Albion Venture Capital Trust PLC Annual Report 2004

Plain-text annual report

Close Brothers Venture Capital Trust PLC Report & Accounts for the year to 31 March 2004 Image of new Express by Holiday Inn hotel at Stansted Airport being developed by Kew Green VCT (Stansted). Applecroft Care Home in Dover. FACT centre containing the Picturehouse cinema in Liverpool. Newly refurbished interior of The Holt Pub in Liverpool owned by The Bold Pub Company. CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Page CONTENTS 2 3 4 5 7 8 9 19 23 25 27 29 30 42 32 42 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 4 Crown Place London EC2A 4BT Tel: 020 7422 7830 Secretary and Registered Ofﬁce Registrar C Kinnear 10 Crown Place London EC2A 4FT Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Tel: 0870 162 3100 Auditors Deloitte & Touche LLP London Safe Custodians 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 Company Number 3142609 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 an 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: Year ended Year ended 31 March 31 March 2003 2004 12.70p 8.50p 9.87p 8.00p 113.11p 108.91 Ordinary Shares ‘C’ Shares pence per pence per share share Year ended Year ended 31 March 31 March 2004 2004 Note Gross dividends for the year ended 31 March 1997 Gross dividends for the year ended 31 March 1998 Gross interim dividends and net ﬁnal dividend for the year (i) 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 Net revenue and capital dividends for the year ended 31 March 2004 Total dividends to 31 March 2004 Net asset value at 31 March 2004 Total return to 31 March 2004 5.00 6.00 – 5.00 6.25 4.50 7.50 7.50 8.00 8.50 47.25 113.11 160.36 5551111 5551111 7.75 8.55 7.50 7.50 8.00 8.50 58.80 113.11 171.91 5551111 5551111 5551111 5551111 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) A 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. iii) Revenue dividends to date amount to 49.55 pence for holders of original ordinary shares and 40.55 pence for holders of original ‘C’ Shares. iv) Capital dividends to date amount to 9.25 pence for holders of original ordinary shares and 6.70 pence for holders of original ‘C’ Shares. Ex date for dividend Record date for ﬁnal dividend Annual General Meeting FINANCIAL CALENDAR Posting of dividend cheques in respect of the ﬁnal dividend 23 June 2004 25 June 2004 26 July 2004 27 July 2004 Announcement of interim results for the six months ended 30 September 2004 December 2004 Payment of interim dividend January 2005 4 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC CHAIRMAN’S STATEMENT Introduction The progress of your Company’s investment portfolio during the year has again been encouraging, resulting in the sale shortly after the year end of the ﬁve homes for people with learning disabilities for a proﬁt of £4 million on cost of £9.9 million. This has meant that, by continuing the 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 8.00 pence per share to 8.50 pence per share for the year to 31 March 2004. The reserve for unrealised appreciation increased by £2.9 million over the year, with £4 million of the unrealised capital reserve becoming realised after the year end. Accordingly your Company’s net asset value per share has risen by a further 3.7 per cent. to 113.11 pence per share which, when combined with the revenue return, has resulted in an overall return of 12.7 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 58.80 pence and 47.25 pence per share respectively. The performance of the market value of the Ordinary Shares against the FTSE All Share, with dividends reinvested, in both cases, is shown below Review of Investments Our key investment areas continue to be the hotel, care home, leisure and residential property development sectors. In the hotel sector, we have seen a pleasing uplift in the valuation of our Days Inn Hotel in the Mailbox development in Birmingham and have recently facilitated the acquisition of our erstwhile partner’s share from the receiver which should lead to a further increase in value at the next valuation date. The new Express by Holiday Inn hotel at Stansted Airport is now under construction with the ﬁrst phase, of 5 FTSE 10001/9707/9701/9807/9801/9907/99150125100755001/0007/0001/0107/0101/0207/0207/0301/0338.1125.0Percentage GrowthClose BrothersVCTPercentage Growth Total ReturnFrom 21 November 96 to 31 March 04250-25CLOSE BROTHERS VENTURE CAPITAL TRUST PLC 183 rooms, expected to open early in 2005. There are currently a variety of other potential new investments in the hotel sector 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 care home sector the sale of our ﬁve homes for people with learning disabilities in East Anglia, in Witham, Bury St. Edmunds, Thetford, Ipswich and March, shortly after the year end enabled a further increase in the year end valuation to be made. Meanwhile, during the course of the year, we invested £1 million in Applecroft Care Home Limited, to acquire an existing nursing home in Dover, and £1million in Barleycroft Care Home Limited to develop a new nursing home in Romford. We believe that the prospects for the care home sector continue to be positive and we are actively seeking further opportunities. In the leisure sector, the Cambridge Arts Picture House cinema continues to perform well, leading to an increase in its valuation. The Picture House cinema in the FACT Centre in Liverpool however has suffered a small devaluation following restrictions on trading caused by a temporary structural issue. The health club owned by Odyssey Glory Mill near Beaconsﬁeld continues to perform well with a membership of over 4,000. In addition, the Company has invested in The Bold Pub Company, formed to acquire a portfolio of pubs in the Northwest of England, and has committed to invest in City Centres Breweries, which has acquired the Smiles brewery in Bristol and is aiming to build up a pub estate. In the residential development sector, which is restricted to 20 per cent. of the portfolio, we continue to have four companies established with separate developers. These have continued to be a useful source of income for your Company with dividends received from three of these, in addition to the running return provided by the loan stock. New Management Performance Incentive Accompanying these accounts is a circular to shareholders proposing a new management performance incentive. This is designed to replace the existing incentive arrangements which are drawing to a close. The new arrangements are subject to approval by shareholders at the forthcoming annual general meeting. Results and Dividend As at 31 March 2004 the net asset value was £40.6 million or 113.1 pence per share, which compares with a net asset value at 31 March 2003 of £39.07 million or 108.9 pence per ordinary share. Net income before taxation was £2.8 million (2003: £3.3 million), out of which the Company paid a ﬁrst interim dividend of 3.00 pence per share and a second capital interim capital dividend of 3.75 pence per share. The board now proposes a ﬁnal revenue dividend of 1.75 pence per share, resulting in total revenue dividends of 4.55 pence and total capital dividends of 3.95 pence, or 8.5 pence per share in total, (2003: total dividends of 8.00 pence per share). The ﬁnal dividend for the year ended 31 March 2004 will be paid on 27 July 2004 to shareholders registered on 25 June 2004. David Watkins Chairman 16 June 2004 6 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 (59) MBA (Harvard), Chairman. Until late 1995 he worked at Baring Securities Limited as Head of Equity Capital Markets – London, before leaving to ultimately become Chief Financial Ofﬁcer and one of the principal shareholders of his current company, The Distinguished Programmes Group LLC, an insurance and underwriting group. 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. He is currently a director of a number of private UK companies. Roderick Davidson (66). 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 (61) ACMA. John Kerr has worked as a venture capitalist and also in manufacturing and service industries. He held a number of ﬁnance and general management posts in the UK and USA, before joining SUMIT Equity Ventures, an independent Midlands based venture capital company, where he was managing director from 1985 to 1992. He then became chief executive of Price & Pierce Limited, which acted as the UK agent for overseas producers of forestry products, before leaving in 1997 to become ﬁnance director of Ambion Brick, a building material company bought out from Ibstock PLC. After retiring in 2002, he now works as a consultant. Jonathan Thornton (57) 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 and £7.0 million in 2003/4 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, (44), 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, (40), 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, (39), 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 (33), 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 2004, comprising amounts invested and scheduled for investment, and after including the revaluations referred to in the Chairman’s statement above: Investee Company Investment at Cost Revaluation £’000 £’000 Total value at 31 March 2004 £’000 Investment Total Reserved value at Movement in value in for the year investment £’000 31 March 2003 £’000 £’000 Hotels Kew Green VCT (Stansted) Ltd Premier VCT (Mailbox) Ltd 2,000 4,600 – 1,088 2,000 5,688 1,000 4,665 – 3,000 423 – Care Homes Applecroft Care Home Ltd Barleycroft Care Home Ltd Broadoaks VCT Ltd Churchcroft VCT Ltd Drummond Court VCT Ltd Fryers Walk VCT Ltd Lombardy Court VCT Ltd Leisure City Screen (Cambridge) Ltd City Screen (Liverpool) Ltd Odyssey Glory Mill Ltd The Bold Pub Company Ltd Residential Development Chase Midland VCT Ltd Country & Metropolitan VCT Ltd Prime VCT Ltd Youngs VCT Ltd 1,000 1,000 1,865 1,550 2,500 2,575 1,450 1,210 200 4,500 260 1,600 3,000 2,200 1,200 – – 758 630 1,015 1,046 589 1,000 1,000 2,623 2,180 3,515 3,621 2,039 – – 2,091 2,066 2,958 3,042 1,540 126 (20) 948 – – – – – 1,336 1,160 180 200 5,448 4,858 260 – 1,600 3,000 2,200 1,200 1,600 3,000 2,200 1,200 - – 532 114 557 579 499 176 (20) 90 – – – – – 925 1,275 – – – – – – – – 140 – – – – Total 32,710 6,180 38,890 31,580 2,950 5,340 9 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Hotels 1. Kew Green VCT (Stansted) Limited Kew Green VCT (Stansted) was established to develop and operate a budget hotel at Stansted Airport under the “Express by Holiday Inn” brand. Construction is under way and the hotel is expected to open in early 2005. Date of initial investment: Operating partner: Amount invested at 31 March 2004: Further amount for investment: Proportion of capital and voting rights held: 28% March 2003 Kew Green Hotels Limited £2.00 million £3.00 million Latest audited ﬁnancial information: 31 August 2003 Turnover for the year Loss before taxation for the year Accumulated retained losses Net assets £ – 2,000 2,000 904,000 Close Brothers Protected VCT PLC and Healthcare & Leisure Property Fund PLC, which are managed or advised by Close Venture Management had invested at 31 March 2004 £1 million and £0.5 million respectively in the company. The investment is valued at cost in view of the fact that the hotel is under construction. 2. 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: Operating partner: Amount invested at 31 March 2004: Further amount reserved for investment: Proportion of capital and voting rights held: 50% December 1999 Hospitality Management International Ltd £4.60 million Nil Latest audited ﬁnancial information: 30 June 2003 Turnover for the year Loss before taxation for the year Accumulated retained losses Net assets £ 1,629,000 3,000 215,000 685,000 In the year to 30 June 2003 the company made an operating proﬁt before management fees, depreciation and interest of £721,000. Healthcare & Leisure Property Fund PLC, which is advised by Close Venture Management, had invested £250,000 in loan stock in the company. Subsequent to the year end Healthcare & Leisure Property Fund PLC invested a further £0.5 million to enable the former operating partner’s shares to be acquired from the receiver of the former operating partner. The investment is valued based upon the company’s net asset value adjusted for the revaluation of the hotel, provided by an independent valuer at the year end. On this basis the valuation of the Company’s investment has been increased by £1.088 million over cost. 10 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Care Homes 3. Applecroft Care Home Limited Applecroft Care Home was formed to acquire an existing 75 bed nursing home in Dover. The acquisition took place in January 2004. Date of initial investment: Operating partner: Amount invested at 31 March 2004: Further amount reserved for investment: Proportion of capital and voting rights held: 21.3% August 2003 Festival Care Home Limited £1.00 million £0.93 million As a newly incorporated company, Applecroft Care Home Limited has not yet ﬁled audited accounts. Close Brothers Protected VCT PLC and the Healthcare & Leisure Property Fund PLC which are managed or advised by Close Venture Management, had invested £1 million and £350,000 respectively in the company. The investment is valued at cost in view of the fact that the care home is a recent acquisition. 4. Barleycroft Care Home Limited Barleycroft Care Home was formed to develop an 80 bed nursing home in Romford. This is expected to open in early 2005. Date of initial investment: Operating partner: Amount invested at 31 March 2004: Further amount reserved for investment: Proportion of capital and voting rights held: 21.3% October 2003 Festival Care Homes Limited £1.00 million £1.28 million There is no ﬁnancial information available as the company has yet to start trading. Close Brothers Protected VCT PLC and the Healthcare & Leisure Property Fund PLC which are managed or advised by Close Venture Management, had invested £1 million and £350,000 respectively in the company. The investment is valued at cost in view of the fact that the care home is a recent acquisition. 11 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC 5. 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 was then extended to a total of 38 beds. The company was sold in April 2004. Date of initial investment: Operating partner: Amount invested at 31 March 2004: 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: September 2003 Turnover for the year Loss before taxation for the year Accumulated retained losses Net assets £ 972,000 100,000 208,000 333,000 In the year to 30 September 2003 the company made an operating proﬁt before management fees, depreciation and interest of £119,000. The investment is valued based upon the net proceeds received for the company following its disposal in April 2004. 6. Churchcroft VCT Limited Churchcroft VCT owned a 34 bed purpose-built home for residents with learning disabilities in Witham, Essex. The company was sold in April 2004 Date of initial investment: Operating partner: Amount invested at 31 March 2004: 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 2003 Turnover for the year Loss before taxation for the year Accumulated retained losses Net assets £ 1,267,000 29,000 82,000 375,000 In the year to 30 September 2003 the company made an operating proﬁt before management fees, depreciation and interest of £372,000. The investment is valued based upon the net proceeds received for the company following its disposal in April 2004. 12 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC 7. Drummond Court VCT Limited Drummond Court VCT owned a 36 bed home for residents with learning disabilities in Bury St. Edmunds, Suffolk. The company was sold in April 2004. Date of initial investment: Operator: Amount invested at 31 March 2004: Further amount reserved for investment: Proportion of capital and voting rights held: 50% September 1998 InterCare Residential Limited £2.50 million Nil Latest audited ﬁnancial information: 30 September 2003 Turnover for the year Loss before taxation for the year Accumulated retained losses Net assets £ 1,125,000 81,000 175,000 564,000 In the year to 30 September 2003 the company made an operating proﬁt before management fees, depreciation and interest of £353,000. The investment is valued based upon the net proceeds received for the company following its disposal in April 2004. 8. Fryers Walk VCT Limited Fryers Walk VCT owned and operates a 34 bed home for residents with learning disabilities in Thetford, Norfolk. The company was sold in April 2004. Date of initial investment: Operating partner: Amount invested at 31 March 2004: 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 2003 Turnover for the year Proﬁt before taxation for the year Accumulated retained proﬁts Net assets £ 991,000 15,000 9,000 779,000 In the year to 30 September 2003 the company made an operating proﬁt before management fees, depreciation and interest of £226,000. The investment is valued based upon the net proceeds received for the company following its disposal in April 2004. 13 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC 9. Lombardy Court VCT Limited The company owned and operated a 24 bed home for residents with learning disabilities in the centre of Ipswich which opened in 2001 and this was then extended to 28 beds. The company was sold in April 2004. Date of initial investment: Operating partner: Amount invested at 31 March 2004: 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 2003 Turnover for the year Proﬁt before taxation for the year Accumulated retained losses Net assets £ 822,000 – 98,000 329,000 In the year to 30 September 2003 the company made an operating proﬁt before management fees, depreciation and interest of £226,000. The investment is valued based upon the net proceeds received for the company following its disposal in April 2004. Leisure 10. 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 £190,000 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 2004: 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 2003 Turnover for the year Loss before taxation for the year Accumulated retained losses Net assets £ 1,550,000 47,000 290,000 73,000 In the year to 31 December 2003 the company made an operating proﬁt before management fees, depreciation and interest of £457,000. The investment is valued based upon the company’s net asset value adjusted for the revaluation of the cinema, provided by an independent valuer at the year end. On this basis the valuation of the Company’s investment has been increased by £126,000 over cost. 14 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC 11 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 but a temporary structural issue led to the three screens closing in April 2003. The cinema became fully operational again in November 2003. Date of initial investment: Operating partner: Amount invested at 31 March 2004: Further amount reserved for investment: Proportion of capital and voting rights held: 18% November 2002 City Screen Limited £0.20 million Nil Latest audited ﬁnancial information: 31 December 2003 Turnover for the year Loss before taxation for the year Accumulated retained losses Net assets £ 580,000 108,000 113,000 135,000 In the year to 31 December 2003 the company made an operating proﬁt before management fees, depreciation and interest of £18,000. 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. The investment is valued based upon the company’s net asset value adjusted for the revaluation of the cinema, provided by an independent valuer at the year end. On this basis the valuation of the Company’s investment has been reduced by £20,000. 12. 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 2004: Further amount reserved for investment: Proportion of capital and voting rights held: 50% December 1999 Odyssey Clubs Group Plc £4.50 million Nil Latest audited ﬁnancial information: 30 September 2003 Turnover for the year Loss before taxation for the year Accumulated retained losses Net assets £ 2,507,000 14,000 390,000 1,605,000 In the year to 30 September 2003 the company made an operating proﬁt before management fees, depreciation and interest of £1,032,000. The investment is valued based upon the company’s net asset value adjusted for the revaluation of the health and ﬁtness club, provided by an independent valuer at the year end. On this basis the valuation of the Company’s investment has been increased by £948,000 over cost. 15 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC 13. The Bold Pub Company Limited The company was formed to acquire a group of 10 freehold and long leasehold pubs in the North West of England and is aiming to increase the size of its portfolio. Date of initial investment: Operating partner: Amount invested at 31 March 2004: Further amount reserved for investment: Proportion of capital and voting rights held: 8.7% February 2004 The Pub Support Company Limited £0.20 million £0.14 million As a newly incorporated company, The Bold Pub Company Limited has not yet ﬁled audited accounts. Close Brothers Protected VCT PLC, Close Brothers Development VCT PLC, Close Technology & General VCT PLC and the Healthcare & Leisure Property Fund PLC, which are all managed or advised by Close Venture Management, have invested £330,000, £670,000, £100,000 and £140,000 respectively. The investment is valued at cost in view of the fact that The Bold Pub Company is a recent investment. Residential Development 14. Chase Midland VCT Limited The company successfully completed its ﬁfth and sixth developments, comprising a four 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, and is expected to commence a follow on development in the Harborne area of Birmingham shortly. This will involve Healthcare & Leisure Property Fund PLC co-investing in the company. Date of initial investment: Developer partner: Amount invested at 31 March 2004: Further amount reserved for investment: Proportion of capital and voting rights held: 50% March 1997 Chase Midland plc £1.60 million Nil Latest audited ﬁnancial information: 30 June 2003 Turnover for the year Proﬁt before taxation for the year Accumulated retained proﬁts Net assets £ 1,318,000 50,000 22,000 42,000 The investment is valued at cost in view of the fact that Chase Midland VCT is a residential property development company and distributes all its proﬁts by way of dividend. 16 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC 15. Country & Metropolitan VCT Limited The company is close to completing its ninth development, a part conversion, part new build 21 apartment scheme in York and is making good progress on 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 2004: Further amount reserved for investment: Proportion of capital and voting rights held: 43% November 1996 Country & Metropolitan plc £3.00 million Nil Latest audited ﬁnancial information: 31 June 2003 Turnover for the year Proﬁt before taxation for the year Accumulated retained proﬁts Net assets £ 4,326,000 535,000 84,000 1,675,000 Healthcare & Leisure Property Fund PLC, which is advised by Close Venture Management, has invested £500,000 in the company. The investment is valued at cost in view of the fact that Country & Metropolitan VCT is a residential property development company and distributes all its proﬁts by way of dividend. 16. Prime VCT Limited (formerly Saxon VCT Limited) This company is currently undertaking a 12 apartment scheme in Hertford, with construction scheduled to complete in September. Date of initial investment: Developer partner: Amount invested at 31 March 2004: Further amount reserved for investment: Proportion of capital and voting rights held: 50% September 1996 Prime Residential Limited £2.20 million Nil Latest audited ﬁnancial information: 30 September 2003 Turnover for the year Proﬁt before taxation for the year Accumulated retained losses Net assets £ 354,000 19,000 24,000 976,000 The investment is valued at cost in view of the fact that Prime VCT is a residential property development company and distributes all its proﬁts by way of dividend. 17 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC 17. Youngs VCT Limited The company is nearing completion of the construction of an 11 apartment scheme at Lee-on- the-Solent, overlooking the Isle of Wight, and sales progress is encouraging. It has recently acquired a site for a follow on development of 19 apartments in Southampton. Date of initial investment: Developer partner: Amount invested at 31 March 2004: Further amount reserved for investment: Proportion of capital and voting rights held: 25.4% March 2000 Youngs Developments Ltd £1.20 million Nil Latest audited ﬁnancial information: 31 December 2003 Turnover for the year Loss before taxation for the year Accumulated retained losses Net assets £ 850,000 65,000 50,000 1,023,000 Close Brothers Protected VCT PLC, which is managed by Close Venture Management, has invested £1 million in the company, and Healthcare & Leisure Property Fund PLC £160,000. The investment is valued at cost in view of the fact that Youngs VCT is a residential property development company and distributes all its proﬁts by way of dividend. 18 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 2004. 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 2004 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 2004 Net interim revenue dividend of 2.80p per share paid on 28 January 2004 Net ﬁnal revenue dividend of 1.75p per share payable on 22 July 2004 to shareholders on the register at the close of business on 25 June 2004 Total transferred to revenue reserve Realised capital return attributable to shareholders for the year ended 31 March 2004 Net ﬁrst interim capital dividend of 0.20p per share paid on 28 January 2004 Net second interim capital dividend of 3.75p per share paid on 28 May 2004 Realised capital loss attributable to shareholders on expenses for the year ended 31 March 2004 Unrealised capital return attributable to shareholders for the year ended 31 March 2004 Total transferred to capital reserve Total transferred to reserves £’000 2,012 (1,005) (628) 555 379 555 21 (72) (1,345) (426) 2,950 555 1,128 555 1,507 555 19 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. During the ﬁnancial year under review the Company did not purchase any of its shares for cancellation. Directors 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 2004 Shares held 31 March 2003 Shares held 10,000 5,000 13,109 31,218 10,000 5,000 13,109 31,218 No Director has a service contract with the Company. The Company does not have any employees. All Directors are members of the Audit Committee. 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 £33,635 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. The outstanding management and performance fees at 31 March 2004 amount to £720,000. 20 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC 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. New Management Performance Incentive Accompanying these accounts is a circular to shareholders proposing a new management performance incentive. This is designed to replace the existing incentive arrangements which are drawing to a close. The new arrangements are subject to approval by shareholders at the forthcoming annual general meeting. Auditors On 1 August 2003, Deloitte & Touche, the company's auditors transferred their business to Deloitte & Touche LLP, a limited liability partnership incorporated under the Limited Liability Partnerships Act 2000. The company’s consent has been given to treating the appointment of Deloitte & Touche as extending to Deloitte & Touche LLP with effect from 1 August 2003 under the provisions of section 26(5) of the Companies Act 1989. A resolution to re-appoint Deloitte & Touche LLP will be proposed at the forthcoming Annual General Meeting. Substantial Interests As at 16 June 2004 the Company was not aware of any beneﬁcial interest exceeding 3 per cent. of the issued share capital. 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 21 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC • prepare the ﬁnancial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the ﬁnancial position of the Company and which enable them to ensure that the ﬁnancial statements comply with the Companies Act 1985. They are also responsible for the system of internal control, for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors conﬁrm that applicable accounting standards have been followed in the ﬁnancial statements accompanying this report. 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 2004 (2003 – nil). Annual General Meeting The Annual General Meeting will be held at 10 Crown Place, London EC2A 4FT at 10.30 a.m. on 26 July 2004. 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 5 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. On behalf of the Board Jonathan Thornton Director 10 Crown Place London EC2A 4FT 16 June 2004 22 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 year. 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. 23 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”). This process has been fully in place throughout the year under review and up to the date of this report. 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 2004 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 24 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 2004. 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. From 1 April 2004 non-executive directors’ fees have been increased by £1,400 per annum per director to £17,500. This is the ﬁrst increase in directors’ fees since the issue of ‘C’ Shares in 1997. 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 All-share Index, in both instances with dividends reinvested, over the last seven years. The directors consider this to be the most appropriate benchmark. There are no options, issued or exercisable, in the Company which would distort the graphical representation below. Source: Lipper, produced using Hindsight 5 by Close Fund Management Ltd. Hindsight is a registered trade mark of Reuters Ltd. 25 FTSE 10001/9707/9701/9807/9801/9907/99150125100755001/0007/0001/0107/0101/0207/0207/0301/0338.1125.0Percentage GrowthClose BrothersVCTPercentage Growth Total ReturnFrom 21 November 96 to 31 March 04250-25 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Service contracts No Director has a service contract with the Company. As a result they do not have a notice period and are not entitled to any termination payment Directors’ remuneration The following items have been audited: The following table shows a breakdown of the remuneration of individual Directors, exclusive of National Insurance or VAT: Year ended 31 March 2004 £’000 Fees Expenses £’000 £’000 Total £’000 Year ended 31 March 2003 £’000 Fees Expenses £’000 £’000 Total £’000 16 16 16 16 – – – – 16 16 16 16 16 16 16 16 – – – – 16 16 16 16 55111 55111 55111 55111 55111 55111 David Watkins Roderick Davidson John Kerr Jonathan Thornton 64 55111 55111 55111 55111 55111 55111 64 64 64 – – 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. The following items have not been audited: 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 Group LLC. In addition to Directors’ remuneration, the Company pays annual premiums in respect of Directors’ liability insurance. By Order of the Board Jonathan Thornton Director 16 June 2004 26 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 2004 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. 27 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: • the ﬁnancial statements give a true and fair view of the state of affairs of the Company as at 31 March 2004 and the total return for the year then ended; and • 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 LLP Chartered Accountants and Registered Auditors London 16 June 2004 28 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 2004 Gains on investments Investment income Investment management fees Other expenses Return on ordinary activities before interest and tax Finance charge Return on ordinary activities before tax Tax on ordinary activities Return attributable to shareholders Dividends Transfer to reserves Year ended 31 March 2004 Year ended 31 March 2003 Revenue Capital £’000 £’000 Total Revenue Capital £’000 £’000 £’000 Total £’000 Note 2 3 4 5 7 8 9 – 2,971 2,971 – 1,843 1,843 3,438 – 3,438 3,941 – 3,941 (419) (478) (897) (459) (605) (1,064) (151) (131) (282) (135) (122) (257) 55 55 55 55 55 55 2,868 2,362 5,230 3,347 1,116 4,463 (54) – (54) (36) – (36) 55 55 55 55 55 55 2,814 2,362 5,176 3,311 1,116 4,427 (802) 183 (619) (975) 191 (784) 55 55 55 55 55 55 2,012 2,545 4,557 2,336 1,307 3,643 (1,633) (1,417) (3,050) (2,334) (538) (2,872) 55 55 55 55 55 55 379 771 55 55 55 55 55 55 1,507 1,128 769 2 Return per share (pence) 10 5.6p 7.1p 12.7p 6.3p 3.6p 9.9p 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. 292929 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Balance Sheet at 31 March 2004 31 March 2004 £’000 31 March 2003 £’000 Note 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 Creditors: due within one year 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 44,230 (5,340) 36,680 (5,100) 555 5551 38,890 31,580 555 5551 – – 11 38,890 31,580 13 19 14 15 16 16 16 16 16 225 5,735 655 10,651 555 5551 5,960 11,306 (3,269) (2,811) 555 5551 2,691 8,495 555 5551 (1,000) (1,000) 555 5551 39,075 555 5551 40,581 17,939 14,110 1,914 222 5,811 585 17,939 14,111 1,914 2,165 2,740 206 555 5551 Equity shareholders’ funds 18 39,075 555 5551 40,581 Net asset value per share 17 113.1p 108.9p The ﬁnancial statements on pages 29 to 41 were approved by the Board of Directors on 16 June 2004. Signed on behalf of the Board of Directors Jonathan Thornton Director 3030 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Cash Flow Statement for the year ended 31 March 2004 Year ended 31 March 2004 £’000 Year ended 31 March 2003 £’000 Note Operating activities Investment income received Dividend income received Deposit interest received Other income received Investment management fees paid Other cash payments 3,189 208 287 – (923) (202) 3,413 220 272 62 (1,098) (373) 555 5551 Net cash inﬂow from operating activities 20 2,559 2,496 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 (53) (27) 1 (150) (13) (822) (4,428) 89 100 (5,790) 7,332 6,376 555 5551 Net cash (outﬂow)/inﬂow from investing activities (4,239) 7,918 Equity dividends paid Revenue dividends paid on ordinary shares Capital dividends paid on ordinary shares (2,332) (610) (2,922) – 555 5551 Net cash (outﬂow)/inﬂow before ﬁnancing (4,824) 6,630 Financing Loan drawdown Capital restructuring expenses Redemption of own shares Net cash outﬂow from ﬁnancing – – (92) (92) 1,000 (108) (3,121) (2,229) 555 555 555 5551 (Decrease)/increase in cash and cash equivalents 19 4,401 555 5551 (4,916) The accompanying notes are an integral part of these statements. 31313131 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Notes to the ﬁnancial statements for the year ended 31 March 2004 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 Accounting Standards and with the Statement of Recommended Practice: “Financial Statements of Investment Trust Companies” (SORP) issued by the Association of Investment Trust Companies in January 2003, except in relation to the treatment of other expenses and ﬁnance interest charged to capital. In view of the further changes that may be required following the new International Financial Reporting Standards that are due to come into force for companies with ﬁnancial years ending after 31 December 2004, and whose provisions in relation to investment companies have yet to be ﬁnalised, your Board has elected not to change the accounting presentation that the company has followed for the past eight years, as it believes that this treatment continues to be appropriate as it is consistent with the method followed in prior years. This means that, in so far as the allocation of fees and expenses to capital is concerned, the Company is not complying with the SORP, although shareholders should note that this has no effect on the Company’s total return or net asset value. Once the requirements of the new International Financial Reporting Standards are ﬁnalised, the Company will decide upon the most appropriate accounting approach to comply with accounting rules. 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 enables 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. 3232 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Notes to the ﬁnancial statements (continued) 1. ACCOUNTING POLICIES continued 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 new 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. 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 is 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 16. Taxation associated with capital expenses is applied in accordance with the new SORP. The Company is required to comply with Financial Reporting Standard 19 “Deferred Tax” for this accounting period. 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 on investments Realised gains for the year Unrealised gains for the year 31 March 31 March 2003 £’000 2004 £’000 21 2,950 541 1,302 1155 1155 1,843 1155 1155 2,971 33333333 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Notes to the ﬁnancial statements (continued) 3. Investment income 31 March 31 March 2003 £’000 2004 £’000 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 4. Investment management fee Investment management fee Performance incentive fee provision 160 2,880 108 286 3,142 246 1155 1155 3,148 3,674 290 267 1155 1155 3,941 1155 1155 3,438 160 3,170 108 286 3,409 246 1155 1155 3,941 1155 1155 3,438 – 3,148 – 3,674 1155 1155 3,674 1155 1155 3,148 31 March 2004 31 March 2003 Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 384 35 384 94 768 129 374 85 374 231 748 316 1155 1155 1155 1155 1155 1155 1,064 1155 1155 1155 1155 1155 1155 478 897 605 419 459 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 of loan facility fees Other 31 March 31 March 2003 £’000 2004 £’000 40 66 26 20 130 38 66 20 13 120 1155 1155 257 1155 1155 282 3434 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Notes to the ﬁnancial statements (continued) 6. Directors’ fees The amounts paid on behalf of Directors during the year are as follows: 31 March 31 March 2003 £’000 2004 £’000 Directors’ fees National insurance and VAT Expenses 7. Finance charge Loan interest 64 2 – 64 2 – 1155 1155 66 1155 1155 66 31 March 31 March 2003 £’000 2004 £’000 36 1155 1155 54 Interest payable under the facility provided by The Royal Bank of Scotland plc is based upon six month LIBOR, plus 1.5% per annum on the amount advanced from the date of draw down. 8. Tax on ordinary activities Tax adjustments for prior years UK corporation tax at 30% Tax attributable to capital expenses 31 March 2004 31 March 2003 Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 – 619 183 – – (183) – 619 – 95 689 191 – – (191) 95 689 – 1155 1155 1155 1155 1155 1155 784 1155 1155 1155 1155 1155 1155 (191) (183) 619 975 802 35353535 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 Excess management expenses Non taxable income UK Corporation tax charge/(credit) for the year 31 March 2004 31 March 2003 Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 2,814 2,362 5,176 3,311 1,116 4,427 844 709 1,553 993 335 1,328 – – 183 (177) (48) – (892) (183) 183 – – (892) – 6 (48) 95 – 191 (218) (86) – (553) (191) 218 – 95 (553) – – (86) 1155 1155 1155 1155 1155 1155 784 1155 1155 1155 1155 1155 1155 (183) (191) 619 975 802 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 Dividends on equity shares: Interim Revenue dividend of 2.80p per share (2003: 2.80p per share) First capital dividend of 0.2p per share (2003: nil) Second capital dividend of 3.75p per share (2003: 1.50p per share) Final Revenue dividend of 1.75p per share (2003: 3.70p per share) Capital dividend: nil (2003: 3.70p per share) 31 March 31 March 2003 £’000 2004 £’000 1,005 72 1,345 1,007 – – 628 – 1,327 538 1155 1155 2,872 1155 1155 3,050 10. Return per share 31 March 2004 31 March 2003 Revenue Capital Total Revenue Capital Total Equity Shares 5.6 pence 7.1 pence 12.7 pence 6.3 pence 3.6 pence 9.9 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 £2,012,000 (2003: £2,336,000) in respect of 35,878,228 (2003 weighted average: 36,901,103) shares, being the number of shares in issue during the year. Capital return per ordinary share is based on net capital proﬁt for the ﬁnancial year of £2,545,000 (2003: £1,307,000), based on the same number of shares as for revenue return shown above. 3636 CLOSE BROTHERS VENTURE CAPITAL TRUST PLC Close Brothers Venture Capital Trust PLC Notes to the ﬁnancial statements (continued) 11. Investments 31 March 31 March 2003 £’000 2004 £’000 38,890 – 31,580 – 1155 1155 31,580 1155 1155 38,890 Qualifying unlisted £’000 Non- Qualifying £’000 31,580 4,428 (89) 21 2,950 1155 – – – – – 1155 Total £’000 31,580 4,428 (89) 21 2,950 1155 38,890 1155 – 1155 38,890 1155 28,350 4,428 (68) 1155 32,710 1155 3,230 2,950 1155 6,180 1155 – – – 1155 – 1155 1155 – 1155 28,350 4,428 (68) 1155 32,710 1155 3,230 2,950 1155 6,180 1155 Qualifying unlisted investments Non-qualifying investments Total Valuation basis Opening valuation: 1 April 2003 Purchases at cost Sales – proceeds – realised gains on disposal Increase in unrealised appreciation in the year Closing valuation: 31 March 2004 Historical cost basis Opening book cost Purchases at cost Disposals at cost Closing book cost Unrealised appreciation Opening unrealised appreciation Net increase in unrealised appreciation Closing unrealised appreciation 37373737 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 3 per cent. or more of the nominal value of the allotted shares of any class, or of the net assets at 31 March 2004, are as follows. Greater detail of each investment is given in the portfolio of investments. Name of Undertaking Applecroft Care Homes Limited Barleycroft Care Homes Limited 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 Prime VCT Limited The Bold Pub Company 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 Authorised: 68,000,000 shares of 50p each (2003: 68,000,000 shares) Allotted, called up and fully paid: 35,878,228 shares of 50p each (2003: 35,878,228 shares) 3838 Country of operation and incorporation Description of shares held Percentage held Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain 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 Ordinary shares Ordinary shares Ordinary shares 21% 21% 50% 50% 50% 50% 18% 43% 50% 50% 28% 50% 50% 50% 50% 8% 25% 31 March 31 March 2003 £’000 2004 £’000 157 68 – 385 189 81 1155 1155 655 1155 1155 225 31 March 31 March 2003 £’000 2004 £’000 389 50 1,973 819 38 – 30 1,866 804 111 1155 1155 2,811 1155 1155 3,269 31 March 31 March 2003 £’000 2004 £’000 34,000 1155 1155 34,000 17,939 1155 1155 17,939 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 Total £’000 Ordinary Shares Beginning of year Realised gains in current year Purchase of own shares (stamp duty) Increase in unrealised appreciation Management performance incentive Costs charged to capital net of tax Capital dividend Retained net revenue for the year End of year 14,111 – (1) – – – – – 1,914 – – – – – – – 2,165 21 – – (121) (426) (1,417) – 2,740 – – 2,950 121 – – – 206 – – – – – – 379 21,136 21 (1) 2,950 – (426) (1,417) 379 1155 1155 1155 1155 1155 1155 22,642 1155 1155 1155 1155 1155 1155 14,110 5,811 1,914 222 585 The movement in the special reserve comprises stamp duty in respect of year ended 31 March 2003 share redemption paid in the current year. 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 2003 pence 2004 pence 113.11 108.91 The movements during the year of the assets attributable to ordinary shareholders were as follows: 31 March 31 March 2003 £’000 2004 £’000 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 39,075 4,557 (3,050) (1) 41,517 3,643 (2,872) (3,213) 1155 1155 39,075 1155 1155 40,581 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 2003 £’000 2004 £’000 Opening shareholders’ funds Decrease in share capital Consideration for share purchases Total return to shareholders before dividends Dividends Closing shareholders’ funds 39393939 39,075 – (1) 4,557 (3,050) 41,517 (1,600) (1,613) 3,643 (2,872) 1155 1155 39,075 1155 1155 40,581 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 31 March 31 March 2003 £’000 2004 £’000 Beginning of year Net cash (outﬂow)/inﬂow End of year 10,651 (4,916) 6,250 4,401 1155 1155 10,651 1155 1155 5,735 20. Reconciliation of net revenue before ﬁnance costs and taxation to net cash inﬂow from operating activities 31 March 31 March 2003 £’000 2004 £’000 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/(decrease) in debtors Increase/(decrease) in creditors Irrecoverable VAT Amortisation Net cash inﬂow from operating activities 2,868 (384) (94) (131) 247 33 – 20 3,347 (374) (231) (122) (136) (36) 35 13 1155 1155 2,496 1155 1155 2,559 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 had 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; and • 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 2004 by approximately 3 per cent. (2003: 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. 4040 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; Fixed Floating Rate Rate £’000 £’000 31 March 2004 No Interest £’000 Total £’000 31 March 2003 Fixed Floating Rate Rate £’000 £’000 No Interest £’000 Total £’000 39,002 1155 1155 1155 1155 1155 1155 1155 1155 22,659 10,051 38,445 19,427 10,651 5,735 8,924 Currency Sterling • Fixed rate assets bear interest at rates based on predetermined yield targets. The weighted average interest rate at 31 March 2004 was 13.7% (2003: 14.3%) • Floating rate assets bear interest at rates based predominantly on base rates. • The weighted average period to maturity for the ﬁxed rate assets is approximately two years. Financial liabilities The Company’s only ﬁnancial liabilities comprise a loan of £1 million under the borrowing facilities referred to below, bearing interest of 1.5 per cent. over LIBOR and the guarantees detailed in note 22 below. The date to maturity is three and one half years. Currency exposure As at 31 March 2004, the Company has no foreign currency exposures (2003: £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 2004 (2003: £5 million). Fair values of ﬁnancial assets and ﬁnancial liabilities All the Company’s ﬁnancial assets and liabilities as at 31 March 2004 are stated in accordance with new 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 for, except those funds scheduled for investment as detailed in the asset-based portfolio summary. There are guarantees which have been given to The Royal Bank of Scotland plc relating to the asset-based funds scheduled for investment in Applecroft Care Home Limited totalling £0.75million. These guarantees fell away upon the investment of funds as detailed below in note 23. Post balance sheet events The following amounts have been invested since 31 March 2004: • On 29 April 2004, the InterCare care homes were disposed of for net proceeds of £13,977,418. • Since the year end, non-qualifying loans were made to Youngs VCT Limited for £195,000. • On 5 May 2004, a further £1 million was invested in Kew Green VCT Limited. • On 6 May 2004, a further £1 million was invested in Barleycroft Care home Limited. • On 1 June 2004, a further £925,000 was invested in Applecroft Care Home Limited. 22. 23. 41 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 10.30 a.m. on Monday 26 July 2004 at 10 Crown Place, London EC2A 4FT for the purpose of dealing with the following business, of which items 5 and 6 are special business Ordinary Business 1 2 3 4 To receive and adopt the accounts and the reports of the Directors and Auditors for the year ended 31 March 2004. To approve the Directors’ remuneration report. To reappoint Deloitte & Touche LLP as auditors for the ensuing year and to authorise the directors to ﬁx their remuneration. To declare a net ﬁnal revenue dividend of 1.75 pence per share payable to Shareholders on the register at the close of business on 25 June 2004. Special Business To consider and, if thought ﬁt, pass the following resolutions of which item 5 will be proposed as a Special Resolution and item 6 will be proposed as an Ordinary Resolution: 5 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 approximately 10 per cent of the issued share capital); the minimum price which may be paid for a Share is 50p; 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; 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 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. (b) (c) (d) (e) That the existing performance incentive for the investment manager of the Company in the form of option agreements between the Company (1) and Close Brothers Investment Limited (2) dated 3 February 1997 be terminated with effect from 1 January 2005 and a new performance incentive in the form of an agreement between the Company (1) and Close Venture Management Limited (2), the principal terms of which are described in a circular to the shareholders of the Company dated 16 June 2004, a daft of which has been produced to the meeting and initialled by the Chairman for the purposes of identiﬁcation (together with any amendments or variations thereto of a non-material nature which the Directors think ﬁt) be and is hereby approved. BY ORDER OF THE BOARD C Kinnear Secretary Registered Ofﬁce 10 Crown Place, London EC2A 4FT Date: 16 June 2004 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. 42 42424242 Close Brothers Venture Capital Trust PLC

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