Regulatory Filings • Jan 15, 2014
Regulatory Filings
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14 January 2014
£30 million Joint Offers for subscription
2013/14 and 2014/15 tax years
bscfunds.com Transforming Small Businesses
This document, the Securities Note and the Summary, which together comprise the Prospectus relating to the VCTs, have been prepared in accordance with the Prospectus Rules made by the Financial Conduct Authority pursuant to Part VI of the Financial Services and Markets Act 2000 ("FSMA"), and have been approved by and filed with the Financial Conduct Authority.
An application has been made to the UK Listing Authority for the Offer Shares to be admitted to the premium segment of the Official List of the UK Listing Authority and will be made to the London Stock Exchange for the Offer Shares to be admitted to trading on its main market for listed securities. It is expected that such Admission will become effective and that dealings in the Ordinary Shares will commence within ten Business Days of their allotment.
Each of the Directors of the VCTs, whose names are set out on page 13 of this document, and the VCTs accept responsibility for the information contained in this document. To the best of the knowledge of the Directors and the VCTs (who have taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.
The Offers are not being made, directly or indirectly, in or into the United States, Canada, Australia, Japan or the Republic of South Africa, or their respective territories or possessions, and documents should not be distributed, forwarded or transmitted in or into such territories. The Offer Shares have not been and will not be registered under the United States Securities Act 1933 (as amended) and may not be offered, sold or delivered, directly or indirectly, in or into the United States, Canada, Australia, Japan or the Republic of South Africa.
Howard Kennedy Corporate Services LLP (the "Sponsor"), which is authorised and regulated by the Financial Conduct Authority (reference no. 523524), is acting for the VCTs in connection with the Offers, and is not advising any other person or treating any other person as a customer in relation to the Offers and will not be responsible to any such person for providing the protections afforded to customers of the Sponsor (subject to the responsibilities and liabilities imposed by FSMA and the regulatory regime established thereunder) or for providing advice in connection with the Offers. The Sponsor does not give any representation, warranty or guarantee that the VCTs will qualify as venture capital trusts or that Investors will obtain any tax relief in respect of their investment.
(Incorporated and registered in England and Wales under the Companies Act 1985 with Registered Number 03134749)
and
(Incorporated and registered in England and Wales under the Companies Act 1985 with Registered Number 04084003)
Joint Offers for Subscription of Ordinary Shares in British Smaller Companies VCT plc and
British Smaller Companies VCT2 plc, to raise up to £30 million, in aggregate
The 2013/2014 Offers will close at 11:00 am on Saturday 5 April 2014 and the 2014/2015 Offers will close at 11:00 am on Wednesday 30 April 2014 (or such later date to which the Directors extend the 2014/2015 Offers, but no later than 13 January 2015) or earlier should the Offers become fully subscribed. The terms and conditions of application are set out on pages 36 to 38 of the Securities Note and are followed by an Application Form for use in connection with the Offers. The Offers are not being underwritten and are not subject to reaching a minimum level of subscription. If the Offers are over subscribed, they may be increased by a further £10 million at the discretion of the VCTs up to a maximum of £40 million funds raised, in aggregate.
The whole of this document should be read. Your attention is drawn to the "Risk factors" set out on page 4 of this document.
| Risk factors | Page 4 |
|---|---|
| Forward looking statements | Page 5 |
| Directors and Advisers | Page 6 |
| Definitions | Page 7-9 |
| Part 1: The VCTs Introduction Investment objectives and policies Co-investment policy Share buy-back policies The Fund Manager The Boards Practices and operations Committees Custody arrangements Dividend policy Dividend Re-investment Schemes The VCTs |
Page 10 10 10 11 11-12 13 14 14-15 15 15 15 16 |
| Part 2: Investment strategies and objectives | Page 17 |
| Part 3: Taxation | Page 18-19 |
| Part 4: Financial information on the VCTs | Page 20-31 |
| Part 5: General information | Page 32-48 |
Your capital is at risk if you invest in the VCTs and you may lose some or all of your capital. The Directors strongly recommend that all potential Investors consult an appropriate adviser before deciding whether to invest. The VCTs and the Directors consider the following risks to be material to each VCT. Additional risks and uncertainties currently unknown to the VCTs and the Directors (such as changes in legal, regulatory or tax requirements), or which the VCTs and the Directors currently believe are immaterial to each VCT, may also have a materially adverse effect on the financial condition or prospects of the VCTs. Material risks relating to the Offer Shares are contained in the Securities Note.
Forward looking statements
Potential Investors should not place undue reliance on forward looking statements. This Registration Document includes statements that are (or may be deemed to be) "forward looking statements", which can be identified by the use of forward looking terminology including terms such as "believes", "continues", "expects", "intends", "may", "will", "would", "should" or, in each case, their negative or other variations or comparable terminology. These forward looking statements include matters that are not historical facts.
Forward looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward looking statements contained in this Registration Document, based on past trends or activities, should not be taken as a representation that such trends or activities will continue in the future.
These statements will be updated as and when required by the Prospectus Rules, the Listing Rules and the DTRs, as appropriate.
Di rectors and Advisers
Directors (all non-executive) and Registered Office (both VCTs):
British Smaller Companies VCT plc Helen Rachelle Sinclair (Chairman) Philip Simon Cammerman Edward Charles Walter Buchan
British Smaller Companies VCT2 plc Richard Last (Chairman) Robert Martin Pettigrew Peter Charles Waller
All of: Saint Martins House 210-212 Chapeltown Road Leeds LS7 4HZ
KHM Secretarial Services Limited Old Cathedral Vicarage St James Row Sheffield S1 1XA
YFM Private Equity Limited Saint Martins House 210-212 Chapeltown Road Leeds LS7 4HZ
Solicitors to the VCTs and to the Offers
HowardKennedyFsi LLP 19 Cavendish Square London W1A 2AW
Sponsor to the Offers Howard Kennedy Corporate Services LLP 19 Cavendish Square London W1A 2AW
Nplus1Singer Advisory LLP 1 Bartholomew Lane London EC2N 2AX
Brewin Dolphin Limited 34 Lisbon Street Leeds LS1 4LX
Registered Auditor Grant Thornton UK LLP 2 Broadfield Court Sheffield S8 0XF
PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH
Bankers The Royal Bank of Scotland plc 27 Park Row Leeds LS1 5QB
Lloyds Banking Corporate Markets 40 Spring Gardens Manchester M2 1EN
Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Tel: 0871 664 0324
In this document the following words and expressions have the following meanings:
| "Act" | the Companies Act 2006, as amended from time to time; |
|---|---|
| "Admission" | the admission of the Offer Shares to a premium listing on the Official List and to trading on the London Stock Exchange's market for listed securities; |
| "AIM" | the Alternative Investment Market of the London Stock Exchange; |
| "Applicant(s)" | an Investor(s) who applies to subscribe for Offer Shares; |
| "Application Form" | form of application for Offer Shares set out at the end of the Securities Note; |
| "Articles" | the articles of association of either VCT (as amended from time to time); |
| "Board(s)" or "Directors" | the directors of the relevant VCT at the date of this document (and each a "Director"); |
| "BSC" | British Smaller Companies VCT plc; |
| "BSC Circular" | the circular issued to the Shareholders of BSC dated 14 January 2014; |
| "BSC2" | British Smaller Companies VCT2 plc; |
| "BSC2 Circular" | the circular issued to the Shareholders of BSC2 dated 14 January 2014; |
| "Business Day" | a day (excluding Saturday and Sunday and public holidays in England and Wales) when the banks are generally open for business in London; |
| "Capita Asset Services" | a trading name of Capita Registrars Limited, whose details are given on page 6; |
| "Dividend Re-investment Scheme(s)", "DRIS" or "Scheme(s)" |
the respective dividend re-investment scheme established for each VCT; |
| "DTRs" | the Disclosure and Transparency Rules made by the FCA under Part VI of FSMA; |
| "FCA" | the Financial Conduct Authority or its successor; |
| "FSMA" | Financial Services and Markets Act 2000, as amended from time to time; |
| "Fund Manager" | YFM Private Equity Limited in its position as the regulated subsidiary of YFM Equity Partners; |
| "General Meeting" or "GM" | the general meeting of the relevant VCT convened for 18 February 2014 at The Berkeley Room, First Floor, Regus Business Lounge, 17 Bruton Street, London W1J 6QB (and any adjournment thereof); |
| "HMRC" | HM Revenue & Customs; |
| "Howard Kennedy" | Howard Kennedy Corporate Services LLP; |
| "Intermediary" | an authorised firm who signs the Application Form and whose details are set out in Section 5 of that document; |
| "Investment Management Team" | those persons whose details are set out on page 12 under the heading "The Investment Management Team"; |
| "Investor(s)" | an individual(s) who subscribes for Offer Shares; |
| "ISDX" | the trading facility operated by ICAP Securities and Derivatives Exchange Limited; |
|---|---|
| "ITA" | Income Tax Act 2007, as amended from time to time; |
| "IFRS" | International Financial Reporting Standards as adopted by the European Union; |
| "Listing Rules" | listing rules made by the FCA under Part VI of FSMA; |
| "London Stock Exchange" | London Stock Exchange plc; |
| "Net Assets" | the aggregate of the gross assets of the relevant VCT including assets represented by any principal monies borrowed by the relevant VCT less all current liabilities of the relevant VCT (other than any principal monies borrowed); |
| "Net Asset Value(s)" or "NAV" | net asset value per Ordinary Share; |
| "2013/2014 Offers" | the offers for subscription of Ordinary Shares to a value not exceeding £30 million in respect of the tax year 2013/2014, details of which are set out in this document; |
| "2014/2015 Offers" | the offers for subscription of Ordinary Shares to a value not exceeding £30 million in respect of the tax year 2014/2015, details of which are set out in this document; |
| "Offer Agreement" | an offer agreement dated 14 January 2014 as set out in paragraph 4.1 on page 43 of this document; |
| "Offer Costs Percentage" | the costs of the Offers as a percentage of subscription proceeds, as set out on page 19 of the Securities Note; |
| "Offers" | the 2013/2014 Offers and the 2014/2015 Offers; |
| "Offer Price(s)" | the price of the Offer Shares as set out on pages 20 to 21 of the Securities Note; |
| "Offer Shares" | Shares to be issued under the Offers; |
| "Official List" | the Official List of the UK Listing Authority; |
| "Ordinary Shares" or "Shares" | ordinary shares of 10p each in the capital of the relevant VCT; |
| "Prospectus" | the Securities Note, the Registration Document and the Summary, which together describe the Offers in full; |
| "Prospectus Rules" | prospectus rules made under Part VI of FSMA; |
| "Qualifying Company" | an unquoted (including AIM-traded) company carrying on a qualifying trade wholly or mainly in the UK satisfying the conditions in Chapter 4 of Part 6 ITA. A summary of these requirements is given in Part 3 of this Registration Document; |
| "Qualifying Holdings" or "Qualifying Investments" |
shares in, or securities of, a Qualifying Company held by a VCT which meets the requirements described in Chapter 4 of Part 6 ITA; |
| "Receiving Agent" | The City Partnership (UK) Limited (assisted by Share Registrars Limited); |
| "Registrar of Companies" | the registrar of companies for England and Wales; |
| "Registration Document" | this document, which has been prepared in accordance with the Prospectus Rules in connection with the Offers; |
| "Regulatory Information Service" | a regulatory information service that is on the list of regulatory information services maintained by the FCA; |
| "Resolutions" | the resolutions of the relevant VCT to be proposed at the GM; |
| "Scheme Administrator" | Capita Asset Services; |
|---|---|
| "Securities Note" | the securities note dated 14 January 2014, which has been prepared in accordance with the Prospectus Rules in connection with the Offers; |
| "Shareholder(s)" | holder(s) of Ordinary Shares; |
| "Shares" or "Ordinary Shares" | ordinary shares of 10p each in the capital of the relevant VCT; |
| "Statutes" | the "Companies Acts" as defined in Section 2 of the Act; |
| "Summary" | the summary of the Offers dated 14 January 2014, which has been prepared in accordance with the Prospectus Rules in connection with the Offers; |
| "UK Listing Authority" | the FCA acting in its capacity as the competent authority under the FSMA; |
| "VAT" | value added tax; |
| "VCTs" | BSC and BSC2, and VCT means either one of them as the context requires; |
| "VCT Regulations" | The Venture Capital Trust (Winding Up and Mergers) (Tax) Regulations 2004, as amended from time to time; |
| "venture capital trust" | a venture capital trust as defined in Section 259 Income Taxes Act 2007; |
| "YFM Equity Partners" | YFM Equity Partners LLP, registered number OC384467; |
| "YFM Private Equity" | YFM Private Equity Limited registered number 02174994, authorised and regulated by the FCA. |
Venture capital trusts were introduced in 1995, incorporating tax incentives for individuals to invest in smaller UK companies. Venture capital trusts are specialist investment companies similar to investment trusts listed on the London Stock Exchange.
BSC and BSC2 are seeking to raise additional funds of up to £30 million, in aggregate, with an over allotment facility of up to a further £10 million, in aggregate, to increase their investment capacity to both take advantage of their ability to invest up to £5 million into larger businesses and to achieve this at an attractive point in their investment cycle.
An investment in both VCTs will provide individuals with the opportunity to invest in established venture capital trusts with mature and diversified portfolios of mainly unlisted smaller UK companies with the aim of generating attractive returns over the medium to long term. Since inception, the VCTs have invested over £80 million in 116 businesses.
A typical Investor for whom the Offers are designed is a UK income taxpayer aged 18 or over, who is professionally advised, with an investment range of between £6,000 and £200,000, who may already have a portfolio of non-venture capital trust investments such as unit trusts/OEICS, investment trusts and direct shareholdings in listed companies, who is willing to invest over the medium to long term and who, having regard to the risk factors set out at the front of this document, considers the investment policy of the VCTs to be attractive. That is to say, an investment policy with potential returns and associated risks that may be higher than investment in the FTSE All-Share Index. This may include retail, institutional and sophisticated investors and high net-worth individuals.
The net proceeds of the Offers will be invested by the VCTs in accordance with their stated investment policies. Both VCTs' objectives are:
BSC2 has historically invested a greater proportion in emerging companies than BSC. Prior to December 2003 the investment strategy of BSC2 was focused on investing in companies developing or using innovative technology. Since December 2003 the investment strategy of BSC2 has converged with that of BSC. The inclusion of investments in more established companies within its investment remit has allowed BSC2 to achieve a balance between exciting growth opportunities and mature companies and sectors, reducing its portfolio's exposure to particular markets and individual companies. The VCTs' investment strategies and objectives are set out in Part 2 of this document.
Where there are opportunities for the VCTs to co-invest the proposed basis for allocation is 60% to BSC and 40% to BSC2. The Board of each of the VCTs has the discretion as to whether to take up their allocation in such co-investment opportunities.
In the event of a conflict of interest on the part of the Fund Manager (which will include where an investment is proposed in a company in which a Relevant Fund already has an interest) or where co-investments are proposed to be made other than on the above basis, such an investment will require the approval of those members of the Boards who are independent of the Fund Manager.
The VCTs are conscious that their Share price is affected by the illiquidity of their Shares in the market. In line with many other venture capital trusts, the VCTs, when appropriate, will operate a buy-back policy. The policies and the rate of discount at which the Shares are bought back are regularly reviewed and the policies are subject to resolutions put before the Shareholders. The rate of discount for both VCTs is currently targeted to be no more than 10 per cent.
YFM Private Equity specialises in investing in unquoted companies and has been making investments in fast growing businesses for 30 years. Including BSC and BSC2, the Fund Manager directly manages funds in excess of £150 million.
The Investment Management Team directly responsible for the management of BSC and BSC2 comprises principally of four key investment directors who together have over 80 years' experience of investing in and managing venture capital opportunities. This key team is strengthened by investment managers and a strong group of support staff from across YFM Equity Partners. This experience has enabled the Fund Manager to establish wide networks of deal introducers, effective investment selection processes and strong portfolio management procedures.
The Fund Manager sources its deals from many areas. The regional office network provides excellent access to interesting investment opportunities. Having been investing for 30 years the Fund Manager has built an extensive and proprietary network of chairmen, CEOs and management teams who regularly introduce opportunities to the Fund Manager.
The Fund Manager is actively involved in the portfolio companies, taking non-executive positions where appropriate. The depth of experience in the Investment Management Team allows the Fund Manager to offer real practical support to portfolio companies particularly in relation to setting corporate strategy, board development, acquisitions, re-financing and realisation with the objectives of maximising value.
The unaudited returns of the VCTs to investors who subscribed at each of the VCT's launches is set out below:
| Track record of Fund Manager's VCTs | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Fundraising round at launch (Tax Years) |
Offer price net of income tax relief (pence) |
Net Asset Value at 30 September 2013 (pence) |
Cumulative dividends paid since launch* (pence) |
Total return to date* (pence) |
Overall return (not in DRIS)** (pence) |
Overall return (in DRIS)*** (pence) |
|||
| BSC | 1995/96 and 1996/97 | 80.0 | 99.2 | 88.7 | 187.9 | 207.9 | 248.0 | ||
| BSC2 | 2000/01 and 2001/02 | 80.0 | 65.6 | 39.0 | 104.6 | 124.6 | 149.3 |
* Sum of NAV and the cumulative dividends paid to Shareholders per Share. This assumes that at the time of the investment the tax relief given in the investment was not also invested in Shares of the VCT
** NAV plus cash dividends paid plus tax relief on the initial subscription
*** 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 the terms of the current DRIS
David Hall – Managing Director David became the managing director of the Fund Manager in 2003, having had responsibility for the Manchester office since 2000. Prior to this he had been an investment manager with Innvotec Limited and Head of Investment for AIM listed Enterprise Plc. David trained as a Chartered Accountant with PricewaterhouseCoopers qualifying in 1986. He holds a BA (Hons) in Economics from the University of Manchester.
David Bell – Portfolio Director David joined YFM Private Equity in 2009 to lead portfolio management activities and is a director of YFM Private Equity. Prior to joining YFM he spent ten years at 3i where he was also portfolio director and had extensive experience of managing and realising in excess of 40 private equity investments in SMEs. He is on the board of RMS Europe Limited and Immunobiology Limited and represents the VCTs' interests on several other investments. He has a first class degree in Mathematics from Imperial College and also spent five years working as a management consultant focusing on supply chain solutions.
Paul Cannings – Director Paul joined YFM Private Equity in 2006 to raise new funds and to make and manage investments. He is a director of YFM Private Equity. Prior to joining YFM he spent 14 years at 3i where he was also director and had extensive experience of making and managing private equity investments. Latterly he held the position of director of the small buyouts and growth capital team. He has led several new investments and currently sits on the boards of Harvey Jones Holdings Limited, Harris Hill Holdings Limited and GO Outdoors Limited. He has a first class degree in Economics from Bristol University and qualified as a Chartered Accountant with PricewaterhouseCoopers.
David Gee – Director of Investments David has 23 years experience in the venture capital field with YFM Private Equity. Since 1996 he has been investment director on the board of YFM Private Equity and is now director of Investments. He is a non-executive director of several companies and has been responsible for a significant number of realisations and listings of investments made by both Companies. He qualified as a Chartered Accountant with Grant Thornton, latterly specialising in corporate finance and holds a degree in Mathematics from Imperial College.
In line with normal venture capital trust practice, the Fund Manager is entitled to receive a performance related incentive fee.
For BSC, the Fund Manager will receive an incentive payment equal to 20 per cent of the amount by which dividends paid in the relevant accounting period exceed 4.0 pence per Share (increasing in line with RPI and as at 31 March 2013 the adjusted target was 4.6 pence per Share), subject to cumulative shortfalls in any prior accounting period being made up. The incentive payment is also conditional upon the average Net Asset Value being not less than 94.0 pence per Share in the relevant accounting period, as adjusted for the impact of share issues and buy backs (as at 31 March 2013 the adjusted target was 93.4 pence per Share). Further details are given on page 44.
For BSC2, the Fund Manager 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 in issue and the Shares under option (if any). These subscription rights are exercisable in the ratio 95:5 between the Fund Manager and Chord Capital Limited. Further details are given on page 45.
Prior to the Offers, the Boards, the Fund Manager, the Investment Management Team and employees of the Fund Manager have together subscribed for 1,394,712 Shares.
Both VCTs benefit from highly experienced Boards, each consisting of three non-executive directors, who are listed below. The Boards have overall responsibility for each VCT's investment policy and administration and have appointed the Fund Manager as their investment manager.
Helen Sinclair (Chairman) has an MA in Economics from the University of Cambridge and an MBA from INSEAD Business School. After working in investment banking Helen spent nearly 8 years at 3i plc focusing on MBOs and growth capital investments. She later co-founded Matrix Private Equity Limited (now Mobeus) in early 2000 raising Mobeus Income & Growth 2 VCT plc (formerly Matrix e-Ventures VCT plc). She subsequently became managing director of Matrix Private Equity Limited before moving to take on a portfolio of non-executive director roles in 2005. She is currently a non-executive director of The Income & Growth VCT plc, Mobeus Income & Growth 4 VCT plc, Spark Ventures plc and Downing One VCT plc and chairs the investment committees of the Third Sector Loan Fund and the Community Investment Fund, both part of Social & Sustainable Capital LLP.
Philip Cammerman has an engineering degree from Imperial College and an MBA from Stanford University. He has over twenty years of industrial experience in engineering and technology orientated industries and has worked in both the USA and the UK. He has spent the last twenty-six years in the venture capital industry and was chairman of YFM Private Equity and a director of YFM Group (Holdings) Limited until he retired in April 2008. He has been responsible for a wide range of venture capital deals in a variety of industries including software, computer maintenance, engineering, printing, safety equipment, design and textiles. He is a non-executive director of Pressure Technologies plc and Hargreave Hale AIM VCT 2 plc.
Edward Buchan is a Fellow of the Institute of Chartered Accountants in England and Wales, starting his career with Deloitte before moving to Hill Samuel Bank Limited where he became Head of Corporate Finance and a member of the Bank Executive Committee. He subsequently joined Close Brothers Corporate Finance Limited and then West LB Panmure, specialising in the transport and logistics industry sectors. He is currently a senior adviser in corporate finance at Edmond De Rothschild Securities and is a non-executive director of Wallem Group Limited, an international ship management and shipping services company based in Hong Kong.
Richard Last (Chairman) is a Fellow of the Institute of Chartered Accountants in England and Wales with substantial experience in the IT software and services sectors, and is chairman and non-executive director of Servelec Group plc, which is listed on the main market of the London Stock Exchange. He is also chairman and non-executive director of Lighthouse Group plc and Arcontech Group plc (a financial software business) and a non-executive director of Corero Network Security plc, all AIM listed. In addition he is a director of a number of private companies including Premier Veterinary Group Limited (of which he is also chairman) and the IT company APD Communications Limited.
Robert Pettigrew has more than 20 years experience in the development of emerging businesses and, in particular, the commercial exploitation of new technologies. He co-founded The Generics Group of companies (renamed Sagentia) in 1986, which is one of the country's leading technology consulting and investment groups and was a key member of the team that took the company public in December 2000. He retired from The Generics Group at the end of 2002 to pursue independent investment activities. He currently is an investor-director and non-executive chairman of Acal Energy Limited, Nightingale-EOS Limited, Sunamp Limited and Odos Imaging Limited.
Peter Waller is an experienced chairman and director with extensive UK and international executive experience in the IT technology, software and services sector. He initially worked with IBM and Hitachi then with Spring plc, at that time one of the UK's largest recruitment and training businesses. He is currently chairman of KeyPoint Technologies (UK) Limited, director and founder of Turnberry Management Company Limited and non-executive director of BCS Learning & Development Limited and Premier Veterinary Group Limited. For the past decade Peter has worked as a board member with a succession of early stage and early growth private and public companies. His particular skills are in sales and marketing and working with companies to develop successful sales growth strategies.
Each Board is responsible for the overall control and management of their VCT with responsibility for its affairs, including determining its investment policy. Investment proposals are originated by the Fund Manager and formally approved by the relevant Board or investment committee.
The Fund Manager is responsible for the sourcing and screening of initial enquiries, carrying out suitable due diligence investigations and making submissions to the Boards regarding potential investments. Once approved, further due diligence is carried out as necessary and HMRC clearance is obtained for approval as a Qualifying Investment.
Each Board reserves the right to take all investment and divestment decisions except in the making of certain investments up to £250,000 in companies whose shares are to be traded on AIM and where the decision is required urgently, in which case the Chairman, or Chairman of the BSC investment committee if appropriate, may act in consultation with the Fund Manager.
Each Board meets regularly throughout the year (normally at least quarterly), and all necessary information is supplied to the Directors on a timely basis to enable them to discharge their duties effectively. Additionally, special meetings will take place or conference calls made when Board decisions are required in advance of regular meetings.
The Board of each VCT regularly monitors the performance of the portfolio and the investment targets set by the relevant VCT Regulations. Reports are received from the Fund Manager as to the trading and financial position of each investee company and members of the Investment Management Team regularly attend the Board meetings. Monitoring reports are also received at each Board meeting on compliance with VCT investment targets so that the Boards can monitor that the VCT status of their VCT is maintained and take corrective action where appropriate.
The VCTs comply with the provisions of the UK Corporate Governance Code save for those provisions relating to the following: (i) Shareholders are not given the opportunity to meet any new non-executive directors at a specific meeting other than the annual general meeting (since the VCTs do not have major Shareholders), (ii) the VCTs have not appointed a CEO or a senior independent non-executive Director and (iii) the presumption concerning the Chairman's independence. Although BSC gave 21 clear days' notice of the annual general meeting held on 19 July 2013 to Shareholders, BSC did not comply with the recommendation to give 20 Business Days' notice due to the restrictions imposed by the timetabling of that meeting. BSC2 has not complied with the provisions relating to the establishment of an independent remuneration committee and the Chairman acting as chairman of the audit committee, as explained below. It is VCT standard practice not to appoint executive officers as executive functions are delegated to the Fund Manager and the Boards consider that each of the Directors acts as a senior independent non-executive Director.
Each VCT has an audit committee which meets at least twice a year. The audit committees review the actions and judgements of the Fund Manager in relation to the interim and annual financial statements and each VCT's compliance with the UK Corporate Governance Code. They review the terms of the management agreement and examine the effectiveness of each VCT's internal control systems, receive information from the Fund Manager's compliance department and review the scope and results of the external audit, its cost effectiveness and the independence and objectivity of the external auditors. The audit committees have written terms of reference which define their responsibilities. The audit committee for BSC consists of Helen Sinclair, Philip Cammerman and Edward Buchan (Chairman) and the audit committee of BSC2 consists of Richard Last (Chairman), Robert Pettigrew and Peter Waller.
BSC has a combined nominations and remuneration committee which consists of the Directors who are considered by the BSC Board to be independent of the Fund Manager.
BSC2 has a nomination committee which consists of the Directors who are considered by the BSC2 Board to be independent of the Fund Manager. The BSC2 Board has determined that due to the remuneration procedures currently in place, in its opinion there is no role for a separate remuneration committee. For BSC2, remuneration issues are dealt with by the full Board.
Edward Buchan is the chairman of BSC's combined nomination and remuneration committee and Richard Last is the chairman of BSC2's nomination committee save when the relevant committee meets to consider a candidate for the Chairmanship. In considering appointments to the Boards, the committees dealing with nominations take into account the ongoing requirements of the VCTs and the need to have a balance of skills and experience on the Boards.
With regards to the allotment of new Shares, the Boards generally operate through a committee of any one Director. The allotment committees meet as and when required to formally approve the allotment of Shares.
The Directors of BSC meet as an investment committee of the Board to consider and approve all investment decisions. The committee is chaired by Philip Cammerman. The BSC2 Board has determined that due to the investment procedures currently in place, in its opinion there is no role for an independent investment committee.
Each VCT's investments are held by the Fund Manager under the terms of an administration and investment advisory agreement (the "IAA"), details of which are set out in paragraphs 4.5 (BSC) and 4.11 (BSC2) on pages 44 and 45. The Fund Manager may be the holder, by way of safekeeping, of safe custody investments or custody assets belonging to the VCTs and may hold documents of title itself by way of safekeeping. All investments made for the accounts of and monies received for the VCTs will be deposited in the name of the VCTs or will be held by a custodian or the VCTs' solicitors. All certificates and other documents evidencing title (whether or not in registered form) will be received by the VCTs or the Fund Manager and will be held by the Fund Manager by way of safekeeping in the relevant VCT's name or forwarded directly to the custodian or the VCTs' solicitors. No third party custodian has been appointed. Neither the Fund Manager nor any custodian appointed by the VCTs will take legal ownership of the VCTs' assets.
BSC is aiming to continue its dividend policy and has a target dividend of 5.5 pence per Share. This compares to 9.2 pence per Share per annum paid over the last five years to 30 September 2013. This average includes the special dividend of 18.0 pence per Share that resulted from the partial disposal of the investment in GO Outdoors Limited in April 2011. This target does not represent a maximum and the Board of BSC may, at their discretion, declare higher dividends where the reserves in a given year make this possible. This is a targeted dividend, and not guaranteed. No forecast or projection is to be implied or inferred.
BSC2 is aiming to continue its dividend policy and has a target dividend of 4.5 pence per Share. This compares to 4.6 pence per Share per annum paid over the last five years to 30 September 2013. This target does not represent a maximum and the Board of BSC2 may, at its discretion, declare higher dividends where the reserves in a given year make this possible. This is a targeted dividend, and not guaranteed. No forecast or projection is to be implied or inferred.
BSC and BSC2 currently operate Dividend Re-investment Schemes providing Shareholders with the opportunity to re-invest the cash dividends paid by the VCTs through the issue of new Shares. It is expected that the first applicable dividend in relation to which Schemes will operate for the Offer Shares will be the final dividend for the financial year ending 31 March 2014 for BSC and the final dividend for the financial year ending 31 December 2013 for BSC2, expected to be paid in June 2014 and August 2014 respectively. Currently, Shareholders whose dividends are re-invested under the Schemes receive Shares at a 5 per cent discount to the latest reported Net Asset Value as at the date the dividend is paid (adjusted for the relevant dividend if this Net Asset Value does not already recognise the dividend). Whilst the Schemes can be withdrawn at any time, the Directors have no plans to do so.
Shareholders participating in the Schemes should qualify for the VCT tax reliefs that are applicable at the time of investment to subscription for new shares in VCTs, subject to current law and the limits set out below, provided they hold the Shares for the five year VCT qualifying period applicable to new subscriptions. The Shares subscribed through the Schemes will form part of each Shareholder's current annual limit of £200,000 for new subscription in VCTs. Dividends paid by either VCT are tax-free provided the holding is acquired within this limit, and need not be reported in the Shareholder's annual tax return. Any loss or gain accruing to a Shareholder on a disposal of the Shares acquired within the current annual limit of £200,000 will be neither a chargeable gain nor an allowable tax loss for the purposes of capital gains tax. Shares acquired first will be treated as disposed of first, whether or not tax relief was obtained on those Shares.
Shareholders wishing to participate in the Schemes should complete the box in Section 3 of the Application Form, whereupon the terms and conditions of the Schemes, together with a mandate form, will be supplied.
The tax consequences of a Shareholder choosing to participate in either Scheme will depend on their personal circumstances and specialist independent tax and financial advice should be obtained before entering the Scheme.
Part 2: Investment Strategies and Objectives
The investment strategies and objectives of each of the VCTs are as set out below:
To obtain venture capital trust status a company must be approved by HMRC as a venture capital trust. A venture capital trust must be approved at all times. A venture capital trust cannot be approved unless the tests detailed below are met throughout the most recent complete accounting period of the venture capital trust and HMRC is satisfied that they will be met in relation to the accounting period of the venture capital trust which is current when the application is made. Where a venture capital trust raises further funds it is given a grace period to invest those funds before the funds become subject to such tests. To maintain approval, the conditions summarised below must continue to be satisfied throughout the life of the venture capital trust:
A Qualifying Investment comprises shares or securities first issued to the venture capital trust (including loans with a five year or greater maturity period but excluding guaranteed loans and securities) by a company satisfying the conditions set out in Chapters 3 and 4 of Part 6 of ITA 2007. The conditions are detailed, but include that the company must be a Qualifying Company (as defined below), have gross assets not exceeding £15 million immediately prior to the investment and £16 million immediately thereafter, apply the funds raised for the purposes of a qualifying trade within certain time limits, have fewer than 250 full-time equivalent employees, and must not receive more than £5 million from VCTs or other State Aid investment sources during the 12 month period which ends on the date of the VCT's investment. Neither the venture capital trust nor any other company may control the investee company. In certain circumstances an investment in a company by a VCT can be split into a part which is a qualifying holding and a part which is a non-qualifying holding.
A Qualifying Company must be unquoted (companies whose shares are traded on AIM or ISDX are treated as unquoted companies for this purpose) and carry on a qualifying trade. Shares in an unquoted company which subsequently becomes listed may still be regarded as a Qualifying Investment for a further five years following listing, provided all other conditions are met. The definition of a qualifying trade excludes certain activities such as dealing in property, shares or securities and the provision of financial services. The trade must be carried on by, or be intended to be carried on by, the Qualifying Company or a subsidiary, which must be at least 90 per cent owned by the parent company at the time of the issue of the shares or securities to the venture capital trust (and at all times thereafter). A company intending to carry on a qualifying trade must begin to trade within two years of the issue of shares or securities to the venture capital trust and continue it thereafter.
A Qualifying Company must have a permanent establishment in the UK, but need not be UK resident, and may have no subsidiaries other than qualifying subsidiaries which must, in most cases, be at least 51 per cent owned.
Venture capital trusts are exempt from corporation tax on chargeable gains. There is no restriction on the distribution of realised capital gains by a venture capital trust, subject to the requirements of company law. Each of the VCTs will be subject to corporation tax on its income (excluding dividends received from UK companies) after deduction of attributable expenses.
Approval of a venture capital trust may be withdrawn by HMRC if the tests summarised above are not satisfied. The exemption from corporation tax on capital gains will not apply to any gain realised after the point at which venture capital trust status is lost. Withdrawal of approval generally has effect from the time when notice is given to the venture capital trust but, in relation to capital gains tax, can be backdated to not earlier than the first day of the accounting period commencing immediately after the last accounting period in which all of the tests were satisfied.
The above is only a summary of the conditions to be satisfied for a company to be treated as a venture capital trust.
Audited statutory accounts of BSC for the years ended 31 March 2011, 31 March 2012 and 31 March 2013, in respect of which BSC's auditors, Grant Thornton UK LLP, registered auditor of 2 Broadfield Court, Sheffield, S8 0XF, a member of the Institute of Chartered Accountants in England and Wales, made unqualified reports under section 495 of the Act, have been delivered to the Registrar of Companies and such reports did not contain any statements under section 498(2) or (3) of the Act. Copies of these audited statutory accounts are available at www.yfmep.com.
Audited statutory accounts of BSC2 for the years ended 31 December 2010, 31 December 2011 and 31 December 2012, in respect of which BSC2's auditors, Grant Thornton UK LLP, registered auditor of 2 Broadfield Court, Sheffield, S8 0XF, a member of the Institute of Chartered Accountants in England and Wales, made unqualified reports under section 495 of the Act as appropriate, have been delivered to the Registrar of Companies and such reports did not contain any statements under section 498(2) or (3) of the Act. Copies of these audited statutory accounts are available at www.yfmep.com.
Unaudited interim accounts of BSC for the six months ended 30 September 2012 and 30 September 2013 are available at www.yfmep.com. These interim accounts have not been audited or reviewed by BSC's auditors except for those interim accounts to 30 September 2013, which have been subject to independent review by the VCT's auditors.
Unaudited interim accounts of BSC2 for the six months ended 30 June 2012 and 30 June 2013 are available at www.yfmep.com. These interim accounts have not been audited or reviewed by BSC2's auditors.
These financial statements are prepared in accordance with IFRS and also contain a description of the relevant VCT's financial condition, changes in financial condition and results of operations for each of the above financial years.
Historical financial information relating to each VCT on the matters referred to below is included in the published annual report and audited statutory accounts for the years stated above, and in the unaudited interim accounts of the relevant VCT for the periods shown above, and is incorporated by reference into this document (the pages of those accounts and interim reports that are not referred to below are not relevant to Investors and are not incorporated into and do not form part of this document):
| BSC Nature of information |
Audited Statutory Accounts for year ended 31 March 2011 Page no. |
Audited Statutory Accounts for year ended 31 March 2012 Page no. |
Unaudited Interim Report for 6 months ended 30 Septembe 2012 Page no. |
Audited Statutory Accounts for year ended 31 March 2013 Page no. |
Unaudited Interim Report for 6 months ended 30 September 2013 Page no. |
|---|---|---|---|---|---|
| Financial Summary and Highlights | 3 | 3-5 | 2-3 | 3-5 | 2-3 |
| Chairman's Statement | 6-8 | 6-8 | 4-6 | 6-9 | 4-8 |
| Fund Manager's Review | 9-23 | 9-23 | – | 10-26 | – |
| Investment Portfolio | – | – | 7-12 | – | 9-14 |
| Valuation of Investments | 24 | 24 | – | 27 | – |
| Directors | 25 | 25 | – | 28 | – |
| Directors' Report | 26-35 | 26-37 | – | 29-40 | – |
| Directors' Remuneration Report | 36-37 | 38-39 | – | 41-42 | – |
| Independent Auditors' Report | 38 | 40 | – | 43 | – |
| Independent Review Report | – | – | – | – | 15 |
| Statement of Comprehensive Income | 39 | 41 | 13 | 44 | 16 |
| Balance Sheet | 40 | 42 | 14 | 45 | 17 |
| Statement of Changes in Equity | 41 | 43 | 15 | 46-47 | 18-19 |
| Statement of Cash Flows | 42 | 44 | 16-17 | 48 | 20 |
| Notes to the Financial Statements | 43-58 | 45-62 | 18-21 | 49-65 | 21-29 |
| Related Party Transactions | 54 | 57 | – | 61 | 29 |
| BSC2 Nature of information |
Audited Statutory Accounts for year ended 31 December 2010 Page no. |
Audited Statutory Accounts for year ended 31 December 2011 Page no. |
Unaudited Interim Report for 6 months ended 30 June 2012 Page no. |
Audited Statutory Accounts for year ended 31 December 2012 Page no. |
Unaudited Interim Report for 6 months ended 30 June 2013 Page no. |
|---|---|---|---|---|---|
| Financial Summary and Highlights | 3-5 | 3-5 | 3 | 3-5 | 2-3 |
| Chairman's Statement | 6-7 | 6-8 | 4-6 | 6-9 | 4-6 |
| Fund Manager's Review | 8-18 | 9-21 | – | 10-26 | – |
| Investment Portfolio | – | – | 7-11 | – | 7-13 |
| Valuation of Investments | 19 | 22 | – | 27 | – |
| Directors | 20 | 23 | – | 28 | – |
| Directors' Report | 21-29 | 24-32 | – | 29-38 | – |
| Directors' Remuneration Report | 30-31 | 33-34 | – | 39-40 | – |
| Independent Auditors' Report | 32 | 35 | – | 41 | – |
| Statement of Comprehensive Income | 33 | 36 | 12 | 42 | 14 |
| Balance Sheet | 34 | 37 | 13 | 43 | 15 |
| Statement of Changes in Equity | 35 | 38 | 14-15 | 44-45 | 16-17 |
| Statement of Cash Flows | 36 | 39 | 16 | 46 | 18 |
| Notes to the Financial Statements | 37-54 | 40-56 | 17-19 | 47-65 | 19-22 |
| Related Party Transactions | 49 | 52 | – | 60 | 22 |
| BSC | Audited Statutory Accounts for year ended 31 March 2011 |
Audited Statutory Accounts for year ended 31 March 2012 |
Unaudited Interim Report for 6 months ended 30 September 2012 |
Audited Statutory Accounts for year ended 31 March 2013 |
Unaudited Interim Report for 6 months ended 30 September 2013 |
|---|---|---|---|---|---|
| Total Net Assets (£000) | 41,172 | 37,894 | 37,176 | 42,089 | 49,507 |
| Change in Net Assets (£000) | 12,164 | (3,278) | (718) | 4,913 | 7,418 |
| Net Asset Value per Share | 120.0p | 99.6p | 94.2p | 97.0p | 99.2p |
| Dividends paid per Share | 6.25p | 23.0p | 3.0p | 5.0p | 4.5p |
| Cumulative Dividends paid per Share | 56.2p | 79.2p | 82.2p | 84.2p | 88.7p |
| BSC2 | Audited Statutory Accounts for year ended 31 December 2010 |
Audited Statutory Accounts for year ended 31 December 2011 |
Unaudited Interim Report for 6 months ended 30 June 2012 |
Audited Statutory Accounts for year ended 31 December 2012 |
Unaudited Interim Report for 6 months ended 30 June 2013 |
|---|---|---|---|---|---|
| Total Net Assets (£000) | 11,829 | 15,982 | 26,004 | 27,152 | 30,258 |
| Change in Net Assets (£000) | (277) | 4,153 | 10,022 | 1,094 | 3,106 |
| Net Asset Value per Share | 68.4p | 68.5p | 68.0p | 65.5p | 65.3p |
| Dividends paid per Share | 4.0p | 4.0p | 2.0p | 4.5p | 2.5p |
| Cumulative Dividends paid per Share | 26.0p | 30.0p | 32.0p | 34.5p | 37.0p |
A description of the changes in the performance of the VCTs, both capital and revenue, and changes to their portfolios of investments:
As at 30 September 2013 BSC's unaudited Net Asset Value was 99.2 pence per Share and as at 30 June 2013 BSC2's unaudited Net Asset Value was 65.3 pence per Share. In October 2013 BSC and BSC2 completed an unquoted investment of £2.90 million into GTK (UK) Limited (through its holding company GTK (Holdco) Limited), a global provider of electronics and manufacturing solutions. In September 2013 BSC2 made an investment of £1.87 million into Douglas Gill International Limited, a manufacturer and distributor of specialist sailing clothing and accessories. In December 2013 the VCTs invested £2.34 million into Leengate Valves Limited (through the holding company HLWKH 556 Limited), a market leading valves wholesaler. In July 2013 BSC2 made a follow on investment of £0.39 million into Bagel Nash Group Limited and received £1.29 million of cash proceeds from the sale of its holding in Digital Healthcare Limited, which represented a profit over the carrying value at 30 June 2013 of £0.37 million. Save in respect of these matters, there have been no significant changes in the financial or trading positions of BSC since 30 September 2013 and BSC2 since 30 June 2013, the date of the last unaudited published financial information of the VCTs.
A full list of the current investments held by BSC and BSC2 as at the date of this document, the values being as at 30 September 2013 (being the latest published NAVs of the VCTs) is set out below. The investment of £2.90 million into GTK (UK) Limited and £2.34 million into Leengate Valves Limited referred to in the paragraph above are valued as at the date of this document and save in respect of these investments, there has been no material change to the VCTs' investment portfolios since 30 September 2013.
| Investee Company | Sector | Carrying | BSC Valuation |
BSC2 Carrying |
Valuation | Combined carrying |
Combined valuation |
|---|---|---|---|---|---|---|---|
| (All in £000) | cost* | cost* | cost* | ||||
| Unquoted investments | |||||||
| DisplayPlan Holdings Limited | Business Services | 1,300 | 3,935 | 700 | 2,119 | 2,000 | 6,054 |
| GO Outdoors Limited | Retail and Brands | 137 | 5,373 | – | – | 137 | 5,373 |
| Douglas Gill International Limited | Retail and Brands | 2,500 | 2,500 | 1,870 | 1,870 | 4,370 | 4,370 |
| Seven Technologies Holdings Limited | Software, IT and Telecomms |
1,984 | 2,469 | 1,238 | 1,548 | 3,222 | 4,017 |
| President Engineering Group Ltd | Manufacturing and Industrial Services |
1,000 | 3,855 | – | – | 1,000 | 3,855 |
| Deep-Secure Ltd | Software, IT and Telecomms |
1,000 | 2,000 | 500 | 1,000 | 1,500 | 3,000 |
| Waterfall Services Limited | Business Services | 767 | 2,347 | 192 | 587 | 959 | 2,934 |
| GTK (UK) Limited | Manufacturing and Industrial Services |
1,750 | 1,750 | 1,150 | 1,150 | 2,900 | 2,900 |
| Leengate Valves Limited | Manufacturing and Industrial Services |
1,401 | 1,401 | 934 | 934 | 2,335 | 2,335 |
| Insider Technologies (Holdings) Limited | Software, IT and Telecomms |
1,170 | 1,210 | 780 | 806 | 1,950 | 2,016 |
| Bagel Nash Group Limited | Retail and Brands, Manufacturing and Industrial Services |
1,212 | 1,135 | 807 | 757 | 2,019 | 1,892 |
| Bluebell Telecom Group Limited | Software, IT and Telecomms |
484 | 722 | 484 | 721 | 968 | 1,443 |
| Harvey Jones Holdings Limited | Retail and Brands | 777 | 884 | 389 | 443 | 1,166 | 1,327 |
| RMS Group Holdings Limited | Manufacturing and Industrial Services |
180 | 833 | 70 | 324 | 250 | 1,157 |
| Fairlight Bridge Limited | Business Services | 1,000 | 1,000 | – | – | 1,000 | 1,000 |
| PowerOasis Limited | Software, IT and Telecomms |
425 | 425 | 567 | 567 | 992 | 992 |
| Immunobiology Limited | Healthcare | – | – | 1,932 | 987 | 1,932 | 987 |
| Selima Limited | Software, IT and Telecomms |
600 | 540 | 300 | 270 | 900 | 810 |
| Harris Hill Holdings Limited | Business Services | 600 | 789 | – | – | 600 | 789 |
| Tissuemed Limited | Healthcare | – | – | 48 | 60 | 48 | 60 |
| Dryden Human Capital Group Limited | Business Services | 609 | 53 | – | – | 609 | 53 |
| Ellfin Home Care Limited | Healthcare | 823 | 13 | 317 | 5 | 1,140 | 18 |
| TeraView Limited | Software, IT and Telecomms |
375 | – | 375 | – | 750 | – |
| Lightmain Company Limited | Manufacturing and Industrial Services |
678 | – | – | – | 678 | – |
| 20,772 | 33,234 | 12,653 | 14,148 | 33,425 | 47,382 |
* Carrying cost is original cost less repayments and the cost of part realisations
| Investee Company | Sector | BSC | BSC2 | Combined | Combined | ||
|---|---|---|---|---|---|---|---|
| Carrying cost* |
Valuation | Carrying cost* |
Valuation | carrying cost* |
valuation | ||
| (All in £000) | |||||||
| Quoted investments | |||||||
| Pressure Technologies plc | Manufacturing and Industrial Services |
286 | 648 | 201 | 454 | 487 | 1,102 |
| Hargreaves Services plc | Manufacturing and Industrial Services |
416 | 641 | 325 | 350 | 741 | 991 |
| Mattioli Woods plc | Business Services | 326 | 846 | – | – | 326 | 846 |
| EKF Diagnostics Holdings plc | Healthcare | 252 | 425 | 224 | 248 | 476 | 673 |
| AB Dynamics plc | Manufacturing and Industrial Services |
224 | 330 | 149 | 220 | 373 | 550 |
| Iomart Group plc | Software, IT and Telecomms |
– | – | 149 | 514 | 149 | 514 |
| Vianet Group plc | Business Services | 404 | 272 | 242 | 165 | 646 | 437 |
| K3 Business Technology Group plc | Software, IT and Telecomms |
402 | 432 | – | – | 402 | 432 |
| Cambridge Cognition Holdings plc | Healthcare | 325 | 201 | 240 | 149 | 565 | 350 |
| Brady Public Limited Company | Software, IT and Telecomms |
– | – | 134 | 134 | 134 | 134 |
| Optos Public Limited Company | Healthcare | – | – | 80 | 128 | 80 | 128 |
| Woodspeen Training Group plc | Various | 250 | 76 | – | – | 250 | 76 |
| Belgravium Technologies plc | Software, IT and Telecomms |
165 | 41 | – | – | 165 | 41 |
| Allergy Therapeutics plc | Healthcare | – | – | 350 | 41 | 350 | 41 |
| 3,050 | 3,912 | 2,094 | 2,403 | 5,144 | 6,315 | ||
| Total unquoted and quoted | 23,822 | 37,146 | 14,747 | 16,551 | 38,569 | 53,697 |
* Carrying cost is original cost less repayments and the cost of part realisations
| Investments/(realisations) since 30 September 2013 (All in £000) |
Sector | BSC Carrying cost* |
Valuation | BSC2 Carrying cost* |
Valuation | Cost | Combined valuation |
|---|---|---|---|---|---|---|---|
| GTK (UK) Limited | Manufacturing and Industrial Services |
1,750 | 1,750 | 1,150 | 1,150 | 2,900 | 2,900 |
| Leengate Valves Limited | Manufacturing and Industrial Services |
1,401 | 1,401 | 934 | 934 | 2,335 | 2,335 |
| Bagel Nash Group Limited | Retail and Brands, Manufacturing and Industrial Services |
10 | – | 7 | – | 17 | – |
| President Engineering Group Ltd | Manufacturing and Industrial Services |
(100) | (100) | – | – | (100) | (100) |
| Hargreaves Services plc | Manufacturing and Industrial Services |
(106) | (162) | – | – | (106) | (162) |
| Mattioli Woods plc | Business Services | (69) | (178) | – | – | (69) | (178) |
| Waterfall Services Limited | Business Services | (667) | (667) | (167) | (167) | (834) | (834) |
| Bluebell Telecom Group Limited | Software, IT and Telecomms |
(72) | (72) | (72) | (72) | (144) | (144) |
| DisplayPlan Holdings Limited | Business Services | (325) | (423) | (175) | (227) | (500) | (650) |
* Carrying cost is original cost less repayments and the cost of part realisations
Brief details are given below of the venture capital trust investments which together represent 65 per cent of the combined Net Asset Value of the VCTs as at 30 September 2013. These investments represent 72 per cent of BSC's NAV and 54 per cent of BSC2's NAV at that date, and have been extracted from the unaudited interim accounts of BSC and management accounts for BSC2 for the period ended 30 September 2013.
| BSC BSC2 |
Cost Valuation |
£2,000,000 £6,054,000 |
Audited financial information: 9 mths (2012: year) ended | 31 Dec 2012 | 31 Mar 2012 |
|---|---|---|---|---|---|
| Basis of valuation | Price of recent investment, reviewed for change in fair value |
Sales | £million 19.97 |
£million 3.52 |
|
| Equity held Type |
35.0% Business Services |
EBITA Profit before tax Net assets |
3.35 2.99 2.81 |
0.31 0.25 0.57 |
| BSC | Cost | £137,420 | Audited financial information: 52 weeks ended | ||
|---|---|---|---|---|---|
| Valuation Basis of valuation |
£5,373,000 Earnings multiple |
27 Jan 2013 £million |
29 Jan 2012 £million |
||
| Equity held Type |
13.5% Retail and Brands |
Sales EBITDA pre-exceptionals |
170.98 9.44 |
143.67 8.46 |
|
| Profit (loss) before tax Net assets |
1.49 4.41 |
(2.56) 2.67 |
| BSC BSC2 |
Cost Valuation |
£4,370,000 £4,370,000 |
Audited financial information: |
|---|---|---|---|
| Basis of valuation | Price of recent investment, reviewed for change in fair value |
Following the buy-out of the existing company in September 2013 the first set of accounts are not yet due. |
|
| Equity held Type |
32.3% Retail and Brands |
| BSC | Cost | £3,222,718 | Audited financial information: year ended 31 Oct | |
|---|---|---|---|---|
| BSC2 | Valuation Basis of valuation |
£4,017,000 Price of recent investment, reviewed for change in fair |
2013 £million |
|
| value | Sales | 11.58 | ||
| Equity held | 16.32% | EBITA | 2.59 | |
| Type | Software, IT and Telecomms | Loss before tax Net assets |
(1.72) 17.75 |
| BSC | Cost | £1,000,000 | Audited financial information: year ended 31 October | ||
|---|---|---|---|---|---|
| Valuation | £3,855,000 | 2013 | 2012 | ||
| Basis of valuation | Earnings multiple | £million | £million | ||
| Equity held Type |
20.0% Manufacturing and Industrial Services |
Sales EBITA Profit before tax Net assets |
20.52 3.76 1.78 3.29 |
19.58 4.01 2.21 2.57 |
| BSC | Cost | £1,500,000 | Audited financial information: year ended 31 December | ||
|---|---|---|---|---|---|
| BSC2 | Valuation | £3,000,000 | 2011 | 2010 | |
| Basis of valuation | Earnings multiple | £million | £million | ||
| Equity held Type |
24.4% Software, IT and Telecomms |
Sales | 3.72 | 2.61 | |
| EBITA | 1.50 | 0.64 | |||
| Profit (loss) before tax | 0.24 | (0.50) | |||
| Net assets | 0.14 | 0.12 |
| BSC | Cost | £958,591 | Audited financial information: year ended 31 March | ||
|---|---|---|---|---|---|
| BSC2 | Valuation Basis of valuation |
£2,934,000 Earnings multiple |
2013 £million |
2012 £million |
|
| Equity held Type |
24.4% Business Services |
Sales EBITA Profit before tax Net assets |
48.74 1.81 1.05 3.47 |
46.46 1.58 0.86 2.73 |
| BSC BSC2 |
Cost Valuation Basis of valuation |
£2,900,000 £2,900,000 Price of recent investment, reviewed for change in fair value |
Audited financial information: Following the buy-out of the existing company in October 2013 the first set of accounts are not yet due. |
|---|---|---|---|
| Equity held Type |
41.4% Manufacturing and Industrial Services |
| BSC BSC2 |
Cost Valuation Basis of valuation |
£2,335,000 £2,335,000 Price of recent investment, reviewed for change in fair |
Audited financial information: Following the buy-out of the existing company in December 2013 the first set of accounts are not yet due. |
|---|---|---|---|
| Equity held Type |
value 17.5% Manufacturing and Industrial Services |
| BSC BSC2 |
Cost Valuation |
£1,950,000 £2,016,000 |
Audited financial information for period from 14 June 2012 to 31 March: 2013 |
|
|---|---|---|---|---|
| Basis of valuation | Price of recent investment, reviewed for change in fair |
2013 £million |
||
| Equity held | value 43.0% |
Net assets | 2.51 | |
| Type | Software, IT and Telecomms | Insider has a small companies exemption from filing full financial statements at Companies House. |
| BSC | Cost | £2,019,066 | Audited financial information: year ended 30 April 2013 |
|---|---|---|---|
| BSC2 | Valuation | £1,892,000 | 2012 |
| Basis of valuation | Price of recent investment, | £million | |
| Equity held Type |
reviewed for change in fair value 11.4% Retail and Brands and Manufacturing and Industrial Services |
3.56 Sales EBITA 0.33 Loss before tax (0.26) 0.45 Net assets |
| BSC | Cost | £968,956 | Audited financial information: year ended 30 April | ||
|---|---|---|---|---|---|
| BSC2 | Valuation | £1,443,000 | 2012 | 2011 | |
| Basis of valuation | Earnings multiple | £million | £million | ||
| Equity held Type |
13.5% Software, IT and Telecomms |
Sales | 13.59 | 7.02 | |
| EBITA | 2.37 | 0.90 | |||
| Profit (loss) before tax | 0.34 | (0.17) | |||
| Net assets | 4.68 | 4.58 |
| BSC | Cost | £1,165,714 | Audited financial information: year ended 31 December | ||
|---|---|---|---|---|---|
| BSC2 | Valuation | £1,327,000 | 2012 | 2011 | |
| Basis of valuation | Earnings multiple | £million | £million | ||
| Equity held Type |
10.3% Retail and Brands |
Sales | 14.48 | 12.24 | |
| EBITA | 0.87 | 0.99 | |||
| Profit before tax | 0.13 | 0.28 | |||
| Net assets | 0.73 | 0.74 |
| BSC | Cost | £250,088 | Audited financial information: year ended 31 December | ||
|---|---|---|---|---|---|
| BSC2 | Valuation Basis of valuation Equity held |
£1,157,000 Earnings multiple 11.25% |
2012 £million |
2011 £million |
|
| Type | Manufacturing and Industrial Services |
Sales EBITDA Profit before tax Net assets |
28.60 4.11 2.51 6.99 |
27.66 2.79 0.99 5.43 |
| BSC | Cost | £1,000,000 | Audited financial information: 13 months ended 31 March | |
|---|---|---|---|---|
| Valuation | £1,000,000 | 2013 | ||
| Basis of valuation | Price of recent investment, | £million | ||
| reviewed for change in fair value |
Net assets | 1.00 | ||
| Equity held | 50.0% | |||
| Type | Business Services | Fairlight Bridge has a small companies exemption from filing full financial statements at Companies House. |
| BSC Cost |
£991,988 | Audited financial information: year ended 31 January | ||
|---|---|---|---|---|
| BSC2 Valuation |
£992,000 | 2013 | 2012 | |
| Basis of valuation | Price of recent investment, reviewed for change in fair |
£million | £million | |
| value | Sales | 1.09 | 2.73 | |
| Equity held | 5.6% | LBITA | (2.88) | (2.12) |
| Type | Software, IT and Telecomms | Loss before tax | (2.88) | (2.12) |
| Net assets | 0.77 | 3.20 |
| BSC2 | Cost | £1,931,818 | Audited financial information: year ended 31 May | ||
|---|---|---|---|---|---|
| Valuation | £987,000 | 2012 | 2011 | ||
| Basis of valuation | Price of recent investment, reviewed for change in fair value |
£million Sales |
– | £million – |
|
| Equity held | 33.4% | Loss before tax | (1.33) | (1.27) | |
| Type | Healthcare | Net assets | (3.11) | (2.05) |
| Cost £900,000 |
Audited financial information: year ended 31 December | ||
|---|---|---|---|
| Valuation £810,000 Basis of valuation |
Earnings multiple | 2012 £million |
2011 £million |
| Equity held 18.8% Type |
Net assets Software, IT and Telecomms |
0.96 | 0.77 |
Selima Limited has a small companies exemption from filing full financial statements at Companies House.
| BSC | Cost | £486,931 | Audited financial information: year ended 29 September. | ||
|---|---|---|---|---|---|
| BSC2 | Valuation | £1,102,000 | The next set of audited financial statements are due by | ||
| Basis of valuation | Quoted bid price | 31 March 2014. | |||
| Equity held | 2.9% | 2012 | 2011 | ||
| Type | Manufacturing and Industrial | £million | £million | ||
| Services | |||||
| Sales | 30.44 | 23.13 | |||
| EBITA | 2.24 | 1.03 | |||
| Profit before tax | 1.78 | 0.58 | |||
| Net assets | 16.06 | 15.54 |
| BSC | Cost | £741,500 | Audited financial information: year ended 31 May | ||
|---|---|---|---|---|---|
| BSC2 | Valuation Basis of valuation Equity held |
£991,000 Quoted bid price 0.4% |
2013 £million |
2012 £million |
|
| Type | Manufacturing and Industrial Services |
Sales EBITA Profit before tax Net assets |
843.30 51.97 43.06 118.33 |
617.92 53.39 44.95 136.36 |
| BSC | Cost | £325,922 | Audited financial information: year ended 31 May | ||
|---|---|---|---|---|---|
| Valuation Basis of valuation Equity held |
£846,000 Quoted bid price 1.4% |
2013 £million |
2012 £million |
||
| Type | Business Services | Sales EBITA Profit before tax Net assets |
23.41 5.45 4.64 29.10 |
20.48 4.84 4.18 25.47 |
| BSC | Cost | £475,528 | Audited financial information: year ended 31 December | ||
|---|---|---|---|---|---|
| BSC2 | Valuation | £673,000 | 2012 | 2011 | |
| Basis of valuation | Quoted bid price | £million | £million | ||
| Equity held Type |
0.9% Healthcare |
Sales | 26.06 | 21.66 | |
| EBITA (LBITA) | 0.20 | (2.04) | |||
| Loss before tax | (0.20) | (2.36) | |||
| Net assets | 39.43 | 114.65 |
BSC BSC2 Cost £372,530 Valuation £550,000 Equity held 2.65%
Basis of valuation Quoted bid price Type Manufacturing and Industrial Services
Audited financial information:
The first set of financial statements for AB Dynamics plc following the investment by the Company is not yet due.
Net liabilities (1.74) (0.41)
| BSC2 | Cost | £148,678 | Audited financial information: year ended 31 March | ||
|---|---|---|---|---|---|
| Valuation | £514,000 | 2013 | 2012 | ||
| Basis of valuation | Quoted bid price | £million | £million | ||
| Equity held Type |
0.2% Software, IT and Telecomms |
Sales | 43.06 | 33.48 | |
| EBITA | 10.97 | 7.08 | |||
| Profit before tax | 8.70 | 5.84 | |||
| Net assets | 52.22 | 45.06 |
| BSC | Cost | £646,070 | Audited financial information: year ended 31 March | ||
|---|---|---|---|---|---|
| BSC2 | Valuation | £437,000 | 2013 | 2012 | |
| Basis of valuation | Quoted bid price | £million | £million | ||
| Equity held Type |
2.1% Business Services |
Sales | 21.09 | 22.98 | |
| EBITA | 2.48 | 3.35 | |||
| Profit before tax | 1.82 | 2.34 | |||
| Net assets | 23.37 | 23.22 |
| BSC BSC2 |
Cost Valuation Basis of valuation |
£564,998 £350,000 Quoted bid price |
Audited financial information: year ended 31 December (figures are given for the Cambridge Cognition Limited business before its flotation in April 2013) |
||
|---|---|---|---|---|---|
| Equity held Type |
17.8% Healthcare |
2012 £million |
2011 £million |
||
| Sales (LBITA) EBITA Loss before tax |
5.68 (1.43) (1.59) |
5.58 0.02 (0.18) |
| BSC2 | Cost | £134,343 | Audited financial information: year ended 31 December | ||
|---|---|---|---|---|---|
| Valuation Basis of valuation |
£134,343 Quoted bid price |
2012 £million |
2011 £million |
||
| Equity held Type |
0.3% Software, IT and Telecomms |
Sales EBITA Profit before tax Net assets |
28.14 2.57 0.80 41.61 |
19.16 2.96 2.10 23.95 |
| BSC2 | Cost Valuation Basis of valuation |
£80,409 £128,000 Quoted bid price |
Audited financial information: year ended 30 September. The next set of audited financial statements are due by 31 March 2014. |
||
|---|---|---|---|---|---|
| Equity held Type |
0.1% Healthcare |
2012 \$million |
2011 \$million |
||
| Sales Profit before tax Net assets |
192.20 23.40 118.60 |
143.30 22.00 100.50 |
1.1 The following allotments and repurchases of Ordinary Shares have taken place since 1 April 2010 (BSC) and 1 January 2010 (BSC2): BSC
| Date | Buybacks Number of Shares |
Price per Share (pence) |
Date | Issues Number of Shares |
Price per Share (pence) |
|---|---|---|---|---|---|
| 3 September 2010 | 260,000 | 78.00 | 1 April 2010 | 1,784,967 | 97.25 |
| 10 December 2010 | 218,448 | 82.25 | 6 April 2010 | 263,254 | 97.25 |
| 31 March 2011 | 300,000 | 102.75 | 22 June 2010 | 77 | 97.25 |
| 20 September 2011 | 46,020 | 92.75 | 28 September 2010 | 166,512 | 85.64 |
| 19 December 2011 | 153,180 | 90.75 | 7 January 2011 | 106,086 | 91.96 |
| 14 June 2012 | 301,493 | 85.00 | 22 March 2011 | 2,025,838 | 128.00 |
| 29 June 2012 | 52,614 | 85.00 | 5 April 2011 | 1,038,195 | 128.00 |
| 21 November 2012 | 333,603 | 80.35 | 4 May 2011 | 383,134 | 128.00 |
| 28 March 2013 | 167,463 | 81.50 | 22 August 2011 | 1,277,941 | 94.05 |
| 19 June 2013 | 377,000 | 87.30 | 20 January 2012 | 152,398 | 99.27 |
| 20 March 2012 | 1,080,772 | 99.75 | |||
| 5 April 2012 | 1,531,778 | 99.75 | |||
| 17 August 2012 | 261,760 | 91.77 | |||
| 31 December 2012 | 4,235,020 | 97.75 | |||
| 14 January 2013 | 183,667 | 87.57 | |||
| 5 April 2013 | 2,730,385 | 95.75 | |||
| 5 April 2013 | 2,929,326 | 97.75 | |||
| 30 April 2013 | 559,278 | 97.75 | |||
| 30 April 2013 | 155,045 | 95.75 | |||
| 9 May 2013 | 26,109 | 95.75 | |||
| 13 August 2013 | 472,076 | 90.44 |
| Date | Buybacks Number of Shares |
Price per Share (pence) |
Date | Issues Number of Shares |
Price per Share (pence) |
|---|---|---|---|---|---|
| 3 November 2010 | 300,000 | 57.75 | 5 April 2010 | 953,798 | 77.25 |
| 10 December 2010 | 266,100 | 56.25 | 30 April 2010 | 242,464 | 77.25 |
| 1 April 2011 | 191,280 | 58.25 | 18 November 2010 | 7,277 | 70.25 |
| 20 September 2011 | 87,450 | 56.00 | 22 March 2011 | 3,655,500 | 70.25 |
| 19 December 2011 | 84,292 | 57.00 | 5 April 2011 | 1,921,901 | 70.25 |
| 11 May 2012 | 168,318 | 57.25 | 4 May 2011 | 690,699 | 70.25 |
| 14 June 2012 | 80,916 | 57.25 | 10 June 2011 | 3,762 | 63.08 |
| 21 November 2012 | 74,405 | 55.68 | 4 August 2011 | 137,931 | 72.50 |
| 18 April 2013 | 279,961 | 59.20 | 8 September 2011 | 5,335 | 62.70 |
| 19 June 2013 | 100,000 | 57.87 | 5 January 2012 | 3,795,914 | 70.50 |
| 30 October 2013 | 145,000 | 59.10 | 20 March 2012 | 6,106,906 | 70.50 |
| 5 April 2012 | 5,080,416 | 70.50 | |||
| 22 May 2012 | 20,611 | 63.17 | |||
| 22 May 2012 | 158,303 | 63.17 | |||
| 26 October 2012 | 151,836 | 62.23 | |||
| 31 December 2012 | 3,136,695 | 69.50 | |||
| 5 April 2013 | 2,191,606 | 69.50 | |||
| 5 April 2013 | 2,236,692 | 68.00 | |||
| 30 April 2013 | 558,579 | 69.50 | |||
| 30 April 2013 | 51,801 | 68.00 | |||
| 5 June 2013 | 254,976 | 61.09 | |||
| 27 September 2013 | 217,026 | 60.14 |
1.2 As at 30 September 2013 (being the end of the last financial period of BSC for which unaudited interim financial information has been published) there were 165,000,000 authorised and 49,885,991 issued Shares, each ranking pari passu. All of the Shares are listed on the premium segment of the Official List of the UK Listing Authority. BSC holds an additional 3,592,658 Shares in the treasury account.
As at 30 June 2013 (being the end of the last financial period of BSC2 for which unaudited financial information has been published) there were 75,000,000 authorised and 46,116,561 issued Shares, each ranking pari passu. All of the Shares are listed on the premium segment of the Official List of the UK Listing Authority. BSC2 held an additional 1,632,722 Shares in the treasury account at this date.
1.3 Immediately following the close of the Offers, assuming £30,000,000 is raised in aggregate by the VCTs under the Offers, at an Offer Price of 103.00p per Share and that Offer Shares are allocated 60 per cent to BSC and 40 per cent to BSC2, the issued share capital of BSC, fully paid or credited as fully paid, will be £7,095,438 divided into 70,954,377 Shares (of which 3,592,658 Shares are held in treasury), and there will remain authorised but un-issued a minimum of £9,404,562 of share capital divided into 94,045,623 Shares.
Immediately following the close of the Offers, assuming £30,000,000 is raised in aggregate by the VCTs under the Offers, at an Offer Price of 68.00p per Share and that Offer Shares are allocated 60 per cent to BSC and 40 per cent to BSC2, the issued share capital of BSC2 fully paid or credited as fully paid will be £6,586,834 divided into 65,868,344 Shares (of which 1,777,772 Shares are held in treasury), and there will remain authorised but un-issued a minimum of £913,166 of share capital divided into 9,131,656 Shares.
(iii) the allotment for cash (otherwise than pursuant to sub-paragraphs (i) to (ii) above) of equity securities up to an aggregate nominal amount of 10 per cent of the issued Ordinary Share capital of the Company immediately following the final closing of the Offers,
during the period commencing on the passing of this Resolution and expiring on the later of 15 months from the date hereof or the next annual general meeting of the Company (unless previously revoked, varied or extended by the Company in general meeting), but so that this authority shall allow the Company to make before the expiry of this authority offers or agreements which would or might require Shares to be allotted, or rights to subscribe for or to convert any security into Shares to be granted, after such expiry and that all previous authorities given to the Directors be and they are hereby revoked, provided that such revocation shall not have retrospective effect.
but so that this authority shall allow the Company to make offers or agreements before the expiry and the Directors may allot equity securities in pursuance of such offers or agreements as if the powers conferred hereby had not so expired. This power applies in relation to a sale of Shares which is an allotment of equity securities by virtue of Section 560(2) of the Act as if in the first paragraph of this Resolution the words "pursuant to the general authority conferred upon the Directors in Resolution (1) above" were omitted;
during the period commencing on the passing of this Resolution and expiring on the later of 15 months from the date hereof or the next annual general meeting of the Company (unless previously revoked, varied or extended by the Company in general meeting), but so that this authority shall allow the Company to make before the expiry of this authority offers or agreements which would or might require Shares to be allotted, or rights to subscribe for or to convert any security into Shares to be granted, after such expiry and that all previous authorities given to the Directors be and they are hereby revoked, provided that such revocation shall not have retrospective effect.
(2) THAT the Directors be and are hereby generally and unconditionally authorised in accordance with Section 551 of the Companies Act 2006 (the "Act") to exercise all the powers of the Company to allot shares in the Company in connection with the Dividend Re-investment Scheme up to an aggregate nominal amount of £650,209 representing approximately 14 per cent of the share capital in issue as at 13 January 2014 (excluding treasury shares) during the period commencing on the passing of this Resolution and expiring on the fifth anniversary of this Resolution (unless previously revoked, varied or extended by the Company in general meeting), but so that this authority shall allow the Company to make before the expiry of this authority offers or agreements which would or might require shares to be allotted after such expiry and that all previous authorities given to the Directors to allot shares in connection with the Dividend Re-investment Scheme be and they are hereby revoked, provided that such revocation shall not have retrospective effect.
but so that this authority shall allow the Company to make offers or agreements before the expiry and the Directors may allot equity securities in pursuance of such offers or agreements as if the powers conferred hereby had not so expired. This power applies in relation to a sale of Shares which is an allotment of equity securities by virtue of Section 560(2) of the Act as if in the first paragraph of this Resolution the words "pursuant to the general authority conferred upon the Directors in Resolution (1) above" were omitted;
The memorandum of association of the VCTs provides that each VCT's principal object is to carry on the business of a venture capital trust. The objects of the VCTs are set out in full in clause 4 of their memorandum of association which are available for inspection at the address specified in paragraph 6.1 below.
The Articles of each VCT contain provisions inter alia to the following effect:
Subject to any disenfranchisement as provided in paragraph 4.2.4 below and subject to any special terms as to voting on which any shares may be issued, on a show of hands or by proxy every Member present in person (or, being a corporation, present by a duly authorised representative) shall have one vote and on a poll every Member present in person or by proxy shall have one vote for every share of which he is the holder.
The Ordinary Shares are in registered form and are freely transferable. All transfers of shares in certified form must be effected by a transfer in writing in any usual form or any other form approved by the Directors. The instrument of transfer of a share shall be executed by or on behalf of the transferor and, in the case of a partly paid share, by or on behalf of the transferee. All transfers of shares which are in uncertificated form may be effected by means of a relevant system. The Directors may refuse to register any transfer of a partly-paid share, provided that such refusal does not prevent dealings taking place on an open and proper basis, and may also refuse to register any instrument of transfer unless:
The VCT may in a general meeting, by Ordinary Resolution, declare dividends in accordance with the respective rights of the members, provided that no dividend shall be payable in excess of the amount recommended by the Directors. The Directors may pay such interim dividends as appear to them to be justified. No dividends or other monies payable in respect of a share shall bear interest as against the VCT. There are no fixed dates on which entitlement to dividend arises. The Directors may with the sanction of an Ordinary Resolution of the Company offer the shareholders the right to elect to receive shares credited as fully paid instead of cash in respect of the whole or part of a dividend.
All dividends unclaimed for a period of twelve years after being declared or becoming due for payment shall be forfeited and shall revert to the VCT.
If any member or other person appearing to be interested in shares of the VCT is in default in supplying within 14 days after the date of service of a notice requiring such a member or other person to supply the VCT in writing all or any such information as is referred to in Section 793 of the 2006 Act, the Directors may, for such period as the default shall continue, impose restrictions upon the relevant shares.
The restrictions available are the suspension of voting or other rights conferred by membership in relation to meetings of the VCT in respect of the relevant shares and, additionally, in the case of a shareholder representing at least 0.25 per cent by nominal value of any class of shares of the VCT then in issue, the withholding of payment of any dividends on, and the restriction of transfer of, the relevant shares.
On a winding-up any surplus assets will be divided amongst the holders of the shares according to the respective number of shares held by them and in accordance with the provisions of the Act, subject to the rights of any shares which may be issued with special rights or privileges. The Articles provide that the liquidator may, with the sanction of a special resolution and any other sanction required by the Act, divide amongst the members in specie the whole or any part of the assets of the VCT in such manner as he may determine.
Whenever the capital of the VCT is divided into different classes of shares, the rights attached to any class may (unless otherwise provided by the terms of issue of that class) be varied or abrogated with the sanction of a special resolution passed at a separate meeting of such holders.
At any time when the VCT has given notice in the prescribed form (which has not been revoked) to the Registrar of Companies of its intention to carry on business as an investment company ("a Relevant Period"), distribution of the VCT's capital profits (within the meaning of Section 833(2) of the Act) shall be prohibited. The Board shall establish a reserve to be called the capital reserve. During a Relevant Period, all surpluses arising from the realisation or revaluation of investments and all other monies realised on or derived from the realisation, payment off of or other dealing with any capital asset in excess of the book value thereof and all other monies which are considered by the Board to be in the nature of accretion to capital shall be credited to the capital reserve. Subject to the Act, the Board may determine whether any amount received by the VCT is to be dealt with as income or capital or partly one way and partly the other. During a Relevant Period, any loss realised on the realisation or payment off of or other dealing with any investments or other capital assets and, subject to the Act, any expenses, loss or liability (or provision therefor) which the Board considers to relate to a capital item or which the Board otherwise considers appropriate to be debited to the capital reserve shall be carried to the debit of the capital reserve. During a Relevant Period, all sums carried and standing to the credit of the capital reserve may be applied for any of the purposes for which sums standing to any revenue reserve are applicable except and provided that during a Relevant Period no part of the capital reserve or any other money in the nature of accretion to capital shall be transferred to the revenue reserves of the VCT or be regarded or treated as profits of the VCT available for distribution (as defined by Section 829(1) of the Act) or applied in paying dividends on any shares in the VCT otherwise than by way of redemption or purchase by the VCT of its own shares. In periods other than a Relevant Period any amount standing to the credit of the capital reserve may be transferred to the revenue reserves of the VCT or be regarded or treated as profits of the VCT available for distribution or be applied in paying dividends on any shares in the VCT.
A Special Resolution is being put to a General Meeting of BSC on 18 February 2014 to extend the life of the VCT from 2018 to 2020. At every fifth annual general meeting thereafter, the Directors are required to propose that the VCT should continue as a venture capital trust for a further five year period.
A Special Resolution is being put to a General Meeting of BSC2 on 18 February 2014 to extend the life of the VCT from 2018 to 2020. At every fifth annual general meeting thereafter, the Directors are required to propose that the VCT should continue as a venture capital trust for a further five year period.
If any such further resolutions are not passed, the Directors shall draw up proposals for the voluntary liquidation, reconstruction or other reorganisation of the VCT for submission to the members of the VCT at a general meeting to be convened by the Directors on a date, in the case of BSC not more than six months after such annual general meeting, and in the case of BSC2 not more than four months after such annual general meeting. Implementation of the proposals will require the approval of Members by Special Resolution.
Annual general meetings shall be held at such time and place as may be determined by the Directors and not more than 15 months shall elapse between the date of one annual general meeting and that of the next. The Directors may, whenever they think fit, convene a general meeting of the Companies, and general meetings shall also be convened on the requisition by members pursuant to the provisions of the Statutes. Any meeting convened under this Article by requisitionists shall be convened in the same manner as nearly as possible as that in which meetings are to be convened by the Directors. General meetings of the VCT other than annual general meetings shall be called general meetings.
Annual general meetings shall be called on not less than 21 days notice in writing and general meetings shall be called on not less than 14 days notice in writing. The notice shall be exclusive of the day on which it is given and of the day of the meeting and shall specify the place, the day and hour of meeting, and in case of special business the general nature of such business. The notice shall be given to the members, other than those who, under the provisions of the Articles or the terms of issue of the shares they hold, are not entitled to receive notice from the VCT, to the Directors and to the auditors. A notice calling an annual general meeting shall specify the meeting as such and the notice convening a meeting to pass a special resolution shall specify the intention to propose the resolution as such.
In every notice calling a meeting of the VCT or any class of the members of the VCT there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint one or more proxies to attend, to speak and vote instead of him.
If within 15 minutes from the time appointed for the meeting a quorum is not present, (or such longer time not exceeding one hour as the Chairman of the meeting may decide to wait) the meeting, if convened by or upon the requisition of members, shall be dissolved. In any other case it shall stand adjourned to the same place and time one week later or to such day and such time (being not more than 28 days hence) and at such place as the Directors shall determine. At any such adjourned meeting if a quorum is not present within 15 minutes from the time appointed for the meeting the member or members present in person or by proxy and entitled to vote shall be a quorum and have power to decide upon all matters which could properly have been disposed of at the meeting from which the adjournment took place. If the meeting is adjourned for 14 days or more the VCT shall give not less than five days notice thereof by advertisement in one national newspaper, but no other notice shall be required.
The Chairman may, with the consent of the meeting (and shall, if so directed by the meeting) adjourn any meeting from time to time and from place to place. No business shall be transacted at any adjourned meeting other than the business left unfinished and which might properly have been transacted at the meeting from which the adjournment took place. When a meeting is adjourned for 30 days or more (otherwise than due to the absence of a quorum) or without a time and place for the adjourned meeting being fixed at least seven clear days notice of the adjourned meeting shall be given in the same manner as in the case of the original meeting.
| BSC | Number of Shares | % of issued share capital |
|---|---|---|
| Helen Sinclair | 17,004 | 0.03% |
| Edward Buchan | 5,840 | 0.02% |
| Philip Cammerman | 55,801 | 0.11% |
| BSC2 | Number of Shares | % of issued share capital |
|---|---|---|
| Richard Last | 120,912 | 0.26% |
| Robert Pettigrew | 54,292 | 0.12% |
| Peter Waller | 17,156 | 0.04% |
3.3 The interests of the Directors and their immediate families in the share capital of the VCTs, all of which are beneficial and the interests of a person connected with a Director following the Offers, assuming £30,000,000 is raised, in aggregate, by the VCTs under the Offers by 28 March 2014, that the Directors are issued Loyalty Bonus Shares, an Offer Price of 103.00p for BSC and 68.00p for BSC2 and that Offer Shares are allocated 60 per cent to BSC and 40 per cent to BSC2, will be as follows:
| BSC | Number of Shares | % of issued share capital |
|---|---|---|
| Helen Sinclair | 17,004 | 0.03% |
| Edward Buchan | 9,781 | 0.01% |
| Philip Cammerman | 59,742 | 0.09% |
| BSC2 | Number of Shares | % of issued share capital |
|---|---|---|
| Richard Last | 125,887 | 0.20% |
| Robert Pettigrew | 57,277 | 0.09% |
| Peter Waller | 20,141 | 0.03% |
Save as disclosed in paragraph 5.17 below, no Director, nor any member of the administrative, management, supervisory body or senior management of the Companies, (i) has an interest in any transaction effected by either VCT which is or was unusual in its nature or conditions or significant to the business of that VCT or (ii) has any potential conflicts of interest between any duties they have to the VCTs and their private interests and/or other duties.
3.13 It is anticipated that the aggregate of fees paid or to be paid to the Directors by BSC for the twelve month period ending 31 March 2014 will not exceed £75,000 plus VAT or National Insurance (as applicable), and by BSC2 for the twelve month period ending 31 December 2013, £67,500 plus VAT or National Insurance (as applicable). Fees paid to the Directors of BSC for the year ended 31 March 2013 and to the Directors of BSC2 for the year ended 31 December 2012 were as follows:
| BSC | Fees paid (£) plus VAT or National Insurance (as applicable) |
|---|---|
| Helen Sinclair | 35,000 |
| Edward Buchan | 20,000 |
| Philip Cammerman | 20,000 |
| BSC2 | Fees paid (£) plus VAT or National Insurance (as applicable) |
| Richard Last | 31,500 |
| Robert Pettigrew | 18,000 |
| BSC | Current directorships/partnerships | Former directorships/partnerships (in last five years) |
|---|---|---|
| Helen Rachelle Sinclair | British Smaller Companies VCT plc The Income & Growth VCT plc Mobeus Income & Growth 4 VCT plc Spark Ventures plc Downing One VCT plc Downing Income VCT 4 plc (in voluntary liquidation) Octopus Eclipse VCT 3 plc (in members voluntary liquidation) Hemstall Road Residents Co. Ltd |
|
| Philip Simon Cammerman | British Smaller Companies VCT plc Clarendon Fund Managers Limited Clarendon Fund Nominees Limited Howmac Limited Nitech Venture Partners Limited NI Venture Partners Limited Pressure Technologies plc Hargreave Hale AIM VCT 2 plc Evince Technology Limited |
British Smaller Companies VCT2 plc Connect Yorkshire |
| Charles Walter Edward Ralph Buchan |
British Smaller Companies VCT plc Wallem Group Limited Buchan Investments Limited The Bristol Diocesan Board of Finance Limited 34 Rosary Gardens Limited Downing Absolute Income VCT 1 plc (in voluntary liquidation) |
| BSC2 | Current directorships/partnerships | Former directorships/partnerships (in last five years) |
|---|---|---|
| Richard Last | British Smaller Companies VCT2 plc Lighthouse Group plc Lynx Limited Lynx Group Limited Lynx Holdings Limited APD Communications Limited APD Mobile Data Limited Waste Management Systems Limited Arcontech Group plc Arcontech Solutions Limited Arcontech Limited Corero Network Security plc Servelec Group plc Hobbs Hole Limited Sphinx CST (Ireland) Limited Learn Solutions Limited Longfield Management Company Limited Cord Developments Limited Cognita Technologies Limited Premier Veterinary Group Limited |
British Smaller Companies VCT plc Orsted Limited (dissolved) Patsystems Limited Gapaid Lynx Overseas Investments Limited (dissolved) Lynx IT Communications Limited (dissolved) FS (UK) Limited (dissolved) Overseas 110 Limited (dissolved) Sphinx CST Limited Sphinx Group Limited Switch Networks Limited (dissolved) Sphinx CST Networks Limited Sphinx Professional Services Limited Sphinx 110 Limited (dissolved) Transient 110 (No 2) Limited (dissolved) Broomco (4184) Limited Signal Limited (dissolved) LynxServ Limited (dissolved) CNH Subsidiary Ltd CSE – Global Limited The Coombes Estate Limited (in voluntary liquidation) Parseq Limited |
| Robert Martin Pettigrew | British Smaller Companies VCT2 plc Odos Imaging Limited Acal Energy Ltd Sunamp Limited Nightingale-EOS Limited |
British Smaller Companies VCT plc Sphere Medical Holding plc Zinwave Holdings Limited Timberpost Limited Xeros Limited |
| Peter Charles Waller | British Smaller Companies VCT2 plc Keypoint Technologies (UK) Limited Premier Veterinary Group Limited Thanet One Limited Zetland Limited Turnberry Management Company Limited BCS Learning & Development Limited |
Corero Network Security plc Corero Dormant One Limited (dissolved) Corero Dormant Three Limited (dissolved) Corero Group Limited (dissolved) Corero Software Limited (dissolved) Eclipse Learner Systems Limited (dissolved) Mondas Information Technology Limited (dissolved) Mondas Systems Limited (dissolved) Rocela Group Limited Rocela Limited |
* Prior to being dissolved these companies were in voluntary liquidation.
The following are the summaries of the principal contents of contracts, not being contracts entered into in the ordinary course of business, which have been entered into by the VCTs within two years immediately preceding the publication of this document or which contain any provisions under which the VCTs have any obligation or entitlement which is material to them as at the date of this document:
4.5 By an administration and investment advisory agreement dated 28 February 1996 between BSC and YFM Private Equity (the "IAA"), as varied by an agreement dated 16 November 2012, YFM Private Equity agreed to provide administrative, company secretarial and investment advisory services to BSC in relation to BSC's qualifying portfolio. The IAA took effect on 4 April 1996 for an initial period of three years and thereafter is terminable by either party on not less than 12 months' notice or, inter alia, on the others' breach or insolvency.
Under the IAA, YFM Private Equity is entitled to receive an annual investment advisory fee of 2 per cent of the Net Assets of BSC (as determined on 31 March and 30 September each year), payable quarterly in advance on 1 January, 1 April, 1 July and 1 October in each year together with an annual secretarial fee of £35,000 (subject to annual adjustment and currently £57,702). The Fund Manager is also entitled to all arrangement, syndication and monitoring fees payable in respect of unquoted investments. BSC indemnifies the Fund Manager against all things lawfully and properly done under the IAA. The total remuneration payable to YFM Private Equity in the period to 31 March 2013 was £808,000. Pursuant to the deed of variation dated 16 November 2012, the Fund Manager shall bear the annual operating costs of BSC to the extent that those costs exceed 3.25 per cent of the Net Asset Value of BSC, a reduction from the previous level of 3.5 per cent.
4.6 An incentive agreement (the "Incentive Agreement") dated 7 July 2009 between BSC, the YFM Private Equity Carried Interest Trust (an employee benefit trust established for the benefit of employees of the Fund Manager) and the Fund Manager under which, with effect from 1 April 2009 ("Effective Date") the Fund Manager is entitled to receive a fee, calculated by reference to each accounting period of BSC, equal to 20 per cent of the amount by which dividends paid to Shareholders exceed 4.0 pence per Share per accounting period (as increased or decreased, as applicable, in each accounting period by the percentage increase or decrease (if any) in the retail prices index in the previous accounting period) ("Target Rate"), once cumulative dividends per Share of 10.0 pence or more have been paid to Shareholders. The Target Rate is further adjusted by reference to any cumulative shortfall in dividends paid per Share from any previous accounting period after the Effective Date. The payment is also conditional upon the Net Asset Value per Share in the relevant accounting period being not less than 94.0 pence per Share, as adjusted for the impact of share issues and buy-backs. A compensatory payment is due if the Incentive Agreement is terminated without cause or if BSC is taken over. The compensatory payment is calculated as a percentage of the fee that would otherwise be payable under the Incentive Agreement by reference to the accounting period following the Incentive Agreement being so terminated; 80 per cent is payable in the first accounting period after such event, 55 per cent in the second, 35 per cent in the third, and nil thereafter. The maximum fee payable in any 12 month period cannot exceed an amount which would represent 25 per cent or more of the Net Asset Value or market capitalisation of BSC at such time. The Target Rate at 31 March 2013 was 4.6 pence, and the calculation was verified by independent auditors. The total incentive payment to YFM Private Equity in respect of the year to 31 March 2013 was £38,678 (in respect of the year to 31 March 2012: £1,415,058).
Mr Cammerman, as a former employee of YFM Private Equity, is one of the beneficiaries of that Trust, and received £14.82 in August 2013 (£735.78 in August 2012).
4.9 An offer agreement dated 26 October 2011 ("the 2011 Offer Agreement") between BSC2 (1), the Directors (2), Howard Kennedy ("HK") (3) and YFM Private Equity (4) under which HK agreed to act as Sponsor to the offer for subscription that was launched by BSC2 in October 2011. As is usual in contracts of this type YFM Private Equity agreed to indemnify BSC2 against the costs of that offer exceeding 5.5% of the aggregate value of accepted applications for Ordinary Shares received under that offer and received a commission of 5.5% of the aggregate value of the gross proceeds received by BSC2 under that offer, less the upfront commission paid by BSC2 to recognised intermediaries in respect of accepted applications under the prospectus for that offer. Under the 2011 Offer Agreement YFM Private Equity, BSC2, and the Directors gave certain warranties which were subject to certain limitations. BSC2 agreed to indemnify HK in respect of its role as Sponsor.
Pursuant to a deed of variation dated 16 November 2012 between BSC2 (1), the trustees of the Trust (2) and Chord (3), 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.
Following the issue of this document, arrangements will be put in place in order that the benefit of the subscription rights are extended to include all of BSC2's issued Shares.
5.2 YFM Private Equity is paid an annual investment advisory fee equal to 2.0 per cent per annum of the Gross Assets of BSC. The BSC2 management fee is 2.5 per cent per annum of the Gross Assets of BSC2, reducing to 1.25 per cent per annum in respect of any Net Asset Value in excess of £16 million and up to £26.667 million. In line with normal VCT practice, the Fund Manager will also be entitled to receive a performance related incentive fee. Further details of these arrangements are set out under the heading "The Fund Manager" in Part 1 of this document and at paragraphs 4.5, 4.6, 4.10 and 4.11 of this Part 5. Paragraph 5.17 below sets out the Companies' related party transactions.
5.3 There have been no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which either VCT is aware) during the previous 12 months which may have, or have had in the recent past, a significant effect on either VCT's financial position or profitability.
5.13 There have been no significant factors, including unusual or infrequent events or new developments, which have materially affected either VCT's income from operations. There have been no governmental, economic, fiscal, monetary or political policies or factors that have materially affected either VCT's operations. However, levels and bases of, and relief from, taxation are subject to change and such changes could be retrospective and could materially affect either VCT's operations.
5.14 The Fund Manager is responsible for the determination and calculation of each VCT's Net Asset Value which the Boards intend to announce at least quarterly, through a Regulatory Information Service. The Boards believe that by announcing their VCT's financial results on a regular basis, it should help to provide a fairer market price for its Shares.
• SMH Equity Partners Limited (formerly YFM Equity Partners Limited), the parent company of YFM Private Equity Limited until 30 September 2013, held an investment in Primal Pictures Limited, an investee company of BSC. On 13 August 2012, YFM Equity Partners disposed of its holding in Primal Pictures Limited for which it has received total proceeds of £74,362.
5.19 Investments will be valued quarterly by the Fund Manager and these Net Asset Values will be communicated to Shareholders through the Regulatory Information Service. Each VCT will also announce when there has been a major change to Net Asset Value, for instance as a result of a disposal of an investment or if that VCT undertakes a fundraising and needs to announce an interim valuation. The Directors do not anticipate any circumstances arising under which the calculation of the Net Asset Value may be suspended. Any suspension will be communicated to Shareholders through the Regulatory Information Service.
5.20 The Directors believe that the Offers have the potential to constitute a significant gross change in each VCT. On the basis of £30,000,000 being raised under the Offers as to 60 per cent by BSC and 40 per cent by BSC2, had the Offers been undertaken at 31 March 2013, in the case of BSC and at 31 December 2012, in the case of BSC2, and an Offer Cost Percentage of 3.5%, the Offers would have resulted in an increase in Net Assets of £17.01 million for BSC and £11.34 million for BSC2, potentially reducing the annual expense ratio of each VCT, increasing the size and range of investments which each VCT could undertake and increasing the number of investments each VCT would be required to make in order to meet the VCT eligibility rules. Had the Offers been undertaken at 1 April 2013, in the case of BSC and at 1 January 2013 in the case of BSC2, the commencement of BSC's and BSC2's current accounting periods respectively, the effect of the Offers on the earnings of both VCTs is expected to have been positive since the fixed costs of operating the VCTs would have been spread over a larger asset base, thereby reducing the running cost per Share.
14 January 2014
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