Neptune-Calculus Income & Growth Regulatory News (NEP)

26 Sep 2005 17:07

Neptune-Calculus Income &Growth VCT26 September 2005 Neptune-Calculus Income and Growth VCT plc Interim Report for the period to 30 June 2005 Chairman's statement I am pleased to present my first interim report to shareholders since the PublicOffer for Subscription by the Neptune-Calculus Income and Growth VCT plc ("theCompany"). The Offer was launched on 10 December 2004 and in the period to 17June 2005 raised £3.7 million. This was a very encouraging outcome and I wouldlike to thank shareholders for their support. The Interim Report shows thefinancial performance of the Company from 30 November 2004, when the Company wasincorporated, to 30 June 2005. I have included below a brief summary of theseresults and what it means for shareholders. Summary of Investment Performance The objective of the Company is to maximise tax-free dividend distributions toshareholders. Initially, these will come from funds invested in non-qualifyinginvestments. In the medium to longer term, they are expected to come fromproceeds from the sale of the Company's VCT qualifying investments. The Company's investment strategy in relation to qualifying investments is toinvest in a diversified portfolio of pre-flotation companies, managementbuy-outs and buy-ins and AIM placements. The Company does not invest in start-upor seed capital situations. In accordance with the Company's risk averseapproach, the Manager will only invest when it believes it has identified theright investment opportunity. Pending investment in qualifying investments, the Company's funds will beinvested in a combination of the Neptune Income Fund and the Neptune QuarterlyIncome Fund, a range of similar UK listed shares, interest bearing funds andmoney market instruments. It is intended that approximately 25 per cent. of theCompany's funds will remain invested in Neptune income funds. The period under review covers the launch of the Company, so few qualifyinginvestments were made. In the period to 30 June 2005, the Company made onequalifying investment for a cost of £124,800. This company is listed on AIM. Afurther £455,000 was invested in the Neptune Income Fund. Further information regarding the investment performance is available within theInvestment Managers' Review. Financial Results Net revenue attributable to Shareholders for the period was £26,886, which wasderived from interest on cash on deposit and a dividend from the Neptune IncomeFund. Unrealised gains on investments of £8,333 were also achieved. Dividend In line with our policy of maximising tax-free dividends to shareholders and asset out in the prospectus for the recent Offer for Subscription, the Directorspropose an interim dividend of 1p per ordinary share to be paid on 14 October2005 to shareholders on the register on 1 February 2005. VCT Qualifying Status As you may be aware, the Company must be 70 per cent. invested in qualifyingcompanies by 31 December 2007 in order to comply with VCT regulations. At 30 June 2005, the Company had invested 3.5 per cent. of shareholders' fundsin qualifying investments and at 26 September 2005 this figure had risen to 11per cent. following investment in two further qualifying companies. The Directors will continue to monitor the Company's progress towards meetingthe Inland Revenue's conditions. In the light of current deal flow, we areconfident that the Company will meet the relevant conditions by its deadline of31 December 2007. Outlook The board is pleased with the progress achieved to date. It is confident thatover the longer term the combination of identifying qualifying investments inwell-managed companies led by entrepreneurs who have the ability to build strongbusinesses and investment in Neptune's income funds will provide an attractivereturn for investors. We continue to see a healthy pipeline of opportunities and expect to makeseveral additional qualifying investments in the forthcoming months.The income tax benefit from investing in VCTs for the tax years 2004/5 and2005/6 is 40 per cent. putting them on a similar basis to investment in SelfInvested Pension Plans. The government is currently reviewing the position forthe tax year 2006/7 and subsequent years but without any known timetable forthat review to be completed. In the light of the uncertainty over the level andbases of tax relief after 5 April 2006, it is the Directors' belief that thisincreases the attractiveness of 2005/6 as a time to invest in VCTs. The Companyis proposing to raise additional capital for investment by means of a 'C' shareoffer. Details will be forwarded to shareholders in due course. Philip StephensChairman26 September 2005 Investment Managers' review Investment manager (qualifying investments) The deal flow of potential VCT qualifying investments remains strong and weexpect to make further investments over the remainder of the financial year. Inline with our patient and risk averse approach, we will only invest inqualifying companies when we are confident we have found the right opportunity.At 30 June 2005, we had invested in one qualifying investment. Debtmatters Group plc Debtmatters is a profitable AIM quoted company which provides permanentsolutions to consumers in debt via Individual Voluntary Arrangements (IVAs). Thebusiness has grown rapidly with turnover increasing by a factor of five betweenthe years ending 31 May 2004 and 31 May 2005. In June 2005, the company raisedapproximately £3 million before expenses via a placing on AIM of 4,615,385shares at 65p, primarily for working capital and marketing purposes. IVAs arelegally binding agreements which were introduced by the UK Government as part ofthe Insolvency Act 1986. The advantage to the lender is that it generally recovers more than it would through other means. The benefit to the borrower isthat it is an alternative to bankruptcy. The Company invested on the same termsas other funds managed by Calculus Capital. Reasons for investment: The UK Department of Trade and Industry reported that in2004 the number of personal insolvencies, including bankruptcies and voluntaryarrangements, rose 31 per cent. to 46,650 in the UK compared with the previousyear. The Debtmatters businesses have been profitable for the last two years Date of investment: June 2005Cost: £124,800Valuation as at 30 June 2005: £124,800Valuation method: AIM bid priceEquity and voting rights held: 0.8% Since 30 June 2005, the Company has made two further qualifying investments. Aninvestment of £125,000 was made in PharmaSmart Limited, an unquoted companywhich provides services to the pharmaceutical industry, and £145,753 wasinvested in Cellcast plc, an AIM quoted company which produces live interactiveprogramming. Calculus Capital Limited26 September 2005 Investment manager (non-qualifying investments) As at 30 June 2005, the Company had invested 12.9 per cent. of the Company's netassets in the Neptune Income Fund and as at 26 September 2005 investment in theNeptune Income Fund and the Neptune Quarterly Fund had risen to 14.5 per cent.in each Fund. The objective of each Fund is to produce high income, increasing at least inline with inflation, from a managed portfolio chiefly invested in UK equities,although with some overseas exposure. The Neptune Income Fund and The NeptuneQuarterly Fund are true stock picking funds, investing in only 33 companies, allof which are equally weighted. We believe that the fundamentals for the UK economy remain generally favourableand dividend income will be a key source of total return for investors. Neptune Investment Management Limited26 September 2005 Investment PortfolioAs at 30 June 2005 Valuation % of Shareholders' Cost Valuation funds £ £ £Debtmatters Group plc 124,800 124,800 3.5%Total Qualifying Investments 124,800 124,800 3.5%Neptune Income Fund A Shares 455,000 463,033 12.9%Total 579,800 587,833 16.4% Unaudited Statement of Total Return(incorporating the revenue account*) for the period 30 November 2004** to 30June 2005 Revenue Capital Total NOTE £'000 £'000 £'000Gains on investments 8 - 8 8Income 2 53 - 53Investment management fees 3 - - -Other expenses 4 (24) - (24)Return on ordinary activities before taxation 29 8 37Taxation on ordinary activities 6 (2) - (2)Return attributable to equity shareholders 27 8 35Dividends in respect of equity shareholders - - -Transfer to reserves 27 8 35Return per ordinary share 7 1.10p 0.33p 1.43p Notes* The revenue column of this statement is the profit and loss account of theCompany.** The Company was incorporated on 30 November 2004** and commenced investingon 22 June 2005All revenue and capital items in the above statement derive from continuingoperations. Unaudited Balance Sheetas at 30 June 2005 NOTE £'000 £'000Fixed assetsInvestments 8 588Current assetsDebtors and prepayments 9 28Cash at bank 3,030 3,058Creditors: amounts falling due within one yearCreditors and accruals 10 47Net current assets 3,011Total net assets 3,599 Represented by: Share capital and reservesShare capital 11 377Share premium 12 3,187Capital reserve -realised 12 -Capital reserve -unrealised 12 8Revenue reserve 12 27Equity shareholders'funds 3,599 Net asset value per ordinary share 95.50p Unaudited Cash Flow Statement Period ended 30 June 2005 £'000 Operating activitiesInvestment income received -Deposit interest received 31Investment management fees paid -Other cash payments (15)Net Cash inflow from operating activities 16 Servicing of FinanceInterest paid -Net Cash outflow from servicing of finance - TaxationCorporation tax received /(paid) - Capital Expenditure and Financial investmentPurchase of investments (580)Sale of investments -Net cash outflow from capital expenditure and financial investment (580) Equity dividends paid -FinancingProceeds of share issues 3,769Cost of share issues (175)Net cash inflow from financing 3,594Increase in cash 3,030 Notes to the Financial Statements Accounting Policies 1 Basis of accounting The accounts have been prepared under the historical cost convention, modifiedto include the revaluation of fixed asset investments. The accounts have beenprepared in accordance with applicable UK accounting standards and are incompliance with the Statement of Recommended Practice 'Financial Statements ofInvestment Trust Companies' ("SORP").As this is the first period since incorporation there are no comparativefigures. Investments Listed investments, investments traded on AIM and unlisted funds are stated atbid prices at the balance sheet date.Capital gains and losses on investments, whether realised or unrealised, aredealt with in the capital reserve. Income Dividends receivable on listed and quoted equity shares and on unlisted fundsare recognised as income on the date on which the shares or units are marked asex-dividend. Where no ex-dividend date is available, the income is recognisedwhen the company's right to receive it has been established.Interest receivable from fixed income securities is recognised in income usingthe effective interest rate method. Interest receivable on bank deposits isincluded in the accounts on an accruals basis.Other income is credited to the revenue account upon receipt. Expenses All expenses are accounted for on an accruals basis. Expenses are chargedthrough the revenue account in the statement of total return except as follows:. -expenses which are incidental to the acquisition of an investment areincluded within the cost of an investment;. -expenses which are incidental to the disposal of an investment are deductedfrom the disposal proceeds on an investment.DividendsDividends paid by the Company are accounted for in the period in which thedividend has been declared. Taxation Deferred tax is recognised in respect of all timing differences that haveoriginated but not reversed at the balance sheet date where transactions orevents that result in an obligation to pay more tax in the future have occurredat the balance sheet date. This is subject to deferred tax assets only beingrecognised if it is considered more likely than not that there will be suitableprofits from which the future reversals of the underlying timing differences canbe deducted. Timing differences are differences between the Company's taxableprofits and its results as stated in the accounts.Deferred tax is measured at the average tax rates that are expected to apply inthe periods in which the timing differences are expected to reverse, based ontax rates and laws that have been enacted or substantially enacted by thebalance sheet date. Deferred tax is measured on a non-discounted basis.No taxation liability arises on gains from sales of fixed asset investments bythe Company by virtue of its venture capital trust status. However, the netrevenue (excluding franked investment income) accruing to the Company is liableto corporation tax at the prevailing rates 2 Income Period to 30 June 2005 £'000Income from listed investmentsUK dividend income 16 Other incomeBank interest receivable 37Total income 53Total income comprises:Dividends 16Interest 37Other income -Total 53 3 Investment management fees Period to 30 June 2005 Revenue Capital Total £000 £'000 £'000Investment management fees - - -Irrecoverable VAT - - -Total - - - The investment managers have waived their fees for the period to 30 June 2005. 4 Other expenses Period to 30 June 2005 £'000Auditors' remuneration for:Audit 7Other services to the Company -Other expenses 17Total 24 Further fees of £4,000 have been paid to the auditors in connection with theissue of shares and have been charged against the share premium account. 5 Directors' remuneration Period to 30 June 2005 £'000Total fees -Remuneration to Directors £Philip Stephens -David Kempton -David McEuen -John Glencross -Robin Geffen - Directors' fees will become payable from 1 July 2005. 6 Taxation on ordinary activities Period to 30 June 2005 Revenue Capital Total £'000 £'000 £000Based on net return:Provision for corporation tax at 19% 2 - 2Total 2 - 2 7 Return per ordinary share Period to 30 June 2005 Revenue Capital Total pence pence penceOrdinary share 1.10 0.33 1.43 Revenue return per ordinary share is based on the net revenue on ordinaryactivities of £26,886 and on 2,436,529 ordinary shares, being the weightedaverage number of ordinary shares in issue during the period. Capital return per ordinary share is based on the net capital gain for theperiod of £8,033 and on 2,436,529 ordinary shares, being the weighted averagenumber of ordinary shares in issue during the period. 8 Investments Period to 30 June 2005 £'000Investments quoted on a recognised exchange 125Unquoted investments 463 588 £'000Opening book cost -Opening unrealised appreciation -Opening valuation -Movements in the period:Purchases at cost 580Sales -- proceeds -- realised losses on sales -Unrealised appreciation 8Closing valuation 588Closing book cost 580Closing unrealised appreciation 8Closing valuation 588 The Company holds an investment quoted on AIM with a book cost of £125,000 andmarket value of £125,000. The remainder of the investments are in a UKOpen Ended Investment Company. Period to 30 June 2005 £'000Realised gain on disposal of investments -Unrealised appreciation 8Gains on investments 8 9 Debtors Period to 30 June 2005 £'000Prepayments and accrued income 28Total 28 10 Creditors: amounts falling due within one year Period to 30 June 2005 £'000Accruals and other creditors 15Costs of share issue 30Corporation tax payable 2Total 47 11 Share capital Period to 30 June 2005 £'000Authorised:50,000,000 Ordinary shares of 10p each 5,000 Authorised, issued and fully paid:3,768,562 Ordinary shares of 10p each 377 12 Reserves Share Capital Capital premium reserve reserve Revenue account realised unrealised reserve £'000 £'000 £'000 £'000At 30 November 2004 - - - -Premium on share issues 3,392 - - -Less: expenses of issue (205) - - -Increase in unrealisedappreciation - - 8 -Retained net revenue for theperiod - - - 27At 30 June 2005 3,187 - 8 27 By a special resolution passed on 30 November 2004, the amount standing to thecredit of the share premium account attributable to the Ordinary Shares wascancelled. The cancellation was confirmed by the Court on 24 August 2005 andregistered by the Registrar of Companies on 1 September 2005. 13 Reconciliation of movement in shareholders' funds Period to 30 June 2005 £'000Revenue reserveNet revenue for the period 27Dividends paid and declared -Retained net revenue for the period 27 Capital reserveMovement in capital reserve 8 8Share capitalIssue of shares 377 377Share premium accountPremium on share issue 3,392Expenses of issue (205) 3,187 Net addition to shareholders' funds 3,599Opening shareholders' funds -Closing shareholders' funds 3,599 14 Net asset value per ordinary share Period to 30 June 2005 penceOrdinary shares of 10p each 95.50 The basic net asset value per ordinary share is based on net assets (includingcurrent period revenue) of £3,599,000 and on 3,768,562 ordinary shares, beingthe number of shares in issue at the end of the period. 15 Reconciliation of operating net revenue to net cash inflow from operatingactivities Period to 30 June 2005 £'000Operating net revenue 29Increase in debtors (28)Increase in creditors 15Net cash inflow from operating activities 16 16 Reconciliation of net cash flow to movement in net funds Period to 30 June 2005 £'000Increase in cash in period 3,030Net funds at beginning of period -Net funds at end of period 3,030 17 Analysis of changes in net funds At Other At 30 November Cash non-cash 30 June 2004 flows movements 2005 £'000 £'000 £'000 £'000Cash at bank - 3,030 - 3,030Total - 3,030 - 3,030 18 Financial commitments At 30 June 2005 the Company did not have any financial commitments which had notbeen accrued. 19 Analysis of financial assets and liabilities The objective of the Company is to maximise tax free dividend distributions toshareholders. The investment strategy is to invest in a diversified portfolio ofpre-flotation companies, management buy-outs and buy-ins and AIM placements. TheCompany does not invest in start-up or seed capital situations. In accordancewith the Company's risk averse approach, the Manager will only invest when itbelieves it has identified the right investment opportunity. The Company's financial instruments comprise securities, cash balances anddebtors and creditors that arise from its operations. The Company has little exposure to credit, income or cash flow risk and noexposure to foreign currency risk. The principal risks the Company faces in its portfolio management activitiesare:- Market risk- Liquidity risk- Interest rate riskThe Investment Manager's policies for managing these risks are summarised belowand have been applied throughout the period. (i) Market risk Market risk arises from uncertainty about the future prices of financialinstruments held in accordance with the Company's investment objectives. Itrepresents the potential loss that the Company might suffer through holdingmarket positions in the face of market movements. These risks are monitored bythe Investment Manager on a regular basis and the Board at meetings with theInvestment Manager. The investments the Company holds includes an AIM quoted security where theliquidity is generally below that of securities listed/quoted in the mainmarket. The ability of the Company to realise positions may therefore berestricted when there are no willing purchasers. The Board, through the nominated Director, considers each investment purchase toensure that any acquisition allows the Company to maintain an appropriate spreadof market risk. In addition it considers each investment to ensure that it fallswithin the VCT qualifying criteria at the time of purchase. In addition itconsiders the associated business risks of investing in each individual company.These include, but are not restricted to, the industry sector, managementexpertise and financial stability of each company. The Company does not use derivative instruments to hedge against market risk. (ii) Liquidity risk Although the Company's AIM quoted investment is less liquid than securitieslisted on the London Stock Exchange the Board seeks to ensure that anappropriate proportion of the Company's investment portfolio is invested in cashand readily realisable securities, which are sufficient to meet any fundingcommitments that may arise. (iii) Interest rate risk The Company does not have any interest bearing liabilities. Interest is earnedon cash balances at banks at variable rates. As required by Financial Reporting Standard 13 "Derivatives and other financialinstrument disclosures", an analysis of financial assets and liabilities, whichidentifies the risk of the Company's of holding such items, is provided below. Financial assets The Company holds a fixed asset investment which is quoted on AIM and theremaining investment is a UK Open Ended Investment Company (OEIC). The interest rate profile of the Company's financial assets as 30 June 2005 was: Financial assets Fixed rate Variable rate on which no financial financial interest is paid assets assets Total £'000 £'000 £'000 £'000Equity shares 588 - - 588Cash - - 3,030 3,030Debtors 28 - - 28 616 - 3,030 3,646 The variable rate is based on the banks' deposit rate. Financial liabilities The Company finances its operations through its issued share capital andexisting reserves. The only financial liabilities of the Company are creditorswhich are due within one year and disclosed in note 10. No interest is paid onthese liabilities.All assets and liabilites are carried at fair value. 20 Related party transactions The Company's investments are managed by Calculus Capital Limited and NeptuneInvestment Management Limited. John Glencross and Robin Geffen , both Directorsof the Company, have an interest in Calculus Capital and Neptune respectively.The amounts paid to the Managers are disclosed in note 3. Calculus Capital Limited also provides administrative services to the Commpany for which it receives an annual fee however it has waived its fee for the periodto 30 June 2005. The Company has invested £455,000 in The Neptune Income Fund, which at theperiod end is valued at £463,000. 21 Nature of financial information The financial information for the period to 30 June 2005 has not been audited.The Company has not yet filed any accounts with the Registrar of Companies. The Company's first financial period will end on 31 December 2005. The Interim Report will be posted to shareholders as soon as practicable afterprinting. The Interim Report will also be available on request from the CompanySecretary at the Company's registered office, 11 Lees Place, London W1K 6LN. This information is provided by RNS The company news service from the London Stock Exchange