Close Brothers Venture Capital Trust PLC Report & Accounts for the year to 31 March 2003 Lombardy Park Care Home, Ipswich Residential development at Rodley, Leeds Days Inn Hotel, The Mailbox, Birmingham Glory Mill Health & Fitness Club Cambridge Arts Picture House CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Page CONTENTS 2 3 4 5 7 8 9 17 22 24 26 28 29 30 31 40 Directors and administration Investment objectives Financial highlights and financial calendar Chairman’s statement The Board of Directors The Manager The portfolio of investments Report of the Directors Statement of corporate governance Directors’ remuneration report Independent auditors’ report Statement of total return (incorporating the revenue account) Balance sheet Cash flow statement Notes to the Financial Statements Notice of meeting CLOSE BROTHERS VENTURE CAPITAL TRUST PLC DIRECTORS AND ADMINISTRATION Directors D J Watkins MBA (Harvard), Chairman (US citizen) R M Davidson J M B L Kerr ACMA J G T Thornton MBA, FCA Investment Manager Close Venture Management 12 Appold Street London EC2A 2AW Tel: 020 7426 4000 Secretary and Registered Office Registrar Auditors Custodians J M Gain 12 Appold Street London EC2A 2AW Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Deloitte & Touche London RBSI Custody Bank Ltd Liberte House 19-23 La Motte Street St Helier Jersey JE4 5RL Capita Trust Company Ltd Guildhall House 81-87 Gresham Street London EC2V 7QE 2 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC INVESTMENT OBJECTIVES Close Brothers Venture Capital Trust PLC (“Close Brothers VCT”) is a venture capital trust which raised a total of £39.7 million through an issue of Ordinary Shares in the spring of 1996 and through a issue of “C” Shares in the following year. The Company offers tax-paying investors substantial tax benefits at the time of investment, on payment of dividends and on the ultimate disposal of the investment. Its investment strategy is to minimise the risk to investors whilst maintaining an attractive yield. This is achieved as follows: • • • • • qualifying unquoted investments are predominantly in specially-formed companies which provide a high level of asset backing for the capital value of the investment; Close Brothers VCT invests alongside selected partners with proven experience in the sectors concerned; investments are normally structured as a mixture of equity and loan stock. The loan stock represents the majority of the finance provided, and is secured on the assets of the investee company. Funds managed or advised by Close Venture Management typically own 50 per cent. of the equity of the investee company; other than the loan stock issued to funds managed or advised by Close Venture Management and, in certain circumstances, temporary bridging finance prior to further investment by funds managed or advised by Close Venture Management, investee companies do not normally have external borrowings; and a clear strategy for the realisation of each qualifying unquoted investment within five years or shortly thereafter is identified from the outset. 3 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC FINANCIAL HIGHLIGHTS Total return per share Net dividends per share Net asset value per share Shareholder value created for each class of share since launch: Note Gross dividends for the year ended 31 March 1997 Gross dividends for the year ended 31 March 1998 Gross first and second interim dividends and net final dividend (i) for the year ended 31 March 1999 Net revenue and capital dividends for the year ended 31 March 2000 (ii) Net revenue and capital dividends for the year ended 31 March 2001 Net revenue dividends for the year ended 31 March 2002 Net revenue and capital dividends for the year ended 31 March 2003 Total dividends to 31 March 2003 Net asset value at 31 March 2003 Total return to 31 March 2003 Year ended Year ended 31 March 31 March 2002 2003 9.9p 8.0p 11.7p 7.5p 108.91p 106.24p Ordinary Shares “C” Shares pence per pence per share share 5.00 6.00 – 5.00 7.75 8.55 7.50 7.50 8.00 50.30 108.91 159.21 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 6.25 4.50 7.50 7.50 8.00 38.75 108.91 147.66 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) Notes: i) Dividends paid before 5 April 1999 were paid to qualifying shareholders inclusive of the associated tax credit. The dividends for the year to 31 March 1999 were maximised in order to take advantage of this tax credit. ii) The capital dividend of 2.55 pence in the year to 31 March 2000 enabled the Ordinary Shares and the C Shares to merge on an equal basis. FINANCIAL CALENDAR Ex date for dividend Record date for final dividend Annual General Meeting Posting of dividend cheques in respect of the final dividend 2 July 2003 4 July 2003 28 July 2003 29 July 2003 Announcement of interim results for the six months ended 30 September 2003 November 2003 Payment of interim dividend December 2003 4 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC CHAIRMAN’S STATEMENT Introduction The progress of your Company’s investment portfolio during the year has continued to be encouraging. As the portfolio has matured we have taken the opportunity to dispose of three of our investments. This has meant that, by continuing its strategy of a progressive dividend policy and of building on the current level of pay out by utilising profits generated both from revenue and from profits on disposal of investments, the Company’s total dividend has increased from last year’s 7.50 pence per share to 8.00 pence per share for the year to 31 March 2003. The three investments sold realised profits of £3 million on a cost of £10.7 million, while the provision for unrealised appreciation increased by £1.3 million over the year. This in turn means that, in market conditions that have not been easy, your Company’s net asset value per share has risen by a further 2.5 per cent. to 108.9 pence per share which, when combined with the revenue return, has resulted in an overall return of 9.9 pence per share for the year. This builds on strong returns over the previous years and your Company has now paid or declared total dividends since launch for the Ordinary Shares and ‘C’ Shares (now converted) amounting to 50.30 pence and 38.75 pence per share respectively. The performance of the market value of the Ordinary Shares against the FTSE 100 Index, with dividends reinvested, in both cases, is shown below. 100 90 80 70 60 50 40 30 20 10 0 -10 h t w o r G e g a t n e c r e P FTSE 100 Close BrothersVCT Percentage Growth Total Return 70.5 8.1 01/01 07/01 01/02 07/02 01/03 01/97 07/97 01/98 07/98 01/99 07/99 07/00 2321 Days From 21/11/96 To 31/03/03 01/00 As mentioned in the interim report the year under review also witnessed a key milestone in the history of the Company. At the AGM held in August of last year, shareholders voted overwhelmingly for the Company to continue as a VCT for a further five years. At the same time, we instituted a tender offer to purchase or procure purchasers for up to 10 per cent. of the Company’s shares at a price of 100 pence per share in order to provide liquidity for those who wished to realise their investment. In the event 9.3 per cent. of the Company’s shares were tendered, meaning that all applications were satisfied in full. Since the completion of the tender offer, the liquidity of the Company’s shares has increased markedly. Following Shareholders’ approval for the change in the Company’s borrowing powers, £1 million has now been drawn down from the borrowing facility provided by the Royal Bank of Scotland of up to £5 million. 5 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Review of Investments Our key investment areas continue to be the hotel, residential property development and care home sectors, with other asset-based areas continuing to be reviewed, as characterised by our investment in our Cambridge cinema and Beaconsfield health and fitness club. In the hotel sector, we committed to invest up to £5 million in a new 175 room Express by Holiday Inn hotel at Stansted Airport. In addition, we sold our investment in Premier VCT (Bristol) Ltd, which owned the Express by Holiday Inn hotel in Bristol city centre, for a profit of £2 million on a cost of £4.3 million. We also completed the sale of our investment in Hawkwell VCT Ltd, which owned the Hawkwell House Hotel in Oxford, for a profit of £840,000 on cost of £3.4 million. The overall return was further enhanced by the fact that, in both cases, our investment had been providing the Company with an income yield of around 10 per cent. on cost per annum. There are currently a variety of interesting potential new investments in the hotel sector which are under review, and the manager considers that, despite the challenging environment for hotels overall, carefully selected and well managed units can be a continuing source of profits for your Company. In the residential development sector, which is restricted to 20 per cent. of the portfolio, we currently have four companies established with separate developers. These have continued to be a useful source of income for your Company, with particularly good results from Country & Metropolitan VCT, which develops residential homes in and around Yorkshire. In the care home sector our principal area of investment during the year continued to be homes for people with learning disabilities in East Anglia. There are now five such homes in which we have invested, in Witham, Bury St. Edmunds, Thetford, Ipswich and March, all of which are performing well, and showing a substantial increase in value over the last year as the market has strengthened. We invested a further £2.75 million in the homes during the year to provide further facilities and capacity. Meanwhile we disposed of our remaining home for the frail and elderly, the 55 bed Hornchurch Nursing Home, realising a profit of £250,000 on cost of £2.85 million; again, the investment also generated an income yield of 10 per cent. per annum. We believe that the prospects for the care home sector, both in the generalist area of the frail and elderly and the specialist area of learning disabilities, continue to be positive and we are reviewing a number of new opportunities. As regards our other areas for investment, the Cambridge Picture House cinema continues to perform well, resulting in a decision to invest £200,000 in City Screen (Liverpool) Ltd in conjunction with Close Brothers Protected VCT, Close Brothers Development VCT and the Close Technology & General VCT to develop a new art house cinema in the FACT Centre in Liverpool. The health club owned by Odyssey Glory Mill, which opened in April 2001, continues to perform strongly with a membership of over 4,000, although its value has again fallen, by £332,000 since last year, in line with a continued softening of values in the health and fitness market. Results and Dividend As at 31 March 2003 the net asset value was £39.07 million or 108.9 pence per share, which compares with a net asset value at 31 March 2002 of £41.5 million or 106.2 pence per ordinary share. Under the tender offer 3.1 million shares were bought in for cancellation, resulting in a reduction in net assets of £3.1 million. Net income before taxation was £3.3 million (2002: £3.4 million) enabling the board to declare a net final revenue dividend of 3.70 pence per share and a net final capital dividend of 1.50 pence per share, resulting in total revenue dividends of 6.50 pence and total capital dividends of 1.50 pence, or 8.0 pence per share in total, (2002: revenue dividends of 7.50 pence per share). The final dividends for the year ended 31 March 2003 will be paid on 29 July 2003 to shareholders registered on 4 July 2003. David Watkins Chairman 6 20 June 2003 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC THE BOARD OF DIRECTORS The following are the Directors of the Company, all of whom operate in a non-executive capacity: David Watkins (58) MBA (Harvard), Chairman. From 1972 until 1991 he worked at Goldman Sachs, where he was Head of Euromarkets Syndication and Head of the European Real Estate Department. He subsequently joined Mountleigh Group PLC where he worked as a director for 12 months on the restructuring of the business. Until late 1995 he worked at Baring Securities Limited as Head of Equity Capital Markets - London, before leaving to join Capital Risk Strategies (UK) Limited, a consultancy formed to provide risk management solutions to large corporations. From 1985 to 1990 he was a director of the Association of International Bond Dealers, and from 1986 to 1990 was a member of the Council of the London Stock Exchange. Roderick Davidson (65). He joined B S Stock & Co, stockbrokers in Bristol in 1960, becoming a partner in 1965 and managing director of Stock Beech & Co. Limited in 1985. In 1990 he joined Albert E Sharp where he managed investment portfolios on behalf of pension funds, charitable trusts and private investors. He retired in the spring of 1998. He is chairman of Close Brothers Development VCT PLC. John Kerr (60) ACMA. He recently retired as finance director of Ambion Brick, a building material company bought out from Ibstock PLC. Prior to this he was chief executive of Price & Pierce Limited, which acts as the UK agent for overseas producers of forestry products. From 1985 to 1992, he was the managing director of SUMIT Equity Ventures Limited, an independent Midlands based venture capital company. Before that, he held a number of finance and general management posts in manufacturing industries both in the UK and USA. Jonathan Thornton (56) MBA, FCA. He retired as a director of Close Brothers Group plc and as chairman of Close Brothers Investment Limited, of which Close Venture Management is a division, in 1998. In 1984 he was responsible for establishing Close Investment Management Limited, the venture capital fund management arm of Close Brothers Group. Prior to this he worked for both 3i plc and Cinven. He is a director of Close Brothers Development VCT PLC. 7 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC THE MANAGER Close Venture Management, a division of Close Brothers Investment Limited which is authorised and regulated by the Financial Services Authority, is the Manager of Close Brothers Venture Capital Trust PLC. In addition to Close Brothers Venture Capital Trust, it manages a further three VCTs: Close Brothers Protected VCT PLC, which raised £27.9 million in 1997 to invest principally in qualifying loans guaranteed by the Royal Bank of Scotland, which are now over time being replaced by co- investments alongside Close Brothers Venture Capital Trust PLC, and in shares issued by companies quoted on AIM; Close Brothers Development VCT PLC, which raised £14.6 million in 1999 and a further £11.5 million in 2002/3 to provide development capital to unquoted companies; and Close Technology & General VCT which has raised £14.3 million to invest in both ‘old economy’ and ‘new economy’ businesses. Close Venture Management also manages Bamboo Investments PLC, which specialises in technology investments, and acts as investment adviser to the Healthcare and Leisure Property Fund PLC, which co-invests in asset-based businesses alongside Close Brothers Venture Capital Trust PLC. Close Brothers was voted ‘VCT Group’ of the year at the Growth Company Awards 2003. The Manager’s ultimate parent company is Close Brothers Group plc, a substantial independent merchant banking group incorporated in the United Kingdom and listed on the London Stock Exchange. Close Brothers Group has extensive experience in asset-based finance over a range of specialised lending activities. The following are specifically responsible for the management and administration of the VCTs managed by Close Venture Management, including Close Brothers Venture Capital Trust PLC: Patrick Reeve, (43), MA, ACA. He qualified as a chartered accountant with Deloitte Haskins & Sells before joining Cazenove & Co where he spent three years in the corporate finance department. He joined the Close Brothers Group in 1989, initially in the development capital subsidiary, where he was a director specialising in the financing of smaller unquoted companies. He joined the corporate finance division in 1991, where he was also a director. He established Close Venture Management with the launch of Close Brothers Venture Capital Trust PLC in the spring of 1996. Ole Bettum, (39), BSc, MBA. After three years as a research economist for the Saudi Government, he graduated from Columbia Business School with an MBA. He worked in the corporate finance department of Price Waterhouse from 1994 and joined Close Brothers Investment in 1996 to help establish Close Venture Management . Henry Stanford, (38), MA, ACA. He qualified as a chartered accountant with Arthur Andersen before joining the corporate finance division of the Close Brothers Group in 1992. He became an assistant director in 1996 and transferred to Close Venture Management in 1998 to concentrate on VCT investment. Will Fraser-Allen (32), BA (Hons), ACA qualified as a chartered accountant with Cooper Lancaster Brewers in 1996 before specialising in corporate finance and investigation. He joined Close Venture Management in 2001. Emil Gigov, (33), BA (Hons), ACA qualified as a chartered accountant with KPMG in 1997 and subsequently worked in KPMG’s corporate finance division. He joined Close Venture Management in 2000. 8 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC THE PORTFOLIO OF INVESTMENTS The following is a summary of qualifying investments at 31 March 2003, comprising amounts invested and scheduled for investment, and after including the revaluations referred to in the Chairman’s statement above: Total Reserved for investment £’000 £’000 Investee Company Investment Investment at Revaluation Care Homes Broadoaks VCT Ltd Churchcroft VCT Ltd Drummond Court VCT Ltd Fryers Walk VCT Ltd Lombardy Court VCT Ltd Hotels Kew Green VCT (Stansted) Ltd Premier VCT (Mailbox) Ltd Residential Development Chase Midland VCT Ltd Country & Metropolitan VCT Ltd Saxon VCT Ltd Youngs VCT Ltd Other Investments City Screen (Cambridge) Ltd City Screen (Liverpool) Ltd Odyssey Glory Mill Ltd Cost £’000 1,865 1,550 2,500 2,575 1,450 1,000 4,000 1,600 3,000 2,200 1,200 1,210 200 4,000 £’000 226 516 458 467 90 – 665 – – – – (50) – 858 2,091 2,066 2,958 3,042 1,540 1,000 4,665 1,600 3,000 2,200 1,200 1,160 200 4,858 Total 28,350 3,230 31,580 – – – – – 4,000 600 – – – – – – 500 5,100 Note: All valuations, other than for the residential property development companies (which typically distribute profits upon completion of developments) and for Kew Green VCT (Stansted) Limited and City Screen (Liverpool) Limited (which have also both been held at cost) are based upon independent valuations. 9 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Care Homes 1. Broadoaks VCT Limited Broadoaks VCT was established to develop and operate a 30 bed purpose-built home for residents with learning disabilities in March, Cambridgeshire. The home opened in April 2002, and it is currently being extended to a total of 38 beds. Date of initial investment: Operating partner: Amount invested at 31 March 2003: Further amount reserved for investment: Proportion of capital and voting rights held: 50% September 2000 InterCare Residential Limited £1.87 million Nil Latest audited financial information: 30 September 2002 Turnover for the year Loss before taxation for the year Accumulated retained losses Net assets £ 159,000 144,000 118,000 424,000 In the year to 30 September 2002 the company made an operating loss before management fees, depreciation and interest of £68,000. 2. Churchcroft VCT Limited Churchcroft VCT owns a 34 bed purpose-built home for residents with learning disabilities in Witham, Essex. Date of initial investment: Operating partner: Amount invested at 31 March 2003: Further amount reserved for investment: Proportion of capital and voting rights held: 50% June 1998 InterCare Residential Limited £1.55 million Nil Latest audited financial information: 30 September 2002 Turnover for the year Loss before taxation for the year Accumulated retained losses Net assets £ 1,151,000 41,000 50,000 407,000 In the year to 30 September 2002 the company made an operating profit before management fees, depreciation and interest of £275,000. 10 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC 3. Drummond Court VCT Limited Drummond Court VCT owns a 36 bed home for residents with learning disabilities in Bury St. Edmunds, Suffolk. The home opened in 1999. Date of initial investment: Operating partner: Amount invested at 31 March 2003: Further amount reserved for investment: Proportion of capital and voting rights held: 50% September 1998 InterCare Residential Limited £2.5 million Nil Latest audited financial information: 30 September 2002 Turnover for the year Loss before taxation for the year Accumulated retained losses Net assets £ 1,085,000 22,000 101,000 341,000 In the year to 30 September 2002 the company made an operating profit before management fees, depreciation and interest of £339,000. 4. Fryers Walk VCT Limited Fryers Walk VCT owns and operates a 34 bed home for residents with learning disabilities in Thetford, Norfolk, which opened in 2001. Date of initial investment: Operating partner: Amount invested at 31 March 2003: Further amount reserved for investment: Proportion of capital and voting rights held: 50% March 1999 InterCare Residential Limited £2.58 million Nil Latest audited financial information: 30 September 2002 Turnover for the year Profit before taxation for the year Accumulated retained profits Net assets £ 885,000 17,000 14,000 486,000 In the year to 30 September 2002 the company made an operating profit before management fees, depreciation and interest of £292,000. 11 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC 5. Lombardy Court VCT Limited The company owns and operates a 24 bed home for residents with learning disabilities in the centre of Ipswich which opened in 2001. A further 4 beds are under construction, taking the total capacity to 28 beds. Date of initial investment: Operating partner: Amount invested at 31 March 2003: Further amount reserved for investment: Proportion of capital and voting rights held: 50% January 2000 InterCare Residential Limited £1.45 million Nil Latest audited financial information: 30 September 2002 Turnover for the year Loss before taxation for the year Accumulated retained losses Net assets £ 668,000 41,000 106,000 268,000 In the year to 30 September 2002 the company made an operating profit before management fees, depreciation and interest of £139,000. Hotels 6. Kew Green VCT (Stansted) Limited Kew Green VCT (Stansted) was established to develop and operate an Express by Holiday Inn hotel at Stansted Airport. Detailed planning permission is currently being sought and the company has therefore yet to start trading. Date of initial investment: Operating partner: Amount invested at 31 March 2003: Further amount reserved for investment: Proportion of capital and voting rights held: 50% March 2003 Kew Green Hotels Limited £1 million £4 million There is no financial information available as the company has yet to start trading. Subsequent to 31 March 2003, Healthcare & Leisure Property Fund PLC, which is advised by Close Venture Management, has invested in the company and it is intended that Close Brothers Protected VCT PLC, which is managed by Close Venture Management, will also co-invest. 12 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC 7. Premier VCT (Mailbox) Limited This company was formed to build and operate a 90 room hotel operating under the Days Inn brand at the Mailbox development in the centre of Birmingham. It opened in April 2001. Date of initial investment: Operator: Amount invested at 31 March 2003: Further amount reserved for investment: Proportion of capital and voting rights held: 50% December 1999 Hospitality Management International Ltd £4 million £0.6 million Latest audited financial information: 30 June 2002 Turnover for the year Loss before taxation for the year Accumulated retained losses Net assets £ 1,378,000 68,000 212,000 688,000 In the year to 30 June 2002 the company made an operating profit before management fees, depreciation and interest of £559,000. Healthcare & Leisure Property Fund PLC, which is advised by Close Venture Management, has invested £250,000 in loan stock in the Company. Residential Development 8. Chase Midland VCT Limited The company is currently undertaking its fifth and sixth developments comprising a 4 apartment new build development within the curtilage of a listed former convent in central Nottingham and the conversion of two former Victorian houses into 12 apartments in the Edgbaston area of Birmingham. Date of initial investment: Developer partner: Amount invested at 31 March 2003: Further amount reserved for investment: Nil Proportion of capital and voting rights held:50% March 1997 Chase Midland plc £1.6 million Latest audited financial information: 30 June 2002 Turnover for the year Profit before taxation for the year Accumulated retained profits Net assets £ 1,749,000 64,000 78,000 797,000 13 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC 9. Country & Metropolitan VCT Limited The company is close to completing its eighth development, a 40 unit scheme in the Rodley area of Leeds and has recently commenced a part conversion, part new build 21 apartment scheme in York. It will also shortly commence a 24 apartment scheme on a former warehouse site in the Pudsey area of Leeds. Date of initial investment: Developer partner: Amount invested at 31 March 2003: Further amount reserved for investment: Proportion of capital and voting rights held: 43% November 1996 Country & Metropolitan plc £3 million Nil Latest audited financial information: 31 August 2002 Turnover for the year Profit before taxation for the year Accumulated retained profits Net assets £ 3,373,000 240,000 10,000 1,373,000 Healthcare & Leisure Property Fund PLC, which is advised by Close Venture Management, has invested £500,000 in the company. 10. Saxon VCT Limited This company successfully completed its fourth and fifth developments, comprising an 11 unit scheme in Dorchester and a 2 house scheme in Henley-on-Thames. It is intended that the shares held by Saxon Developments Limited will be sold to Prime Residential Limited, which is controlled by the former managing director of Saxon Developments, and the company will be renamed Prime VCT Limited. It will shortly commence a 12 apartment scheme in Hertford. Date of initial investment: Developer partner: Amount invested at 31 March 2003: Further amount reserved for investment: Proportion of capital and voting rights held: 50% September 1996 Saxon Development Limited £2.2 million Nil Latest audited financial information: 30 September 2002 Turnover for the year Profit before taxation for the year Accumulated retained profits Net assets £ 2,618,000 158,000 17,000 1,017,000 14 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC 11. Youngs VCT Limited The company recently completed converting a Grade II Listed Hall in Funtington, near Chichester, into 4 houses, of which two have been sold to date. It has commenced construction of an 11 apartment scheme at Lee-on-the-Solent, overlooking the Isle of Wight. Date of initial investment: Developer partner: Amount invested at 31 March 2003: Further amount reserved for investment: Proportion of capital and voting rights held: 27% March 2000 Youngs Developments Ltd £1.2 million Nil Latest audited financial information: 31 December 2001 Turnover for the year Profit before taxation for the year Accumulated retained profits Net assets £ 1,735,000 358,000 38,000 583,000 Subsequent to 31 December 2001, Close Brothers Protected VCT PLC, which is managed by Close Venture Management, invested £1 million in the company. Other investments 12. City Screen (Cambridge) Limited The company was formed to develop and operate a three screen “art-house” cinema in the centre of Cambridge. The cinema opened in August 1999. Close Brothers Venture Capital Trust has received management fees of £125,000 to date in addition to its running return of approximately 10% from loan stock. Date of initial investment: Operating partner: Amount invested at 31 March 2003: Further amount reserved for investment: Proportion of capital and voting rights held: 50% July 1999 City Screen Limited £1.21 million Nil Latest audited financial information: 31 December 2002 Turnover for the year Loss before taxation for the year Accumulated retained losses Net assets £ 1,373,000 28,000 264,000 99,000 In the year to 31 December 2002 the company made an operating profit before management fees, depreciation and interest of £369,000. 15 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC 13. City Screen (Liverpool) Limited The company was formed to develop and operate a three screen “art-house” cinema in the FACT centre in Liverpool. The cinema commenced trading in February 2003. Date of initial investment: Operating partner: Amount invested at 31 March 2003: Further amount reserved for investment: Proportion of capital and voting rights held: 18% November 2002 City Screen Limited £0.2 million Nil Latest audited financial information: 31 December 2002 Turnover for the year Loss before taxation for the year Accumulated retained losses Net assets £ Nil 5,000 5,000 243,000 Close Brothers Protected VCT PLC, Close Brothers Development VCT PLC and Close Technology & General VCT PLC, which are all managed by Close Venture Management, have invested £250,000, £50,000 and £50,000 respectively. 14. Odyssey Glory Mill Limited The company was formed to develop and operate a 32,000 square foot health and fitness club on a five acre site outside Beaconsfield. The club opened in April 2001 and has over 4,000 members. Date of initial investment: Operating partner: Amount invested at 31 March 2003: Further amount reserved for investment: Proportion of capital and voting rights held: 50% December 1999 Odyssey Clubs Group Plc £4 million £0.5 million Latest audited financial information: 30 September 2002 Turnover for the year Loss before taxation for the year Accumulated retained losses Net assets £ 2,193,000 15,000 376,000 1,394,000 In the year to 30 September 2002 the company made an operating profit before management fees, depreciation and interest of £850,000. 16 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC REPORT OF THE DIRECTORS The Directors submit the Report and Accounts of the Company for the year to 31 March 2003. Principal Activity and Status The principal activity of the Company is that of a venture capital trust. It was approved by the Inland Revenue as a venture capital trust in accordance with Section 842 of the Income and Corporation Taxes Act 1988 and in the opinion of the Directors, the Company has subsequently conducted its affairs so as to enable it to continue to obtain such approval. Approval for the year ended 31 March 2003 is subject to review should there be any subsequent enquiry under corporation tax self assessment. The Company is not a close company for taxation purposes. Details of the principal investments made by the Company are given above in the review of the portfolio of investments. A review of the Company’s business during the year is contained in the Chairman’s Statement. The Company is no longer an investment company as defined in Section 266 of the Companies Act 1985. The Company revoked its investment company status on 11 May 2000 to enable the Company to pay dividends from realised capital profits. Results and Dividends Revenue return attributable to shareholders for the year ended 31 March 2003 Net interim revenue dividend of 2.80p per share paid on 29 January 2003 Net final revenue dividend of 3.70p per share payable on 29 July 2003 to shareholders on the register at the close of business on 4 July 2003 Total transferred to revenue reserve Realised capital return attributable to shareholders for the year ended 31 March 2003 Realisation of revaluation gains from previous years Net final capital dividend of 1.50p per share payable on 29 July 2003 to shareholders on the register at the close of business on 4 July 2003 Realised capital loss attributable to shareholders on expenses for the year ended 31 March 2003 Unrealised capital return attributable to shareholders for the year ended 31 March 2003 Total transferred to capital reserve Total transferred to reserves £’000 2,336 (1,007) (1,327) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 2 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 3,073 (2,532) (538) (536) 1,302 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 769 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 771 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 17 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Purchase of Own Shares The purchase of shares by the Company is intended, inter alia, to provide a market for the shares and thereby to reduce the discount at which shares may trade. Since any purchases are made at a discount to net asset value at the time of purchase, the net asset value per share of the remaining shares in issue should increase. The Company purchased, for cancellation, the following shares with a nominal value of 50p: Date 18 July 2002 31 March 2003 Percentage of share capital cancelled Directors Price (pence) 100.00 95.00 Shares purchased No. 3,102,967 96,500 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 3,199,467 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 8.2% (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) The Directors who held office throughout the year, and their interests in the shares of the Company (together with those of their immediate family) were: D J Watkins R M Davidson J M B L Kerr J G T Thornton 31 March 2003 Shares held 31 March 2002 Shares held 10,000 5,000 13,109 31,218 10,000 5,000 9,109 31,218 J M B L Kerr purchased 4,000 shares on 28 January 2003 at 101 pence per share. No Director has a service contract with the Company. The Company does not have any employees. All Directors are members of the Audit Committee. 18 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Management Agreement The Company and Close Brothers Investment Limited (the “Manager”) entered into a management agreement for an initial fixed period to 3 April 2000 which may now be terminated by either party on 12 months’ notice. Under this agreement, the Manager also provides secretarial and administrative services to the Company. The management agreement is subject to earlier termination in the event of certain breaches or on the insolvency of either party. The following fees are payable to the Manager by the Company under the terms of the agreement: • • • Non-Qualifying Investments A fee equal to 0.50 per cent. of funds invested in non-qualifying investments. Qualifying Investments A fee equal to 1.8 per cent. of funds invested in qualifying investments. Secretarial and administrative services A fee of £32,625 per annum, plus VAT, rising annually in line with the Retail Prices Index. The Manager is also entitled to an arrangement fee, payable by each company in which the Company invests, of in the region of two per cent. on each investment made. Management Performance Incentive On flotation in 1996 the Manager entered into an agreement with the Company whereby the Manager was granted options to subscribe for new shares equivalent to eight per cent. of the total shares issued by the Company. Under this arrangement the options could be exercised in whole or in part during the period 2001 to 2004 in respect of the Ordinary Shares and during the period 2002 to 2005 in respect of the “C” Shares. Under the incentive arrangements the subscription price per share was 100 pence less the amount by which the actual return to shareholders, including dividends received, exceeds the minimum performance objectives, subject to a minimum subscription price of 80 pence per share. In the light of subsequent changes in legislation in the 1998 Budget which prohibits the issue of new shares by venture capital trusts which invest in certain asset-based activities, in particular those in which the Company invests, the Board has elected not to issue further new shares. In these circumstances, under the terms of the original option agreement, the Manager is entitled to a cash sum equal to the value of the shares to which the Manager would otherwise have been entitled, less the subscription price. Although full provision for this payment has been made by the Company, the cash sum will be payable over the remaining life of options in annual tranches. Auditors Deloitte & Touche are the appointed auditors. They have expressed their willingness to continue in office as auditors and a resolution proposing their reappointment will be submitted at the Annual General Meeting. Substantial Interests As at 20 June 2003 the Company was not aware of any beneficial interest exceeding 3 per cent. of the issued share capital. 19 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Statement of Directors’ Responsibilities United Kingdom company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit or loss of the Company for that period. In preparing those financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • • state whether all applicable accounting standards have been followed; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. Re-appointment of directors At the forthcoming Annual General Meeting, as required by the Articles of Association, all directors retire and being eligible offer themselves for re-election. Annual General Meeting The Annual General Meeting will be held at 12 Appold Street, London EC2A 2AW at 10 a.m. on 28 July 2003. The notice of the Annual General Meeting is at the end of this document. A resolution will be proposed as special business at the Annual General Meeting for the following purpose: Purchase of own shares A resolution concerning Special Business, number 6 in the notice of meeting, will renew the authority to purchase in the market and cancel up to 3,587,822 of the Company’s issued shares (equivalent to 10 per cent. of the share capital currently in issue). Purchases of shares will be made within guidelines established from time to time by the Board, but only if it is considered that such purchases would be to the advantage of the Company and its shareholders taken as a whole. Purchases will only be made in the market for cash at prices below the prevailing net asset value per Ordinary Share. Under the rules of the London Stock Exchange the maximum price which can be paid by the Company is 5 per cent. above the average of the relevant market value of the shares for the five business days preceding the purchase. Shares which are purchased will be cancelled. In making purchases the Company will deal only with member firms of the London Stock Exchange. Purchases of shares will be funded from distributable reserves. To the extent that the Company purchases shares at a discount to net asset value, the net asset value of the remaining shares in issue will increase. 20 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Supplier payment policy The Company’s policy is to pay all supplier invoices within 30 days of the invoice date, or as otherwise agreed. There were no overdue trade creditors at 31 March 2003 (2002 - nil). By Order of the Board J M Gain Secretary 12 Appold Street London EC2A 2AW 20 June 2003 21 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC STATEMENT OF CORPORATE GOVERNANCE Background The Financial Services Authority requires all listed companies to disclose how they have applied the principles and complied with the provisions of the Combined Code (“the Code”). Application of the Principles of the Code The Board attaches importance to matters set out in the Code and applies its principles. However, as a venture capital trust company, most of the Company’s day-to-day responsibilities are delegated to third parties and the Directors are all non-executive. Thus, not all the provisions of the Code are directly applicable to the Company. Board of Directors The Board consists solely of non-executive Directors. Mr Watkins is the Chairman and senior independent Director. All Directors are able to take independent professional advice in furtherance of their duties if necessary. The Board has a formal schedule of matters reserved to it and meets quarterly or as may be necessary. The management agreement between the Company and its Manager sets out the matters over which the Manager has authority and the limits beyond which Board approval must be sought. These include the management of the investment portfolio, the organisation of custodial services, accounting, secretarial and administrative services. All other matters are reserved for the approval of the Board of Directors. The Articles of Association require that all Directors are subject to re-election procedures by rotation at the Annual General Meeting. All Directors, in accordance with the Code, will submit themselves for re-election at least once every three years. Directors’ Remuneration Since the Company has no executive Directors, the detailed Directors’ Remuneration disclosure requirements set out in Listing Rules 12.43A(a), 12.43A(b) and 12.43A(c) as they relate to Combined Code Provisions B.1 to B.3, B1.1 to B1.10, B2.1 to B2.6 and B3.1 to B3.5 are not relevant. Audit Committee The Audit Committee consists of all Directors. Written terms of reference have been constituted for the Audit Committee. It meets as required throughout the period. The Committee overviews the Company’s accounting policies and financial reporting and provides a forum through which the Company’s external auditors report to the Board. The Audit Committee also undertakes the duties of the Engagement Committee, and therefore also reviews all matters arising under the management agreement. Nomination Committee A Nomination Committee has not been formed as the size of the Board does not warrant its formation. 22 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Internal Control The Board has established an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. This process is subject to regular review by the Board and accords with the Internal Control Guidance for Directors on the Combined Code published in September 1999 (“the Turnbull guidance”). The process is now fully in place. The Board is responsible for the Company’s system of internal control and for reviewing its effectiveness. However, such a system is designed to manage rather than eliminate the risks of failure to achieve the Company’s business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The Board, assisted by the Manager, undertook a full review of the Company’s business risks. The Board receives each year from the Manager a formal report which details the steps taken to monitor the areas of risk, including those that are not directly the responsibility of the Manager, and which reports the details of any known internal control failures. Steps will continue to be taken to embed the system of internal control and risk management into the operations and culture of the Company and its key suppliers, and to deal with areas of improvement which come to management’s and the Board’s attention. The Company does not have an internal audit function but it does have access to the internal audit department of Close Brothers Group which reports on the Manager’s activities. The Board will continue to monitor its system of internal control in order to provide assurance that it operates as intended. Going Concern After making enquiries the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors have adopted the going concern basis in preparing the accounts. Statement of Compliance The Directors consider that the Company has complied throughout the year ended 31 March 2003 with all the relevant provisions set out in Section 1 of the Combined Code on Corporate Governance issued by the Financial Services Authority. The Company continues to comply with the Code as at the date of this report. 23 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC DIRECTORS’ REMUNERATION REPORT Introduction This report is submitted in accordance with the Directors’ Remuneration Report Regulations 2002 in respect of the year ended 31 March 2003. Remuneration Committee Since the Company has no executive Directors and consists solely of non-executive Directors, a remuneration committee is not warranted. Directors’ remuneration policy The Company’s policy is that fees payable to non-executive Directors should reflect their expertise, responsibilities and time spent on Company matters. In determining the level of non-executive remuneration market equivalents are considered in comparison to the overall activities and size of the Company. The maximum level of non-executive directors’ remuneration is fixed by the Company’s Articles of Association, amendment to which is by way of a special resolution subject to ratification by shareholders. The Articles of Association provide for aggregate non-executive Directors’ fees not to exceed £70,000 per annum. Performance graph The graph below shows the performance of Close Brothers Venture Capital Trust PLC’s share price against the FTSE 100 Index, in both instances with dividends reinvested, over the last six years. The directors consider this to be the most appropriate benchmark, however, would remind investors that shares in VCTs generally continue to trade at a discount to the actual net asset value of the Company. There are no options, issued or exercisable, in the Company which would distort the graphical representation below. 100 90 80 70 60 50 40 30 20 10 0 -10 h t w o r G e g a t n e c r e P FTSE 100 Close BrothersVCT Percentage Growth Total Return 70.5 8.1 01/01 07/01 01/02 07/02 01/03 01/97 07/97 01/98 07/98 01/99 07/99 07/00 2321 Days From 21/11/96 To 31/03/03 01/00 24 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Service contracts No Director has a service contract with the Company. Directors’ remuneration The following items have been audited The following table shows a breakdown of the remuneration of individual Directors, inclusive of National Insurance or VAT: Year ended 31 March 2003 £’000 Fees Expenses £’000 £’000 Total £’000 Year ended 31 March 2002 £’000 Fees Expenses £’000 £’000 Total £’000 16 18 16 – – – 16 18 16 16 18 16 – – – 16 18 16 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 16 – 16 16 – 16 David Watkins Roderick Davidson John Kerr Jonathan Thornton 66 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 66 – 66 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 66 – The Company does not confer any share options, long term incentives or retirement benefits to any director, nor does it make a contribution to any pension scheme on behalf of the Directors. Roderick Davidson and John Kerr are remunerated personally. Jonathan Thornton’s services are provided by Jonathan Thornton Limited. David Watkins services are provided by Shippan Point LLP. In addition to Directors’ remuneration, the Company pays annual premiums in respect of Directors’ liability insurance. By Order of the Board J M Gain Secretary 20 June 2003 25 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF CLOSE BROTHERS VENTURE CAPITAL TRUST PLC We have audited the financial statements of Close Brothers Venture Capital Trust PLC for the year ended 31 March 2003 which comprise the statement of total return, the balance sheet, the cash flow statement and the related notes 1 to 23. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the part of the Directors’ remuneration report that is described as having been audited. This report is made solely to the Company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As described in the statement of Directors’ responsibilities, the Company’s Directors are responsible for the preparation of the financial statements in accordance with applicable United Kingdom law and accounting standards. They are also responsible for the preparation of the other information contained in the annual report including the Directors’ remuneration report. Our responsibility is to audit the financial statements and the part of the Directors’ remuneration report described as having been audited in accordance with relevant United Kingdom legal and regulatory requirements and auditing standards. We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the Directors’ remuneration report described as having been audited have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Directors’ report is not consistent with the financial statements, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding Directors’ remuneration and transactions with the Company is not disclosed. We review whether the corporate governance statement reflects the Company's compliance with the seven provisions of the Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the Board's statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Company's corporate governance procedures or its risk and control procedures. We read the Directors’ report and the other information contained in the annual report for the above year as described in the contents section including the unaudited part of the Directors’ remuneration report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Basis of audit opinion We conducted our audit in accordance with United Kingdom auditing standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the Directors’ remuneration report described as having been audited. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the circumstances of the Company, consistently applied and adequately disclosed. 26 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of the Directors’ remuneration report described as having been audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the Directors’ remuneration report described as having been audited. Opinion In our opinion: (cid:2) the financial statements give a true and fair view of the state of affairs of the Company as at 31 March 2003 and the total return for the year then ended; and (cid:2) the financial statements and part of the Directors’ remuneration report described as having been audited have been properly prepared in accordance with the Companies Act 1985. Deloitte & Touche Chartered Accountants and Registered Auditors London 20 June 2003 27 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Statement of Total Return (incorporating the revenue account) for the year ended 31 March 2003 Year ended 31 March 2003 Year ended 31 March 2002 Revenue Capital £’000 £’000 Total Revenue Capital £’000 £’000 £’000 Total £’000 Note Gains on investments Investment income Investment management fees Other expenses Return on ordinary activities before interest and tax Finance interest Return on ordinary activities before tax Tax on ordinary activities Return attributable to shareholders Dividends Transfer to reserves 2 3 4 5 7 8 9 – 1,843 1,843 – 2,306 2,306 3,941 – 3,941 4,018 – 4,018 (459) (605) (1,064) (519) (787) (1,306) (135) (122) (257) (85) (85) (170) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 3,347 1,116 4,463 3,414 1,434 4,848 (36) – (36) – – – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 3,311 1,116 4,427 3,414 1,434 4,848 (975) 191 (784) (469) 214 (255) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 2,336 1,307 3,643 2,945 1,648 4,593 (2,334) (538) (2,872) (2,930) – (2,930) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 771 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 769 2 1,663 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 1,648 15 Return per share (pence) 6.3p 3.6p 9.9p 7.5p 4.2p 11.7p All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. The revenue column represents the profit and loss account of the Company. 28 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Balance Sheet at 31 March 2003 Fixed asset investments Qualifying: Scheduled for investment less: uninvested Net investments to date Non-qualifying investments: Total fixed asset investments Current assets Debtors and accrued income Cash at banks 31 March 2003 £’000 31 March 2002 £’000 Note 36,680 (5,100) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 31,580 33,608 (2,135) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 31,473 – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 6,145 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 11 31,580 37,618 13 19 655 10,651 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 11,306 700 6,250 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 6,950 Creditors: due within one year 14 (2,811) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (3,051) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) Net current assets Creditors: due after more than one year Total assets less liabilities Capital and reserves Called up share capital Special reserve Capital redemption reserve Realised capital reserve Unrealised capital reserve Revenue reserve Equity shareholders’ funds Net asset value per share (pence) 8,495 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 3,899 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (1,000) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 39,075 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 41,517 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 17,939 14,111 1,914 2,165 2,740 206 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 19,539 17,324 314 27 4,109 204 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 39,075 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 41,517 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 108.9p 106.2p 15 16 16 16 16 16 18 17 The financial statements on pages 28 to 39 were approved by the Board of Directors on 20 June 2003. Signed on behalf of the Board of Directors Roderick Davidson Director 29 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Cash Flow Statement for the year ended 31 March 2003 Operating activities Investment income received Dividend income received Deposit interest received Other income received Investment management fees paid Other cash payments Year ended 31 March 2003 £’000 Year ended 31 March 2002 £’000 Note 3,413 220 272 62 (1,098) (373) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 3,102 297 221 250 (767) (175) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) Net cash inflow from operating activities 20 2,496 2,928 Finance interest paid Taxation VAT paid UK corporation tax paid Investing activities Purchase of qualifying investments Disposals of qualifying investments Disposals of non-qualifying investments Net cash inflow/(outflow) from investing activities Equity dividends paid Revenue dividends paid on ordinary shares Capital dividends paid on ordinary shares Net cash inflow/(outflow) before financing Financing Loan drawdown Capital restructuring expenses Redemption of own shares Net cash outflow from financing (27) – (13) (822) – (569) (5,790) 7,332 6,376 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (4,646) 2,021 2,000 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 7,918 (625) (2,922) – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (2,489) (489) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 6,630 (1,244) 1,000 (108) (3,121) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) – – (83) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (2,229) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (83) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) Increase/(decrease) in cash and cash equivalents 19 4,401 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (1,327) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) The accompanying notes are an integral part of these statements. 30 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Notes to the financial statements for the year ended 31 March 2003 1. ACCOUNTING POLICIES Accounting convention The financial statements are prepared under the historical cost convention, modified by the revaluation of certain investments. True and fair override The Company is no longer an investment company within the meaning of s266, Companies Act 1985. However, it conducts its affairs as a venture capital trust for taxation purposes under s842AA of the Income and Corporation Taxes Act 1988. The financial statements are prepared in accordance with applicable United Kingdom Accounting Standards and with the Statement of Recommended Practice “Financial Statements of Investment Trust Companies” (SORP). Ordinarily, the absence of Section 266 status would require the Company to adopt a different presentation of the accounts than that recommended by the Association of Investment Trust Companies. However, the Directors consider it appropriate to continue to present the accounts in accordance with the SORP. Under the SORP, the financial performance of the trust is presented in a statement of total return in which the revenue column is the profit and loss account of the Company. The revenue column excludes certain capital items, which since the Company is no longer an investment company, the Companies Act 1985 would ordinarily require to be included in the profit and loss account: net profits on disposal of investments, calculated by reference to their previous carrying amount, permanent diminution in value of investments, management expenses charged to capital, less tax relief thereon and the distribution of capital profits. In the opinion of the Directors the presentation adopted enabled the Company to report in a manner consistent with the sector within which it operates. The Directors therefore consider that these departures from the specific provisions of Schedule 4 of the Companies Act relating to the form and content of accounts for companies other than investment companies and these departures from accounting standards are necessary to give a true and fair view. The departures have no effect on the total return or balance sheet. The particular accounting policies adopted are described below. Capital reserves Realised reserves The following are accounted for in this reserve: – gains and losses on the realisation of investments; – expenses and finance costs, together with the related taxation effect; and – realised gains and losses on transactions undertaken to hedge an exposure of a capital nature. Unrealised reserve The following are accounted for in this reserve: – increases and decreases in the valuation of investments held at the year end; and – unrealised gains and losses on transactions undertaken to hedge an exposure of a capital nature. Special reserve This reserve is distributable and is primarily used for the cancellation of the Company’s share capital. Investments Unquoted investments are stated at a valuation determined by the directors as supported, where appropriate, by independent professional valuations and in accordance with the British Venture Capital Association (BVCA) guidelines. The unrealised depreciation or appreciation on the valuation of investments is dealt with in the unrealised reserve and gains and losses arising on the disposal of investments are dealt with in the realised capital reserve. It is not the Company’s policy to exercise controlling or significant influence over investee companies. Therefore the results of these companies are not incorporated into the revenue account. Income and expenses All income and expenses are treated on the accruals basis and dividend income (other than on non-equity shares) is included in revenue when the investment is quoted ex-dividend. The fixed returns on non-equity shares and on debt securities are recognised on a time apportionment basis. Income received is treated in accordance with Financial Reporting Standard No. 16. 31 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Notes to the financial statements (continued) 1. ACCOUNTING POLICIES continued Management expenses 50 per cent. of management expenses, representing the proportion of the investment management fee and other expenses attributable to the enhancement of the value of the investments of the Company, has been charged to capital reserves, net of corporation tax. The balance is charged to the revenue account. Management performance incentive A percentage of the management performance incentive fee, determined by the current net asset value and capital dividends distributed are charged to capital reserves, net of corporation tax. The balance, representing dividends paid out of revenue, is charged to the revenue account. Taxation Taxation is applied on a current basis in accordance with Financial Reporting Standard No.16. Taxation associated with capital expenses is applied in accordance with the SORP. Financial Reporting Standard 19 “Deferred Tax” has been adopted in these financial statements. Provision is made for taxation at current rates on the excess of taxable income over expenses. Where applicable, a provision is made on all material timing differences between the recognition of income in the financial statements and their recognition in the Company’s annual tax returns. Deferred tax is recognised to the extent that it is probable that an actual liability will crystallise or an asset be recoverable. The specific nature regarding the taxation of VCTs means that it is unlikely that any deferred tax will arise. The directors have considered the requirements of FRS 19 and do not believe any provision should be made. 2. Gains/(losses) on investments Realised gains/(losses) for the year Unrealised gains for the year 3. Investment income Income from investments UK franked investment income UK unfranked investment income Other income Other income Deposit interest Total income Total income comprises: Dividends Interest Other Income from investments: Listed Unlisted 32 31 March 31 March 2002 £’000 2003 £’000 541 1,302 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 1,843 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (128) 2,434 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 2,306 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 31 March 31 March 2002 £’000 2003 £’000 286 3,142 246 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 3,674 267 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 3,941 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 286 3,409 246 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 3,941 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 268 3,213 315 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 3,796 222 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 4,018 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 268 3,435 315 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 4,018 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) – 3,674 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 3,674 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 94 3,702 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 3,796 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Notes to the financial statements (continued) 4. Investment management fee Investment management fee Performance incentive fee provision 31 March 2003 31 March 2002 Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 374 85 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 459 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 374 231 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 748 316 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 385 134 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 385 402 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 770 536 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 605 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 1,064 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 519 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 787 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 1,306 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) Further details of the Management Agreement under which the investment management fee is paid are given in the Report of the Directors. 5. Other expenses Secretarial and Administrative fee Directors’ fees Auditors’ remuneration – audit fees Amortisation Other 31 March 31 March 2002 £’000 2003 £’000 38 66 20 13 120 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 38 66 16 – 50 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 257 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 170 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) Costs associated with the tender offer are included in ‘Other’ and amount to approximately £40,000. 6. Directors’ fees The remuneration of the Chairman, which was equal to that received by each of the other directors, was £16,100 (2002: £16,100), exclusive of statutory deductions or VAT. Further details can be found in the Directors’ remuneration report. 7. Finance interest Loan interest 8. Tax on ordinary activities Tax adjustments for prior years UK corporation tax at 30% Tax attributable to capital expenses 31 March 31 March 2002 £’000 2003 £’000 36 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 31 March 2003 31 March 2002 Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 95 689 191 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) – – (191) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 95 689 – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (368) 623 214 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) – – (214) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (368) 623 – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 975 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (191) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 784 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 469 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (214) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 255 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 33 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Notes to the financial statements (continued) 8. Tax on ordinary activities (continued) Return on ordinary activities before taxation Tax charge calculated on return on ordinary activities before taxation at the applicable rate of corporation tax of 30% Effects of: Prior year tax adjustment Non taxable gains on investments Tax attributable to capital expenses Expenses charged to capital Non taxable income 31 March 2003 31 March 2002 Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 3,311 1,116 4,427 3,414 1,434 4,848 993 335 1,328 1,024 430 1,454 95 – 191 (218) (86) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) – (553) (191) 218 – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 95 (553) – – (86) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (368) – 155 (262) (80) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) – (692) (214) 262 – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (368) (692) (59) – (80) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 975 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (191) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 784 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 469 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (214) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 255 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) NOTES (i) Venture Capital Trusts are not subject to corporation tax on capital gains. (ii) Tax relief on expenses charged to capital has been determined by allocating tax relief to all expenses proportionately by reference to the applicable corporation tax rate of 30% and allocating the relief in the same ratio as expenses between revenue and capital. (iii) No deferred tax asset or liability has arisen in the year. (iv) Tax is provided at the current rate of 30 per cent. 9. Dividends and other appropriations Dividends on equity shares: – interim revenue dividend of 2.80p per share (2002: 2.60p per Ordinary share) – final revenue dividend of 3.70p per share (2002: 4.90p per Ordinary share) – final capital dividend of 1.50p per share (2002: 0.00p per Ordinary share) 31 March 31 March 2002 £’000 2003 £’000 1,007 1,017 1,327 538 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 2,872 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 1,913 – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 2,930 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 10. Return per share 31 March 2003 31 March 2002 Revenue Capital Total Revenue Capital Total Equity Shares 6.3 pence 3.6 pence 9.9 pence 7.5 pence 4.2 pence 11.7 pence Revenue return per share is based on the net revenue on ordinary activities after taxation but before deduction of dividends and other appropriations of £2,336,000 (2002: £2,945,000) in respect of 36,901,103 (2002: 39,113,969) shares, being the weighted average number of shares in issue during the year. Capital return per ordinary share is based on net capital profit for the financial year of £1,307,000 (2002: £1,648,000), based on the same weighted average number of shares as for revenue return shown above. 34 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Notes to the financial statements (continued) 11. Investments Qualifying unlisted investments Non-qualifying unlisted investments Total Valuation basis Opening valuation: 1 April 2002 Purchases at cost Sales – proceeds – realised gains on disposal Realisation of revaluation gains from previous years Increase in unrealised appreciation Closing valuation: 31 March 2003 Historical cost basis Opening book cost Purchases at cost Disposals at cost Closing book cost Unrealised appreciation Opening unrealised appreciation Net increase/(decrease) in unrealised appreciation Closing unrealised appreciation 31 March 31 March 2002 £’000 2003 £’000 31,580 – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 31,580 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 31,473 6,145 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 37,618 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) Qualifying unlisted £’000 Non- Qualifying unlisted £’000 31,473 5,790 (7,329) 1,092 (748) 1,302 6,145 – (6,342) 1,981 (1,784) – Total £’000 37,618 5,790 (13,671) 3,073 (2,532) 1,302 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 31,580 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 28,790 5,790 (6,230) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 28,350 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 2,683 547 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 3,230 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 4,361 – (4,361) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 1,784 (1,784) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 31,580 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 33,151 5,790 (10,591) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 28,350 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 4,467 (1,237) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 3,230 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 35 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Notes to the financial statements (continued) 12. Significant interests Details of investments in which the company has an interest of 10 per cent. or more of the nominal value of the allotted shares of any class, or of the net assets at 31 March 2003, are as follows. Greater detail of each investment is given in the Portfolio of investments. Name of Undertaking Broadoaks VCT Limited Chase Midland VCT Limited Churchcroft VCT Limited City Screen (Cambridge) Limited City Screen (Liverpool) Limited Country & Metropolitan VCT Limited Drummond Court VCT Limited Fryers Walk VCT Limited Kew Green VCT (Stansted) Limited Lombardy Court VCT Limited Odyssey Glory Mill Limited Premier VCT (Mailbox) Limited Saxon VCT Limited Youngs VCT Limited 13. Debtors Prepayments and accrued income Other debtors UK corporation tax 14. Creditors: amounts falling due within one year UK corporation tax payable VAT Proposed dividend Operating creditors and accruals Other creditors 15. Called up Share Capital Country of incorporation and operation Description of shares held Percentage held UK UK UK UK UK UK UK UK UK UK UK UK UK UK Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares Ordinary shares 50% 50% 50% 50% 18% 43% 50% 50% 50% 50% 50% 50% 50% 27% 31 March 31 March 2002 £’000 2003 £’000 385 189 81 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 372 – 328 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 655 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 700 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 31 March 31 March 2002 £’000 2003 £’000 – 30 1,866 804 111 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 121 – 1,915 840 175 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 2,811 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 3,051 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 31 March 31 March 2002 £’000 2003 £’000 34,000 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 34,000 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 17,939 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 19,539 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) Authorised: 68,000,000 shares of 50p each (2002: 68,000,000 shares) Allotted, called up and fully paid: 35,878,228 shares of 50p each (2002: 39,077,695 shares) Details of the shares bought by the company for cancellation can be found on page 18. 36 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Notes to the financial statements (continued) 16. Reserves Special redemption reserve reserve £’000 £’000 Capital Realised Unrealised capital reserve £’000 capital Revenue reserve reserve £’000 £’000 Ordinary Shares Beginning of year Realised gains from previous years Realised gains in current year Purchase of own shares Increase in unrealised appreciation Costs charged to capital net of tax Capital dividend Retained net revenue for the year End of year 17,324 – – (3,213) – – – – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 14,111 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 314 – – 1,600 – – – – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 27 2,532 541 – – (397) (538) – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 4,109 (2,532) – – 1,302 (139) – – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 204 – – – – – – 2 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 1,914 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 2,165 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 2,740 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 206 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) Total £’000 21,978 – 541 (1,613) 1,302 (536) (538) 2 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 21,136 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 17. Net asset value per share The net asset value per share and the net asset values at the year end calculated in accordance with the Articles of Association were as follows: Net asset value per share 31 March 31 March 2002 pence 2003 pence 108.91 106.24 The movements during the year of the assets attributable to ordinary shareholders were as follows: Total assets attributable at beginning of year Total return for the period Dividends appropriated in the year Purchase of own shares for cancellation Total net assets attributable at end of year 31 March 31 March 2002 £’000 2003 £’000 41,517 3,643 (2,872) (3,213) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 39,075 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 39,937 4,593 (2,930) (83) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 41,517 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) Net asset value per share is based on net assets at the year end, and on 35,878,228 shares, being the number of shares in issue at the year end. 18. Reconciliation of movements in shareholders’ funds 31 March 31 March 2002 £’000 2003 £’000 41,517 (1,600) (1,613) 3,643 (2,872) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 39,075 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 39,937 (50) (33) 4,593 (2,930) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 41,517 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) Opening shareholders’ funds Decrease in share capital Consideration for share purchases Total return to shareholders before dividends Dividends Closing shareholders’ funds 37 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Notes to the financial statements (continued) 19. Analysis of changes in cash and cash equivalents during the year Beginning of year Net cash inflow/(outflow) End of year 31 March 31 March 2002 £’000 2003 £’000 6,250 4,401 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 10,651 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 7,577 (1,327) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 6,250 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 20. Reconciliation of net revenue before finance costs and taxation to net cash inflow from operating activities Net revenue before finance costs and taxation Investment management fee charged to capital Performance incentive fee charged to capital Other expenses charged to capital Increase in debtors (Decrease)/ increase in creditors Irrecoverable VAT Amortisation Net cash inflow from operating activities 31 March 31 March 2002 £’000 2003 £’000 3,347 (374) (231) (122) (136) (36) 35 13 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 3,414 (385) (402) (85) (147) 533 – – (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 2,496 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 2,928 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 21. Financial instruments and risk management The Company’s financial instruments, other than derivatives, comprise investments in unquoted companies, floating rate notes, cash and liquid resources. The main purpose of these financial instruments is to generate revenue and capital appreciation for the Company’s operations. Investments in unquoted companies comprise equity and fixed rate loan stock. The Company has also entered into derivative transactions (comprising interest rate swaptions). The purpose of such transactions was to manage interest rate risk. These have now expired. The Company had not entered into any further such transactions. The principal risks arising from the Company’s operations are: • interest rate risk; • investment risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. These policies have remained unchanged since the beginning of the financial year. Interest rate risk The Company’s policy is to accept a degree of interest rate risk on non-qualifying investments. On the basis of the Company’s analysis, it is estimated that a fall of one percentage point in interest rates would have reduced profit before tax to 31 March 2003 by approximately 2 per cent. (2002: 2 per cent.). Investment risk As a venture capital trust, it is the Company’s specific business to evaluate and control the investment risk in its portfolio of unquoted companies, the results of which are detailed in the Chairman’s statement. 38 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Notes to the financial statements (continued) 21. Financial instruments and risk management (continued) Financial assets The Company’s interest rate risk on its financial assets is as follows; Currency Fixed Floating Rate Rate £’000 £’000 31 March 2003 No Interest £’000 Total £’000 31 March 2002 Fixed Floating Rate Rate £’000 £’000 No Interest £’000 Total £’000 Sterling 19,427 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 10,651 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 8,924 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 39,002 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 22,234 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 6,250 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 10,868 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) 39,352 (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) (cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1)(cid:1) • Fixed rate assets bear interest at rates based on predetermined yield targets. The weighted average interest rate at 31 March 2003 was 14.3% (2002: 14.5%) • Floating rate assets bear interest at rates based predominantly on base rates. Financial liabilities The Company’s only financial liabilities comprise a loan of £1 million under the borrowing facilities referred to below bearing interest at 1.5 per cent. over LIBOR and the guarantees detailed in note 22 below. Currency exposure As at 31 March 2003, the Company has no foreign currency exposures (2002: £nil). Borrowing facilities The Company has a £5 million committed draw down borrowing facility with The Royal Bank of Scotland plc as at 31 March 2003 (2002: £nil). Fair values of financial assets and financial liabilities All the Company’s financial assets and liabilities as at 31 March 2003 are stated in accordance with BVCA guidelines which the directors agree represents a fair value. See note 1 to the accounts. Contingencies, guarantees and financial commitments There are no contingencies, guarantees and financial commitments of the Company at the year end which have not been accrued except for scheduled investments as detailed in the balance sheet, and guarantees given to The Royal Bank of Scotland plc relating thereto totalling £1.1 million. Post balance sheet events The following amounts have been invested since 31 March 2003; • On 30 April 2003, a further £600,000 was invested in Premier VCT (Mailbox) Limited; and • On 30 April 2003, a further £500,000 was invested in Odyssey Glory Mill Limited. 22. 23. 39 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC NOTICE OF MEETING Notice is hereby given that the Annual General Meeting of Close Brothers Venture Capital Trust PLC will be held at 10 a.m. on 28 July 2003 at 12 Appold Street, London EC2A 2AW for the purpose of dealing with the following business, of which item 6 is special business. Ordinary Business 1 2 To receive and adopt the accounts and the reports of the Directors and Auditors for the year ended 31 March 2003. To approve the Directors’ remuneration report. To elect the following as director each of whom retires by rotation; 3 (a) D J Watkins (b) J M B L Kerr (c) R M Davidson (d) J G T Thornton 4 5 To reappoint Deloitte & Touche as auditors for the ensuing year and to authorise the directors to fix their remuneration. To declare a net final revenue dividend of 3.70 pence per share and a net final capital dividend of 1.50 pence per share, payable to Shareholders on the register at the close of business on 4 July 2003. Special Business To consider and, if thought fit, pass the following resolution which will be proposed Special Resolution: 6 That the Company be generally and unconditionally authorised to make one or more market purchases (within the meaning of Section 163(3) of the Companies Act 1985) of Ordinary Shares of 50p in the capital of the Company (“Shares”) provided that: (a) the maximum aggregate number of Shares authorised to be purchased is 3,587,822 (representing approximately 10 per cent of the issued share capital); (b) the minimum price which may be paid for a Share is 50p; (c) the maximum price which may be paid for a Share is an amount equal to 5 per cent. above the average of the middle market quotations for an Ordinary Share in the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which that Share is purchased; (d) this authority expires at the conclusion of the next Annual General Meeting of the Company or eighteen months from the date of the passing of this resolution whichever is earlier; and (e) the Company may make a contract or contracts to purchase Shares under this authority before the expiry of the authority which will or may be executed wholly or partly after the expiry of the authority, and may make a purchase of Shares in pursuance of any such contract or contracts. BY ORDER OF THE BOARD J M Gain Secretary Registered Office 12 Appold Street, London EC2A 2AW Date: 20 June 2003 NOTES 1. A shareholder entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and, on a poll, to vote in his stead. Such proxy need not be a member of the Company. A form of proxy is enclosed and to be valid must be lodged with the Registrars of the Company not less than 48 hours before the time fixed for the meeting. The register of interests of directors kept by the Company in accordance with Section 325 of the Companies Act 1985 will be open for inspection at the meeting. No director has a contract of service with the Company. 2. 3. 4. 40 Close Brothers Venture Capital Trust PLC