TIDMMIG2
RNS Number : 8711N
Maven Income and Growth VCT 2 PLC
11 May 2018
Maven Income and Growth VCT 2 PLC
The Directors announce the Company's results for the year ended
31 January 2018
Highlights for the Year
-- NAV total return at the year end of 97.55p per share (2017: 99.24p)
-- NAV at year end of 40.47p per share (2017: 50.52p), after
payment of dividends totalling 8.36p per share during the year
-- Annual dividends 6.11p per share (2017: 4.25p)
-- Eight new VCT qualifying investments completed
-- Profitable exits achieved from SPS (EU) and John McGavigan
Chairman's Statement
On behalf of your Board, I am pleased to announce the results
for the year to 31 January 2018. During the reporting period
considerable progress has been achieved in the construction of the
long term portfolio, with the addition of eight new VCT qualifying
investments in companies operating across a wide range of high
growth industries and sectors. In addition, a number of profitable
exits were completed from some of the more mature investee
companies. However, one of the larger portfolio company holdings
suffered a write-down in value, which impacted upon the financial
performance for the full year.
The annual dividend was 6.11p per share, representing a yield of
16.38%, based on the share price at the year end. This enhanced
level of distributions reflects a number of profitable
realisations, and was also required in order to ensure your
Company's ongoing compliance with the VCT legislation. Whilst this
level of annual distributions is not expected to be maintained,
your Board remains committed to making distributions when
realisations are achieved and to paying regular tax-free income to
Shareholders.
During the year, your Company has made encouraging progress
against a backdrop of economic uncertainty, largely related to the
ongoing negotiations regarding the UK's intended withdrawal from
the European Union (EU), and an evolving regulatory environment.
Over the past few years, the framework under which VCTs operate has
become increasingly complex, with further new legislation announced
in the 2017 Autumn Budget Statement. However, your Board believes
that the Manager has the depth of experience and breadth of skill
to ensure that your Company continues to respond appropriately and
remains well positioned to deliver future growth.
The majority of the companies in the investee portfolio have
continued to trade in line with plan throughout the year and the
continued progress achieved by a number of established private
company holdings has enabled the valuations of certain assets to be
increased. The Board is encouraged to note that after a number of
years of exceptionally challenging market conditions, the portfolio
companies with exposure to the oil & gas services sector are
seeing an improvement in trading, with financial performance
showing an increase over the comparative period in the prior year.
The valuations of a number of these assets had previously been
reduced in response to market conditions, and the conservative
valuation of these holdings will be maintained until there is
evidence of a sustained market recovery. Elsewhere in the
portfolio, there are a small number of investments that are
operating behind plan, or where a market adjustment has impacted
upon performance and, as a result, the valuations of these assets
have been reduced. A detailed analysis of portfolio developments
can be found in the Investment Manager's Review in the Annual
Report. The impact of these on the overall financial performance of
the Company is summarised in the Directors' Report.
It is pleasing to report on the addition of eight carefully
selected growth oriented companies to the portfolio during the
reporting period. The pipeline of new opportunities remains strong
and is supported by the Manager's expanded nationwide office
network, which is delivering a regular supply of prospective
investments. The Board is, however, aware of the challenges that
VCT managers are facing with regard to securing Advance Assurance
from HM Revenue & Customs (HMRC) for new investments, and notes
that this has resulted in a number of potential transactions being
lost during the year. The Directors welcomed the announcement in
the 2017 Autumn Budget Statement that the Advanced Assurance
process will be revised, as this should markedly improve the
timescales for transaction approval.
Given the maturing profile of a number of assets in the
portfolio, there has been significant sale and realisation activity
during the year. Most notably, in December 2017, exits were
achieved from SPS (EU), the UK's largest provider of promotional
merchandise and John McGavigan, a manufacturer and supplier of
plastic components for the global automotive industry, delivering
total returns over the life of the investments of 2.5 times and 4.2
times cost respectively. The Board is aware that discussions are
progressing regarding further potential exits from a number of the
more mature holdings in the portfolio, although there can be no
certainty that these will lead to profitable realisations.
In light of the evolving legislative environment for VCTs, the
Directors believe it is important that Shareholders are aware of
the longer term implications arising from the Finance (No. 2) Act
2015 and the further amendments in the Finance Act 2018. The
changes to the VCT rules that were enacted in November 2015
specifically prohibit participation in management buy-outs or
acquisition based transactions. They also restrict the ability of
VCTs to support older companies, including existing portfolio
holdings, unless certain conditions are met. As a result, VCT
managers are required to focus on the provision of development
capital to younger or earlier stage companies which, given their
inherent lack of maturity, have a different risk profile. In
addition, transaction structures are now required to contain a
greater proportion of equity, where previously higher levels of
interest bearing debt was permitted. As the portfolio evolves, and
a greater proportion of holdings are invested in earlier stage
companies, there is likely to be an impact on income levels. This
could result in dividend payments being subject to variation in
terms of quantum and timing, and may ultimately be driven by
realisation activity, and the requirement to comply with the VCT
rules. The Board and the Manager will ensure that this transition
is managed carefully in line with your Company's investment
objective.
Regulatory Developments
During the summer of 2017, the Patient Capital Review was
formally extended to consider the effectiveness and value for money
provided by the VCT and Enterprise Investment Scheme sector. The
Manager contributed to this consultation on behalf of its VCT
clients and it was widely anticipated that, as a result of this
review, the 2017 Autumn Budget Statement would include a number of
amendments.
The Directors were encouraged that the measures announced in the
2017 Autumn Budget Statement were intended to preserve the
attractive fundamentals of the VCT scheme, which continues to
provide a valuable bridge between private capital and the UK SME
sector. The availability of long-term patient capital, in line with
Government objectives at what is an increasingly important time for
the UK economy, gives comfort to small businesses and ensures that
entrepreneurial companies can continue to access equity finance,
and allows investors to benefit from their success.
Whilst there were no changes to tax reliefs, or the minimum
holding period for these reliefs, and VCT dividends will maintain
their tax-free status, a number of less favourable changes were
announced, some of which had been anticipated. As expected, the
focus is to continue to move towards supporting higher risk
investments, and includes the introduction of a 'risk to capital'
based test, certain sector exclusions and measures designed to
assist the financing of knowledge-intensive companies. The
percentage of funds that a VCT must hold in qualifying investments
will increase from 70% to 80% from 6 April 2019, with a shorter
time period for the investment of newly raised funds. In order to
assist with this requirement, the add-back period on sales will be
increased from six to twelve months.
The Autumn Budget Statement also announced that HMRC anticipates
being able to improve its approval process for Advance Assurance
clearance during the early part of 2018. This is a welcome
development as it should help the rate of new investment and allow
VCT managers to continue to build their portfolios without
unnecessary delay, whilst complying with the qualifying
requirements. The Finance Act 2018 received Royal Assent in March
2018 and the Board and the Manager will continue to consider the
implications and take these developments into account when planning
future strategy.
In January 2018 two major new pieces of legislation were
introduced; the Packaged Retail and Insurance-based Investment
Products (PRIIPs) Regulation and the Second Markets in Financial
Instruments Directive (MiFID II), which came into force on 1 and 3
January 2018 respectively. PRIIPs requires a Key Information
Document (KID) to be published by the Company; the form and content
of the KID is strictly prescribed and includes specific information
on investment risks, performance and costs, which must be provided
to all potential investors to enable them to compare the
performance of different VCTs. With regard to MiFID II, the main
practical change for investment companies is the requirement for
the Manager to report all transactions in quoted shares, including
share buy-backs as well as those in underlying investments, to the
Financial Conduct Authority to assist in its continued efforts to
combat market abuse.
The General Data Protection Regulation comes into force on 25
May 2018, replacing the Data Protection Act 1998. This regulation
enforces the principle of 'privacy by design and by default' and
enshrines new rights for individuals, including the right to be
forgotten and to data portability. The Manager is working with the
third parties that process Shareholders' personal data to ensure
that their rights under the new regulation are respected.
Dividends
As previously highlighted, the Directors considered it necessary
to distribute an enhanced level of interim dividends during the
financial year. This was a result of a build-up of distributable
reserves, including the proceeds from recent profitable
realisations, and the requirement to ensure ongoing compliance with
the VCT regulations.
The first interim dividend in respect of the year ended 31
January 2018, of 3.41p per Ordinary Share and comprising capital
only, was paid on 15 September 2017 to Shareholders on the register
at close of business on 25 August 2017. The second interim dividend
of 2.70p per Ordinary Share, comprising 0.70p of revenue and 2.0p
of capital, was paid on 26 January 2018 to Shareholders on the
register at close of business on 5 January 2018. No final dividend
is proposed and, therefore, total distributions for the financial
year were 6.11p per Ordinary Share, representing a yield of 16.38%
based on the year-end closing mid-market price of 37.30p. The
effect of paying dividends is to reduce the NAV of the Company by
the total cost of the distribution.
Since the Company's launch, and after receipt of the two interim
dividends noted above, Shareholders will have received 57.08p per
share in tax-free dividends. Decisions on future distributions will
take into consideration the availability of surplus revenue, the
adequacy of reserves, the proceeds from any further realisations
and the VCT qualifying levels of the portfolio, all of which are
kept under close review by the Board and the Manager.
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 10% to 20%
of the prevailing NAV per share.
Strategy
The Directors are monitoring the strategic options for your
Company in light of the recent regulatory changes, the Company's
increased rate of distribution, and the resultant impact on NAV.
This strategic review remains at an early stage and the Board will
ensure Shareholders are updated fully on any developments in due
course.
Annual General Meeting (AGM)
As Shareholders are aware, AGMs have been held in Glasgow and
London in alternate years in order to allow a wide range of
Shareholders the opportunity to meet the Directors and the Manager.
The 2018 AGM will be held in the Glasgow office of Maven Capital
Partners UK LLP on 13 June 2018, and the Notice of Annual General
Meeting can be found in the Annual Report.
The Future
The portfolio is currently transitioning from a concentration in
more established companies completed prior to the VCT rule changes
in 2015, towards a focus on younger companies that are active in
emerging industries and offer higher growth and return potential.
This hybrid portfolio offers investors a blended exposure to a wide
range of assets with different income and capital return potential.
The over-riding objective is to continue to increase the portfolio
in size and breadth in order to deliver consistently positive
returns, and at the same time ensure the payment of regular
dividends to Shareholders.
John Lawrence MBE
Chairman
11 May 2018
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
Under an investment policy approved by the Directors, the
Company aims to achieve long-term capital appreciation and generate
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/NEX 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
unquoted UK companies and AIM/NEX quoted companies which, by their
nature, carry 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 robust and 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;
-- co-investing with other clients of the Manager;
-- ensuring valuations of underlying investments are made
accurately and fairly (see Notes to the Financial Statements 1(e)
and 1(f) for further detail);
-- taking steps to ensure that share price discount is managed appropriately; and
-- choosing and appointing an FCA authorised investment manager
with the appropriate skills, experience and resources to achieve
the investment objectives above, with ongoing monitoring to ensure
the Manager is performing in line with expectations.
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 listed investments 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.
The economic and market environment is kept under constant
review and the investment strategy of the Company adapted so far as
is possible to mitigate emerging risks.
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, the
Manager and other key third party outsourcers such as the
Custodian, Company Secretary and Registrar. These include controls
designed to ensure that the Company's assets are safeguarded, that
all records are complete and accurate and that the third parties
have adequate controls in relation to the prevention of data
protection and cyber security failings.
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, incorporated by the Finance (No. 2) Act 2015 and the
Finance Act 2018.
The Board works closely with the Manager to ensure compliance
with all applicable and upcoming legislation, such that VCT
qualifying status is maintained. Further information on the
management of this risk is detailed under other headings in this
Business Report.
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
Guidance 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, which regulates the management of alternative
investment funds, including VCTs, introduced a new authorisation
and supervisory regime for all investment companies in the EU. The
Company is approved by the FCA as an internally managed small
registered 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 Link 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 exists in Article 50 of the Lisbon
Treaty, which was invoked on 29 March 2017. The full political,
economic and legal consequences of the referendum vote are not yet
known. It is possible that investments in the UK may be more
difficult to value and assess for suitability of risk, harder to
buy or sell, and 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.
On a regular basis, the Board reviews the political situation,
together with any associated changes to the economic, regulatory
and legislative environment in order to ensure that any risks
arising are mitigated as effectively as possible.
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 2018 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, or as otherwise required.
Key Performance Indicators
At each Board Meeting the Directors consider a number of APMs to
assess the Company's success in achieving its investment objective.
These APMs are key performance indicators that enable Shareholders
and prospective investors to gain an understanding of its business,
and are as follows:
-- NAV total return;
-- cumulative dividends paid;
-- 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.
Cumulative dividends paid is the total amount of both capital and
income distributions paid since the launch of the Company. The
Directors seek to pay dividends to comply with the VCT rules taking
account of the level of distributable reserves, profitable
realisations in each accounting period and the Company's future
cash flow projections. The share price discount to NAV is the
percentage by which the mid-market price of an investment is lower
than its net asset value per share.
A historical record of some of these measures is shown in the
Financial Highlights in the Annual Report and changes in the
profile of the portfolio are reflected in the Summary of Investment
Changes. Definitions of the APMs can be found in the Glossary.
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. Further information can be found
in the Annual Report in Notes 2 and 4 to the Financial
Statements.
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
At the forthcoming AGM, 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 2019, as it is believed
that these are in the best interests of Shareholders.
Approval
This 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
11 May 2018
Income Statement
For the Year Ended 31 January 2018
Year ended 31 January Year ended 31 January
2018 2017
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- -------- -------- -------- --------
(Losses)/gains on investments - (688) (688) - 1,070 1,070
Income from investments 678 - 678 627 - 627
Other income 9 - 9 4 - 4
Investment management fees (45) (404) (449) (70) (632) (702)
Other expenses (249) - (249) (302) - (302)
---------------------------------- -------- -------- -------- -------- -------- --------
Net return on ordinary activities 393 (1,092) (699) 259 438 697
before taxation
Tax on ordinary activities (65) 65 - (51) 51 -
---------------------------------- -------- -------- -------- -------- -------- --------
Return attributable to Equity
Shareholders 328 (1,027) (699) 208 489 697
---------------------------------- -------- -------- -------- -------- -------- --------
Earnings per share (pence) 0.81 (2.54) (1.73) 0.51 1.19 1.70
---------------------------------- -------- -------- -------- -------- -------- --------
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 earnings per share figures are relevant.
The basic and diluted earnings per share are, therefore,
identical.
The accompanying Notes are an integral part of the Financial
Statements.
Statement of Changes in Equity
For the Year Ended 31 January 2018
Share Capital Special Capital
Share premium reserve Capital 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
2017 4,058 9,473 (11,894) 454 17,618 346 447 20,502
Net return - - 798 (1,825) - - 328 (699)
Dividends
paid - - (3,023) - - - (363) (3,386)
Repurchase
and
Cancellation
of shares (25) - - - (96) 25 - (96)
-------------- --------- -------- --------- --------------- -------------- --------------- --------- ---------
At 31 January
2018 4,033 9,473 (14,119) (1,371) 17,522 371 412 16,321
-------------- --------- -------- --------- --------------- -------------- --------------- --------- ---------
For the Year Ended 31 January 2017
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
2016 4,109 9,473 (11,296) 821 17,842 295 526 21,770
Net return - - 856 (367) - - 208 697
Dividends
paid - - (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
-------------- --------- -------- --------- ----------- -------------- ----------- --------- ---------
The accompanying Notes are an integral part of the Financial
Statements.
Balance Sheet
As at 31 January 2018
31 January 2018 31 January 2017
GBP'000 GBP'000
----------------------------- --------------- ---------------
Fixed assets
Investments at fair value
through profit or loss 12,276 17,111
Current assets
Debtors 315 273
Cash 3,764 3,334
----------------------------- --------------- ---------------
4,079 3,607
Creditors
Amounts falling due within
one year (34) (216)
----------------------------- --------------- ---------------
Net current assets 4,045 3,391
----------------------------- --------------- ---------------
Net assets 16,321 20,502
----------------------------- --------------- ---------------
Capital and reserves
Called up share capital 4,033 4,058
Share premium account 9,473 9,473
Capital reserve - realised (14,119) (11,894)
Capital reserve - unrealised (1,371) 454
Special distributable
reserve 17,522 17,618
Capital redemption reserve 371 346
Revenue reserve 412 447
----------------------------- --------------- ---------------
Net assets attributable
to
Ordinary Shareholders 16,321 20,502
----------------------------- --------------- ---------------
Net asset value per
Ordinary Share (pence) 40.47 50.52
----------------------------- --------------- ---------------
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 11 May 2018 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 2018
Year ended Year ended
31 January 2018 31 January 2017
GBP'000 GBP'000
------------------------------ ---------------- ----------------
Net cash flows from operating
activities (918) (1,516)
Cash flows from investing
activities
Investment income received 626 621
Deposit interest received 9 4
Purchase of investments (1,837) (5,492)
Sale of investments 6,032 10,994
------------------------------ ---------------- ----------------
Net cash flows from investing
activities 4,830 6,127
------------------------------ ---------------- ----------------
Cash flows from financing
activities
Equity dividends paid (3,386) (1,741)
Repurchase of Ordinary
Shares (96) (224)
============================== ================ ================
Net cash flows from financing
activities (3,482) (1,965)
============================== ================ ================
Net increase in cash 430 2,646
------------------------------ ---------------- ----------------
Cash at beginning of
year 3,334 688
Cash at end of year 3,764 3,334
------------------------------ ---------------- ----------------
The accompanying Notes are an integral part of the Financial
Statements.
Notes to the Financial Statements
For the Year Ended 31 January 2018
1. Accounting Policies
(a) Basis of preparation
The Financial Statements have been prepared under the historical
cost convention, as modified by the revaluation of investments, and
in accordance with 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
Association of Investment Companies (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 early stage investments completed in the reporting
period, 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 investee
company.
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. 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) Critical accounting judgements and key sources of estimation uncertainty
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. In the opinion of the Board and the
Manager, there are no critical accounting judgements.
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 Year ended
31 January 2018 31 January 2017
------------------------ ---------------- ----------------
The returns per share
have been
based on the following
figures:
Weighted average number
of Ordinary Shares 40,509,549 40,948,352
Revenue return GBP328,000 GBP208,000
Capital return (GBP1,027,000) GBP489,000
------------------------ ---------------- ----------------
Total return (GBP699,000) GBP697,000
------------------------ ---------------- ----------------
NAV per Ordinary Share
NAV per Ordinary Share as at 31 January 2018 has been calculated
using the number of Ordinary Shares in issue at that date of 2018:
40,334,617 (2017: 40,584,617).
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 2018 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 13 June
2018, commencing at 10.30am, at Maven Capital Partners UK LLP,
Kintyre House, 205 West George Street, Glasgow, G2 2LW.
Copies of this announcement, and of the Annual Report and
Financial Statements for the year ended 31 January 2018, 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 2018 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 2017 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
11 May 2018
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSFKDDKPBKDNPD
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