk constituting uncertainty about the future prices of financial instruments held by the Company.
Credit risk
The Company has also invested in loan stocks and as a result is subject to credit risk.
Other risks
The majority of the loan stocks are fixed rate so the Board does not consider interest rate risk to be material. The Company has no exposure to foreign currency risk, nor does it have any interest bearing liabilities. Further comment is provided on the financial instruments risks of the Company in note 18 to the accounts.
The Board regularly reviews the risks the business faces and their potential impact on the Company. The Board monitors the Company's performance through the use of regular financial information and administrator and management reports.
Key performance indicators
The key performance indicators are those that communicate the financial performance and strength of the Company as a whole; these being principally the total return per Ordinary Share and net asset value per Ordinary Share. Further key performance indicators are those which show the Company's position in relation to the VCT tests which it is required to meet to maintain its VCT status.
In addition to the above, the Board considers performance against the Company's closest benchmark, the FTSE AIM All-share Index. The performance measures for the year are included in the Financial Highlights in the Report and Accounts.
Key strategic issues considered during the year
The key strategic issues considered during the year were:
The performance of the Company
The value and nature of investments made and realised during the year to ensure these were in accordance with the investment policy and/or whether any changes should be proposed to the investment policy.
The Investment Manager's Review (Qualifying Investments) provides commentary on the performance of the Company during the year.
The level of dividends paid and proposed
The Board considered the level of dividends to be proposed and the use of proceeds arising from the sale of one of the Company's investments.
Employees, environmental, human rights and community issues
The Company has no employees and the Board comprises entirely non-executive directors. Day-to-day management of the Company's business is delegated to the Investment Managers (details of the management agreement is set out in the Directors' Report) and the Company itself has no environmental, human rights, or community policies. In carrying out its activities and in relationships with suppliers, the Company aims to conduct itself responsibly, ethically and fairly.
Statement Regarding Annual Report and Accounts
The directors consider that taken as a whole, the Annual Report and Accounts is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
By order of the Board
Lesley Watkins
Company Secretary
20 March 2015
DIRECTORS' RESPONSIBILITIES STATEMENT
The directors are responsible for preparing the Annual Financial Report and the Company's Accounts in accordance with applicable law and regulations.
Company law requires the directors to prepare accounts for each financial year. Under that law the directors have to prepare the accounts in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws). Under company law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company for that period. In preparing these accounts, the directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgments and accounting estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the accounts;
-- prepare the accounts on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the accounts and the Remuneration report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.
The directors are responsible for the integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of accounts may differ from legislation in other jurisdictions.
The accounts are published on the www.calculuscapital.com website, which is a website maintained by the Company's Investment Manager, Calculus Capital Limited. The maintenance and integrity of the website maintained by Calculus Capital Limited is, so far as it relates to the Company, the responsibility of Calculus Capital Limited. The work carried out by the auditor does not involve consideration of the maintenance and integrity of this website and accordingly, the auditors accept no responsibility for any changes that have occurred to the accounts since they were initially presented on the website. Visitors to the website need to be aware that legislation in the United Kingdom covering the preparation and dissemination of the accounts may differ from legislation in their own jurisdiction.
We confirm that, to the best of our knowledge: (a) the Accounts, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and deficit of the Company; and (b) the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
On behalf of the Board
Philip Stephens
Chairman
20 March 2015
INCOME STATEMENT
For the year ended 31 December 2014
Year ended
31 December Year ended
2014 31 December 2013
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains/(losses) on
investments at fair value 8 - 788 788 - (521) (521)
Investment income 2 107 -- 107 134 - 134
Investment management fee 3 (14) (42) (56) (15) (45) (60)
Other expenses 4 (148) -- (148) (131) - (131)
(Deficit)/return on ordinary
activities
before taxation (55) 746 691 (12) (566) (578)
Taxation on ordinary activities 5 - - - - - -
(Deficit)/return attributable
to Ordinary shareholders (55) 746 691 (12) (566) (578)
(Deficit)/return per Ordinary
Share 7 (0.49 )p 6.60 p 6.11 p (0.10 )p (5.00 )p (5.10)p
The total column is the profit and loss account of the Company. The revenue and capital columns are provided as supplementary information in accordance with the AIC SORP.
All items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.
There is no statement of total recognised gains and losses as there were no other gains and losses.
The notes to the financial statements form an integral part of this statement.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the year ended 31 December 2014
Capital
Share Share Special redemption Capital Revenue
capital premium reserve reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
For the year ended
31 December 2014
1 January 2014 1,131 - 8,695 510 (4,851) 1 5,486
Net deficit after taxation for
the year - - - - 746 (55) 691
Dividends paid - - (339) - - - (339)
31 December 2014 1,131 - 8,356 510 (4,105) (54) 5,838
For the year ended
31 December 2013
1 January 2013 1,135 631 8,809 105 (4,285) 39 6,434
Shares issued 401 1,867 - - - - 2,268
Share issue costs - (50) - - - - (50)
Purchase of own shares (405) - (2,233) 405 - - (2,233)
Net deficit after taxation for
the year - - - - (566) (12) (578)
Dividends paid - - (314) - - (26) (340)
Share premium cancellation - (2,448) 2,448 - - - -
Share premium cancellation costs - - (15) - - - (15)
31 December 2013 1,131 - 8,695 510 (4,851) 1 5,486
The notes to the financial statements form an integral part of this statement.
BALANCE SHEET
As at 31 December 2014
Year ended Year ended
31 December 31 December
2014 2013
Note GBP'000 GBP'000
Fixed Assets
Investments at fair value through profit or loss 8 3,949 5,423
Current Assets
Debtors 10 21 23
Cash at bank 1,979 88
2,000 111
Creditors: Amounts falling due within one year
Creditors 11 (111) (48)
Net Current Assets 1,889 63
Net Assets 5,838 5,486
Represented by:
CALLED UP SHARE CAPITAL AND RESERVES
Share capital 12 1,131 1,131
Special reserve 13 8,356 8,695
Capital redemption reserve 13 510 510
Capital reserve - other 13 (2,640) (3,757)
Capital reserve - investment holding loss 13 (1,465) (1,094)
Revenue reserve 13 (54) 1
Total Ordinary shareholders' funds 5,838 5,486
Net asset value per Ordinary Share 14 51.61 p 48.50 p
The notes to the financial statements form an integral part of this statement.
CASH FLOW STATEMENT
For the year ended 31 December 2014
Year ended Year ended
31 December 31 December
2014 2013
Note GBP'000 GBP'000
Operating activities
Investment income received 98 160
Investment management fees paid - (117)
Administration fees paid - (24)
Other cash payments (130) (113)
Net cash outflow from operating activities 15 (32) (94)
Investing activities
Purchase of investments (160) (857)
Sale of investments 2,422 1,345
Net cash inflow from investing activities 2,262 488
Equity dividends paid 6 (339) (340)
Financing
Purchase of own shares - (2,233)
Net proceeds of ordinary share issue - 2,268
Share issue costs - (50)
Share premium cancellation costs - (15)
Net cash outflow from financing - (30)
Increase/(decrease) in cash for the year 16 1,891 24
The notes to the financial statements form an integral part of this statement.
NOTES TO THE ACCOUNTS
1 Accounting Policies
Basis of accounting
The accounts have been prepared under the historical cost convention, except for the valuation of investments at fair value, and in accordance with applicable UK Generally Accepted Accounting Principles (GAAP). The directors have prepared the accounts on a basis compliant with the recommendations of the Statement of Recommended Practice January 2009 ("the SORP") for Investment Trust Companies and Venture Capital Trusts produced by the Association of Investment Companies ("AIC"). The accounts have been prepared on a going concern basis.
Investments
As the Company's business is investing in financial assets with a view to profiting from their total return in the form of increases in fair value, investments are designated as at fair value through profit or loss on initial recognition in accordance with Financial Reporting Standard 26 (FRS 26) Financial Instruments: Recognition and Measurement and International Private Equity and Venture Capital ('IPEVC') guidelines. Fair value is the amount for which an asset can be exchanged between knowledgeable, willing parties in an arm's length transaction. The Company manages and evaluates the performance of these investments on a fair value basis in accordance with its investment strategy, and information about the investments is provided on this basis to the Board of directors.
Investments held at fair value through profit or loss are initially recognised at fair value, being the consideration given and excluding transaction or other dealing costs associated with the investment, which are expensed and included in the capital column of the Income Statement.
After initial recognition, investments, which are classified as at fair value through profit or loss, are measured at fair value. Gains or losses on investments classified as at fair value through profit or loss are recognised in the capital column of the Income Statement, and allocated to the capital reserve - other, and capital reserve - investment holding loss as appropriate.
Aggregate transaction and dealing costs included in disposals and additions are disclosed in note 8 to the accounts, as recommended by the SORP. All purchases and sales of quoted investments are accounted for on the trade date basis. All purchases and sales of unquoted investments are accounted for on the date that the sale and purchase agreement becomes unconditional.
For quoted investments, fair value is established by reference to bid, or last, market prices depending on the convention of the exchange on which the investment is quoted at the close of business on the balance sheet date.
Unquoted investments are valued using an appropriate valuation technique so as to establish what the transaction price would have been at the balance sheet date. Such investments are valued in accordance with the IPEVC guidelines. Primary indicators of fair value are derived from earnings or sales multiples, using discounted cash flows, recent arm's length market transactions by independent third parties, from net assets, or where appropriate, at cost for recent investments or the valuation as at the previous reporting date.
Premiums on loan stock investments and preference shares are accrued at fair value when the Company has the right to receive the premium and expects to do so.
Those venture capital investments that may be termed associated undertakings are not equity accounted for and are carried at fair value as determined by the directors in accordance with the Company's accounting policy, as required by FRS 9 "Associates and Joint Ventures", where venture capital entities hold investments as part of an investment portfolio.
Income
Dividends receivable on equity shares and on unquoted funds are recognised as income on the date on which the shares or units are marked as ex-dividend. Where no ex-dividend date is available, the income is recognised when the Company's right to receive it has been established.
Interest income on loan stock and dividends on preference shares are accrued on a daily basis. Provision is made against this income where recovery is doubtful.
Interest receivable from fixed income securities is recognised using the effective interest rate method.
Interest receivable on bank deposits is included in the accounts on an accruals basis.
Other income is credited to the revenue column of the Income Statement when the Company's right to receive the income is established.
Expenses
All expenses are accounted for on an accruals basis. Expenses are charged through revenue in the Income Statement except as follows:
- costs which are incidental to the acquisition or disposal of an investment are taken to the capital column of the Income Statement;
- expenses are charged to the capital column in the Income Statement where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect investment management fees have been allocated 75 per cent to the capital column and 25 per cent to the revenue column in the Income Statement, being in line with the Board's expected long-term split of returns, in the form of capital gains and revenue respectively, from the investment portfolio of the Company;
- expenses associated with the issue of shares are deducted from the Share premium account.
Capital reserve
Capital reserve - other
The following are accounted for in this reserve:
- gains and losses on disposal of investments; - transaction costs which are incidental to the acquisition of investments;
- 75% of investment management fee expenses, together with the related tax effect, is charged to the capital column of the Income Statement in accordance with the above policies; and
- 100% of performance incentive fees.
Capital reserve - investment holding loss
The following are accounted for in this reserve:
- movements in the fair value of investments held at the year end.
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 have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversals of the underlying timing differences can be deducted. Timing differences are differences between the Company's taxable profits and its results as stated in the accounts.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.
No taxation liability arises on gains from sales of fixed asset investments by the Company by virtue of its venture capital trust status. However, the net revenue (excluding UK dividend income) accruing to the Company is liable to corporation tax at the prevailing rates.
Any tax relief obtained in respect of management fees allocated to capital is reflected in the capital reserve - other and a corresponding amount is charged against revenue. The relief is the amount by which corporation tax payable is reduced as a result of capital expenses.
Dividends
Dividends to shareholders are accounted for in the year in which they are paid or approved in general meetings. Dividends payable to equity shareholders are recognised in the Reconciliation of Movements in Shareholders' Funds when they are paid, or have been approved by shareholders in the case of a final dividend and become a liability of the Company.
Share Buybacks
Where shares are purchased for cancellation, the consideration paid, including any directly attributable incremental costs, is deducted from distributable reserves. As required by the Companies Act 2006, the equivalent of the nominal value of shares cancelled is transferred to capital redemption reserve.
2 Income
Year ended Year ended
31 December 2014 31 December 2013
GBP'000 GBP'000
Income from quoted investments
UK dividend income 44 57
Unfranked investment income - 1
44 58
Income from unquoted investments
Unfranked investment income 48 73
48 73
Other income
Redemption premium 15 3
Fees - -
15 3
Total income 107 134
Total income comprises
Dividends 44 58
Interest 48 73
Redemption premium 15 3
Fees -
Total income 107 134
3 Investment management fee
Year ended Year ended
31 December 2014 31 December 2013
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP\'000 GBP'000 GBP'000
Investment management fee 20 61 81 24 71 95
Claw back of excess expenses (6) (19) (25) (9) (26) (35)
14 42 56 15 45 60
For the year ended 31 December 2014, Calculus Capital Limited waived GBP24,912 (2013: GBP34,716) of its fees. At 31 December 2014, there was GBP46,073 outstanding receivable from Calculus Capital Limited (31 December 2013: receivable from Calculus Capital Limited GBP11,202). Details of the terms and conditions of the investment management agreement are set out under "Management" in the Directors' Report.
4 Other expenses
Year ended Year ended
31 December 2014 31 December 2013
GBP'000 GBP'000
Fees payable to the Company's auditor for the
audit of the
Company's individual accounts 22 23
Fees payable to the Company's auditor for other
services: - -
Tax compliance services 10 6
Directors' remuneration and social security
contributions 28 28
Other expenses 88 74
148 131
Further details of directors' remuneration can be found in the Directors' Remuneration Report.
5 Taxation on ordinary activities
Year ended Year ended
31 December 2014 31 December 2013
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK Corporation Tax - - - - - -
(Deficit)/return on ordinary activities
before taxation: (55) 746 691 (12) (566) (578)
(Deficit)/return on ordinary activities
multiplied by Corporation Tax at
21.50% (2013: 23.25%) (12) 160 148 (3) (131) (134)
Effect of:
UK dividends not chargeable to
tax (10) - (10) (13) - (13)
Non-taxable losses/(gains) - - - - 121 121
Excess expenses for the year 22 (160) 148 16 10 26
Total current tax charge - - - - - -
At 31 December 2014, the Company had GBP1,351,017 (31 December 2013: GBP1,210,181) of excess management expenses to carry forward against future taxable profits. The deferred tax asset of GBP270,203 (31 December 2013: GBP254,138) has not been recognised due to the fact that it is unlikely the excess management fees will be set off in the foreseeable future.
6 Dividends
Year ended Year ended
31 December 2014 31 December 2013
GBP'000 GBP'000
Declared and paid:
2013 Final dividend: 2.0p (2012: 2.0p) per
Ordinary Share 226 227
2014 Interim dividend: 1.0p (2013: 1.0p) per
Ordinary Share 113 113
339 340
Proposed:
2014 Final dividend: 2.0p (2013: 2.0p) per
Ordinary Share 226 226
The Company paid a final dividend on 6 June 2014 of 2.0p per Ordinary Share (2013: 2.0p) and an interim dividend on 9 October 2014 of 1.0p per Ordinary Share (2013:1.0p). The directors are proposing a final dividend of 2p per Ordinary Share in respect of the year ended 31 December 2014 (2013: 2.0p). Subject to shareholder approval, this dividend will be paid on 5 June 2015 to shareholders on the register on 1 May 2015. The Company paid a special interim dividend on 10 March 2015 of 5.0p per Ordinary Share (2014: nil).
7 Basic and diluted earnings per share
Year ended Year ended
31 December 2014 31 December 2013
GBP'000 GBP'000
Declared and paid:
2013 Final dividend: 2.0p (2012: 2.0p) per
Ordinary Share 226 227
2014 Interim dividend: 1.0p (2013: 1.0p) per
Ordinary Share 113 113
339 340
Proposed:
2014 Final dividend: 2.0p (2013: 2.0p) per
Ordinary Share 226 226
Basic and diluted earnings per Ordinary Share is based on the net revenue deficit on ordinary activities attributable to the Ordinary Shares of GBP55,000 (2013: GBP12,000) and on 11,311,329 (31 December 2013: 11,328,771) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year.
Basic and diluted capital deficit per Ordinary Share is based on the net capital return for the year of GBP746,000 (2013: GBP566,000) and on 11,311,329 (31 December 2013: 11,328,771) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year.
Basic and diluted total return per Ordinary Share is based on the total return on ordinary activities attributable to the Ordinary Shares of GBP691,000 (2013: GBP578,000) and on 11,311,329 (31 December 2013: 11,328,771) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year.
As the Company has not issued any convertible securities or share options, there is no dilutive effect on return per share.
8 Investments at fair value through profit or loss
Year Ended Year Ended
31 December 2014 31 December 2013
GBP'000 GBP'000
AIM investments 560 685
Quoted Neptune income funds 960 1,111
Unquoted and money market investments 2,429 3,627
3,949 5,423
GBP'000 GBP'000
Opening book cost 6,517 7,075
Opening investment holding losses (1,094) (704)
Opening valuation 5,423 6,371
Movements in the year:
Purchases at cost 160 865
Sales - proceeds (2,422) (1,284)
- realised gains/(losses) on sales 1,159 (139)
Movement in investment holding losses (371) (382)
Reallocation of RMS shares - (8)
Closing valuation 3,949 5,423
Closing book cost 5,414 6,517
Closing unrealised losses (1,465) (1,094)
Closing valuation 3,949 5,423
GBP'000 GBP'000
Gain/(loss) on disposal of investments 1,159 (139)
Movement in investment holding losses (371) (382)
Total gains/(losses) on investments 788 (521)
Note 18 to the accounts provides a detailed analysis of investments held at fair value through profit and loss in accordance with Financial Reporting Standard 29 'Financial Instruments: Disclosures'.
9 Significant interests
The Company had the following interests of 3 per cent or more in the share capital of its portfolio companies:
Class of shares Number held Proportion of
class held
Terrain Energy Limited Ordinary GBP1 412,677 6.2%
A Ordinary Shares
Heritage House Media Limited* of 1p 147,369 21.1%
AA Ordinary
Heritage House Media Limited* Shares of 1p 1,955,934 19.6%
RMS Group Holdings Limited Ordinary GBP1 85,166 4.5%
Dryden Human Capital Group B Ordinary of
Limited 5p 250,000 3.7%
10 Debtors
Year Ended Year Ended
31 December 2014 31 December 2013
GBP'000 GBP'000
Accrued income - 6
Other debtors and prepayments 21 17
21 23
11 Creditors - amounts falling due within one year
Year Ended Year Ended
31 December 31 December
2014 2013
GBP'000 GBP'000
Accruals and other creditors 111 48
12 Called up share capital
Ordinary Shares
Year Ended Year Ended
Issued and fully paid: 31 December 2014 31 December 2013
Ordinary Shares of 10p each Number GBP'000 Number GBP'000
As at 1 January 11,311,329 1,131 11,351,880 1,135
Purchase of own shares - - (4,052,635) (405)
Shares issued - - 4,012,084 401
As at 31 December 11,311,329 1,131 11,311,329 1,131
13 Reserves
Capital
reserve
-
Capital Capital investment
Special redemption reserve holding Revenue
reserve reserve - other loss reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2014 8,695 510 (3,757) (1,094) 1
Gains on sales - - 1,159
Movement in investment holding
losses - - - (371) -
Investment management fee charged
to capital - - (42) - -
Dividends paid (339) - - - -
Retained net loss for the year - - - - (55)
At 31 December 2014 8,356 510 (2,640) (1,465) (54)
The Special reserve was created to (i) create a distributable reserve which can be used by the Company to fund purchases of its own shares; (ii) to enable the Company to offset the effects of any future unrealised losses on future dividends payable in respect of shares; and (iii) since the Company revoked its status as an investment company, for any other purpose. The Company is therefore able to make distributions out of the aggregate of its Revenue reserve, Special reserve and Capital reserves, excluding any gains arising on the valuation of unquoted investments.
14 Net asset value per share
Year Ended Year Ended
31 December 2014 31 December 2013
pence pence
Ordinary Shares of 10p each 51.61 48.50
The basic and diluted net asset value per Ordinary Share is based on net assets (including current year revenue) of GBP5,838,033 (31 December 2013: GBP5,486,293) and on 11,311,329 (31 December 2013: 11,311,329) Ordinary Shares, being the number of Ordinary Shares in issue at the end of the year.
15 Reconciliation of net (deficit)/return before finance charges and taxation to net cash outflow from operating activities
Year ended Year ended
31 December 2014 31 December 2013
GBP'000 GBP'000
Net (deficit)/return before finance charges
and taxation 691 (578)
Net capital deficit/(return) (745) 566
Decrease in debtors 2 12
(Decrease)/ increase in creditors 62 (49)
Investment management fee charged to capital (42) (45)
Net cash outflow from operating activities (32) (94)
16 Reconciliation of net cash flow to movement in net funds
Year ended Year ended
31 December 2014 31 December 2013
GBP'000 GBP'000
Increase/(decrease) in cash in year 1,891 24
Net funds at beginning of year 88 64
Net funds at end of year 1,979 88
17 Financial commitments
At 31 December 2014 and 2013 the Company did not have any financial commitments which had not been accrued.
18 Analysis of financial assets and liabilities
The objective of the Company is to generate long term capital growth and tax free dividends for investors. The investment policy is to invest approximately 75 per cent of the Company's funds in a diversified portfolio of holdings in qualifying investments, whether unquoted or traded on AIM. Investments are made selectively across a diverse range of sectors in companies which have the potential to generate growth and enhance their value. The investments in a particular company may be made in loan stocks or preference shares as well as equity shares where it is felt this would enhance shareholder return. In accordance with the Company's risk averse approach, the Investment Manager will only invest when it believes it has identified the right investment opportunity. The balance of approximately 25 per cent of the Company's funds can be invested in a combination of Neptune income funds, a portfolio of similar income generating UK listed shares and money market instruments.
The ten largest holdings by value and the amounts invested in quoted equity, unquoted equity, unquoted bonds, unquoted preference shares, quoted funds and unquoted funds are set out in the Investment Portfolio, in the Report and Accounts.
The Company's financial instruments comprise securities, cash balances and debtors and creditors that arise from its operations.
The Company has no exposure to foreign currency risk.
The principal risks the Company faces in its portfolio management activities are:
- Market price risk - Interest rate risk - Liquidity risk - Credit risk
The Investment Manager's policies for managing these risks are summarised below and have been applied throughout the year. The Board keeps the risks under continual review through the provision of monthly management information and quarterly board meetings.
(i) 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 loss that the Company might suffer through holding market positions in the face of market movements. This risk is monitored by the Investment Manager on a regular basis and by the Board at meetings with the Investment Manager.
The Board reviews each investment purchase in the qualifying portfolio to ensure that any acquisition allows the Company to maintain an appropriate spread of other price risk and that it falls within the VCT qualifying criteria at the time of purchase. It considers the associated business risks of each investment. These include, but are not restricted to, the industry sector, management expertise and financial stability of each company.
The Company does not use derivative instruments to hedge against market price risk. The maximum potential exposure to market price risk is the value of the investment portfolio as at 31 December 2014 of GBP3,949,000 (31 December 2013: GBP5,423,000).
The Board believes that the Company's assets are mainly exposed to market price risk, as the Company holds most of its assets in the form of investments in VCT qualifying small UK companies whose equity shares are either quoted or valued by reference to the share prices of quoted comparable companies and are thus subject to market movements. The Board considers that investments in loan stock and/or preference shares may also be sensitive to changes in quoted share prices as the value of these financial instruments can be determined with reference to the enterprise value of the investee company which may be based on the value of quoted comparable companies.
The table below shows the impact upon profit and net assets if there were to be a 10 per cent (31 December 2013: 10 per cent) movement in overall share prices, and assumes:
- that each of the sub categories of instruments (shares and loan stocks other than liquidity funds) held by the Company produces an overall movement of 10 per cent, and
-
that the actual portfolio of investments held by the Company is perfectly correlated to this overall movement in share prices. Shareholders should however note that this level of correlation is highly unlikely in reality.
If overall share prices fell/rose by 10 per cent (2013: 10 per cent), with all other variables held constant:
Year Ended Year Ended
31 December 2014 31 December 2013
Return and Return and
net assets net assets
GBP'000 GBP'000
(Decrease)/increase in return (395)/395 (519)/519
(Decrease)/increase in net asset value per Ordinary
Share (3.49)p/3.49 p (4.59)p/4.59 p
A decrease of GBP393,752 (31 December 2013: GBP519,380) in the net assets of the Company would have decreased investment management fees payable to the Investment Managers for the financial year under review by GBP13,809 (31 December 2013: GBP18,178). An increase of GBP393,752 (31 December 2013: 519,380) would have increased investment management fees payable by GBP13,809 (31 December 2013: GBP18,178).
The impact of a change of 10 per cent has been selected, as in current market conditions, an increase/(decrease) in the aggregate values of investments by 10 per cent is reasonably possible based on historical changes that have been observed.
(ii) Interest rate risk
Interest is earned on cash balances and money market funds and is linked to the banks' variable deposit rates. The Board does not consider interest rate risk to be material. Interest rate risk arising on loan stock instruments is not considered significant, as the main risks on these investments are credit risk and market price risk. The Company does not have any interest bearing liabilities.
As required by Financial Reporting Standard 29 'Financial Instruments: Disclosures' an analysis of financial assets and liabilities, which identifies the risk of the Company's holding of such items is provided. The Company's financial assets comprise equity and preference shares, loan stock, cash and debtors. The interest rate profile of the Company's financial assets is given in the table below:
Year Ended Year Ended
31 December 2014 31 December 2013
Fair value Cash flow Fair value Cash flow
interest interest interest interest
rate rate rate rate
risk risk risk risk
GBP'000 GBP'000 GBP'000 GBP'000
Loan stock 829 - 1,093 -
Money market funds - 3 - 229
Cash - 1,979 - 88
829 1,982 1,093 317
The variable rate is based on the banks' deposit rate, and applies to cash balances held and the money market funds. The benchmark rate which determines the interest payments received on interest bearing cash balances is the Bank of England base rate which was 0.5 per cent as at 31 December 2014 (31 December 2013: 0.5 per cent).
(iii) Liquidity risk
The investments the Company holds include AIM quoted securities where the liquidity is generally below that of securities listed/quoted on the main market and it also holds unquoted investments where there is no ready market for the securities. The ability of the Company to realise positions may therefore be restricted when there are no willing purchasers.
The Board, which monitors the Company's overall liquidity risk, seeks to ensure that an appropriate proportion of the Company's investment portfolio is invested in cash and readily realisable securities, which are sufficient to meet any funding commitments that may arise.
At 31 December 2014, the Company held GBP2,458,000 (31 December 2013: GBP1,427,000) in cash and readily realisable securities (including the investments in the Neptune Income and Neptune Quarterly Income Funds) to pay accounts payable and accrued expenses.
(iv) Credit risk
The failure of a counterparty to a transaction to discharge its obligations under that transaction could result in the Company suffering a loss. The Company manages this risk by ensuring that where an investment is made in an unquoted loan, it is made as part of the overall equity and debt package. The recoverability of the debt is assessed as part of the overall investment process and is then monitored on an ongoing basis by the Investment Manager who reports to the Board on any recoverability issues. It also ensures that cash at bank is held only with reputable banks with high quality external credit ratings. None of the Company's financial assets are secured by collateral or other credit enhancements. The total exposure to loan stocks and cash is set out above in the interest rate risk section.
All assets of the Company which are traded on a recognised exchange are held by Reyker Securities plc, the Company's custodian. The Board regularly monitors the Company's risk by reviewing assessments of the custodian submitted by the Investment Manager.
Fair value hierarchy
Investments held at fair value through profit and loss are valued in accordance with IPEVC guidelines as follows:
Year ended Year ended
Valuation Methodology 31 December 2014 31 December 2013
GBP'000 GBP'000
Quoted market bid price 1,523 2,025
Expected recoverable amount 65 138
Discounted cash flow 28 103
Earnings multiple 599 1,859
Recent investment price 397 222
Sales multiple 462 387
Precedent transaction multiple 103 -
Reserves multiple 772 689
3,949 5,423
The valuation method used will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEVCA guidelines.
As required by Financial Reporting Standard 29 'Financial Instruments: Disclosures' (the Standard) an analysis of financial assets and liabilities, which identifies the risk of the Company's holding of such items is provided. The Standard requires an analysis of investments carried at fair value based on the reliability and significance of the information used to measure their fair value.
In order to provide further information on the valuation techniques used to measure assets carried at fair value, the measurement bases are categorised into a "fair value hierarchy" as follows:
- Quoted market prices in active markets - "Level 1"
Inputs to Level 1 fair values are quoted prices in active markets for identical assets. An active market is one in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis. The Company's investments in AIM quoted equities, money market funds and the quoted Neptune funds are classified within this category.
- Valued using models with significant observable market inputs - "Level 2"
Inputs to Level 2 fair values are inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly. The Company has no investments classified within this category.
- Valued using models with significant unobservable market inputs - "Level 3"
Inputs to Level 3 fair values are unobservable inputs for the asset. Unobservable inputs may have been used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset at the measurement date (or market information for the inputs to any valuation models). As such, unobservable inputs reflect the assumptions the Company considers that market participants would use in pricing the asset. The Company's unquoted equities, preference shares and loan stock are classified within this category. As explained in note 1, unquoted investments are valued in accordance with the IPEVCA guidelines.
Financial assets at fair value through
profit or loss
for year ended 31 December 2014
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Equity investments 560 - 1,597 2,157
Fixed interest investments - - 829 829
Preference share investments - - - -
Money market funds 3 - - 3
Quoted Neptune income funds 960 - - 960
1,523 - 2,426 3,949
Financial assets at fair value through
profit or loss
for year ended 31 December 2013
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Equity investments 685 - 2,241 2,926
Fixed interest investments - - 1,093 1,093
Preference share investments - - 64 64
Money market funds 229 - - 229
Quoted Neptune income funds 1,111 - - 1,111
2,025 - 3,398 5,423
The table below shows movements in the assets measured at fair value based on Level 3 valuation techniques for which any significant input is not based on observable market data. During the year there were no transfers between levels 1, 2 or 3.
Level 3 financial assets at fair value
through profit or loss
for year ended 31 December 2014
Preference Fixed
share interest
Equity investments investments investments Total
GBP'000 GBP'000 GBP'000 GBP'000
Opening balance at 1 January 2014 2,241 64 1,093 3,398
Purchases - - 160 160
Sales (568) (64) (106) (738)
Total net losses recognised
in the Income Statement (76) (318) (394)
Closing balance at 31 December 2014 1,597 - 829 2,426
Level 3 financial assets at fair value
through profit or loss
for year end 31 December 2013
Preference Fixed
share interest
Equity investments investments investments* Total
GBP'000 GBP'000 GBP'000 GBP'000
Opening balance at 1 January 2013 2,133 376 1,069 3,578
Purchases 133 - 432 565
Sales - - (408) (408)
Total net (losses)/gains recognised
in the Income Statement (25) (312) - (337)
Closing balance at 31 December 2013 2,241 64 1,093 3,398
* Included within the fixed interest investments was loan stock purchased by the Company's former wholly owned subsidiary Neptune-Calculus SPV Limited for GBP5,463, on which a loss of GBPnil was recognised in the Income Statement.
The Standard requires disclosure, by class of financial instruments, if the effect of changing one or more inputs to reasonably possible alternative assumptions would result in a significant change to the fair value measurement. The information used in determination of the fair value of Level 3 investments is chosen with reference to the specific underlying circumstances and position of the investee company. The portfolio has been reviewed and both downside and upside reasonable possible alternative assumptions have been identified and applied to the valuation of each of the unquoted investments. Applying the downside alternatives the value of the unquoted investment portfolio would be GBP163,000 (31 December 2013: GBP290,000) or 6.6 per cent (31 December 2013: 8.5 per cent) lower. Using the upside alternatives the value of the unquoted investment portfolio would be increased by GBP166,000 (31 December 2013: GBP306,000) or 6.7 per cent (31 December 2013: 9.0 per cent) higher.
Financial liabilities
The Company finances its operations through its issued share capital and existing reserves. The only financial liabilities of the Company are creditors all of which are sterling denominated and are due within one year. The creditors are disclosed in note 11. No interest is paid on these liabilities.
All assets and liabilities are carried at fair value.
Capital management policies and procedures
The Company's capital management objectives are to ensure that it will be able to continue as a going concern and to maximise the income and capital return to its Ordinary shareholders.
The Board, with the assistance of the Investment Manager monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes the planned level of gearing, which takes account of the Manager's views on the market; the need for new issues of equity shares; and the extent to which revenue in excess of that which is required to be distributed should be retained. The capital of the Company is made up of called up share capital and reserves as detailed on the balance sheet in the Report and Accounts.
19 Transactions with the Investment Manager
The Company's qualifying investments are managed by Calculus Capital Limited. John Glencross, a director of the Company, has an interest in Calculus Capital Limited and is a director of Terrain Energy Limited. John Glencross was also a director of Limetec Limited from 1st January 2014 to 31st October 2014, when he resigned from the Board. The amounts paid to the Investment Manager are disclosed in note 3.
Calculus Capital Limited receives annual fees from Terrain Energy Limited for the provision of John Glencross as a director, as well as annual monitoring fees. Calculus Capital Limited also received a fee from Limetec Limited Group for the provision of John Glencross as a director until 31st October 2014. Calculus Capital Limited receives an annual monitoring fee from Limetec Limited, MicroEnergy Generation Services Limited, Hampshire Cosmetics Limited and Human Race Group Limited. Other funds under the management or advice of Calculus Capital Limited have also invested in Terrain Energy Limited, Limetec Limited, MicroEnergy Generation Services Limited, Hampshire Cosmetics Limited, Human Race Group Limited and Dryden Human Capital Group Limited. In the year ended 31 December 2014, the amount payable to Calculus Capital Limited which was attributable to the investment made by the Company was GBP2,640 (2013: GBP4,519) (excluding VAT) from Terrain Energy Limited, GBP5,780 (2013: GBP2,889) (excluding VAT) from Limetec Limited, GBP3,138 (2013: GBP3,295) from Human Race Group Limited, GBP699 (2013: GBPnil) for Hampshire Cosmetics Limited and GBP235 (2013: GBP674) (excluding VAT) from MicroEnergy Generation Services Limited. Calculus Capital Limited also receives fees relating to a directorship for Dryden Human Capital Limited. The amount which was attributable to the Company in 2014 was GBP2,874.78 (2013: GBP608) (excluding VAT).
In the year ended 31 December 2014, Calculus Capital Limited received no arrangement fees (2013: GBPnil) as a result of the Company's investment in Limetec Limited and no arrangement fees (2013: GBPnil) as a result of the Company's investment in Dryden Human Capital Group Limited.
As mentioned in the Directors' Report, the Company may co-invest with other funds managed and advised by Calculus Capital Limited. The allocation between different funds takes into account such factors as the funds available for investment and the time horizon of these funds, the size of a potential investment, and the existing sector exposure of the various funds.
20 Nature of financial Information
These are not full accounts in terms of Section 434 of the Companies Act 2006. Full audited accounts for the year ended 31 December 2013 have been lodged with the Registrar of Companies. The Report and Accounts for the year ended 31 December 2014 will be sent to shareholders shortly and will be available for inspection at 104 Park Street, London, W1K 6NF, the Company's registered office, and will be published on www.calculuscapital.com, a website maintained by the Company's Investment Manager, Calculus Capital Limited. The audited accounts for the year ended 31 December 2014 contain an unqualified audit report.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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