TIDMBSC
RNS Number : 6330I
British Smaller Companies VCT2 Plc
27 March 2015
BRITISH SMALLER COMPANIES VCT2 PLC
Annual Financial Report Announcement for
the Year ended 31 December 2014
British Smaller Companies VCT2 plc ("the Company") today
announces its audited results for the year ended 31 December
2014.
Financial Highlights
-- An increase in total return of 1.7 per cent to 106.4 pence
per ordinary share (2013: 104.6 pence per ordinary share).
-- An increase in net asset value of 1.8 pence per ordinary
share prior to the payment of dividends, representing a 2.7 per
cent increase on the opening net asset value.
-- Total dividends paid in the year of 4.5 pence per ordinary
share (2013: 4.5 pence per ordinary share).
-- Total cumulative dividends paid since inception of 43.5 pence
per ordinary share (2013: 39.0 pence per ordinary share).
-- Proposed final dividend of 2.5 pence per ordinary share in
respect of the year ended 31 December 2014.
-- Successful joint fundraising with British Smaller Companies
VCT plc during the year, raising new funds of GBP10.2 million for
the Company. Following the excellent response to the fundraising
launched on 20 October 2014 with British Smaller Companies VCT plc
the offers were fully subscribed on 24 March 2015 raising GBP40
million in aggregate.
-- The Company invested a total of GBP13.6 million into 16
companies during the year, including GBP12.46 million into 11 new
companies and GBP1.14 million of follow-on investment to support
the existing portfolio.
-- Successful realisation of the Company's investment in
Waterfall Services Limited. Total proceeds of GBP1.33 million on
the original investment of GBP0.25 million generated a 5.3x
return.
Strategic Report
The Company is pleased to present its Strategic Report for the
year ended 31 December 2014. The purpose of this report is to
inform shareholders and help them to assess how the directors have
performed in their duty to promote the success of the Company. This
Report has been prepared by the directors in accordance with
section 414 of the Companies Act 2006.
Chairman's Statement
Improved economic conditions in 2014 were the background for a
very active period for the Company resulting in a positive
evolution of the shape of the portfolio. The share offer, which
closed on 29 May 2014, raised new funds of GBP10.2 million. A total
of GBP13.6 million was invested during the year to 31 December 2014
of which GBP8.1 million was invested in the second half of the
year. The eleven new investments made in the year continue our
strategy of sector and geographical diversity, with businesses in
Scotland, Wales, Cambridgeshire, the Midlands, Yorkshire and London
all receiving investment. As at 31 December 2014 the portfolio
value was GBP28.2 million (72 per cent of net assets) which
compares to GBP16.3 million (53 per cent of net assets) a year
earlier.
One of the objectives of the Company in building the portfolio
is to increase the level of income it receives. I am pleased to
report that the majority of new investments include a significant
proportion of yielding loans and preference shares. As a result the
portfolio income has increased to GBP1.27 million in the year to 31
December 2014 compared to GBP0.69 million in 2013. With the benefit
of a full year's income from these investments this trend is
expected to continue into 2015. The 2014 income exceeded the
administrative expenses of the Company by GBP0.18 million compared
to a shortfall of GBP0.21 million in 2013. Realised gains of
GBP0.87 million increased the surplus to GBP1.05 million with
unrealised gains of GBP0.11 million taking the aggregate profit for
the year to GBP1.16 million.
Following the strong investment rate in 2014, which is expected
to continue into 2015, the Board launched a further share offer
alongside British Smaller Companies VCT plc in October 2014 which
was fully subscribed by 24 March 2015. These additional funds will
ensure that the Company remains well positioned to take advantage
of new investment opportunities and to support the portfolio in the
coming year. Additionally the increased scale and diversity of the
Company will help to underpin consistent returns and improve
efficiencies.
Financial Results
In the year to 31 December 2014 the Company's total return
increased by 1.8 pence per ordinary share to 106.4 pence per
ordinary share, driven mainly by underlying value growth in the
investment portfolio. This equates to an increase of 2.7 per cent
on the opening net asset value at 31 December 2013.
During the year the Company has paid total dividends of 4.5
pence per ordinary share, bringing the total cumulative dividends
paid since inception to 43.5 pence per ordinary share. The net
asset value at 31 December 2014 is 62.9 pence per share as
summarised in the table below:
Pence per GBP000
ordinary share
----------------------- -------------------
NAV at 31 December
2013 65.6 30,458
Net underlying
increase in portfolio 1.6 981
Net income 0.3 176
Issue/buy-back
of new shares (0.1) 10,512
--------------- ------ ---------- -------
1.8 11,669
Dividends paid (4.5) (2,794)
(2.7) 8,875
--------------- ------ ---------- -------
NAV at 31 December
2014 62.9 39,333
--------------- ------ ---------- -------
The chart on page 11 of the annual report shows in greater
detail the movement in total return, net asset value and dividends
paid over time.
The investments held at 31 December 2013, amounting to GBP17.15
million, have over the year increased by GBP0.98 million to
GBP18.13 million at 31 December 2014. This return comprises a gain
over the opening value from the realisation of investments of
GBP0.87 million, and a gain on the revaluation of portfolios of
GBP0.11 million. Strong value gains were seen across many portfolio
businesses, as a result of improved trading results and delivery of
value growth strategies; these were however partially offset by a
decline in the value of two businesses, Seven Technologies Holdings
Limited and Deep-Secure Limited, due primarily to a freeze in
defence sector spending.
Shareholder Relations
Dividends
Your Board remains committed to achieving the objective of a
consistent and, where possible, increasing dividend stream over
time whilst seeking to maintain capital value. Dividends paid in
the year comprise a final dividend of 2.5 pence per ordinary share
in respect of the year ended 31 December 2013, and an interim
dividend of 2.0 pence per ordinary share in respect of the
financial year just ended, totalling 4.5 pence per ordinary share.
This represents 6.9 per cent of the opening net asset value per
ordinary share and brings the cumulative dividends paid to 43.5
pence per ordinary share.
The Board is pleased to propose a final dividend of 2.5 pence
per ordinary share for the year ended 31 December 2014. This final
dividend is subject to approval by the shareholders at the
forthcoming Annual General Meeting and if approved will then be
paid on 8 June 2015 to shareholders on the register at 8 May 2015.
The ex-dividend date is 7 May 2015.
Dividend Re-Investment Scheme ("DRIS")
The Company operates a DRIS, which gives shareholders the
opportunity to re-invest any cash dividends as described on page 2
of the annual report. The DRIS is open to all shareholders,
including those who invested under the recent share offers. For the
financial year ending 31 December 2014 dividends totalling GBP0.4
million were invested in the Company by way of the DRIS.
Fundraising
In the light of the continued strong demand for investment from
UK businesses your Company launched a prospectus offer on 20
October 2014 alongside British Smaller Companies VCT plc, to
increase its investment capacity. The Company and British Smaller
Companies VCT plc received an excellent response and the offers
were fully subscribed on 24 March 2015 raising GBP40 million in
aggregate.
Shareholder Communications
Your Board remains committed to enhancing shareholder
communications and holds shareholder workshops where investors are
invited to meet members of the Board, representatives from YFM
Private Equity Limited ("the Investment Adviser") and the CEOs of
one or more of our investee companies. Our 20(th) shareholder
workshop was held at Freemasons' Hall, London on 4 February 2015
and achieved the highest ever attendance with over 200 shareholders
attending. Presentations at the workshop were made by Andrew Barker
MD of Mangar International, Rachel McCorry CEO of IO Outsourcing,
Michael Green Commercial Director and Matt Guise Sales Director of
Macro Art. After lunch, David Hall presented on behalf of the
Investment Adviser, followed by a Question and Answer session
hosted by David Hall, David Bell and Paul Cannings, all of the
Investment Adviser.
The Annual General Meeting of the Company will be held at 12.00
noon on 15 May 2015 at 33 St James Square, London, SW1Y 4JS. Full
details of the agenda for this meeting are included in the Notice
of the Annual General Meeting on pages 74 to 76 of the annual
report.
Regulatory
On 21 July 2014 the Financial Conduct Authority approved the
Company's application to become a Small Registered UK Alternative
Investment Fund Manager as defined under the new Alternative
Investment Fund Manager's Directive following the implementation of
the EU's directive on self-managed investment funds. Following this
the Company has retained responsibility for the custody of its
investments. YFM Private Equity Limited has continued to provide
advisory and administrative services to the Company. I am pleased
to report that The City Partnership (UK) Limited has been appointed
as Company Secretary to the Company with effect from 1 December
2014.
The Company has complied with the new reporting regulations
throughout this annual report. The Board hopes these changes will
help shareholders gain a greater understanding of the Company's
performance and strategy.
Changes to Investment Advisory Agreement
Your Board has agreed with YFM Private Equity Limited a number
of changes to the Investment Advisory Agreement ("the IAA"). In
particular it has added clauses that:
i With effect from 1 October 2013 limit total deal fees paid by
investee companies to the Investment Adviser at the point of
investment to 3.0 per cent of the total sum invested in new
unquoted investments during the financial period, and 2.0 per cent
of the total sum invested in follow-on unquoted investments during
the financial period. Any excess of total fees over these limits
will be rebated to the Company; and
ii Limit the annual monitoring and directors fees paid by
investee companies to the Investment Adviser to a maximum of
GBP40,000 per annum per unquoted investment.
Further details of the IAA are set out in note 3.
Subsequent Events
Since the end of the reporting period, the Company has completed
one additional investment for GBP0.4 million. At the date of this
report the Company has approval for four further investments
totalling GBP3.4 million.
Outlook
During the year there have been some indicators of improved
economic conditions which have continued into the early part of
2015. Consequently 2014 has been a year of strong new investment
levels and this momentum has continued into 2015, although we
continue to take a cautious approach and look for businesses with
resilient growth strategies. Funds raised under the recent
prospectus offer will ensure your Company can continue to take
advantage of these opportunities.
Good progress continues to be made across the portfolio to
position businesses to grow and realise shareholder value.
Richard Last
Chairman
26 March 2015
Objectives and Key Policies
The Company's objective is to provide investors with an
attractive long-term tax free dividend yield whilst seeking to
maintain the capital value of their investment and the Company's
status as a venture capital trust.
Investment Policy
The investment strategy of the Company is to create a portfolio
with a mix of companies operating in traditional industries and
those that offer opportunities in the development and application
of innovation.
The legislation governing VCTs requires that at least 70 per
cent by value of its holdings must be in qualifying holdings. The
maximum value of any single investment is 15 per cent at the time
of investment.
The Company invests in UK businesses across a broad range of
sectors including, but not limited to, Software, IT &
Telecommunications, Business Services, Manufacturing &
Industrial Services, Retail & Brands and Healthcare, in VCT
qualifying and non-qualifying unquoted and AIM traded
securities.
The Company invests in a range of securities which may include
ordinary and preference shares, and fixed income securities, such
as corporate bonds and gilts. Unquoted investments are structured
so as to spread risk and enhance revenue yields, usually as a
combination of ordinary shares, preference shares and loan stock,
while AIM securities are generally held in ordinary shares.
Borrowing
The Company funds the investment programmes out of its own
resources and has no borrowing facilities for this purpose.
Co-Investment
British Smaller Companies VCT plc and British Smaller Companies
VCT2 plc ("the VCTs") have in aggregate first choice of all
investment opportunities requiring up to GBP4.5 million of equity.
Amounts above GBP4.5 million may be allocated one third to YFM's
institutional co-investment fund and two thirds to the VCTs. Where
there are opportunities for the VCTs to co-invest with each other
the proposed basis for allocation is 40 per cent to the Company and
60 per cent to British Smaller Companies VCT plc. The Board of the
Company has discretion as to whether or not to take up, or in the
circumstances where British Smaller Companies VCT plc does not take
its allocation, increase its allocation in such co-investment
opportunities.
Asset Mix
Pending investment in VCT-qualifying and non-VCT qualifying
unquoted or AIM traded securities, surplus cash is primarily held
in interest bearing instant access, notice and fixed term bank
accounts and can also be invested in non-qualifying unquoted
investments.
Remuneration Policy
The Company's policy on the remuneration of its directors, all
of whom being non-executive directors, can be found on page 43 of
the annual report.
Other Key Policies
Details of the Company's policies on the payment of dividends,
the DRIS and the buy-back of shares are given on page 2 of the
annual report. In addition to these the Company's anti-bribery and
environmental and social responsibilities policies can be found on
page 32 of the annual report.
Practices and Operations
The Investment Adviser is responsible for the sourcing and
screening of initial enquiries, carrying out suitable due diligence
investigations and making submissions to the Board regarding
potential investments. Once approved, further due diligence is
carried out as necessary and HMRC clearance is obtained for
approval as a Qualifying Investment.
The Board approves all investment and divestment decisions save
in that new investments up to GBP250,000 in companies whose shares
are traded on AIM or a recognised UK Exchange and where the
decision is required urgently, in which case the Chairman of the
Board of directors, if appropriate, may act in consultation with
the Investment Adviser.
The Board regularly monitors the performance of the portfolio
and the investment requirements set by the relevant VCT
legislation. Reports are received from the Investment Adviser
regarding the trading and financial position of each investee
company and senior members of the Investment Advisory Team
regularly attend the Company's Board meetings. Monitoring reports
are also received at each Board meeting on compliance with VCT
regulations so that the Board can monitor that the venture capital
trust status of the Company is maintained and take corrective
action if appropriate.
The Board reviews the terms of YFM Private Equity Limited's
appointment as Investment Adviser on a regular basis.
YFM Private Equity Limited has performed investment advisory,
administrative and secretarial services for the Company since its
inception on 28 November 2000. The principal terms of the agreement
under which these services are performed are set out in note 3.
Performance Incentive
The Investment Adviser will receive an amount (satisfied by the
issue of shares) equivalent to 20 per cent of the amount by which
the cumulative dividends paid as at the last Business Day in
December in any year plus the middle market quotation per share
exceeds 120 pence per share on that same day, multiplied by the
number of shares issued and the shares under option (if any). These
subscription rights are exercisable in the ratio 95:5 between the
Investment Adviser and Chord Capital Limited. Further details are
given in note 3.
In the opinion of the directors the continuing appointment of
YFM Private Equity Limited as Investment Adviser is in the
interests of the shareholders as a whole in view of its experience
in advising venture capital trusts and in making, managing and
exiting investments of the kind falling within the Company's
investment policies.
Key Performance Indicators
The Company monitors a number of key performance indicators,
which are typical for VCTs, as detailed below:
Total Return
The recognised measurement of financial performance in the VCT
industry is that of total return (expressed in pence per share)
calculated by adding the total cumulative dividend paid to
shareholders from the date a company is launched to its current
reporting date, inclusive of any tax credits, to the net asset
value at that date. The chart on page 11 of the annual report shows
the five year total return of your Company, calculated by reference
to the net asset value per ordinary share plus cumulative dividends
paid per ordinary share.
The evaluation of comparative success of the Company's total
return is by way of reference to the share price total return for
approximately 60 generalist VCTs as published by The Association of
Investment Companies ("the AIC"). This is the Company's stated
benchmark index. A comparison and explanation of the calculation of
this return is shown in the Directors' Remuneration Report on page
45 of the annual report.
Shareholder Returns
The table below shows the cumulative dividends, the total return
on each fundraising round per ordinary share and the total return
if a shareholder had opted to participate in the Company's DRIS.
The cumulative dividend and total return figures in this table
exclude the benefits of all tax reliefs while the last two columns
include the benefit of tax relief as noted.
Tax year Offer Offer Net Cumulative Total Overall Overall
price price asset dividends return return return
net value paid since including including
of as at since fundraising/date tax relief tax
initial 31 December fundraising(1) of acquisition since relief
tax 2014 fundraising since
relief without fundraising
participation with
in the participation
DRIS(2) in the
DRIS(3)
--------------- ------- --------- ------------- --------------- ----------------- -------------- --------------
All pence per
ordinary
share
2000/01 and
2001/02 100.00 80.00 62.90 43.50 106.40 126.40 155.44
2001/02 and
2002/03 100.00 80.00 62.90 43.50 106.40 126.40 155.44
December 2005
issue
of shares on
acquisition
of British
Smaller
Technology
Companies(4) 100.00 80.00 43.19 28.94 72.13 92.13 142.00
2009/10 and
2010/11 77.25 54.08 62.90 21.50 84.40 107.58 119.07
2010/11 and
2011/12 70.25 49.18 62.90 17.50 80.40 101.48 110.26
2011/12 70.50 49.35 62.90 13.50 76.40 97.55 103.78
2012/13 and
2013/14 68.00 47.60 62.90 9.00 71.90 92.30 96.12
2013/14 and
2014/15 68.00 47.60 62.90 4.50 67.40 87.80 89.41
Notes
1. This assumes that at the time of investment the tax relief
given on the investment was not also invested in shares of the
Company.
2. NAV plus cash dividends paid plus tax relief on initial subscription.
3. NAV plus tax relief on the initial subscription plus
additional tax relief and NAV on DRIS shares purchased. Assuming
that all dividends. since inception were invested under terms of
current DRIS.
4. Assuming initial offer price and initial tax relief from
original subscription in British Smaller Technology Companies VCT
plc.
Expenses
The Board monitors expenses using the Ongoing Charges figure, as
calculated in line with the AIC recommended methodology. This
figure shows shareholders the annual percentage reduction in net
asset value as a result of recurring operational expenses and,
whilst based on historical information, provides an indication of
the likely level of costs that will be incurred in managing the
fund in the future. The Ongoing Charges figure has fallen since 31
December 2013 as the raising of additional capital in the year has
spread the fixed costs over a larger asset base.
Year to Year to
31 December 31 December
2014 (%) 2013 (%)
------------------------ ------------- -------------
Ongoing Charges figure 2.56 2.83
The Ongoing Charges figure replaces the Total Expense Ratio
(TER%) previously reported. TER% is calculated as the annual
ongoing charges (excluding any performance related fees, trail
commission payable to financial intermediaries, but excluding VAT)
over total net asset value as at the relevant period end and forms
the basis of any expenses in excess of the operating costs cap
described in note 3 on page 58 of the annual report. There was no
breach of the cap in the current or prior year. Following the final
allotment in respect of the current fundraising the costs cap will
be reduced from 3.25 per cent to 2.9 per cent.
Compliance with VCT Legislative Tests
The main business risk facing the Company is the retention of
VCT qualifying status. The Board receives regular reports on
compliance with the VCT legislative tests from its Investment
Adviser. In addition the Board receives formal reports from its VCT
Status Advisers twice a year. The Board can confirm that during the
period all of the VCT legislative tests have been met. With effect
from 1 January 2015 Robertson Hare LLP replaced
PricewaterhouseCoopers LLP as VCT Status Adviser to the
Company.
Under Chapter 3 Part 6 of the Income Tax Act 2007, in addition
to the requirement for a VCT's ordinary share capital to be listed
in the Official List on a European regulated market throughout the
period, there are a further five specific tests that VCTs must meet
following the initial three year provisional period:
Income Test
The Company's income in the period must be derived wholly or
mainly (70 per cent) from shares or securities. The Company
complied with this test in the period, with 89.68 per cent (2013:
72.79 per cent) of income being derived from such sources.
Retained Income Test
The Company must not retain more than 15 per cent of its income
from shares and securities. The Company complied with this test in
the period, with 0 per cent (2013: 0 per cent) of income being
retained in the period subject to payment of the final dividend to
be approved at the Annual General Meeting on 15 May 2015.
Qualifying Holdings Test
At least 70 per cent by value of the Company's investments must
be represented throughout the period by shares or securities
comprised in qualifying holdings of investee companies. The Company
complied with this test, with 77.54 per cent (2013: 85.04 per cent)
of value being in qualifying holdings.
Eligible Shares Test
At least 30 per cent of the Company's qualifying holdings must
be represented throughout the period by holdings of
non-preferential ordinary shares. The Company complied with this
test, with 39.95 per cent (2013: 46.42 per cent) of value being in
holdings of eligible ordinary shares.
For monies raised from 6 April 2011 onwards the eligible shares
test highlighted above increases to at least 70 per cent of
qualifying holdings that must be represented by eligible shares.
The Company complied with this test, with 76.92 per cent of value
being in holdings of eligible shares.
In addition, monies raised from share issues from 6 April 2012
onwards are not permitted to be used to finance buy-outs or
otherwise to acquire existing shares. There is also an annual limit
for each investee company which provides that they may not raise
more than GBP5.0 million of state aid investment (including from
VCTs) in the 12 months ending on the date of each investment.
The Board and Investment Adviser are mindful of these additional
requirements and of balancing investments to ensure continued
compliance.
Maximum Single Investment Test
The value of any one investment has, at any time in the period,
not represented more than 15 per cent of the Company's total
investment value. This is calculated at the time of investment and
further additions and therefore cannot be breached passively. The
Company has complied with this test with the highest such value
being 5.24 per cent (2013: 6.72 per cent).
Other
The Finance Bill 2014 contained conditions/restrictions with
respect to the use of monies in respect of VCTs. In particular, no
dividends can be paid out of cancelled share premium arising from
shares allotted on or after 6 April 2014 until at least three
financial years have elapsed. In the case of the Company this is 31
December 2017.
From the share premium cancellation of GBP13.55 million on 10
October 2014, GBP12.21 million will be available for distribution
following the filing of the annual report and accounts and GBP1.34
million will remain undistributable until 31 December 2017.
Investment Review
The GBP13.6 million of investments in the year to 31 December
2014 has significantly increased the scale and diversification of
the portfolio.
The improving economic outlook and changes in EU restrictions on
qualifying VCT investments allowing investments in any 12 month
period up to GBP5.0 million from VCT funds have contributed to an
increase in the volume and size of investment opportunities with
this trend continuing into 2015.
Considerable progress has been made by many of the businesses in
the Company's investment portfolio during the year with an overall
value gain of GBP0.98 million excluding movements due to
investments and realisations. This has enabled the Company to
maintain its strong investor returns and is further analysed below.
The proposed final dividend is 2.5 pence per ordinary share. Since
the year end one investment for GBP0.4 million has been completed.
A further four investments totalling GBP3.4 million have been
approved at the date of this report.
Investment portfolio (excluding GBP000 %
fixed income securities)
--------------------------------- ---------- -------
Unquoted value gain 368 37.5
Quoted value loss (257) (26.2)
Gain on disposal over opening
value 560 57.1
--------------------------------- ---------- -------
Portfolio movement 671 68.4
Gain from deferred proceeds 310 31.6
--------------------------------- ---------- -------
Total Value Movement 981 100.0
--------------------------------- ---------- -------
At 31 December 2014 the investment portfolio was valued at
GBP28.2 million, representing 71.7 per cent of net assets (53.4 per
cent at 31 December 2013). Cash at 31 December 2014 was GBP10.6
million representing 27.0 per cent of net assets (43.3 per cent at
31 December 2013, 46.19 per cent including gilt investments).
Significant Investment Movements
Unquoted
The GBP0.37 million unrealised valuation gain from the unquoted
portfolio is as a result of good progress by a number of businesses
which have seen profit growth. The top four value gains in the
period all resulted from filing of improved profitability:
-- GTK (Holdco) Limited (value gain of GBP0.45 million) supplier
of specialist electronic components;
-- Mangar Health Limited (value gain of GBP0.44 million)
manufacturer of lifting products for care of the elderly;
-- Intelligent Office Limited (value gain of GBP0.40 million)
provider of outsourced business services; and
-- Callstream Group Limited (value gain of GBP0.27 million)
supplier of telephone services to SMEs.
These gains were partially offset by two businesses which saw
profits impacted by short term reductions in public sector defence
budgets:
-- Seven Technologies Holdings Limited (down GBP0.79 million) a
supplier of remote telecoms surveillance systems: and
-- Deep-Secure Limited (down GBP0.49 million) supplier of secure
communication software to high security government and military
departments.
Quoted
The performance of the quoted portfolio in the period has been
mixed resulting in a GBP0.26 million overall reduction. The two
most significant value movements were EKF Diagnostic Holdings plc
(a fall of GBP0.12 million) and Iomart Group plc (a fall of GBP0.12
million); albeit both have subsequently recovered.
New Investments
During the year ended 31 December 2014 the Company completed
sixteen investments totalling GBP13.6 million (excluding
capitalised interest and non-cash proceeds received on the sale of
investments). This comprised of ten new unquoted and one new quoted
investment and five follow-on investments into existing portfolio
companies and is analysed below.
New and Follow-On Investments Investments made GBPm
Date Company New Follow-on Total
-------- ------------------------------- ------ ---------- ------
Jan-14 Mangar Health Limited 1.64 1.64
EKF Diagnostics Holdings
Mar-14 plc* 0.06 0.06
Intelligent Office UK Limited
May-14 (via IO Outsourcing Limited) 1.96 1.96
EKF Diagnostics Holdings
May-14 plc* 0.15 0.15
Jun-14 AB Dynamics plc* 0.10 0.10
Jun-14 Intamac Systems Limited 0.75 0.75
Jun-14 Macro Art Holdings Limited 0.84 0.84
Sep-14 Harvey Jones Holdings Limited 0.80 0.80
The Heritage Window Company
Sep-14 Holdco Limited 1.27 1.27
Oct-14 Gamma Communications plc* 0.17 0.17
Cambrian Park & Leisure
Oct-14 Homes Limited 1.20 1.20
Springboard Research Holdings
Oct-14 Limited 1.19 1.19
ACC Aviation (via NewAcc
Nov-14 (2014) Limited) 1.38 1.38
Nov-14 Business Collaborator Limited 1.34 1.34
Wakefield Acoustics (via
Dec-14 Malvar Engineering Limited) 0.72 0.72
Dec-14 PowerOasis Limited 0.03 0.03
-------- ------------------------------- ------ ---------- ------
Invested in the 12 months
to 31 December 2014 12.46 1.14 13.60
---------------------------------------- ------ ---------- ------
*Quoted company
The eleven new investments during the year totalled GBP12.46
million:
-- In January 2014 the Company invested GBP1.64 million to fund
the management buyout of Mangar Health Limited, a world leader in
inflatable lifting, handling and bathing equipment for the elderly,
disabled and emergency services markets.
-- In May 2014 the Company invested GBP1.96 million to fund the
management buyout of Intelligent Office UK Limited, a leading
provider of business process outsourcing solutions to the UK legal
sector.
-- In June 2014 the Company provided GBP0.75 million of growth
capital funding to Intamac Systems Limited, which develops
technology to connect physical products via the internet so they
can be monitored and controlled using smart mobile phones and
computers.
-- In June 2014 the Company invested GBP0.84 million to fund the
management buyout and growth capital for Macro Art Holdings
Limited, a specialist wide-format digital printer.
-- In September 2014 the Company funded the management buyout
and provided development capital with an investment of GBP1.27
million into The Heritage Window Company Holdco Limited, a
specialist manufacturer and supplier of slim line aluminium
windows.
-- In October 2014 the Company invested GBP0.17 million as part
of an AIM placing to support the expansion of Gamma Communications
plc, a leading provider of voice, data and mobile communication
services to UK businesses.
-- In October 2014 the Company invested GBP1.20 million to
support the management buyout of Cambrian Park & Leisure Homes
Limited, the largest holiday lodge builder in Wales.
-- In October 2014 the Company invested GBP1.19 million to
support the management buyout of Springboard Research Holdings
Limited, a leading provider of retail performance monitoring and
data services.
-- In November 2014 the Company invested GBP1.38 million to
support the management buyout and future growth plans of ACC
Aviation, a specialist broker of leasing and chartering services to
international airlines.
-- In November 2014 the Company invested GBP1.34 million in
backing the management buyout of market leading software company
Business Collaborator Limited which facilitates collaboration
within the construction sector.
-- In December 2014 the Company invested GBP0.72 million in the
management buyout of Wakefield Acoustics, a specialist supplier of
industrial acoustic solutions.
The majority of the above investments are valued at cost and
will be moved to earnings-based valuations during 2015.
The GBP1.14 million of investments into existing portfolio
companies during the year was dominated by GBP0.80 million invested
into kitchen manufacturer and retailer Harvey Jones Holdings
Limited in the form of a high-yielding debt instrument.
Disposal of Investments
During the year to 31 December 2014 the Company received
proceeds from disposals, repayments of loans and deferred
consideration of GBP2.74 million, and GBP1.37 million from the
disposal of fixed income securities. Overall this resulted in a
value gain on disposal of investments of GBP0.87 million compared
to 31 December 2013 valuations and a realised gain on cost of
GBP1.71 million. This is analysed below.
Disposal of Investments Net proceeds Cost Opening Gain Gain
from of investments value on opening on
sales 31 December value cost
of investments 2013
GBP000 GBP000 GBP000 GBP000
GBP000
------------------------- ---------------- ---------------- ------------- ------------ --------
Sale of portfolio
investments 2,314 1,036 1,754 560 1,278
Deferred proceeds
received 345 - 120 225 345
Deferred proceeds
accrued 85 - - 85 85
------------------------- ---------------- ---------------- ------------- ------------ --------
Investment portfolio
disposals 2,744 1,036 1,874 870 1,708
Fixed income securities
disposals 1,365 1,363 1,365 - 2
------------------------- ---------------- ---------------- ------------- ------------ --------
Total investment
and fixed income
securities disposals 4,109 2,399 3,239 870 1,710
------------------------- ---------------- ---------------- ------------- ------------ --------
The most significant proceeds related to:
-- In December 2014 the Company realised its investment in
leading independent contract caterer Waterfall Sevices Limited via
a secondary buyout backed by LDC. Proceeds from the sale in
December were GBP0.96 million, a profit on the 31 December 2013
carrying value of GBP0.48 million and a profit on cost of GBP0.94
million.
-- GBP0.35 million of additional deferred proceeds was received
from Beckton Dickinson relating to the trade sale of Sirigen Group
Limited in 2012, following successful delivery of the two year
development milestones. This brings the total proceeds to date to
GBP1.88 million and increases the cash return to 3.6x.
-- During the year the Company sold various shares in quoted
holdings. The non-core holdings in Vianet Group plc and Optos plc
were realised for GBP0.33 million in line with the opening 31
December 2013 value. Holdings in Pressure Technologies plc and
Iomart Group plc were also partially realised for combined proceeds
of GBP0.30 million, realising a gain on their opening carrying
value of GBP0.06 million.
-- Several unquoted investments repaid loan balances totalling
GBP0.72 million following strong cash generation, resulting in a
small realised profit on carrying value due to redemption premium.
This included DisplayPlan Holdings Limited (GBP0.23 million), GTK
(Holdco) Limited (GBP0.23 million), Callstream Group Limited
(GBP0.17 million), Bagel Nash Group Limited (GBP0.08 million) and
Macro Art Holdings Limited (GBP0.02 million).
A further analysis of all investments sold in the year can be
found in note 7 to the financial statements on page 63 of the
annual report.
Portfolio Composition
As at 31 December 2014 the portfolio of quoted and unquoted
investments had a value of GBP28.2 million of which the unquoted
investments constitute 92 per cent of the value and the quoted
investments 8 per cent of the value. An analysis of the movements
in the year is shown on page 21 of the annual report.
This year we have continued to improve the diversification of
the portfolio. This is probably shown most clearly by the fact that
at 31 December 2014 there were 21 investments with a value greater
than GBP0.5 million which compares to 11 a year earlier. Investment
company information is shown on pages 22 to 29 of the annual
report.
The charts on page 14 of the annual report show the composition
of the portfolio as at 31 December 2014 by industry sector, age of
investment, asset class and the stage of financing at the point of
investment. This demonstrates representation across a wide range of
industry sectors.
Valuation Policy
Unquoted investments are valued in accordance with the valuation
policy set out on page 55 of the annual report, which takes account
of current industry guidelines for the valuation of venture capital
portfolios. Adjustments to fair value are made where an investment
is significantly under-performing. As at 31 December 2014 the
percentage of investments falling into each valuation category is
shown in the table below:
Valuation % of portfolio
GBP000 by value
--------------------------------- ---------- ---------------
Earnings multiple 16,604 59%
Cost, reviewed for change in
fair value 7,843 28%
Price of recent investment
reviewed for change in fair
value 1,641 5%
Quoted investments at bid price 2,128 8%
--------------------------------- ---------- ---------------
Total 28,216 100%
--------------------------------- ---------- ---------------
Summary and Outlook
Some clearer signs of economic recovery have been seen during
the year but there remains some uncertainty in global markets. Many
of the portfolio companies have delivered improved results,
focusing on proven brands, niche growth sectors or rolling out new
technology. We will maintain a cautious approach to new
investments; only backing proven business models with a clear
strategy for value growth.
We have seen a marked increase in new investment levels in 2014.
This is in part due to changes in EU restrictions on qualifying VCT
investments and we expect to see this investment level continue in
2015.
We believe that the increasing level of investment, combined
with several good exit prospects over the next few years, affords
the Board the opportunity to achieve its aim of increasing
dividends whilst preserving and enhancing the underlying net asset
value. The increasing diversification of the portfolio should also
help to reduce volatility of returns.
Investment Portfolio Summary to 31 December 2014
Date Location Industry Current Proceeds Valuation Realised
of initial sector cost to at 31 and
investment date* December unrealised
2014 return
to
date
Current
investments GBP000 GBP000 GBP000 GBP000
---------------- ------------ ------------------ --------------- ----------------- ------------------- ----------------------------- ---------------------
Unquoted
portfolio
Intelligent
Office
(via IO
Outsourcing Business
Limited) May-14 Alloa Services 1,956 - 2,355 2,355
DisplayPlan
Holdings Business
Limited Jan-12 Baldock Services 525 228 2,008 2,236
Mangar
Health
Limited Jan-14 Powys Healthcare 1,640 - 2,081 2,081
Gill Marine
Holdings Retail &
Limited Sep-13 Nottingham Brands 1,870 - 1,732 1,732
Seven
Technologies Software,
Holdings IT &
Limited Apr-12 Belfast Telecomms 1,238 762 924 1,686
Manufacturing
GTK (Holdco) & Industrial
Limited Oct-13 Basingstoke Services 916 234 1,365 1,599
ACC Aviation
(via Newacc
(2014) Business
Limited) Nov-14 Reigate Services 1,379 - 1,379 1,379
Business
Collaborator Business
Limited Nov-14 Reading Services 1,340 - 1,340 1,340
The Heritage
Window
Company Manufacturing
Holdco & Industrial
Limited Sep-14 Sevenoaks Services 1,268 - 1,268 1,268
Cambrian
Park &
Leisure
Homes
Limited Manufacturing
(via DWFCO & Industrial
8 Limited) Oct-14 Gwynedd Services 1,200 - 1,200 1,200
Harvey
Jones
Holdings Retail &
Limited May-07 London Brands 1,193 - 1,194 1,194
Springboard
Research
Holdings Business
Limited Oct-14 Bedfordshire Services 1,186 - 1,186 1,186
Leengate Manufacturing
Holdings & Industrial
Limited Dec-13 Derbyshire Services 934 - 1,080 1,080
Callstream Software,
Group Henley-in IT &
Limited Sep-10 -Arden Telecomms 329 265 773 1,038
Immunobiology
Limited Jun-03 Cambridge Healthcare 1,932 - 987 987
Macro
Art Holdings Business
Limited Jun-14 Cambridgeshire Services 819 21 847 868
RMS Group Manufacturing
Holdings & Industrial
Limited Jul-07 Goole Services 70 349 405 754
Intamac Software,
Systems IT &
Limited Jun-14 Northampton Telecomms 750 - 750 750
Wakefield
Acoustics
(via Malvar
Engineering Business
Limited) Dec-14 Cleckheaton Services 720 - 720 720
Retail &
Brands/
Bagel Manufacturing
Nash Group & Industrial
Limited Jul-11 Leeds Services 732 93 590 683
Software,
PowerOasis IT &
Limited Nov-11 Swindon Telecomms 594 - 594 594
Insider
Technologies Software,
(Holdings) IT &
Limited Aug-12 Manchester Telecomms 780 - 522 522
Software,
Deep-Secure IT &
Limited Dec-09 Malvern Telecomms 500 - 424 424
Selima
Holding Software,
Company IT &
Ltd Mar-12 Sheffield Telecomms 300 - 304 304
Other 422 - 60 60
------------------------------------------------------------------- ----------------- ------------------- ----------------------------- ---------------------
Total
unquoted
investments 24,593 1,952 26,088 28,040
------------------------------------------------------------------- ----------------- ------------------- ----------------------------- ---------------------
Quoted
portfolio
Pressure Manufacturing
Technologies & Industrial
plc Jun-07 Sheffield Services 120 498 289 787
Iomart Software,
Group IT &
plc May-11 London Telecomms 119 209 231 440
Manufacturing
AB Dynamics & Industrial
plc May-13 Bradford-on-Avon Services 253 - 364 364
Software,
Brady IT &
plc Dec-10 Cambridge Telecomms 134 163 178 341
EKF Diagnostics
Holdings
plc Jun-11 London Healthcare 437 - 340 340
Hargreaves Manufacturing
Services & Industrial
plc Aug-12 Durham Services 325 - 262 262
Gamma Software,
Communications IT &
plc Oct-14 Reading Telecomms 168 - 213 213
Cambridge
Cognition
Holdings
plc May-02 Cambridge Healthcare 240 - 141 141
Allergy
Therapeutics
plc Oct-04 Worthing Healthcare 350 - 110 110
Total
quoted
investments 2,146 870 2,128 2,998
26,739 2,822 28,216 31,038
---------------------------------------------------------------- ----------------- ------------------- ----------------------------- ---------------------
Full disposals
to date 16,060 22,323 - 22,323
Total
investment
portfolio 42,799 25,145 28,216 53,361
------------------------------------------------------------------- ----------------- ------------------- ----------------------------- ---------------------
*Proceeds include premiums and profits on loan repayments and
preference redemptions
Disposal History to 31 December 2014
Name of Company Date Date Industry Cost Proceeds Capital Gains
of initial of sector to return (losses)
investment disposal date multiple on disposal
or full
provision
GBP000 GBP000 x GBP000
----------------- ------------ ----------- -------------- ------------------------- ------------------------ ----------------------------- ----------------------------
Cozart plc Jul-04 Oct-07 Healthcare 1,566 2,978 1.90 1,412
Sarian Systems
Limited* Dec-05 Apr-08 Telecoms 928 2,605 2.81 1,677
DxS Limited Apr-04 Sep-09 Healthcare 163 2,514 15.42 2,351
Vibration
Technology
Limited** Mar-02 Sep-06 Industrial 1,061 2,328 2.19 1,267
Primal Pictures Medical
Limited* Dec-05 Aug-12 instruments 961 2,256 2.35 1,295
Sirigen Group Medical
Limited Jun-10 Aug-12 Technology 517 1,876 3.63 1,359
Amino
Technologies
plc** Sep-01 Nov-04 Electronics 415 1,872 4.51 1,457
Waterfall
Services Business
Limited Feb-07 Dec-14 Services 483 1,422 2.94 939
Digital
Healthcare Medical
Limited Jun-05 Aug-13 instruments 3,072 1,285 0.42 (1,787)
The ART
Technology
Group Inc** Apr-03 Oct-09 Software 275 638 2.32 363
Tamesis
Limited** Jul-01 Sep-07 Software 150 317 2.11 167
Optos plc* Dec-05 Jan-14 Healthcare 152 316 2.08 164
Tekton Group
Limited Dec-05 Dec-06 Software 103 296 2.87 193
Tikit Group
plc May-11 Jan-13 Software 198 283 1.43 85
Oxonica plc** May-02 Sep-09 Chemical 241 258 1.07 17
Group NBT
plc May-11 Nov-11 IT Support 197 256 1.30 59
Vianet Group Business
plc Oct-06 Sep-14 Services 243 176 0.72 (67)
Patsystems
plc Sep-07 Jan-12 Software 317 164 0.52 (153)
May Gurney
Integrated
Services plc May-11 Mar-13 Construction 211 141 0.67 (70)
Arakis Limited Mar-04 Aug-05 Healthcare 14 108 7.71 94
SoseiCo Limited Aug-05 Feb-06 Healthcare 158 94 0.59 (64)
Voxar Limited* Dec-05 Nov-06 Software - 91 - 91
Sirus
Pharmaceuticals
Limited** Sep-01 Mar-04 Healthcare 270 18 0.07 (252)
Broadreach
Networks
Limited** Feb-03 Dec-05 Telecoms 550 17 0.03 (533)
Focus Solutions
Group plc* Dec-05 Feb-06 Software 7 7 1.00 -
Oxis Energy ( 1
Limited* Dec-05 Dec-12 Electronics 5 4 0.80 )
2 Ergo Group
plc May-11 Jun-13 Software 197 3 0.02 (194)
Ellfin Home
Care Limited Dec-07 Dec-13 Healthcare 317 - - (317)
Infinite Data
Storage
Limited** Mar-02 Dec-07 Software 425 - - (425)
Purely Proteins
Limited** Nov-03 Dec-06 Software 438 - - (438)
ExpressOn
Biosystems
Limited** Oct-02 Dec-05 Healthcare 450 - - (450)
Comvurgent
Limited* Dec-05 Dec-07 Software 611 - - (611)
Silistix
Limited** Dec-03 Dec-10 Electronics 1,365 - - (1,365)
----------------- ------------ ----------- -------------- ------------------------- ------------------------ ----------------------------- ----------------------------
Total 16,060 22,323 - 6,263
------------------------------------------------------------ ------------------------- ------------------------ ----------------------------- ----------------------------
* Investment acquired solely from the merger with British
Smaller Technology Companies VCT plc in December 2005
** Investment made prior to 31 December 2003
Reconciliation of Investment Portfolio Movement since 31
December 2013
Name of Company Investment Disposal Additions Valuation Investment
Valuation Proceeds gains including Valuation
at 31 profits/(losses) at 31
December on disposal December
2013 2014
GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ----------- ---------- ---------- ------------------ -----------
Intelligent Office
(via IO Outsourcing
Limited) - - 1,956 399 2,355
Mangar Health Limited - - 1,640 441 2,081
DisplayPlan Holdings
Limited 2,142 (228) - 94 2,008
Gill Marine Holdings
Limited 1,870 - - (138) 1,732
ACC Aviation (via
Newacc (2014) Limited) - - 1,379 - 1,379
GTK (Holdco) Limited 1,141 (225) - 449 1,365
Business Collaborator
Limited - - 1,340 - 1,340
The Heritage Window
Company Holdco Limited - - 1,268 - 1,268
Cambrian Park &
Leisure Homes Limited - - 1,200 - 1,200
Harvey Jones Holdings
Limited 441 - 804 (51) 1,194
Springboard Research
Holdings Limited - - 1,186 - 1,186
Leengate Holdings
Limited 934 - - 146 1,080
Immunobiology Limited 987 - - - 987
Seven Technologies
Holdings Limited 1,711 - - (787) 924
Macro Art Holdings
Limited - (21) 840 28 847
Callstream Group
Limited 674 (169) - 268 773
Intamac Systems
Limited - - 750 - 750
Wakefield Acoustics
(via Malvar Engineering
Limited) - - 720 - 720
PowerOasis Limited 425 - 27 142 594
Bagel Nash Group
Limited 733 (80) 8 (71) 590
Insider Technologies
(Holdings) Limited 689 - - (167) 522
Deep-Secure Limited 915 - - (491) 424
Waterfall Services
Limited 489 (964) - 475 -
Other Investments 3,104 (627) 486 (66) 2,897
Total Movement 16,255 (2,314) 13,604 671 28,216
-------------------------- ----------- ---------- ---------- ------------------ -----------
Risk Factors
The Board carries out a regular review of the risk environment
in which the Company operates. The principal risks and
uncertainties identified by the Board and techniques used to
mitigate these risks are as follows:
The Board seeks to mitigate its principal risks by setting
policy, regularly reviewing performance and monitoring progress and
compliance. In the mitigation and management of these risks, the
Board applies rigorously the principles detailed in section
C.2:"Risk Management & Internal Control" of The UK Corporate
Governance Code issued by the Financial Reporting Council in
September 2012. Details of the Company's internal controls are
contained in the Corporate Governance and Internal Control sections
on page 41 of the annual report and further information on exposure
to risks including those associated with financial instruments is
given in note 17a on page 70 of the annual report.
Loss of Approval as a VCT
Risk - The Company must comply with Chapter 3 Part 6 of the
Income Tax Act 2007 which allows it to be exempted from corporation
tax on capital gains. Any breach of these rules may lead to the
Company losing its approval as a VCT, qualifying shareholders who
have not held their shares for the designated holding period having
to repay the income tax relief they obtained and future dividends
paid by the Company becoming subject to tax. The Company would also
lose its exemption from corporation tax on capital gains.
Mitigation - One of the Key Performance Indicators monitored by
the Company is the compliance with legislative tests. Details of
how the Company manages these requirements can be found under the
heading "Compliance with VCT Legislative Tests" on pages 12 and 13
of the annual report.
Economic
Risk - Events such as recession and interest rate fluctuations
could affect investee companies' performance and valuations.
Mitigation - As well as the response to 'Investment and
Strategic' risk below the Company has a clear investment policy
(summarised on page 9 of the annual report) and a diversified
portfolio operating in a range of sectors. The Investment Adviser
actively monitors investee performance which provides quality
information for the monthly review of the portfolio.
Investment and Strategic
Risk - Inappropriate strategy, poor asset allocation or
consistently weak stock allocation may lead to under performance
and poor returns to shareholders. The quality of enquiries,
investments, investee company management teams and monitoring, and
the risk of not identifying investee under performance might also
lead to under performance and poor returns to shareholders.
Mitigation - The Board reviews strategy annually. At each of the
Board meetings the directors review the appropriateness of the
Company's objectives and stated strategy in response to changes in
the operating environment and peer group activity. The Investment
Adviser carries out due diligence on potential investee companies
and their management teams and utilises external reports where
appropriate to assess the viability of investee businesses before
investing. Wherever possible a non-executive director will be
appointed to the board of the investee.
Regulatory
Risk - The Company is required to comply with the Companies Act
2006, the rules of the UK Listing Authority, the Prospectus Rules
made by the Financial Conduct Authority and International Financial
Reporting Standards as adopted by the European Union and is subject
to the EU's Alternative Investment Fund Manager's Directive which
took effect from 22 July 2014. Breach of any of these might lead to
suspension of the Company's Stock Exchange listing, financial
penalties or a qualified audit report.
Mitigation - The Investment Adviser and the Company Secretary
have procedures in place to ensure recurring Listing Rules
requirements are met and actively consults with brokers, solicitors
and external compliance advisers as appropriate. The key controls
around regulatory compliance are explained on page 41 of the annual
report.
Reputational
Risk- Inadequate or failed controls might result in breaches of
regulations or loss of shareholder trust.
Mitigation - The Board is comprised of directors with suitable
experience and qualifications who report annually to the
shareholders on their independence. The Investment Adviser is
well-respected with a proven track record and has a formal
recruitment process to employ experienced investment staff.
Allocation rules relating to co-investments with other funds
advised by the Investment Adviser, have been agreed between the
Investment Adviser and the Company. Advice is sought from external
advisors where required. Both the Company and the Investment
Adviser maintain appropriate insurances.
Operational
Risk - Failure of the Investment Adviser's and administrator's
accounting systems or disruption to its business might lead to an
inability to provide accurate reporting and monitoring.
Mitigation - The Investment Adviser has a documented disaster
recovery plan.
Financial
Risk - Inadequate controls might lead to misappropriation of
assets. Inappropriate accounting policies might lead to
misreporting or breaches of regulations.
Mitigation - The key controls around financial reporting are
described on page 41 of the annual report.
Market/Liquidity
Risk - Lack of liquidity in both the venture capital and public
markets. Investment in AIM quoted and unquoted companies, by their
nature, involve a higher degree of risk than investment in
companies trading on the main market. In particular, smaller
companies often have limited product lines, markets or financial
resources and may be dependent for their management on a smaller
number of key individuals. The fact that a share is traded on AIM
does not guarantee its liquidity. The spread between the buying and
selling price of such shares may be wide and thus the price used
for valuation may not be achievable. In addition, the market for
stock in smaller companies is often less liquid than that for stock
in larger companies, bringing with it potential difficulties in
acquiring, valuing and disposing of such stock.
Mitigation - Overall liquidity risks are monitored on an ongoing
basis by the Investment Adviser and on a quarterly basis by the
Board. Sufficient investments in cash and fixed income securities
are maintained to pay expenses as they fall due.
Other Matters
The Board recognises the requirement under Section 414C of the
Companies Act 2006 to detail information about environmental
matters (including the impact of the Company's business on the
environment), employee, human rights, social and community issues,
including information about any policies it has in relation to
these matters and effectiveness of these policies.
The Company seeks to ensure that its business is conducted in a
manner that is responsible to the environment. The management and
administration of the Company is undertaken by the Investment
Adviser. YFM Private Equity Limited recognises the importance of
its environmental responsibilities, monitors its impact on the
environment and implements policies to reduce any damage that might
be caused by its activities. Initiatives of the Investment Adviser
designed to minimise its and the Company's impact on the
environment include recycling and reducing energy consumption.
Given the size and nature of the Company's activities and the fact
that it has no employees, the Board considers there is limited
scope to develop and implement social and community policies.
Anti-Bribery and Corruption Policy
The Company has a zero tolerance approach to bribery. The
following is a summary of its policy:
-- it is the Company's policy to conduct all of its business in
an honest and ethical manner. The Company is committed to acting
professionally, fairly and with integrity in all its business
dealings and relationships;
-- the directors of the Company, the Investment Adviser and any
other service providers must not promise, offer, give, request,
agree to receive or accept financial or other advantage in return
for favourable treatment, to influence a business outcome or gain
any business advantage on behalf of the Company or encourage others
to do so; and
-- the Company has communicated its anti-bribery policy to the
Investment Adviser and its other service providers.
The Company had no employees during the year. The Board is
composed of three male non-executive directors. For a review of the
policies used when appointing directors to the Board of the Company
please refer to the Directors' Remuneration Report in the annual
report.
Directors' Responsibilities Statement.
The directors are responsible for preparing the annual report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare the financial
statements for each financial year. Under that law the directors
are required to prepare the financial statements and have elected
to prepare the Company's financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union. Under company law the directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and of the profit or loss for the Company for that
period.
In preparing these financial statements, the directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with
IFRSs as adopted by the European Union, subject to any material
departures disclosed and explained in the financial statements;
and
-- prepare a Strategic Report, Directors' Report and Directors'
Remuneration Report which comply with the requirements of the
Companies Act 2006.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
its financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Website Publication
The directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Company's website at
www.bscfunds.com in accordance with legislation in the United
Kingdom governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the Company's website is the
responsibility of the directors. The directors' responsibility also
extends to the ongoing integrity of the financial statements
contained therein.
Directors' Responsibilities pursuant to DTR4
The directors confirm to the best of their knowledge:
-- the financial statements have been prepared in accordance
with IFRSs as adopted by the European Union and give a true and
fair view of the assets, liabilities, financial position and profit
and loss of the Company; and
-- the annual report includes a fair review of the development
and performance of the business and the financial position of the
Company, together with a description of the principal risks and
uncertainties that it faces.
Having taken advice from the Audit Committee the Board considers
the annual report and accounts, taken as a whole, are fair,
balanced and understandable and that it provides the information
necessary for shareholders to assess the Company's performance,
business model and strategy.
The names and functions of all the directors are stated on page
33 of the annual report.
For and on behalf of the Board.
This statement was approved by the Board and signed on its
behalf on 26 March 2015.
Richard Last
Chairman
Financial Statements
Statement of Comprehensive Income for the year ended 31 December
2014
2014 2013
Notes Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Gain on disposal
of investments - 870 870 - 596 596
Gains on investments
held at fair value - 111 111 - 1,748 1,748
Income 2 1,272 - 1,272 689 - 689
Administrative expenses:
---------- ---------- --------- ---------- ---------- ---------
Investment Adviser's
fee (173) (521) (694) (141) (421) (562)
Other expenses (402) - (402) (340) - (340)
---------- ---------- --------- ---------- ---------- ---------
(575) (521) (1,096) (481) (421) (902)
Profit before taxation 697 460 1,157 208 1,923 2,131
Taxation 4 (7) 7 - - - -
Profit for the year 690 467 1,157 208 1,923 2,131
-------------------------- -------- ---------- ---------- --------- ---------- ---------- ---------
Total comprehensive
income for the year 690 467 1,157 208 1,923 2,131
-------------------------- -------- ---------- ---------- --------- ---------- ---------- ---------
Basic and diluted
earnings per ordinary
share 6 1.19p 0.81p 2.00p 0.46p 4.27p 4.73p
-------------------------- -------- ---------- ---------- --------- ---------- ---------- ---------
The Total column of this statement represents the Company's
Statement of Comprehensive Income, prepared in accordance with
International Financial Reporting Standards ('IFRSs') as adopted by
the European Union. The supplementary Revenue and Capital columns
are prepared under the Statement of Recommended Practice 'Financial
Statements of Investment Trust Companies and Venture Capital
Trusts' ('SORP') 2009 published by The AIC.
Balance Sheet At 31 December 2014
2014 2013
Assets Notes GBP000 GBP000
Non-current assets
Investments 7 28,216 16,255
Fixed income securities 7 - 890
------------------------------- ------ --------- ------------
Financial assets at
fair value through
profit or loss 7 28,216 17,145
Trade and other receivables 417 132
------------------------------- ------ --------- ------------
28,633 17,277
Current assets
Trade and other receivables 314 123
Cash on fixed term
deposit - 4,500
Cash and cash equivalents 10,633 8,680
10,947 13,303
Liabilities
Current liabilities
Trade and other payables (247) (122)
Net current assets 10,700 13,181
Net assets 39,333 30,458
Shareholders' equity
Share capital 6,447 4,822
Share premium account 342 4,926
Capital redemption
reserve 88 88
Other reserve 2 2
Merger reserve 5,525 5,525
Capital reserve 24,822 14,568
Investment holding
gains and losses 1,507 448
Revenue reserve 600 79
Total shareholders'
equity 39,333 30,458
------------------------------- ------ --------- ------------
Net asset value per
ordinary share 8 62.9p 65.6p
------------------------------- ------ --------- ------------
Statement of Changes in Equity for the year ended 31 December
2014
Share Investment
Share premium Other Merger Capital holding Revenue Total
capital account reserves(1) reserve reserve gains reserve equity
(losses)
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at
31 December
2012 4,271 14,806 90 5,525 7,225 (4,919) 154 27,152
--------------- --------- ----------- ------------- --------- ---------- ------------ ---------- ---------
Revenue return
for the year - - - - - - 208 208
Capital
expenses - - - - (421) - - (421)
Investment
holding gain
on
investments
held at fair
value - - - - - 1,748 - 1,748
Realisation
of
investments
in the year - - - - 596 - - 596
Total
comprehensive
income for
the year - - - - 175 1,748 208 2,131
--------------- --------- ----------- ------------- --------- ---------- ------------ ---------- ---------
Issue of share
capital 504 2,964 - - - - - 3,468
Issue costs(2) - (178) - - - - - (178)
Purchase of
own shares - - - - (309) - - (309)
Issue of
shares
- DRIS 47 239 - - - - - 286
Dividends - - - - (1,800) - (283) (2,083)
Cancellation
of share
premium
account -
net of costs - (12,905) - - 12,896 - - (9)
--------------- --------- ----------- ------------- --------- ---------- ------------ ---------- ---------
Total
transactions
with owners 551 (9,880) - - 10,787 - (283) 1,175
Realisation
of negative
goodwill - - - - 177 (177) - -
Realisation
of prior year
investment
holding gains - - - - (3,796) 3,796 - -
Balance at
31 December
2013 4,822 4,926 90 5,525 14,568 448 79 30,458
--------------- --------- ----------- ------------- --------- ---------- ------------ ---------- ---------
Revenue return
for the year - - - - - - 690 690
Capital
expenses - - - - (514) - - (514)
Investment
holding gain
on
investments
held at fair
value - - - - - 111 - 111
Realisation
of
investments
in the year - - - - 870 - - 870
--------------- --------- ----------- ------------- --------- ---------- ------------ ---------- ---------
Total
comprehensive
income for
the year - - - - 356 111 690 1,157
--------------- --------- ----------- ------------- --------- ---------- ------------ ---------- ---------
Issue of share
capital 1,551 9,200 - - - - - 10,751
Issue costs(2) (591) - - - - - (591)
Purchase of
own shares - - - - (75) - - (75)
Issue of
shares
- DRIS 74 362 - - - - - 436
Dividends - - - - (2,625) - (169) (2,794)
Cancellation
of share
premium
account -
net of costs - (13,555) - - 13,546 - - (9)
--------------- --------- ----------- ------------- --------- ---------- ------------ ---------- ---------
Total
transactions
with owners 1,625 (4,584) - - 10,846 - (169) 7,718
Realisation
of negative
goodwill - - - - 13 (13) - -
Realisation
of prior year
investment
holding gains - - - - (961) 961 - -
Balance at
31 December
2014 6,447 342 90 5,525 24,822 1,507 600 39,333
--------------- --------- ----------- ------------- --------- ---------- ------------ ---------- ---------
Reserves as
above 6,447 342 90 5,525 24,822 1,507 600 39,333
Less undistributable
reserves (6,447) (342) (90) (5,525) (1,343) (1,507) - (15,254)
Less interest
not yet distributable - - - - - - (332) (332)
Less deferred
proceeds - - - - (85) - - (85)
Reserves available
for distribution(3) - - - - 23,394 - 268 23,622
------------------------ -------- ------ ----- -------- -------- -------- -------- ---------
1 Other reserves include the capital redemption reserve and other reserve, which are non-distributable. The other reserve was created upon the exercise of warrants and the capital redemption reserve was created for the purchase and cancellation of own shares.
2 Issue costs include both fundraising costs and costs incurred
from the Company's DRIS.
3 Subject to filing these financial statements at Companies House.
The merger reserve was created to account for the difference
between the nominal and fair value of shares issued as
consideration for the acquisition of the assets and liabilities of
British Smaller Technology Companies VCT plc. The reserve was
created after meeting the criteria under section 131 of the
Companies Act 1985 and the provisions of the Companies Act 2006 for
merger relief. The merger reserve is a non-distributable
reserve.
The capital reserve and revenue reserve are both primarily
distributable reserves. The reserves total GBP25,422,000 (2013:
GBP14,647,000) representing an increase of GBP10,775,000 (2013:
GBP7,268,000 increase) during the year. This change arises from the
profit in the year of GBP1,046,000 (2013: GBP383,000), a transfer
of valuation losses from the investment holding reserve of
GBP961,000 (2013: GBP3,796,000), dividends of GBP2,794,000 (2013:
GBP2,083,000), purchase of shares of GBP75,000 (2013: GBP309,000),
realisation of negative goodwill of GBP13,000 (2013: GBP177,000)
and the cancellation of the Company's share premium account of
GBP13,546,000 (2013: GBP12,896,000). An analysis of the
distributable elements of these reserves is given above. The
directors also take into account the level of the investment
holding gains (losses) reserve and the future requirements of the
Company when determining the level of dividend payments.
Statement of Cash Flows for the year ended 31 December 2014
2014 2013
GBP000 GBP000
Net cash outflow from operating
activities (293) (79)
---------------------------------------- --------- ---------
Cash flows (used in) from
investing activities
Purchase of financial assets
at fair value through profit
or loss (14,071) (5,499)
Proceeds from sale of financial
assets at fair value through
profit or loss 3,679 2,926
Deferred consideration 345 125
Cash placed on fixed term
deposit - (4,500)
Cash maturing from fixed
term deposits 4,500 7,048
Net cash (outflow) inflow
from investing activities (5,547) 100
---------------------------------------- --------- ---------
Cash flows from (used in)
financing activities
Issue of ordinary shares 10,510 3,412
Costs of ordinary share
issues* (350) (122)
Purchase of own ordinary
shares (75) (309)
Dividends paid - net of
dividends re-invested (2,283) (1,797)
Share premium cancellation
cost (9) (9)
---------------------------------------- --------- ---------
Net cash inflow from financing
activities 7,793 1,175
---------------------------------------- --------- ---------
Net increase in cash and
cash equivalents 1,953 1,196
Cash and cash equivalents
at the beginning of the
year 8,680 7,484
Cash and cash equivalents
at the end of the year 10,633 8,680
---------------------------------------- --------- ---------
* Issue costs include both fundraising costs and expenses
incurred from the Company's DRIS.
Reconciliation of Profit before Taxation to Net Cash Outflow
from Operating Activities
2014 2013
GBP000 GBP000
Profit before taxation 1,157 2,131
Increase (decrease) in
trade and other payables 50 (154)
(Increase) decrease in trade
and other receivables (511) 300
Gains on disposal of
investments in the year (870) (596)
Profit on investments
held at fair value (111) (1,748)
Capitalised interest (8) (12)
------------------------------------ -------- --------
Net cash outflow from
operating activities (293) (79)
Notes to the Financial Statements for the year ended 31 December
2014
1 Basis of Preparation
This announcement of the annual results of the Company for the
year ended 31 December 2014 has been prepared using accounting
policies consistent with those adopted in the full audited
financial statements which have been prepared on a going concern
basis and in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union and those parts
of the Companies Act 2006 applicable to companies reporting under
IFRS.
The financial statements have been prepared under the historical
cost basis as modified by the measurement of investments at fair
value through profit or loss.
The accounts have been prepared in compliance with the
recommendations set out in the Statement of Recommended Practice
'Financial Statements of Investment Trust Companies and Venture
Capital Trusts' issued by the AIC in January 2009 (SORP) to the
extent that they do not conflict with IFRSs as adopted by the
European Union.
The financial statements are prepared in accordance with IFRSs
and interpretations in force at the reporting date. The standards
and interpretations applicable for the first time that have been
adopted are IFRS 10, 11, and 12, and amendments to IAS 27, 28, 32
and 36. There has been no material impact on the financial
statements.
Other standards and interpretations have been issued which will
be effective for future reporting periods but have not been adopted
early in these financial statements. These include amendments to
IFRS 9, 10, 11, 14 and 15, and amendments to IAS 16, 27, 28 and 38,
together with the SORP issued in November 2014. A full impact
assessment has not yet been completed in order to assess whether
these new standards will have a material impact on the financial
statements.
2 Income
2014 2013
GBP000 GBP000
Dividends from unquoted
companies 43 40
Dividends from AIM quoted
companies 160 44
Interest on loans to unquoted
companies 926 384
Fixed income Government
securities 7 18
Income from investments held
at fair value through profit
or loss 1,136 486
Interest on bank deposits 136 203
1,272 689
-------------------------------- -------- --------
The above is stated net of GBP46,000 (2013: GBP57,000) of income
in relation to loan interest, which has been fully provided.
3 Administrative expenses
2014 2013
GBP000 GBP000
Investment Adviser's fee 694 562
Other expenses:
Trail Commission 100 62
Directors' remuneration (comprises
only short term benefits including
social security contributions) 75 75
Administration fee 60 58
Printing 47 29
Listing and registrar fees 43 37
General expenses 39 40
Irrecoverable VAT 20 22
Auditor's remuneration - audit fees
(excluding irrecoverable VAT) 18 17
1,096 902
-------------------------------------- -------- --------
No fees are payable to the auditor in respect of other services
supplied pursuant to legislation (2013: GBPnil).
YFM Private Equity Limited has acted as Investment Adviser and
performed administrative and secretarial duties for the Company
under an agreement dated 28 November 2000, superseded by an
agreement dated 31 October 2005 and as varied by agreements dated 8
December 2010, 26 October 2011, 16 November 2012 and 17 October
2014 (the "IAA"). The IAA may be terminated by not less than twelve
months' notice given by either party at any time. Following the
Financial Conduct Authority's registration of the Company as a
Small Registered Alternative Investment Fund Manager, the Company
has retained responsibility for the custody of its investments.
The key features of the agreement are:
-- YFM Private Equity Limited receives an Investment Adviser
fee, payable quarterly in advance, at the rate of 2.5 per cent of
net assets, calculated at half-yearly intervals as at 30 June and
31 December. The fee is allocated between capital and revenue as
described in note 1 on pages 54 to 57 of the annual report;
-- Pursuant to a deed of variation dated 26 October 2011 the
advisory fee will be reduced to 1.25 per cent per annum in respect
of any net asset value of the Company in excess of GBP16 million
and up to GBP26.667 million and to 2.0 per cent in respect of any
net asset value of the Company in excess of GBP26.667 million;
-- Pursuant to the deed of variation dated 17 October 2014, YFM
Private Equity Limited shall bear the annual operating costs of the
Company (including the advisory fee set out above but excluding any
payment of the performance incentive fee, details of which are set
out below and excluding VAT and trail commissions) to the extent
that those costs exceed 2.9 per cent of the net asset value of the
Company, a reduction from the previous level of 3.25 per cent;
and
-- Under the IAA YFM Private Equity Limited also provides
administrative and secretarial services to the Company for a fee of
GBP46,000 per annum plus annual adjustments to reflect movements in
the Retail Prices Index. This fee is charged fully to revenue.
When the Company makes investments into its unquoted portfolio
the Investment Adviser charges that investee an arrangement fee,
calculated by applying a percentage to the investment amount. With
effect from 1 October 2013 if the average of relevant fees exceeds
3.0 per cent of the total invested into new portfolio companies and
2.0 per cent into follow-on investments over the Company's
financial year, this excess will be rebated to the Company. As at
31 December 2014, the Company was due a rebate from the Investment
Adviser of GBP4,000 (2013: GBP12,000).
Monitoring and directors fees the Investment Adviser receives
from the investee companies are limited to a maximum of GBP40,000
(excluding VAT) per annum per company.
The total remuneration payable to YFM Private Equity Limited in
the period was GBP754,000 (2013: GBP620,000).
Under the Subscription Rights Agreement dated 23 November 2001
between the Company, YFM Private Equity Limited and Chord Capital
Limited (formerly Generics Asset Management Limited), as amended by
an agreement between those parties dated 31 October 2005, YFM
Private Equity and Chord have a performance-related incentive,
structured so as to entitle them to an amount (satisfied by the
issue by the Company of ordinary shares) equivalent to 20 per cent
of the amount by which the cumulative cash dividends paid as at the
last Business Day in December in any year plus the average of the
middle market quotation per ordinary share exceeds 120 pence per
ordinary share on that same day multiplied by the number of
ordinary shares in issue and the shares under option (if any). The
subscription rights were exercisable in the ration 59:41 between
YFM Private Equity and Chord. By a Deed of Assignment dated 19
December 2003 (together with a supplemental agreement dated 5
October 2005), the benefit of the YFM Private Equity subscription
right was assigned to YFM Private Equity Limited Carried Interest
Trust (the "Trust"), an employee benefit trust formed for the
benefit of certain employees of YFM Private Equity Limited and
associated companies. Pursuant to a deed of variation dated 16
November 2012 between the Company, the trustees of the Trust and
Chord, the Subscription Rights Agreement was varied so that the
subscription rights will be exercisable in the ratio of 95:5
between the trustees of the Trust and Chord. Pursuant to a deed of
variation dated 5 August 2014 the Subscription Rights Agreement was
varied so that the recipient was changed from the Trust to YFM
Private Equity. As at 31 December 2014 the total of cumulative cash
dividends paid and mid-market price was 99.50 pence per ordinary
share. No shares have been issued under this agreement.
Under the terms of the joint offer with British Smaller
Companies VCT plc, launched on 14 January 2014 (which closed on 5
April 2014), YFM Private Equity Limited was entitled to 5.5 per
cent of gross subscriptions from execution brokers and 3.5 per cent
of gross subscriptions for applications through intermediaries
offering financial advice or directly from applicants, less the
cost of incentive shares and re-investment of intermediary
commission. The net amount payable to YFM Private Equity amounted
to GBP488,847 in total.
Under the terms of the offer with British Smaller Companies VCT
plc, launched on 20 October 2014, YFM Private Equity Limited was
entitled to 5.0 per cent of gross subscriptions from execution
brokers and 3.0 per cent of gross subscriptions for applications
through intermediaries offering financial advice or directly from
applicants, less the cost of incentive shares and re-investment of
intermediary commission. The net amount payable to YFM Private
Equity at the date of this report amounted to GBP280,985.
The Investment Adviser met all costs and expenses arising from
these offers out of these fees, including any payment or
re-investment of initial intermediary commissions (excluding
permissible trail commission, which continues to be met by the
Company).
The details of directors' remuneration are set out in the
Directors' Remuneration Report on page 44 of the annual report
under the heading "Directors' Remuneration for the year ended 31
December 2014 (audited)".
4 Taxation
2014 2013
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Corporation tax at - - - - - -
20% (2013: 20%)
--------------------------- ------ ---------- --------- ---------- ---------- ---------
Profit before taxation 697 460 1,157 208 1,923 2,131
--------------------------- ------ ---------- --------- ---------- ---------- ---------
Profit before taxation
multiplied by standard
small company rate
of corporation tax
in UK of 20% (2013:
20%) 139 92 231 42 385 427
Effect of:
UK dividends received (41) - (41) (17) - (17)
Non taxable profits
on investments - (196) (196) - (469) (469)
Excess advisory expenses (91) 97 6 (25) 84 59
Tax charge (credit) 7 (7) - - - -
--------------------------- ------ ---------- --------- ---------- ---------- ---------
The Company has no provided or unprovided deferred tax liability
in either year.
Deferred tax assets of GBP560,000 calculated at 20% (2013:
GBP559,000) in respect of unrelieved advisory expenses (GBP2.799
million as at 31 December 2014 and GBP2.793 million as at 31
December 2013) have not been recognised as the directors do not
currently believe that it is probable that sufficient taxable
profits will be available against which assets can be
recovered.
Due to the Company's status as a venture capital trust and the
continued intention to meet with the conditions required to comply
with Section 274 of the Income Tax Act 2007, the Company has not
provided for deferred tax on any capital gains or losses arising on
the revaluation or realisation of investments.
5 Dividends
----------------------------------------------------------------------------------------------------------- --- -------------------------------- --------------------------------
Amounts recognised as distributions to equity
holders in the year to 31 December
2014 2013
Revenue Capital Total Revenue Capital Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Final dividend for
2013 of 2.5p (2012:
2.5p) per ordinary
share 7 1,542 1,549 154 1,001 1,155
Interim dividend
for 2014 of 2.0p
(2013: 2.0p) per
ordinary share 162 1,083 1,245 129 799 928
169 2,625 2,794 283 1,800 2,083
------------------------------------------------------------------------------------------------------------ -------------- --------- --------- ---------- --------- ---------
Shares Issued under
DRIS (436) (286)
Unclaimed dividends (75) -
---------------------------------------------------------------------------------------------------------------- ---------- --------- --------- ---------- --------- ---------
Dividends paid in
Statement of Cash
Flows 2,283 1,797
---------------------------------------------------------------------------------------------------------------- ---------- --------- --------- ---------- --------- ---------
The final year-end dividend of 2.5 pence per ordinary share in
respect of the year to 31 December 2013 was paid on 30 June 2014 to
shareholders on the register at 30 May 2014.
The interim dividend of 2.0 pence per ordinary share was paid on
7 October 2014 to shareholders on the register as at 5 September
2014.
A final dividend of 2.5 pence per ordinary share in respect of
the year to 31 December 2014 is proposed. This dividend has not
been recognised in the year ended 31 December 2014 as the
obligation did not exist at the balance sheet date.
During the year the Company has received GBP75,000 from the
Registrars in respect of unclaimed dividends. These are held in a
separate bank account until such time as contact can be made with
the shareholders affected so that payment can be made to them.
6 Basic and Diluted Earnings per Ordinary Share
The basic and diluted earnings per ordinary share is based on
the profit after tax attributable to shareholders of GBP1,157,000
(2013: GBP2,131,000 profit) and 57,825,246 (2013: 45,070,587)
ordinary shares being the weighted average number of ordinary
shares in issue during the year.
The basic and diluted revenue earnings per ordinary share is
based on the profit for the year attributable to shareholders of
GBP690,000 (2013: GBP208,000) and 57,825,246 (2013: 45,070,587)
ordinary shares being the weighted average number of ordinary
shares in issue during the year.
The basic and diluted capital earnings per ordinary share is
based on the capital profit for the year attributable to
shareholders of GBP467,000 (2013: GBP1,923,000) and 57,825,246
(2013: 45,070,587) ordinary shares being the weighted average
number of ordinary shares in issue during the year.
During the year the Company issued 16,245,613 ordinary shares.
The Company has also repurchased 132,300 of its own shares which
are held in treasury. The treasury shares have been excluded in
calculating the weighted average number of ordinary shares for the
period that they were treasury shares.
The only potentially dilutive shares are those shares which,
subject to certain criteria being achieved in the future, may be
issued by the Company to meet its obligations under the IAA as set
out in note 3. No such shares have been issued or are currently
expected to be issued. There are, therefore, considered to be no
potentially dilutive shares in issue at 31 December 2014 or 31
December 2013.
7 Financial Assets at Fair Value through Profit or Loss
Movements in investments at fair value through profit or loss
during the year to 31 December 2014 are summarised as follows:
IFRS 13 Level Level Level
measurement 3 1 1
classification
----------------- -------------------- ------------------- ------------------ ----------------- ------------------
Unquoted Quoted Total Fixed Total
investments equity quoted income investments
investments and securities
unquoted
GBP000 GBP000 GBP000 GBP000 GBP000
Opening cost 13,792 2,061 15,853 888 16,741
Opening
investment
holding (loss)
gain (4) 406 402 2 404
Opening fair
value at
1 January 2014 13,788 2,467 16,255 890 17,145
Additions at
cost 13,110 486 13,596 475 14,071
Capitalised
interest 8 - 8 - 8
Disposal
proceeds (1,687) (627) (2,314) (1,365) (3,679)
Net profit on
disposal* 501 59 560 - 560
Change in fair
value in the
year on assets
held at 31
December
2014 368 (257) 111 - 111
----------------- -------------------- ------------------- ------------------ ----------------- ------------------
Closing fair
value at
31 December
2014 26,088 2,128 28,216 - 28,216
----------------- -------------------- ------------------- ------------------ ----------------- ------------------
Closing cost 24,593 2,146 26,739 - 26,739
Closing
investment
holding gain
(loss) 1,495 (18) 1,477 - 1,477
----------------- -------------------- ------------------- ------------------ ----------------- ------------------
Closing fair
value at
31 December
2014 26,088 2,128 28,216 - 28,216
----------------- -------------------- ------------------- ------------------ ----------------- ------------------
*The net profit on disposal in the table above is GBP560,000
whereas that shown in the Statement of Comprehensive Income and the
table on page 17 of the annual report is GBP870,000. The difference
comprises deferred proceeds of GBP310,000 in respect of assets
which have been disposed and are not included within the investment
portfolio at the year end.
Following the merger between the Company and British Smaller
Technologies Company VCT plc a total of GBP975,000 of negative
goodwill was recognised in the investment holding gains and losses
reserve in respect of the investments acquired. The relevant amount
per investment is realised, at the point of disposal to the capital
reserve. At 31 December 2014 a total of GBP30,000 was held on
investments yet to be realised in the investment holdings gains and
losses reserve.
The total of fair value adjustments below cost made against
unquoted investments during the year ended 31 December 2014
amounted to GBP766,000 (2013: GBP524,000).
There were no individual reductions in fair value during the
year that exceeded five per cent of the total assets of the
Company. In 2013 there were also no such individual reductions.
8 Basic and Diluted Net Asset Value per Ordinary Share
The basic and diluted net asset value per ordinary share is
calculated on attributable assets of GBP39,333,000 (2013:
GBP30,458,000) and 62,556,876 (2013: 46,443,563) ordinary shares in
issue at the year end.
The treasury shares have been excluded in calculating the number
of ordinary shares in issue at 31 December 2014.
The only potentially dilutive shares are those shares which,
subject to certain criteria being achieved in the future, may be
issued by the Company to meet its obligations under the IAA as set
out in note 3. No such shares have been issued or are currently
expected to be issued. There are therefore considered to be no
potentially dilutive shares in issue at 31 December 2014 or 31
December 2013. Consequently, basic and diluted net asset value per
ordinary share is the same for the year ended 31 December 2014 and
31 December 2013.
9 Total Return per Ordinary Share
The total return per ordinary share is calculated on cumulative
dividends paid of 43.5 pence per ordinary share (2013: 39.0 pence
per ordinary share) plus the net asset value as calculated per note
8.
10 Related Party Transactions
Mr R Last was appointed as chairman and non-executive director
of Gamma Communications Limited ("Gamma") on 17 June 2014. On 10
October 2014 the ordinary shares of Gamma were admitted to trading
on the AIM. As part of the placing of Gamma's ordinary shares Mr R
Last invested GBP100,000, representing a 0.06 per cent equity stake
in Gamma. During the year he received GBP43,750 from Gamma in
respect of his services.
11 Events after the Balance Sheet Date
Following the period end an investment of GBP0.4 million has
been made into quoted portfolio company Gooch & Housego plc, a
company specialising in the design, manufacture and supply of fibre
optic solutions such as optical components, photonic packaging and
optoelectronic integration.
In the period since the year end the Company has also received
GBP435,000 of monthly capital loan repayments from investee
companies. The most significant of these was GBP303,000 received in
February 2015 from DisplayPlan Holdings Limited as part of an early
loan repayment agreed with the company.
Subsequent to the year end the Company allotted a total of
14,110,981 ordinary shares on 6 January 2015, 2 February 2015 and 2
March 2015 pursuant to the offer detailed under "Fundraising"
above, raising net proceeds of GBP8.67m.
12 Financial Information
The financial information set out in this announcement for the
year ended 31 December 2014 does not constitute full statutory
accounts as defined in section 434 of the Companies Act 2006 but
has been extracted from the Company's statutory accounts for that
period. Statutory accounts for the year ended 31 December 2014 will
be delivered to the Registrar of Companies following the Company's
Annual General Meeting on 15 May 2015. Those accounts have been
reported upon without qualification by the Company's independent
auditor and did not contain a statement under Section 498(2) or (3)
of the Companies Act 2006.
13 Annual Report and Accounts
Copies of the statutory accounts for the year ended 31 December
2014 will shortly be submitted to the National Storage Mechanism
and will be available to the public for viewing online at
www.hemscott.com/msn/do. They can also shortly be viewed on the
Company's website at www.bscfunds.com. Hard copies of the statutory
accounts for the year ended 31 December 2014 will be distributed by
post to shareholders and will be available thereafter to members of
the public from the Company's registered office.
14 Directors
The directors of the Company are Mr R Last, Mr R Pettigrew, and
Mr P Waller.
15 Annual General Meeting
The Annual General Meeting of the Company will be held at 33 St
James Square, London, SW1Y 4JS on 15 May 2015 at 12.00 noon.
16 Final Dividend for the year ended 31 December 2014
Further to the announcement of its final results for the year
ended 31 December 2014, the Company confirms that, subject to its
approval by shareholders at the forthcoming Annual General Meeting
to be held on 15 May 2015, the final dividend of 2.5 pence per
ordinary share ("Final Dividend") will be paid on 8 June 2015 to
those shareholders on the Company's register at the close of
business on 8 May 2015. The ex-dividend date is 7 May 2015.
17 Dividend re-investment scheme ("DRIS")
The Company operates a dividend reinvestment scheme ("DRIS").
The latest date for receipt of DRIS elections so as to participate
in the DRIS in respect of the Final Dividend is the close of
business on 22 May 2015.
For further information, please contact:
David Hall YFM Equity Partners Limited Tel: 0113 244 1000
Emily Watts Nplus 1 Singer Advisory LLP Tel: 0207 496 3000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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