TIDMBSC
RNS Number : 6295G
British Smaller Companies VCT2 Plc
23 November 2015
British Smaller Companies VCT2 plc
Interim Management Statement
For the quarter ended 30 September 2015
British Smaller Companies VCT2 plc (the "Company") presents its
interim management statement for the quarter ended 30 September
2015. The statement also includes relevant financial information
between the end of the quarter and the date of this statement. A
copy of this interim management statement can be found at
www.bscfunds.com.
Overview
The Company has continued to make good progress in the quarter
with total return rising to 109.1 pence per ordinary share. This is
an increase of 2.7 pence per ordinary share in the first nine
months of the year; equivalent to 4.3% of the opening Net Asset
Value ('NAV').
Since the March 2015 Budget, when prospective changes to the
rules impacting venture capital trusts were announced, there has
been some uncertainty about the timing and precise detail of the
changes. As each new investment that is made has required HMRC
advanced assurance this has resulted in a considerable slowdown of
new investment activity until clarity over the proposed changes
became clear. Consequently no new investments were completed
between 25 March 2015 and the quarter end.
However, in advance of the new Finance Bill, which received
Royal Assent on 18 November 2015, advanced assurances have again
begun to be received. As a consequence since the quarter end the
Company has completed 1 new investment of GBP2.0 million into
KeTech Enterprises Limited and two follow-on investments totalling
GBP0.6 million. A further two new investments totalling GBP1.7
million and one follow-on investment of GBP0.2 million have also
been approved by the Board bringing investment activity levels
since the end of the period to GBP4.5 million. This level of
activity is more in line with the levels that have been experienced
prior to the March 2015 budget.
Performance
30 September Movement 30 June
2015 2015
--------------------------- ------------- --------- -----------
Net Assets (GBPm) 53.3 (0.8) 54.1
--------------------------- ------------- --------- -----------
NAV per share (PPS) 61.1 (1.4) 62.5
--------------------------- ------------- --------- -----------
Cumulative dividends paid
(PPS) 48.0 2.0 46.0
--------------------------- ------------- --------- -----------
Total Return (PPS) 109.1 0.6 108.5
--------------------------- ------------- --------- -----------
Shares in issue 87,262,575 581,009 86,681,566
--------------------------- ------------- --------- -----------
The total return at 30 September 2015, calculated by reference
to the NAV per ordinary share and the cumulative dividends paid per
ordinary share, was 109.1 pence per ordinary share compared to
108.5 pence per ordinary share at 30 June 2015. Following payment
of a 2.0 pence per ordinary share interim dividend cumulative
dividends paid have increased to 48.0 pence per ordinary share (30
June 2015: 46.0 pence per ordinary share).
The unaudited NAV per ordinary share as at 30 September 2015 was
61.1 pence per ordinary share (30 June 2015: 62.5 pence per
ordinary share) representing a decrease of 1.4 pence per ordinary
share. The decrease in NAV per ordinary share is due to the interim
dividend of 2.0 pence per ordinary share paid on 28 September 2015,
offset by the net upward movement in the overall portfolio
valuation.
Dividends and shares in issue
The number of ordinary shares in issue at 30 September 2015 was
87,262,575 (30 June 2015: 86,681,566). In addition, at 30 September
2015 the Company held 2,128,003 ordinary shares in treasury (30
June 2015: 2,128,003).
On 28 September 2015 the Company paid an interim dividend of 2.0
pence per ordinary share. Pursuant to its dividend re-investment
scheme and on the same date the Company issued 581,009 ordinary
shares at a price of 57.48 pence per ordinary share.
Net assets
Net assets at 30 September 2015 comprised the following:
% of net
GBP000 assets
Unquoted investments at
fair value 31,229 58.6
Quoted investments at
bid price 2,641 5.0
------- ---------
Total investments 33,870 63.6
Cash and cash equivalents 18,703 35.1
Other net current assets 711 1.3
------- ---------
Net assets 53,284 100.0
======= =========
The investment portfolio at 30 September 2015 was comprised as
follows:
Valuation
as a %
Valuation of net
GBP000 assets
Intelligent Office 3,059 5.7
Mangar Health Limited 2,026 3.8
DisplayPlan Holdings Limited 1,860 3.5
Gill Marine Holdings Limited 1,764 3.3
GTK (Holdco) Limited 1,470 2.8
ACC Aviation 1,379 2.6
Business Collaborator Limited 1,340 2.5
Immunobiology Limited 1,311 2.5
Harvey Jones Holdings Limited 1,301 2.4
Springboard Research Holdings
Limited 1,241 2.3
---------- ----------
16,751 31.4
Other investments 17,119 32.2
Total investments 33,870 63.6
========== ==========
During the quarter to 30 September 2015 the Company made two
investments totalling GBP0.4 million: one follow-on investment of
GBP0.3 million into Immunobiology Limited and GBP0.1 million of
additional investment into AIM listed Brady plc.
In the quarter to 30 September 2015 the realisation and
repayment of investments generated cash proceeds of GBP0.2 million.
Since the end of the quarter the Company has realised its
investment in Insider Technologies for proceeds of GBP0.8 million,
an increase of GBP0.3 million over the value at the beginning of
the financial year and received loan repayments of GBP0.4
million.
Portfolio Performance
Over the quarter to 30 September 2015 aggregate unrealised
portfolio valuations have increased by GBP0.4 million. This
included a GBP0.2 million uplift in respect of the investment in
Insider Technologies, which as above was realised following the
quarter end.
The Board continues to follow its policy of maintaining a
diversified portfolio. At 30 September 2015, only one investment
represented more than 5 per cent of the Company's NAV.
Regulatory Changes
By way of background. The changes that have been introduced this
year to the regulations surrounding VCTs (and EIS) have arisen as a
result of an EU review of the use of state-aided investment. The EU
has a set of guidelines, Risk Capital Finance (RCF) which sets out
the operating framework for investment schemes that receive state
aid. In the case of VCTs the income tax reliefs received are state
aid. These guidelines were the subject of some revision with the
latest set coming into force on 1 January 2015.
The UK legislation that has now been enacted as part of the
Finance Bill includes changes to reflect the requirements of the
RCF and VCTs have to comply with both the UK legislation and the
RCF and are subject to review by both HMRC and HM Treasury and the
EU.
The principal changes that have been made are to the definitions
of Qualifying Investments and what VCTs are able to do with
non-qualifying money.
In summary Qualifying Investments can be made into both younger
companies, those less than ten years old if classed as knowledge
intensive, or seven years old if not and older companies where the
VCT investment is either not the first state aided investment the
company has received or that the VCT investment is "substantial in
relation to the size of the company" and the monies are used to
fund the company's growth plans.
There are also restrictions on the use of funds prior to them
being invested in Qualifying Investments; this is known in the
legislation as the liquidity test. This is restricted to shares or
securities on a regulated market; certain liquid funds and of
course cash. Notably AIM is excluded as it is not a regulated
market, which means new non-qualifying investments on AIM will not
be allowed.
Impact of the Regulatory Changes
Existing portfolio
The new rules apply to all investments from 18 November 2015,
the date of Royal Assent. The Board has worked closely with its
Adviser to review the existing portfolio against the new
legislation and does not believe that there will be any material
impact on the portfolio.
New investments
The Company has always had a policy of investing in small
companies to support their growth plans and will be able to
continue to follow this policy under the new legislation. The Board
believes that the overall pool of potential investments available
to the VCT market as a whole will be restricted from previous
levels, which is the purpose of the legislative changes.
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