Maven Income 1 Regulatory News (MIG1)

10 Jun 2008 17:57



Aberdeen Income and Growth VCT PLC

Final results for the year ended 29 February 2008

The Directors are pleased to report that, in this challenging year, there has been progress for your Company despite the generally

more difficult market conditions and where the AIM market, particularly in the second half of the year, has been very volatile. 

Among the highlights are:

NAV total return increased to 101.6p per share (pps) at year-end, up 2.0% over the year;

NAV at year-end of 72.8pps (after adjusting for dividends paid);

Strong level of new investment activity with 9 new private equity investments and 12 new AIM investments completed during the reporting period;

One successful exit from an unlisted company during the year plus receipt of deferred consideration from a number of earlier investments generated a gain of 3.0pps;

Net realised capital gains from AIM stocks of 4.0pps for the year; and

Dividend proposed of 2.3pps to bring total to 5.8p for the year.

Performance

The NAV total return at 29 February 2008 was 101.6pps, an increase of 2.0% over the equivalent figure at 28 February 2007. The full year position has fallen back marginally from the advance announced in the interim results due to the decline in the AIM market in the second half of the year. The FTSE AIM All-share index fell by 7.5% over the year while the Company's AIM portfolio achieved an overall increase of 3.5% for the same period, including realised capital gains equivalent to 4.0pps.

The Net Asset Value (NAV) at 29 February 2008, before payment of a final dividend in respect of the year then ended, was 72.8pps compared with 81.1pps at 28 February 2007; however dividends totalling 10.3pps had been paid during the year which effectively reduced the opening NAV by that amount. The most important measure for a VCT is the NAV total return, being the long-term record of income and capital gains dividend payments plus the current NAV. In the short term, the NAV on its own is a less important measure of the performance as the underlying investments are long-term in nature and not readily realisable.

Dividends

The Board stated in the 2007 Annual Report that it expected to declare dividends totalling at least 4.0pps for the year ending 29 February 2008. The Directors are now recommending the payment of a final dividend of 2.3pps, to be paid on 25 July 2008 to Shareholders on the register at close of business on 27 June 2008. The total dividend in respect of the year ended 29 February 2008 will, therefore, be 5.8pps.

The Board intends to pay regular dividends from realised gains and hopes that the level of payment will be increased over time but this cannot be guaranteed. All dividends are, of course, paid tax-free to Shareholders and a net dividend of 5.8pps is equivalent to a yield of 7.7% from an equity investment to a higher-rate taxpayer on an effective initial investment of 80pps; if the initial tax relief of 20% is taken into account, the effective annual yield rises to 9.7%, and, based on the mid-market share price of 46.5p at 29 February 2008, the annual yield to a higher-rate taxpayer buying shares in the secondary market would by 16.6%. Since the Company's launch, and after receipt of the final dividend, Shareholders will have received 31.1pps in tax-free dividends, of which 21.6p has been paid over the last four years. 

The effect of paying the proposed dividend of 2.3pps will be to reduce the NAV to 70.5pps.

Articles of Association

At the Annual General Meeting, Directors will be asking Shareholders to approve a number of amendments to the Company's Articles of Association, primarily to reflect the provisions of the Companies Act 2006. An explanation of the main changes between the proposed and existing Articles of Association will set out in the Appendix to the Notice of Meeting to be included in the Annual Report.

The Board considers that the Resolution to be put to the meeting is in the best interests of the Company and its Shareholders; the Directors will be voting in favour of it and unanimously recommend that Shareholders do so as well.

Outlook

A significant number of new unlisted investments were made over the course of the year and all are generally trading well. They should form the basis of successful realisations in future periods, although it is too early to predict the quantum and timing of those realisations. The Manager continues to be extremely selective in the choice of AIM investments and those holdings should provide realised gains in due course, although this is less predictable in the current climate of uncertainty. AIM investments are actively traded, with profits taken when available in the market, and this policy will continue into the future.

There is a continual need to re-invest following the realisation of successful investments. The Company is well placed to achieve this given the Manager's extensive network and local relationships throughout the UK from which investments can be sourced.

A Statement of Total Recognised Gains and Losses has not been prepared, as all gains and losses are recognised in the Income Statement.

*The total column of this statement is the Profit and Loss Account of the Company.

Notes

Accounting Policies - UK Generally Accepted Accounting Practice

The Financial Statements have been prepared under the historical cost convention, modified to include the revaluations of investments, and in accordance with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' (the SORP) issued in 2005.

Income

Dividends receivable on equity shares are treated as revenue for the period on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the year end are treated as revenue for the period. Provision is made for any dividends not expected to be received. The fixed returns on debt securities and non-equity shares are recognised on a time apportionment basis so as to reflect the effective interest rate on the debt securities and shares. Provision is made for any fixed income not expected to be received. Interest receivable from cash and short term deposits and interest payable are accrued to the end of the year.

Expenses

All expenses are accounted for on an accruals basis and charged to the Income Statement. Expenses are charged through the revenue account except as follows:

expenses which are incidental to the acquisition and disposal of an investment are charged to capital; and

expenses are charged to realised capital reserves where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect, the investment management fee has been allocated 20% to revenue and 80% to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth.

Taxation

Deferred taxation 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 right to pay less 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 reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the Financial Statements which are capable of reversal in one or more subsequent periods.

Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences are expected to reverse, based on tax rates and laws enacted or substantively enacted at the Balance Sheet date. The tax effect of different items of income/gain and expenditure/loss is allocated between capital reserves and revenue account on the same basis as the particular item to which it relates using the Company's effective rate of tax for the period.

Investments

In valuing unlisted investments the Directors follow the criteria set out below. These procedures comply with the revised International Private Equity and Venture Capital Valuation Guidelines for the valuation of private equity and venture capital investments. Investments are recognised at their trade date and are valued at fair value, which represent the Directors' view of the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction. This does not assume that the underlying business is saleable at the reporting date or that its current shareholders have an intention to sell their holding in the near future.

A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or expires.

For investments completed within the 12 months prior to the reporting date and those at an early stage in their development, fair value is determined using the Price of Recent Investment Method, except that adjustments are made when there has been a material change in the trading circumstances of the company or a substantial movement in the relevant sector of the stock market.

 Whenever practical, recent investments will be valued by reference to a material arm's length transaction or a quoted price.

Mature companies are valued by applying a multiple to their fully-taxed prospective earnings to determine the enterprise value of the company.3.1 To obtain a valuation of the total ordinary share capital held by management and the institutional investors, the value of third party debt, institutional loan stock, debentures and preference share capital is deducted from the enterprise value. The effect of any performance related mechanisms is taken into account when determining the value of the ordinary share capital.3.2 Preference shares, debentures and loan stock are valued using the Price of Recent Investment Method. When a redemption premium has accrued, this will only be valued if there is a reasonable prospect of it being paid. Preference shares which carry a right to convert into ordinary share capital are valued at the higher of the Price of Recent Investment Method basis and the price/earnings basis, both described above. 

Where there is evidence of impairment, a provision may be taken against the previous valuation of the investment. 

In the absence of evidence of a deterioration, or strong defensible evidence of an increase in value, the fair value is determined to be that reported at the previous Balance Sheet date.

All unlisted investments are valued individually by Aberdeen Private Equity's Portfolio Management Team. The resultant valuations are subject to detailed scrutiny and approval by the Directors of the Company.

In accordance with normal market practice, investments listed on AIM, PLUS or another recognised stock exchange are valued at their bid market price.

Gains and losses on investments

When the Company revalues its investments during the year, any gains or losses arising are credited/charged to the Income Statement.

Movement in reserves

Returns per Ordinary Share

The returns per Ordinary Share are based on the following figures:

Net Asset Value per Ordinary Share

Net Asset Value per Ordinary Share as at 29 February 2008 has been calculated using the number of Ordinary Shares in issue at that date of 35,463,992 (2007: 35,463,992). 

Principal risks and uncertainties

The principal risks facing the Company relate to its investment activities and include market price, interest rate and liquidity risk. 

Additional risks faced by the Company, and the mitigation approach adopted by the Board, are as follows:

investment objective: the Board's aim is to maximise absolute returns to Shareholders while managing risk by ensuring an appropriate diversification of investments;

investment policy: inappropriate stock selection leading to underperformance in absolute and relative terms is a risk which the Manager mitigates by operating within investment guidelines and regularly monitoring performance against the peer group;

discount volatility: due to the lack of liquidity in the secondary market, venture capital trust shares tend to trade at discounts to net asset values which the Board seeks to manage, through the Manager and the Company's Broker, by ensuring that sufficient information on the Company is available to potential buyers of its shares; and

regulatory risk: the Company operates in a complex regulatory environment and faces a number of related risks. A breach of section 842AA of the Income and Corporation Taxes Act 1988 could result in the Company being subject to capital gains tax on the sale of its investments. A breach of the VCT Regulations could result in the loss of VCT status and consequent loss of tax reliefs currently available to Shareholders. A serious breach of other regulations, such as the UKLA Listing Rules or the Companies Act, would lead to suspension of its shares from the Stock Exchange, loss of VCT status and reputational damage. The Board receives quarterly reports from the Manager in order to monitor compliance with regulations.

At least twice each year the Board considers all of the above risks and the measures in place to manage them.

Other information

The Annual General Meeting will be held on 3 July 2008, commencing at 2.15 p.m.

This Preliminary Announcement has been prepared on the same basis as the Annual Report and Financial Statements for the year ended 28 February 2007. The Annual Report and Financial Statements for the year ended 29 February 2008 will be filed with the Registrar of Companies and issued to Shareholders in due course.

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. The statutory Financial Statements for the year ended 28 February 2007 have been delivered to the Registrar of Companies and contained an audit report which was unqualified and did not constitute statements under Sections 237(2) or (3) of the Companies Act 1985.

Copies of this announcement will be available to the public at the office of Aberdeen Asset Managers Limited, 149 St Vincent Street, Glasgow; at the registered office of the Company, One Bow Churchyard, Cheapside, London and on the Company's website at www.aigvct.co.uk

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 29 February 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

10 June 2008