TIDMMIG2
RNS Number : 0528F
Maven Income and Growth VCT 2 PLC
12 May 2017
Maven Income and Growth VCT 2 PLC
The Directors announce the Company's results for the year ended
31 January 2017
Highlights for the Year
-- NAV total return of 99.24p per share (2016: 97.45p) at the year end
-- NAV at year end of 50.52p per share (2016: 52.98p) after
payment of dividends totalling 4.25p per share during the year
-- Six new VCT qualifying private equity investments added to the portfolio
-- Strong pipeline of VCT qualifying private equity investments
-- Realisation of Nenplas, achieving a total return of 5.0 times cost
-- Disposal of Dantec Hose, generating a total return of 2.1 times cost
-- Proposed final dividend of 2.25p per share (2016: 2.25p)
Chairman's Statement
On behalf of your Board I am pleased to report on the further
progress achieved in the year to 31 January 2017. During the period
under review NAV total return increased to 99.24p per share,
reflecting the strength of the underlying portfolio. The profitable
realisations of several of the more mature investments have helped
to maintain the steady increase in NAV total return. Your Board is
mindful of the importance of dividend payments to Shareholders and,
in recognition of the performance achieved, is recommending a final
dividend of 2.25p per share. This represents a full year
distribution of 4.25p per share, equivalent to an annual tax-free
yield of 9.66%, based on the share price at the year end.
The reporting period has been one of considerable change for the
UK VCT industry following the enactment of the revised VCT
legislation in November 2015. The new rules have introduced a
number of restrictions on the types of transactions and companies
in which VCTs can invest, requiring the Manager to focus on the
provision of development capital, or investing in businesses with
growth finance requirements, rather than management buy-outs or
acquisition based transactions which have traditionally offered a
more predictable return profile. The investment team at Maven is
highly experienced at sourcing and executing transactions that meet
the revised criteria, and the Board is pleased to report that six
new VCT qualifying investments were completed during the year. The
Directors are also encouraged by the large and diverse pipeline of
prospective new investments, at various stages of due diligence,
and anticipate seeing a number of these transactions complete
during the first half of the current financial year.
The Board believes that considerable progress has been achieved
by your Company during the reporting period, despite the challenges
presented by the implementation of the revised VCT legislation and
the economic uncertainty resulting from the outcome of the European
Union (EU) referendum in June 2016. Against this backdrop, the core
portfolio has continued to perform well, as can be seen from the
detailed analysis included in the Investment Manager's Review in
the Annual Report. The continuing growth experienced by a number of
private company holdings has enabled the valuations of these assets
to be increased, reflecting positive trading results. The Board
also remains conscious of the impact that the low oil price is
having on companies with exposure to the energy services sector and
whilst direct remedial action has been taken by those investee
companies with exposure, the external environment has continued to
be challenging and is likely to remain so until at least the second
half of 2017. As such, the valuations of a number of these
investments have been conservatively reduced to reflect the
prevailing market conditions.
A number of profitable realisations were achieved during the
reporting period, most notably the exit from Nenplas which
completed in December 2016, achieving a total return of 5.0 times
cost over the life of the investment. The Directors are also aware
that discussions are in progress regarding potential exits from
several of the more mature assets, although there can be no
certainty that these will lead to profitable realisations.
Whilst the full impact of the UK's decision to leave the EU will
become clearer once formal negotiations commence, the Board and the
Manager have conducted a review of the Company's assets and, at
present, believe that any overall effect is not likely to be
significant. The businesses in which your Company has invested will
maintain or adapt their growth strategies as appropriate, with a
number of exporters already seeing a short-term benefit from the
devaluation of Sterling against several major currencies that has
occurred since the referendum in June 2016.
The Board is pleased to note that, in June 2016, Maven received
industry recognition for its performance when it was named Private
Equity House of the Year, for the second year running, at the 2016
High Potential Business Awards (previously the M&A Awards).
This category celebrates outstanding growth businesses and their
financial backers, recognising private equity managers that have
displayed the keenest judgement and opportunism in completing
acquisitions or exit transactions. Maven was also named Private
Equity Manager of the Year at the ACQ Global Awards which celebrate
achievement and innovation across the fund management industry.
The Board recognises the excellent work done by the management
and staff at Maven and is pleased to acknowledge the industry's
recognition of your Manager.
Dividends
The Board recommends that a final dividend of 2.25p per Ordinary
Share, comprising 0.20p of revenue and 2.05p of capital, be paid on
23 June 2017 to Shareholders on the register at 26 May 2017. This
would bring total dividends for the year to 4.25p per share
representing a yield of 9.66% based on the year-end closing
mid-market share price of 44.00p. The effect of paying the proposed
final dividend would be to reduce the NAV of the Company by the
total cost of the distribution.
Since the Company's launch, and after receipt of the proposed
final dividend, Shareholders will have received 50.97p per share in
tax-free dividends. The Board considers it important for
Shareholders to be aware that the move to invest in development
capital and growth finance opportunities, as required by the
revised VCT legislation, is likely to result in less predictable
capital gains and income flows, with the result that the quantum
and timing of future dividend payments could be subject to
fluctuation.
Fund Raising
As the Company currently enjoys significant cash liquidity for
new investment, the Board has elected not to raise further funds at
present.
Share Buy-backs
Shareholders should be aware that the Board's primary objective
is for the Company to retain sufficient liquid assets for making
investments in line with its stated policy and for the continued
payment of dividends. However, the Directors also acknowledge the
need to maintain an orderly market in the Company's shares and have
delegated authority to the Manager to buy back shares in the market
for cancellation or to be held in treasury, subject always to such
transactions being in the best interests of Shareholders.
It is intended that, subject to market conditions, available
liquidity and the maintenance of the Company's VCT status, shares
will be bought back at prices representing a discount of between
10% and 20% to the prevailing NAV per share.
Regulatory Developments
As previously reported, the Finance Act (No. 2) 2015 was enacted
in November 2015 and introduced a number of changes to the
legislation governing VCTs. The new rules are designed to bring the
UK VCT scheme into line with EU State Aid Rules for smaller company
investment and have introduced a number of restrictions on the
types of qualifying transactions and companies in which VCTs can
invest. Unlike previous changes in legislation, the new rules apply
to all funds raised by a VCT, including those raised prior to
November 2015, although existing investments, completed prior to
the legislation change, are unaffected.
The new rules specifically prohibit participation in management
buy-outs or acquisitions, and limit the ability to support older
companies unless specific criteria are met. The emphasis is,
therefore, on providing development capital to younger and earlier
stage companies, or supporting more established businesses which
can demonstrate growth strategies that satisfy specific provisions
under the revised qualification criteria. In a further amendment,
the March 2016 Budget Statement included changes to the rules
governing non-qualifying investments by VCTs. With effect from 6
April 2016, VCTs have only been able to make qualifying investments
and certain limited investments for liquidity purposes, with other
types of new non-qualifying investments now prohibited.
The revised legislation has imposed additional diligence and
administrative requirements on the investment process in order to
ensure that all aspects of the potential investment and transaction
structure remain compliant with the new rules. The Manager
continues to pursue a cautious approach and works closely with a
specialist VCT adviser, engaged by the Company, to assist in
interpreting the revised legislation and advising on the VCT tax
clearance process with HM Revenue & Customs (HMRC), with
advance assurance secured prior to any new investment completing.
The Board welcomed the announcement in the Chancellor's 2016 Autumn
Statement that, in response to the increased volume of applications
submitted and the resultant delays experienced in obtaining
clearance for proposed investments, a consultation is being carried
out to consider the options for streamlining the HMRC advance
assurance service.
The 2016 Autumn Statement highlighted that the Government will
no longer be initiating a review of the provision allowing
replacement capital in certain new VCT transactions, but suggested
that this may be reviewed at some point in the future. Whilst the
Directors and the Manager were disappointed by this announcement,
as the ability to include replacement capital was viewed as an
important flexibility under the new rules, it does not impact the
Company's investment strategy which has already adapted to meet the
requirements of the new rules. The Chancellor's 2017 Spring
Statement did not introduce any further amendment to the VCT
legislation.
Annual General Meeting (AGM)
As indicated in previous Annual Reports, in order to allow a
wider range of Shareholders the opportunity to meet the Directors
and the Manager, it is intended that AGMs will be held in Glasgow
and London in alternate years. Therefore, the 2017 AGM will be held
in the London office of Maven Capital Partners LLP on 14 June 2017,
and the Notice of Annual General Meeting can be found in the Annual
Report.
The Future
Your Board remains committed to the strategy of building a large
and diversified portfolio of income generating private company
holdings capable of supporting attractive tax-free distributions to
Shareholders. Whilst the introduction of the new VCT rules has
placed restrictions on the types of transactions and companies in
which the Company can invest, the Directors are encouraged by the
progress achieved during the reporting period. The completion of
six new VCT qualifying investments, together with the strong and
growing pipeline of potential opportunities at various stages of
the diligence process across Maven's regional office network,
demonstrates the flexibility of its approach, which has adapted
well to meet the regulatory changes while also delivering the
investment objective.
Over the coming years the portfolio will continue to evolve as
selective high growth VCT qualifying opportunities are added,
whilst the more mature assets naturally progress to exit. This
gradual rebalancing of the asset base may have an impact on the
quantum and timing of future Shareholder distributions, as the
proportion of earlier stage investments increases. However, the
Directors believe that the strength of the underlying portfolio,
which consists of a larger proportion of investments completed
prior to the rule changes, is capable of maintaining an attractive
dividend policy.
John E Lawrence MBE
Chairman
12 May 2017
Business Report
This Business Report is intended to provide an overview of the
strategy and business model of the Company as well as the key
measures used by the Directors in overseeing its management. The
Company is a venture capital trust which invests in accordance with
the investment objective set out below.
Investment Objective
The Company aims to achieve long-term capital appreciation and
generate maintainable levels of income for Shareholders.
Business Model and Investment Policy
Under an investment policy approved by the Directors, the
Company intends to achieve its objective by:
-- investing the majority of its funds in a diversified
portfolio of shares and securities in smaller, unquoted UK
companies and AIM/ISDX quoted companies which meet the criteria for
VCT qualifying investments and have strong growth potential;
-- investing no more than GBP1 million in any company in one
year and no more than 15% of the Company's assets by cost in one
business at any time; and
-- borrowing up to 15% of net asset value, if required and only
on a selective basis, in pursuit of its investment strategy.
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Company are as
follows:
Investment Risk
Many of the Company's investments are in small and medium sized
UK unquoted and AIM/ISDX quoted companies which, by their nature,
entail a higher level of risk and lower liquidity than investments
in large quoted companies. The Board aims to limit the risk
attaching to the investment portfolio as a whole by ensuring that a
structured selection, monitoring and realisation process is
applied. The Board reviews the investment portfolio with the
Manager on a regular basis.
The Company manages and minimises investment risk by:
-- diversifying across a large number of companies;
-- diversifying across a range of economic sectors;
-- actively and closely monitoring the progress of investee companies;
-- seeking to appoint a non-executive director to the board of
each private investee company, provided from the Manager's
investment management team or from its pool of experienced
independent directors;
-- co-investing with other funds run by the Manager in larger
deals, which tend to carry less risk;
-- not investing in hostile public to private transactions; and
-- retaining the services of a manager that can provide the
resources required to achieve the investment objective and meet the
criteria stated above.
Financial and Liquidity Risk
As most of the investments require a mid to long-term commitment
and are relatively illiquid, the Company retains a portion of the
portfolio in cash or cash equivalents in order to finance any new
unquoted investment opportunities. The Company has only limited
direct exposure to currency risk and does not enter into any
derivative transactions.
Economic Risk
The valuation of investment companies may be affected by
underlying economic conditions such as fluctuating interest rates
and the availability of bank finance.
Credit Risk
The Company may hold financial instruments and cash deposits and
is dependent on counterparties discharging their agreed
responsibilities. The Directors consider the creditworthiness of
the counterparties to such instruments and seek to ensure that
there is no undue concentration of exposure to any one party.
Internal Control Risk
The Board reviews regularly the system of internal controls,
both financial and non-financial, operated by the Company and the
Manager. These include controls designed to ensure that the
Company's assets are safeguarded and that all records are complete
and accurate.
VCT Qualifying Status Risk
The Company operates in a complex regulatory environment and
faces a number of related risks, including:
-- becoming subject to capital gains tax on the sale of its
investments as a result of a breach of Section 274 of the Income
Tax Act 2007;
-- loss of VCT status and consequent loss of tax reliefs
available to Shareholders as a result of a breach of the VCT
Regulations;
-- loss of VCT status and reputational damage as a result of
serious breach of other regulations such as the FCA Listing Rules
and the Companies Act 2006; and
-- increased investment restrictions resulting from the EU State
Aid Rules, enacted through the Finance Act (No. 2) 2015.
Legislative and Regulatory Risk
In order to maintain its approval as a VCT, the Company is
required to comply with current VCT legislation in the UK as well
as the EU State Aid Rules. Changes in the future to either
legislation could have an adverse impact on Shareholder investment
returns whilst maintaining the Company's VCT status. The Board and
the Manager continue to make representations where appropriate,
either directly or through relevant industry bodies such as the
BVCA.
The Board has retained Philip Hare & Associates LLP as VCT
Adviser to the Company.
Breaches of other regulations including, but not limited to, the
Companies Act 2006, the FCA Listing Rules, the FCA Disclosure and
Transparency Rules or the Alternative Investment Fund Managers
Directive (AIFMD), could lead to a number of detrimental outcomes
and reputational damage. Breaches of controls by service providers
to the Company could also lead to reputational damage or loss.
The AIFMD introduced a new authorisation and supervisory regime
for all investment companies in the EU. The Company was approved by
the FCA as a self-managed UK AIFM under the AIFMD.
The Company is also required to comply with tax legislation
under the Foreign Account Tax Compliance Act and the Common
Reporting Standard. The Company has appointed Capita Asset Services
to act on its behalf to report annually to HMRC and ensure
compliance with this legislation.
Political Risk
In a referendum held on 23 June 2016, the UK voted to leave the
EU (a process informally known as Brexit). The formal process of
implementing this decision was contained within Article 50 of the
Lisbon Treaty and the political, economic and legal consequences of
the referendum vote are not yet known. It is possible that
investments in the UK may be more subjective to value, may be more
difficult to assess for suitability of risk, harder to buy or sell,
or may be subject to greater or more frequent rises and falls in
value. In the longer term, there is likely to be a period of
uncertainty as the UK seeks to negotiate its exit from the EU. The
UK's laws and regulations concerning funds may, in future, diverge
from those of the EU. This could lead to changes in the operation
of the Company, the rights of investors, or the territories in
which the shares of the Company may be promoted and sold.
An explanation of certain economic and financial risks and how
they are managed is also contained in Note 16 to the Financial
Statements.
Statement of Compliance with Investment Policy
The Company is adhering to its stated investment policy and
managing the risks arising from it. This can be seen in various
tables and charts throughout the Annual Report, and from
information provided in the Chairman's Statement and in the
Investment Manager's Review. A review of the Company's business,
its position as at 31 January 2017 and its performance during the
year then ended is included in the Chairman's Statement, which also
includes an overview of the Company's strategy and business
model.
The management of the investment portfolio has been delegated to
Maven Capital Partners UK LLP (Maven), which also provides company
secretarial, administrative and financial management services to
the Company. The Board is satisfied with the depth and breadth of
the Manager's resources and its network of offices, which originate
new deals and enable it to monitor the geographically widespread
portfolio of companies effectively.
The Investment Portfolio Summary in the Annual Report discloses
the investments in the portfolio and the degree of co-investment
with other clients of the Manager. The tabular analysis of the
unlisted and quoted portfolio in the Annual Report show that the
portfolio is diversified across a variety of industry sectors and
deal types. The level of VCT qualifying investment is monitored by
the Manager on a daily basis and reported to the Risk Committee
quarterly.
Key Performance Indicators
At each Board Meeting the Directors consider a number of
financial performance measures to assess the Company's success in
achieving its investment objective, and these also enable
Shareholders and prospective investors to gain an understanding of
its business. The key performance indicators are as follows:
-- NAV total return;
-- dividend growth;
-- share price discount to NAV;
-- investment income; and
-- operational expenses.
The NAV total return is a measure of the Shareholder value that
includes current NAV per share and total dividends paid to date.
The dividend growth measure shows how much of that Shareholder
value has been returned to original investors in the form of
dividends. A historical record of these measures is shown in the
Financial Highlights in the Annual Report and the profile of the
portfolio is reflected in the Summary of Investment Changes in the
Annual Report. The Board reviews the Company's investment income
and operational expenses on a quarterly basis as the Directors
consider that both of these elements are important components in
the generation of Shareholder returns.
There is no meaningful VCT index against which to compare the
financial performance of the Company but, for reporting to the
Board and Shareholders, the Manager uses comparisons with
appropriate indices and the Company's peer group. The Directors
also consider non-financial performance measures such as the flow
of investment proposals and the Company's ranking within the VCT
sector by independent analysts.
Consideration is also given to economic, regulatory and
political trends and features that may impact on the Company's
future development and performance.
Valuation Process
Investments held by Maven Income and Growth VCT 2 PLC in
unquoted companies are valued in accordance with the International
Private Equity and Venture Capital Valuation Guidelines.
Investments quoted or traded on a recognised stock exchange are
valued at their bid prices.
Share Buy-backs
The Board will seek the necessary Shareholder authority to
continue to conduct a share buy-back programme under appropriate
circumstances.
Employee, Environmental and Human Rights Policy
The Company has no direct employee or environmental
responsibilities, nor is it responsible for the emission of
greenhouse gases. However, the Directors will consider economic,
regulatory and political trends and features that may impact on the
Company's future development and performance. The Board's principal
responsibility to Shareholders is to ensure that the investment
portfolio is managed and invested properly.
The management of the portfolio is undertaken by the Manager
through members of its portfolio management team. The Manager
engages with the Company's underlying investee companies in
relation to their corporate governance practices and in developing
their policies on social, community and environmental matters and
further information may be found in the Statement of Corporate
Governance. In light of the nature of the Company's business, there
are no relevant human rights issues and, therefore, the Company
does not have a human rights policy.
Independent Auditor
The Company's Independent Auditor is required to report if there
are any material inconsistencies between the content of the
Strategic Report and the Financial Statements. The Independent
Auditor's Report can be found in the Annual Report.
Future Strategy
The Board and the Manager intend to maintain the policies set
out above for the year ending 31 January 2018 as it is believed
that these are in the best interests of Shareholders.
Approval
The Business Report, and the Strategic Report as a whole, was
approved by the Board of Directors and signed on its behalf by:
John Lawrence MBE
Director
12 May 2017
Income Statement
For the Year Ended 31 January 2017
Year ended 31 Year ended 31
January 2017 January 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- -------- -------- -------- -------- -------- ----------
Gains on investments - 1,070 1,070 - 3,085 3,085
Income from investments 627 - 627 1,025 - 1,025
Other income 4 - 4 - - -
Investment management fees (70) (632) (702) (116) (1,041) (1,157)
Other expenses (302) - (302) (188) - (188)
------------------------------------------- -------- -------- -------- -------- -------- --------
Net return on ordinary activities
before taxation 259 438 697 721 2,044 2,765
Tax on ordinary activities (51) (51) - (119) 119 -
------------------------------------------- -------- -------- -------- -------- -------- --------
Return attributable to Equity Shareholders 208 489 697 602 2,163 2,765
------------------------------------------- -------- -------- -------- -------- -------- --------
Earnings per share (pence) 0.51 1.19 1.70 1.48 5.33 6.81
------------------------------------------- -------- -------- -------- -------- -------- --------
All gains and losses are recognised in the Income Statement.
All items in the above statement are derived from continuing
operations. The Company has only one class of business and one
reportable segment, the results of which are set out in the Income
Statement and Balance Sheet. The Company derives its income from
investments made in shares, securities and bank deposits.
There are no potentially dilutive capital instruments in issue
and therefore no diluted returns per share figures are relevant.
The basic and diluted earnings per share are therefore
identical.
The total column of this Statement is the Profit and Loss
Account of the Company.
Statement of Changes in Equity
For the Year Ended 31 January 2017
Share Capital Capital reserve Special Capital
Share premium reserve unrealised distributable redemption Revenue
capital account realised GBP'000 reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- -------- --------- --------------- -------------- -------------- --------- ---------
At 31 January
2016 4,109 9,473 (11,296) 821 17,842 295 526 21,770
Net return - - 856 (367) - - 208 697
Dividends paid
6 - - (1,454) - - - (287) (1,741)
Repurchase and
cancellation
of shares (51) - - - (224) 51 - (224)
--------------- --------- -------- --------- --------------- -------------- -------------- --------- ---------
At 31 January
2017 4,058 9,473 (11,894) 454 17,618 346 447 20,502
--------------- --------- -------- --------- --------------- -------------- -------------- --------- ---------
For the Year Ended 31 January 2016
Share Capital Capital Special Capital
Share premium reserve reserve distributable redemption Revenue
capital account realised unrealised reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- -------- --------- ----------- -------------- ----------- --------- ---------
At 31 January
2015 3,424 6,174 (11,223) 3,987 17,842 295 335 20,834
Net return - - 5,329 (3,166) - - 602 2,765
Dividends paid
6 - - (5,402) - - - (411) (5,813)
Share issue
12 685 3,299 - - - - - 3,984
--------------- --------- -------- --------- ----------- -------------- ----------- --------- ---------
At 31 January
2016 4,109 9,473 (11,296) 821 17,842 295 526 21,770
--------------- --------- -------- --------- ----------- -------------- ----------- --------- ---------
The accompanying Notes are an integral part of the Financial
Statements.
Balance Sheet
As at 31 January 2017
31 January 2017 31 January 2016
GBP'000 GBP'000
------------------------------- --------------- ---------------
Fixed assets
Investments at fair value
through profit or loss 17,111 21,591
Current assets
Debtors 273 221
Cash 3,334 688
------------------------------- --------------- ---------------
3,607 909
Creditors
Amounts falling due within
one year (216) (730)
------------------------------- --------------- ---------------
Net current assets 3,391 179
------------------------------- --------------- ---------------
Net assets 20,502 21,770
------------------------------- --------------- ---------------
Capital and reserves
Called up share capital 4,058 4,109
Share premium account 9,473 9,473
Capital reserve - realised (11,894) (11,296)
Capital reserve - unrealised 454 821
Special distributable reserve 17,618 17,842
Capital redemption reserve 346 295
Revenue reserve 447 526
------------------------------- --------------- ---------------
Net assets attributable
to Ordinary Shareholders 20,502 21,770
------------------------------- --------------- ---------------
Net asset value per Ordinary
Share (pence) 50.52 52.98
------------------------------- --------------- ---------------
The Financial Statements of Maven Income and Growth VCT 2 PLC,
registered number 4135802, were approved and authorised for issue
by the Board of Directors on 12 May 2017 and were signed on its
behalf by:
John Lawrence MBE
Director
The accompanying Notes are an integral part of the Financial
Statements.
Cash Flow Statement
For the Year Ended 31 January 2017
Year ended Year ended
31 January 2017 31 January 2016
GBP'000 GBP'000
---------------------------- ---------------- ----------------
Net cash flows from
operating activities (1,516) (1,034)
Cash flows from investing
activities
Investment income received 621 1,065
Deposit interest received 4 -
Purchase of investments (5,492) (27,006)
Sale of investments 10,994 28,244
---------------------------- ---------------- ----------------
Net cash flows from
investing activities 6,127 2,303
---------------------------- ---------------- ----------------
Cash flows from financing
activities
Equity dividends paid (1,741) (5,813)
Issue of Ordinary Shares - 3,984
Repurchase of Ordinary
Shares (224) -
---------------------------- ---------------- ----------------
Net cash flows from
financing activities (1,965) (1,829)
---------------------------- ---------------- ----------------
Net increase/(decrease)
in cash 2,646 (560)
---------------------------- ---------------- ----------------
Cash at beginning of
year 688 1,248
Cash at end of year 3,334 688
The accompanying Notes are an integral part of the Financial
Statements.
Notes to the Financial Statements
For the Year Ended 31 January 2017
1. Accounting Policies
(a) Basis of preparation
The Financial Statements have been prepared under FRS 102, the
Financial Reporting Standard applicable in the UK and Republic of
Ireland and in accordance with the Statement of Recommended
Practice for Investment Trust Companies and Venture Capital Trusts
(the SORP) issued by the AIC in November 2014.
(b) Income
Dividends receivable on equity shares and unit trusts are
treated as revenue for the period on an ex-dividend basis. Where no
ex-dividend date is available dividends receivable on or before the
year end are treated as revenue for the period. Provision is made
for any dividends not expected to be received. The fixed returns on
debt securities and non-equity shares are recognised on a time
apportionment basis so as to reflect the effective interest rate on
the debt securities and shares. Provision is made for any fixed
income not expected to be received. Interest receivable from cash
and short term deposits and interest payable are accrued to the end
of the year.
(c) Expenses
All expenses are accounted for on an accruals basis and charged
to the Income Statement. Expenses are charged through the revenue
account except as follows:
-- expenses which are incidental to the acquisition and disposal
of an investment are charged to capital; and
-- expenses are charged to realised capital reserves where a
connection with the maintenance or enhancement of the value of the
investments can be demonstrated. In this respect, the investment
management fee has been allocated 10% to revenue and 90% to
realised capital reserves to reflect the Company's investment
policy and prospective income and capital growth.
(d) Taxation
Deferred taxation is recognised in respect of all timing
differences that have originated but not reversed at the balance
sheet date, where transactions or events that result in an
obligation to pay more tax in the future or right to pay less tax
in the future have occurred at the balance sheet date. This is
subject to deferred tax assets only being recognised if it is
considered more likely than not that there will be suitable profits
from which the future reversal of the underlying timing differences
can be deducted. Timing differences are differences arising between
the Company's taxable profits and its results as stated in the
Financial Statements which are capable of reversal in one or more
subsequent periods.
Deferred tax is measured on a non-discounted basis at the tax
rates that are expected to apply in the periods in which timing
differences are expected to reverse, based on tax rates and laws
enacted or substantively enacted at the balance sheet date.
The tax effect of different items of income/gain and
expenditure/loss is allocated between capital reserves and revenue
account on the same basis as the particular item to which it
relates using the Company's effective rate of tax for the
period.
UK corporation tax is provided at amounts expected to be
paid/recovered using the tax rates and laws that have been enacted
or substantively enacted at the balance sheet date.
(e) Investments
In valuing unlisted investments the Directors follow the
criteria set out below. These procedures comply with the revised
International Private Equity and Venture Capital Valuation
Guidelines (IPEVCV) for the valuation of private equity and venture
capital investments. Investments are recognised at their trade date
and are designated by the Directors as fair value through profit
and loss. At subsequent reporting dates, investments are valued at
fair value, which represents the Directors' view of the amount for
which an asset could be exchanged between knowledgeable and willing
parties in an arm's length transaction. This does not assume that
the underlying business is saleable at the reporting date or that
its current shareholders have an intention to sell their holding in
the near future.
A financial asset or liability is generally derecognised when
the contract that gives rise to it is settled, sold, cancelled or
expires.
1. For investments completed prior to the reporting date and
those at an early stage in their development, fair value is
determined using the Price of Recent Investment Method, except that
adjustments are made when there has been a material change in the
trading circumstances of the company or a substantial movement in
the relevant sector of the stock market.
2. Whenever practical, recent investments will be valued by
reference to a material arm's length transaction or a quoted
price.
3. Mature companies are valued by applying a multiple to their
prospective earnings to determine the enterprise value of the
company.
3.1 To obtain a valuation of the total ordinary share capital
held by management and the institutional investors, the value of
third party debt, institutional loan stock, debentures and
preference share capital is deducted from the enterprise value. The
effect of any performance related mechanisms is taken into account
when determining the value of the ordinary share capital.
3.2 Preference shares, debentures and loan stock are valued
using the Price of Recent Investment Method. When a redemption
premium has accrued, this will only be valued if there is a
reasonable prospect of it being paid. Preference shares which carry
a right to convert into ordinary share capital are valued at the
higher of the Price of Recent Investment Method basis and the
price/earnings basis, both described above.
4. In the absence of evidence of a deterioration, or strong
defensible evidence of an increase in value, the fair value is
determined to be that reported at the previous balance sheet
date.
5. All unlisted investments are valued individually by the
portfolio management team of Maven Capital Partners UK LLP. The
resultant valuations are subject to detailed scrutiny and approval
by the Directors of the Company.
6. In accordance with normal market practice, investments listed
on the Alternative Investment Market or a recognised stock exchange
are valued at their bid market price.
(f) Fair value measurement
Fair value is defined as the price that the Company would
receive upon selling an investment in a timely transaction to an
independent buyer in the principal or the most advantageous market
of the investment. A three-tier hierarchy has been established to
maximise the use of observable market data and minimise the use of
unobservable inputs and to establish classification of fair value
measurements for disclosure purposes. Inputs refer broadly to the
assumptions that market participants would use in pricing the asset
or liability, including assumptions about risk, for example, the
risk inherent in a particular valuation technique used to measure
fair value including such a pricing model and/or the risk inherent
in the inputs to the valuation technique. Inputs may be observable
or unobservable.
Observable inputs are inputs that reflect the assumptions market
participants would use in pricing the asset or liability developed
based on market data obtained from sources independent of the
reporting entity. Unobservable inputs are inputs that reflect the
reporting entity's own assumptions about the assumptions market
participants would use in pricing the asset or liability developed
based on best information available in the circumstances.
The three-tier hierarchy of inputs is summarised in the three
broad levels listed below.
-- Level 1 - the unadjusted quoted price in an active market for
identical assets or liabilities that the entity can access at the
measurement date.
-- Level 2 - inputs other than quoted prices included within
Level 1 that are observable (ie developed using market data) for
the asset or liability, either directly or indirectly.
-- Level 3 - inputs are unobservable (ie for which market data
is unavailable) for the asset or liability.
(g) Gains and losses on investments
When the Company sells or revalues its investments during the
year, any gains or losses arising are credited/charged to the
Income Statement.
(h) Significant judgements and estimates
Disclosure is required of judgements and estimates made by the
Board and the Manager in applying the accounting policies that have
a significant effect on the Financial Statements. The area
involving the highest degree of judgement and estimates is the
valuation of unlisted investments recognised in Note 8 and
explained in Note 1 (e) above.
Reserves
Share premium account
The share premium account represents the premium above nominal
value received by the Company on issuing shares net of issue
costs.
Capital reserves
Gains or losses on investments realised in the year that have
been recognised in the Income Statement are transferred to the
capital reserve realised account on disposal. Furthermore, any
prior unrealised gains or losses on such investments are
transferred from the capital reserve unrealised account to the
capital reserve realised account on disposal. Increases and
decreases in the fair value of investments are recognised in the
Income Statement and are then transferred to the capital reserve
unrealised account. The capital reserve realised account also
represents capital dividends, capital investment management fees
and the tax effect of capital items.
Special distributable reserve
The total cost to the Company of the repurchase and cancellation
of shares is represented in the special distributable reserve
account.
Capital redemption reserve
The nominal value of shares repurchased and cancelled is
represented in the capital redemption reserve.
Revenue reserve
The revenue reserve represents accumulated profits retained by
the Company that have not been distributed to Shareholders as a
dividend.
Earnings per share
Year ended 31 January Year ended 31
2017 January 2016
------------------------ --------------------- -------------
The returns per share
have been based on the
following figures:
Weighted average number
of Ordinary Shares 40,948,352 40,602,938
Revenue return GBP208,000 GBP602,000
Capital return GBP489,000 GBP2,163,000
------------------------ --------------------- -------------
Total return GBP697,000 GBP2,765,000
------------------------ --------------------- -------------
NAV per Ordinary Share
NAV per Ordinary Share as at 31 January 2017 has been calculated
using the number of Ordinary Shares in issue at that date of
40,584,617 (2016: 41,089,617).
Directors' Responsibility Statement
The Directors believe that, to the best of their knowledge:
-- the Financial Statements have been prepared in accordance
with the applicable accounting standards and give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company as at 31 January 2017 and for the year to that
date;
-- the Directors' Report includes a fair review of the
development and performance of the Company, together with a
description of the principal risks and uncertainties that it faces;
and
-- the Annual Report and Financial Statements taken as a whole
is fair, balanced and understandable and provides the information
necessary to assess the Company's position and performance,
business model and strategy.
Other Information
The Annual General Meeting will be held on Wednesday 14 June
2017, commencing at 10.30am, at Maven Capital Partners UK LLP,
Fifth Floor, 1-2 Royal Exchange Buildings, London EC3V 3LF.
Copies of this announcement, and of the Annual Report and
Financial Statements for the year ended 31 January 2017, will be
available to the public at the offices of Maven Capital Partners UK
LLP, Kintyre House, 205 West George Street, Glasgow G2 2LW; at the
registered office of the Company, Fifth Floor, 1-2 Royal Exchange
Buildings, London EC3V 3LF and on the Company's website at
www.mavencp.com/migvct2.
The Annual Report and Financial Statements for the year ended 31
January 2017 will be issued to Shareholders and filed with the
Registrar of Companies in due course.
The financial information contained within this Announcement
does not constitute the Company's statutory Financial Statements as
defined in the Companies Act 2006. The statutory Financial
Statements for the year ended 31 January 2016 have been delivered
to the Registrar of Companies and contained an audit report which
was unqualified and did not constitute statements under S498(2) or
S498(3) of the Companies Act 2006.
Neither the content of the Company's website nor the contents of
any website accessible from hyperlinks on the Company's website (or
any other website) is incorporated into, or forms part of, this
announcement.
The Annual Report will be submitted to the National Storage
Mechanism and will be available for inspection at:
www.morningstar.co.uk/uk/NSM.
By order of the Board
Maven Capital Partners UK LLP
Secretary
12 May 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKBDBPBKDCPD
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May 12, 2017 11:32 ET (15:32 GMT)
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