Annual Report • Jan 31, 2017
Annual Report
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Annual Report For the Year Ended 31 January 2017
Maven Income and Growth VCT 2 PLC (the Company) is a venture capital trust (VCT) and its shares are listed on the Premium segment of the Official List and traded on the main market of the London Stock Exchange. It has one class of share and was incorporated on 4 January 2001.
The Company aims to achieve long-term capital appreciation and generate maintainable levels of income for Shareholders.
The Articles of Association require the Directors to put a proposal for the continuation of the Company, in its then form, to Shareholders at the Company's Annual General Meeting to be held in 2020.
Shares in the Company can be purchased and sold in the market through a stockbroker. For qualifying investors buying shares on the open market:
The Stockbroker to the Company is Shore Capital Stockbrokers (020 7647 8132).
The Company currently conducts its affairs so that the shares issued by it can be recommended by authorised financial advisers to ordinary retail investors in accordance with the rules of the Financial Conduct Authority (FCA) in relation to non-mainstream investment products and intends to continue to do so for the foreseeable future. The Company's shares are excluded from the FCA's restrictions which apply to nonmainstream investment products because they are shares in a VCT and the returns to investors are predominantly based on investments in private companies or publicly quoted securities.
Shareholders in a number of UK registered companies have received unsolicited calls from organisations, usually based overseas or using false UK addresses or phone lines routed abroad, offering to buy shares at prices much higher than their current market values or to sell non-tradeable, overpriced, high risk or even non-existent securities.
Whilst the callers may sound credible and professional, Shareholders should be aware that their intentions are often fraudulent and high pressure sales techniques may be applied, often involving a request for an indemnity or a payment to be provided in advance.
If you receive such a call, you should exercise caution and, based on advice from the FCA, the following precautions are suggested:
Telephone: 0300 123 2040
Website: www.actionfraud.police.uk
FCA
Annual General Meeting 14 June 2017
| Rate | 2.00p |
|---|---|
| XD date | 29 September 2016 |
| Record date | 30 September 2016 |
| Payment date | 28 October 2016 |
| Rate | 2.25p |
|---|---|
| XD date | 25 May 2017 |
| Record date | 26 May 2017 |
| Payment date | 23 June 2017 |
| Financial Highlights | 5 | |
|---|---|---|
| Your Board | 7 | |
| Chairman's Statement | 9 | |
| Summary of Investment Changes | 12 | |
| Business Report | 13 | |
| Analysis of Unlisted and Quoted Portfolio | 16 | |
| Investment Manager's Review | 18 | |
| Largest Investments by Valuation | 24 | |
| Investment Portfolio Summary | 30 | |
| Directors' Report | 33 |
|---|---|
| Directors' Remuneration Report | 37 |
| Statement of Corporate Governance | 41 |
| Statement of Directors' Responsibilities | 45 |
| Report by the Audit and Risk Committees | 46 |
| Independent Auditor's Report to the Members of Maven Income and Growth VCT 2 PLC |
49 |
| Income Statement | 55 | |
|---|---|---|
| Statement of Changes in Equity | 55 | |
| Balance Sheet | 56 | |
| Cash Flow Statement | 57 | |
| Notes to the Financial Statements | 58 | |
| Annual General Meeting | ||
| Notice of Annual General Meeting | 70 | |
| Explanatory Notes to the Notice of Annual General Meeting |
75 |
| Financial Highlights | 5 |
|---|---|
| Your Board | 7 |
| Chairman's Statement | 9 |
| Summary of Investment Changes | 12 |
| Business Report | 13 |
| Analysis of Unlisted and Quoted Portfolio | 16 |
| Investment Manager's Review | 18 |
| Largest Investments by Valuation | 24 |
| Investment Portfolio Summary | 30 |
MIG 2 AR YE 31 Jan 2017 v13 Final (All Pages).indd 4 15/05/2017 12:00
| 31 January 2017 | 31 January 2016 | 31 January 2015 | |
|---|---|---|---|
| Net asset value (NAV) | £20,502,000 | £21,770,000 | £20,834,000 |
| NAV per Ordinary Share | 50.52p | 52.98p | 60.84p |
| Dividends paid or proposed for year | 4.25p | 14.25p | 4.00p |
| Dividends paid to date | 48.72p | 44.47p | 30.32p |
| NAV total return per share1 | 99.24p | 97.45p | 91.16p |
| Share price2 | 44.00p | 48.25p | 54.00p |
| Discount to NAV | 12.91% | 8.93% | 11.24% |
| Annual yield3 | 9.66% | 29.53% | 7.41% |
| Ordinary Shares in issue | 40,584,617 | 41,089,617 | 34,243,932 |
1 Sum of current NAV per share and dividends paid to date (excluding initial tax relief).
2Mid-market price (Source: London Stock Exchange).
3Based on dividends paid or proposed for year and share price at year end.
The above chart shows the NAV total return per share as at 31 January in each year. Dividends that have been proposed but not yet paid are included in the NAV at the balance sheet date. The policy for valuing investments is disclosed in Note 1 to the Financial Statements.
| Year ended 31 January | Payment date | Interim/final | Rate (p) |
|---|---|---|---|
| 2002-2012 | Total | 21.12 | |
| 2013 | 9 November 2012 | Interim | 1.75 |
| 21 June 2013 | Final | 1.75 | |
| 2014 | 1 November 2013 | Interim | 1.85 |
| 20 June 2014 | Final | 2.00 | |
| 2015 | 31 October 2014 | Interim | 1.85 |
| 26 June 2015 | Final | 2.15 | |
| 2016 | 30 October 2015 | Interim | 2.00 |
| 30 October 2015 | Special | 10.00 | |
| 24 June 2016 | Final | 2.25 | |
| 2017 | 28 October 2016 | Interim | 2.00 |
| Total dividends paid | 48.72 | ||
| 2017 | 23 June 2017 | Proposed final | 2.25 |
| Total dividends paid or proposed | 50.97 |
The Board of four Directors, all of whom are non-executive and the majority of whom are considered by the Board to be independent of the Manager, supervises the management of Maven Income and Growth VCT 2 PLC and looks after the interests of its Shareholders. The Board is responsible for setting and monitoring the Company's strategy and the biographies set out below indicate the Directors' range of investment, commercial and professional experience. Further details are provided in the Directors' Report and in the Statement of Corporate Governance.
John Lawrence MBE Chairman and Independent Non-executive Director
Relevant experience and other directorships: John is a former chairman of Formation Group PLC and a former director of W H Ireland Group plc, a company admitted to AIM in 2000. He formed JEL Energy Conservation Services Limited in 1975, which was sold to Thorn EMI. Since 1993, he has been an investor and non-executive chairman or director of a number of public and private companies (including a number of venture capital backed buy-out companies), assisting the management teams to develop strategy and growth. In 1984 John was awarded an MBE for services to industry.
Length of service: He was appointed as a Director on 11 January 2001 and as Chairman on 17 June 2015.
Last re-elected to the Board: 15 June 2016
Committee membership: Audit, Management Engagement (Chairman), Nomination, Remuneration and Risk.
Employment by the Manager: None
Shared directorships with other Directors: None
Shareholding in Company: 10,155 Ordinary Shares
The Hon Robert Kissin Independent Non-executive Director
Relevant experience and other directorships: Robert established Lewis & Peat Merchant Bank Limited in 1973 and subsequently, as a director of Guinness Peat Group Limited, was responsible for international projects and finance in the Middle East and Far East. Having been appointed chairman of Lewis & Peat Inc. in 1981, he was responsible for the Guinness Peat Group's US trading activities and, since 1990, has been involved in a number of energy related projects in America and Central Asia.
Length of service: He was appointed as a Director on 1 September 2004.
Last re-elected to the Board: 17 June 2015
Committee membership: Audit, Management Engagement, Nomination (Chairman), Remuneration (Chairman) and Risk.
Employment by the Manager: None
Shared directorships with other Directors: None
Shareholding in Company: 10,000 Ordinary Shares
Peter Linthwaite Independent Non-executive Director
Relevant experience and other directorships: Peter oversees the portfolio of private equity fund investments of The Royal London Mutual Insurance Society Limited. He has over 25 years of private equity experience and was chief executive of the British Private Equity and Venture Capital Association (BVCA) from 2005 to 2007.
Length of service: He was appointed as a Director on 16 September 2015.
Elected to the Board: 15 June 2016
Committee membership: Audit (Chairman), Management Engagement, Nomination, Remuneration and Risk (Chairman).
Employment by the Manager: None
Shared directorships with other Directors: None
Shareholding in Company: 5,000 Ordinary Shares
Bill Nixon Non-executive Director
Relevant experience and other directorships: Bill is managing partner of Maven Capital Partners UK LLP (Maven) and has over 35 years' experience in banking and private equity. He is a Fellow of the Chartered Institute of Bankers in Scotland and obtained an MBA from Strathclyde University in 1996. In the 1990s, Bill was head of the private equity business at Clydesdale Bank plc, a subsidiary of National Australia Bank, before joining Aberdeen Asset Management plc (Aberdeen) in 1999. In 2004, he was appointed as principal fund manager to all Aberdeen managed VCTs. In 2009, Bill and his senior colleagues led a management buy-out from Aberdeen to form Maven. He is also a director of Maven Income and Growth VCTs 3, 4 and 6.
Length of service: He served as an Alternate Director from 1 November 2005 and was appointed as a Director on 16 July 2008.
Last re-elected to the Board: 15 June 2016
Committee membership: None
Employment by the Manager: Since 1999 (1999 - 2009 with Aberdeen)
Shared directorships with other Directors: None
Shareholding in Company: 321,585 Ordinary Shares
On behalf of your Board I am pleased to report on the further progress achieved in the year to 31 January 2017. During the period under review NAV total return increased to 99.24p per share reflecting the strength of the underlying portfolio. The profitable realisations of several of the more mature investments have helped to maintain the steady increase in NAV total return. Your Board is mindful of the importance of dividend payments to Shareholders and, in recognition of the performance achieved, is recommending a final dividend of 2.25p per share. This represents a full year distribution of 4.25p per share, equivalent to an annual tax-free yield of 9.66%, based on the share price at the year end.
The reporting period has been one of considerable change for the UK VCT industry following the enactment of the revised VCT legislation in November 2015. The new rules have introduced a number of restrictions on the types of transactions and companies in which VCTs can invest, requiring the Manager to focus on the provision of development capital, or investing in businesses with growth finance requirements, rather than management buy-outs or acquisition based transactions which have traditionally offered a more predictable return profile. The investment team at Maven is highly experienced at sourcing and executing transactions that meet the revised criteria, and the Board is pleased to report that six new VCT qualifying investments were completed during the year. The Directors are also encouraged by the large and diverse pipeline of prospective new investments, at various stages of due diligence, and anticipate seeing a number of these transactions complete during the first half of the current financial year.
The Board believes that considerable progress has been achieved by your Company during the reporting period, despite the challenges presented by the implementation of the revised VCT legislation and the economic uncertainty resulting from the outcome of the European Union (EU) referendum in June 2016. Against this backdrop, the core portfolio has continued to perform well, as can be seen from the detailed analysis included in the Investment Manager's Review on pages 18 to 23 of this Annual Report. The continuing growth experienced by a number of private company holdings has enabled the valuations of these assets to be increased, reflecting positive trading results. The Board also remains conscious of the impact that the low oil price is having on companies with exposure to the energy services sector and, whilst direct remedial action has been taken by those investee companies with exposure, the external environment has continued to be challenging and is likely to remain so until at least the second half of 2017. As such, the valuations of a number of these investments have been conservatively reduced to reflect the prevailing market conditions.
A number of profitable realisations were achieved during the reporting period, most notably the exit from Nenplas which completed in December 2016, achieving a total return of 5.0 times cost over the life of the investment. The Directors are also aware that discussions are in progress regarding potential exits from several of the more mature assets, although there can be no certainty that these will lead to profitable realisations.
Whilst the full impact of the UK's decision to leave the EU will become clearer once formal negotiations commence, the Board and the Manager have conducted a review of the Company's assets and, at present, believe that any overall effect is not likely to be significant. The businesses in which your Company has invested will maintain or adapt their growth strategies as appropriate, with a number of exporters already seeing a short-term benefit from the devaluation of Sterling against several major currencies that has occurred since the referendum in June 2016.
NAV total return of 99.24p per share (2016: 97.45p) at the year end
NAV at year end of 50.52p per share (2016: 52.98p) after payment of dividends totalling 4.25p per share during the year
Six new VCT qualifying private equity investments added to the portfolio
Strong pipeline of VCT qualifying private equity investments
Realisation of Nenplas, achieving a total return of 5.0 times cost
Disposal of Dantec Hose, generating a total return of 2.1 times cost
Proposed final dividend of 2.25p per share (2016: 2.25p) The Board is pleased to note that, in June 2016, Maven received industry recognition for its performance when it was named Private Equity House of the Year, for the second year running, at the 2016 High Potential Business Awards (previously the M&A Awards). This category celebrates outstanding growth businesses and their financial backers, recognising private equity managers that have displayed the keenest judgement and opportunism in completing acquisitions or exit transactions. Maven was also named Private Equity Manager of the Year at the ACQ Global Awards which celebrate achievement and innovation across the fund management industry.
The Board recognises the excellent work done by the management and staff at Maven and is pleased to acknowledge the industry's recognition of your Manager.
The Board recommends that a final dividend of 2.25p per Ordinary Share, comprising 0.20p of revenue and 2.05p of capital, be paid on 23 June 2017 to Shareholders on the register at 26 May 2017. This would bring total dividends for the year to 4.25p per share representing a yield of 9.66% based on the year-end closing mid-market share price of 44.00p. The effect of paying the proposed final dividend would be to reduce the NAV of the Company by the total cost of the distribution.
Since the Company's launch, and after receipt of the proposed final dividend, Shareholders will have received 50.97p per share in tax-free dividends. The Board considers it important for Shareholders to be aware that the move to invest in development capital and growth finance opportunities, as required by the revised VCT legislation, is likely to result in less predictable capital gains and income flows, with the result that the quantum and timing of future dividend payments could be subject to fluctuation.
As the Company currently enjoys significant cash liquidity for new investment, the Board has elected not to raise further funds at present.
Shareholders should be aware that the Board's primary objective is for the Company to retain sufficient liquid assets for making investments in line with its stated policy and for the continued payment of dividends. However, the Directors also acknowledge the need to maintain an orderly market in the Company's shares and have delegated authority to the Manager to buy back shares in the market for cancellation or to be held in treasury, subject always to such transactions being in the best interests of Shareholders.
It is intended that, subject to market conditions, available liquidity and the maintenance of the Company's VCT status, shares will be bought back at prices representing a discount of between 10% and 20% to the prevailing NAV per share.
As previously reported, the Finance Act (No. 2) 2015 was enacted in November 2015 and introduced a number of changes to the legislation governing VCTs. The new rules are designed to bring the UK VCT scheme into line with EU State Aid Rules for smaller company investment and have introduced a number of restrictions on the types of qualifying transactions and companies in which VCTs can invest. Unlike previous changes in legislation, the new rules apply to all funds raised by a VCT, including those raised prior to November 2015, although existing investments, completed prior to the legislation change, are unaffected.
The new rules specifically prohibit participation in management buy-outs or acquisitions, and limit the ability to support older companies unless specific criteria are met. The emphasis is, therefore, on providing development capital to younger and earlier stage companies, or supporting more established businesses which can demonstrate growth strategies that satisfy specific provisions under the revised qualification criteria. In a further amendment, the March 2016 Budget Statement included changes to the rules governing non-qualifying investments by VCTs. With effect from 6 April 2016, VCTs have only been able to make qualifying investments and certain limited investments for liquidity purposes, with other types of new nonqualifying investments now prohibited.
The revised legislation has imposed additional diligence and administrative requirements on the investment process in order to ensure that all aspects of the potential investment and transaction structure remain compliant with the new rules. The Manager continues to pursue a cautious approach and works closely with a specialist VCT adviser, engaged by the Company, to assist in interpreting the revised legislation and advising on the VCT tax clearance process with HM Revenue & Customs (HMRC), with advance assurance secured prior to any new investment completing. The Board welcomed the announcement in the Chancellor's 2016 Autumn Statement that, in response to the increased volume of applications submitted and the resultant delays experienced in obtaining clearance for proposed investments, a consultation is being carried out to consider the options for streamlining the HMRC advance assurance service.
The 2016 Autumn Statement highlighted that the Government will no longer be initiating a review of the provision allowing replacement capital in certain new VCT transactions, but suggested that this may be reviewed at some point in the future. Whilst the Directors and the Manager were disappointed by this announcement, as the ability to include replacement capital was viewed as an important flexibility under the new rules, it does not impact the Company's investment strategy which has already adapted to meet the requirements of the new rules. The Chancellor's 2017 Spring Statement did not introduce any further amendment to the VCT legislation.
As indicated in previous Annual Reports, in order to allow a wider range of Shareholders the opportunity to meet the Directors and the Manager, it is intended that AGMs will be held in Glasgow and London in alternate years. Therefore, the 2017 AGM will be held in the London office of Maven Capital Partners LLP on 14 June 2017, and the Notice of Annual General Meeting can be found on pages 70 to 74 of this Annual Report.
Your Board remains committed to the strategy of building a large and diversified portfolio of income generating private company holdings capable of supporting attractive tax-free distributions to Shareholders. Whilst the introduction of the new VCT rules has placed restrictions on the types of transactions and companies in which your Company can invest, the Directors are encouraged by the progress achieved during the reporting period. The completion of six new VCT qualifying investments, together with the strong and growing pipeline of potential opportunities at various stages of the diligence process across Maven's regional office network, demonstrates the flexibility of its approach, which has adapted well to meet the regulatory changes while also delivering the investment objective.
Over the coming years the portfolio will continue to evolve as selective high growth VCT qualifying opportunities are added, whilst the more mature assets naturally progress to exit. This gradual rebalancing of the asset base may have an impact on the quantum and timing of future Shareholder distributions, as the proportion of earlier stage investments increases. However, the Directors believe that the strength of the underlying portfolio, which consists of a larger proportion of investments completed prior to the rule changes, is capable of maintaining an attractive dividend policy.
John E Lawrence MBE Chairman
12 May 2017
For the Year Ended 31 January 2017
| £'000 | Valuation 31 January 2016 % |
Net investment/ (disinvestment) £'000 |
Appreciation/ (depreciation) £'000 |
£'000 | Valuation 31 January 2017 % |
|
|---|---|---|---|---|---|---|
| Unlisted investments | ||||||
| Equities | 6,412 | 29.5 | (529) | 1,010 | 6,893 | 33.6 |
| Loan stock | 10,157 | 46.7 | (1,108) | (17) | 9,032 | 44.1 |
| 16,569 | 76.2 | (1,637) | 993 | 15,925 | 77.7 | |
| AIM/ISDX investments | ||||||
| Equities | 114 | 0.5 | (40) | 39 | 113 | 0.6 |
| Listed investments | ||||||
| Equities | 13 | 0.1 | (3) | - | 10 | - |
| Investment trusts | - | - | 1,036 | 27 | 1,063 | 5.2 |
| UK treasury bills | 4,895 | 22.5 | (4,906) | 11 | - | - |
| Total investments | 21,591 | 99.3 | (5,550) | 1,070 | 17,111 | 83.5 |
| Other net assets | 179 | 0.7 | 3,212 | - | 3,391 | 16.5 |
| Net assets | 21,770 | 100.0 | (2,338) | 1,070 | 20,502 | 100.0 |
This Business Report is intended to provide an overview of the strategy and business model of the Company as well as the key measures used by the Directors in overseeing its management. The Company is a venture capital trust which invests in accordance with the investment objective set out below.
The Company aims to achieve long-term capital appreciation and generate maintainable levels of income for Shareholders.
Under an investment policy approved by the Directors, the Company intends to achieve its objective by:
The principal risks and uncertainties facing the Company are as follows:
Many of the Company's investments are in small and medium sized UK unquoted and AIM/ISDX quoted companies which, by their nature, entail a higher level of risk and lower liquidity than investments in large quoted companies. The Board aims to limit the risk attaching to the investment portfolio as a whole by ensuring that a structured selection, monitoring and realisation process is applied. The Board reviews the investment portfolio with the Manager on a regular basis.
The Company manages and minimises investment risk by:
As most of the investments require a mid to long-term commitment and are relatively illiquid, the Company retains a portion of the portfolio in cash or cash equivalents in order to finance any new unquoted investment opportunities. The Company has only limited direct exposure to currency risk and does not enter into any derivative transactions.
The valuation of investment companies may be affected by underlying economic conditions such as fluctuating interest rates and the availability of bank finance.
The Company may hold financial instruments and cash deposits and is dependent on counterparties discharging their agreed responsibilities. The Directors consider the creditworthiness of the counterparties to such instruments and seek to ensure that there is no undue concentration of exposure to any one party.
The Board reviews regularly the system of internal controls, both financial and non-financial, operated by the Company and the Manager. These include controls designed to ensure that the Company's assets are safeguarded and that all records are complete and accurate.
The Company operates in a complex regulatory environment and faces a number of related risks, including:
In order to maintain its approval as a VCT, the Company is required to comply with current VCT legislation in the UK as well as the EU State Aid Rules. Changes in the future to either legislation could have an adverse impact on Shareholder investment returns whilst maintaining the Company's VCT status. The Board and the Manager continue to make representations where appropriate, either directly or through relevant industry bodies such as the BVCA.
The Board has retained Philip Hare & Associates LLP as VCT Adviser to the Company.
Breaches of other regulations including, but not limited to, the Companies Act 2006, the FCA Listing Rules, the FCA Disclosure and Transparency Rules or the Alternative Investment Fund Managers Directive (AIFMD), could lead to a number of detrimental outcomes and reputational damage. Breaches of controls by service providers to the Company could also lead to reputational damage or loss.
The AIFMD introduced a new authorisation and supervisory regime for all investment companies in the EU. The Company was approved by the FCA as a self-managed UK AIFM under the AIFMD.
The Company is also required to comply with tax legislation under the Foreign Account Tax Compliance Act and the Common Reporting Standard. The Company has appointed Capita Asset Services to act on its behalf to report annually to HMRC and ensure compliance with this legislation.
In a referendum held on 23 June 2016, the UK voted to leave the EU (a process informally known as Brexit). The formal process of implementing this decision was contained within Article 50 of the Lisbon Treaty and the political, economic and legal consequences of the referendum vote are not yet known. It is possible that investments in the UK may be more subjective to value, may be more difficult to assess for suitability of risk, harder to buy or sell, or may be subject to greater or more frequent rises and falls in value. In the longer term, there is likely to be a period of uncertainty as the UK seeks to negotiate its exit from the EU. The UK's laws and regulations concerning funds may, in future, diverge from those of the EU. This could lead to changes in the operation of the Company, the rights of investors, or the territories in which the shares of the Company may be promoted and sold.
An explanation of certain economic and financial risks and how they are managed is also contained in Note 16 to the Financial Statements.
The Company is adhering to its stated investment policy and managing the risks arising from it. This can be seen in various tables and charts throughout this Annual Report, and from information provided in the Chairman's Statement and in the Investment Manager's Review. A review of the Company's business, its position as at 31 January 2017 and its performance during the year then ended is included in the Chairman's Statement, which also includes an overview of the Company's strategy and business model.
The management of the investment portfolio has been delegated to Maven Capital Partners UK LLP (Maven), which also provides company secretarial, administrative and financial management services to the Company. The Board is satisfied with the depth and breadth of the Manager's resources and its network of offices, which originate new deals and enable it to monitor the geographically widespread portfolio of companies effectively.
The Investment Portfolio Summary on pages 30 and 31 discloses the investments in the portfolio and the degree of co-investment with other clients of the Manager. The tabular analysis of the unlisted and quoted portfolio on pages 16 and 17 show that the portfolio is diversified across a variety of industry sectors and deal types. The level of VCT qualifying investment is monitored by the Manager on a daily basis and reported to the Risk Committee quarterly.
At each Board Meeting the Directors consider a number of financial performance measures to assess the Company's success in achieving its investment objective, and these also enable Shareholders and prospective investors to gain an understanding of its business. The key performance indicators are as follows:
The NAV total return is a measure of the Shareholder value that includes current NAV per share and total dividends paid to date. The dividend growth measure shows how much of that Shareholder value has been returned to original investors in the form of dividends. A historical record of these measures is shown in the Financial Highlights on pages 5 and 6 and the profile of the portfolio is reflected in the Summary of Investment Changes on page 12. The Board reviews the Company's investment income and operational expenses on a quarterly basis as the Directors consider that both of these elements are important components in the generation of Shareholder returns.
There is no meaningful VCT index against which to compare the financial performance of the Company but, for reporting to the Board and Shareholders, the Manager uses comparisons with appropriate indices and the Company's peer group. The Directors also consider non-financial performance measures such as the flow of investment proposals and the Company's ranking within the VCT sector by independent analysts.
Consideration is also given to economic, regulatory and political trends and features that may impact on the Company's future development and performance.
Investments held by Maven Income and Growth VCT 2 PLC in unquoted companies are valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines. Investments quoted or traded on a recognised stock exchange are valued at their bid prices.
The Board will seek the necessary Shareholder authority to continue to conduct a share buy-back programme under appropriate circumstances.
The Company has no direct employee or environmental responsibilities, nor is it responsible for the emission of greenhouse gases. However, the Directors will consider economic, regulatory and political trends and features that may impact on the Company's future development and performance. The Board's principal responsibility to Shareholders is to ensure that the investment portfolio is managed and invested properly.
The management of the portfolio is undertaken by the Manager through members of its portfolio management team. The Manager engages with the Company's underlying investee companies in relation to their corporate governance practices and in developing their policies on social, community and environmental matters and further information may be found in the Statement of Corporate Governance. In light of the nature of the Company's business, there are no relevant human rights issues and, therefore, the Company does not have a human rights policy.
The Company's Independent Auditor is required to report if there are any material inconsistencies between the content of the Strategic Report and the Financial Statements. The Independent Auditor's Report can be found on pages 49 to 53.
The Board and the Manager intend to maintain the policies set out above for the year ending 31 January 2018 as it is believed that these are in the best interests of Shareholders.
The Business Report, and the Strategic Report as a whole, was approved by the Board of Directors and signed on its behalf by:
John Lawrence MBE Director 12 May 2017
As at 31 January 2017
| Industry sector | Unlisted valuation £'000 |
% | Quoted valuation £'000 |
% | Total valuation £'000 |
% |
|---|---|---|---|---|---|---|
| Support services | 3,100 | 18.2 | 8 | - | 3,108 | 18.2 |
| Automobiles & parts | 1,662 | 9.7 | - | - | 1,662 | 9.7 |
| Technology | 1,657 | 9.7 | - | - | 1,657 | 9.7 |
| Insurance | 1,585 | 9.3 | 10 | 0.1 | 1,595 | 9.4 |
| Energy services | 1,478 | 8.6 | - | - | 1,478 | 8.6 |
| Investment companies | 100 | 0.6 | 1,063 | 6.2 | 1,163 | 6.8 |
| Telecommunication services | 1,038 | 6.1 | - | - | 1,038 | 6.1 |
| Electronic & electrical equipment | 1,033 | 6.0 | - | - | 1,033 | 6.0 |
| Speciality & other finance | 889 | 5.2 | - | - | 889 | 5.2 |
| Diversified industrials | 691 | 4.0 | - | - | 691 | 4.0 |
| Household goods & textiles | 392 | 2.3 | 31 | 0.2 | 423 | 2.5 |
| Construction & building materials | 408 | 2.4 | - | - | 408 | 2.4 |
| Food producers & processors | 400 | 2.3 | - | - | 400 | 2.3 |
| Software & computer services | 374 | 2.2 | 24 | 0.1 | 398 | 2.3 |
| Health | 398 | 2.3 | - | - | 398 | 2.3 |
| Engineering & machinery | 277 | 1.6 | - | - | 277 | 1.6 |
| Leisure & hotels | 224 | 1.3 | - | - | 224 | 1.3 |
| General retailers | 114 | 0.7 | - | - | 114 | 0.7 |
| Beverages | 105 | 0.6 | - | - | 105 | 0.6 |
| Media & entertainment | - | - | 50 | 0.3 | 50 | 0.3 |
| Total | 15,925 | 93.1 | 1,186 | 6.9 | 17,111 | 100.0 |
As at 31 January 2017
| Deal type | Number | Valuation £'000 |
% |
|---|---|---|---|
| Unlisted | |||
| Management buy-out | 13 | 5,676 | 33.2 |
| Development capital | 14 | 3,642 | 21.3 |
| Acquisition finance | 7 | 3,425 | 20.0 |
| Replacement capital | 4 | 1,481 | 8.7 |
| Buy-in/management buy-out | 3 | 988 | 5.8 |
| Management buy-in | 1 | 347 | 2.0 |
| Buy & build | 1 | 261 | 1.5 |
| Early stage | 1 | 105 | 0.6 |
| Total unlisted | 44 | 15,925 | 93.1 |
| Quoted | |||
| Listed | 11 | 1,063 | 6.2 |
| AIM | 10 | 123 | 0.7 |
| Total quoted | 21 | 1,186 | 6.9 |
| Total unlisted and quoted | 65 | 17,111 | 100.0 |
Bill Nixon Managing Partner Maven Capital Partners UK LLP
The year to 31 January 2017 represented another period of positive progress by your Company. During the period, a number of profitable realisations were achieved, the most notable being Nenplas, which was sold to a German trade buyer, achieving an exit multiple of 5.0 times cost over the life of the investment. In addition, six VCT qualifying private company holdings were added to the portfolio, with a strong pipeline of prospective new investments currently at various stages of due diligence. This encouraging performance leaves your Company well positioned and with sufficient liquidity to maintain an active investment policy.
During the reporting period, the Manager has focused on continuing to deliver your Company's investment objective within the provisions of the new VCT rules. These rules have introduced a number of restrictions on the types of companies and transactions in which VCTs can invest, with the emphasis on providing development capital, or supporting businesses with growth finance requirements.
Over the course of the year, the investment team has reviewed and assessed an extensive pipeline of potential opportunities, progressing only those prospects that meet Maven's strict investment quality criteria. The focus has been on identifying opportunities available at an attractive entry price or that can demonstrate a disruptive business model capable of scalable growth. Wherever possible Maven is keen to support management teams with a proven track record of success in a previous business.
The Manager is pleased to report on the completion of six new investments across a range of sectors. In April 2016, an investment was completed in The GP Service (UK), a business with an innovative on-line interface which provides access to GP appointments delivered by a live video link. In July 2016, an investment was completed in Rockar, a revolutionary automotive retail platform. In October 2016, Maven VCTs invested in Chic Lifestyle, a fast growing inventory management system for small luxury accommodation operators in the premium travel market. In November 2016, an investment was completed in Growth Capital Ventures, a developer and operator of on-line co-investing platforms for the alternative finance sector. In December 2016, Maven VCTs invested in Whiterock Group, a specialist visual asset management business operating across a range of sectors, and QikServe, a business that has developed a patented software product for the hospitality industry.
Maven is currently evaluating a strong pipeline of potential new investments across a diverse range of sectors and it is anticipated that a number of these will complete in the first half of the current financial year. Given the complexity of the new VCT rules, and to ensure ongoing compliance, the investment team continues to work closely with VCT advisers in order to obtain advance assurance from HMRC prior to any investment being completed. Latterly, it has become apparent that the level of information required, and the time taken to opine, by HMRC can vary significantly, which has delayed the completion of a number of new investments in the current reporting period. The Manager, therefore, welcomed the announcement that a consultation has been launched into options to streamline the HMRC advance assurance service.
During the year, considerable progress has been achieved across the portfolio, despite the challenges presented by the enactment of the revised VCT legislation and the economic uncertainty resulting from the outcome of the UK referendum on EU membership in June 2016. Maven maintains a supportive working relationship with investee management teams, offering practical assistance to help deliver strategic and operational objectives. This proactive approach helps to ensure greater stability across the portfolio with a view to maximising the value of assets up to the point of exit.
The Maven team has also worked closely with those portfolio companies that have been engaged in an exit process, helping management teams to develop appropriate strategies and identify suitable buyers that may be willing to pay a premium price for the business. It is encouraging to note that, although a number of successful realisations completed during the period, there remains further interest in your Company's assets from a range of potential trade and private equity acquirers, in the UK and from overseas. However, there can be no guarantee that these discussions will lead to realisations.
Notable exits during the period included Nenplas, which completed in December 2016 achieving a 5.0 times total return, and Dantec Hose, which completed in February 2016 achieving a 2.1 times total return. Both assets were sold to German trade buyers at a premium to carrying value. The cash generated from these sales has allowed your Company to build a strong liquidity position to support its investment strategy.
The private equity portfolio has generally performed well during the year, as detailed below, with strong trading results having led to valuation uplifts for a number of companies operating across a range of sectors. Conversely, the Board has elected to take protective provisions against the values of a number of investments in businesses with an exposure to the oil & gas sector, until there is evidence of a sustained recovery.
Cursor Controls, a global leader in the design and niche manufacture of trackball pointing solutions for industrial applications, has performed well since Maven clients invested in July 2015. The impressive organic growth achieved in the year to 31 December 2015 has been maintained and was further enhanced by the acquisition, in April 2016, of Belgian distributor NSI. The acquisition was identified as part of Maven's investment case and is expected to be significantly earnings enhancing, with a number of commercial and operational synergies identified to help drive the growth and profitability of the enlarged group. The management team is encouraged by the integration process to date, with NSI trading to plan and the core Cursor business delivering organic growth.
Manufacturer and supplier of technical plastic components and interior parts for the global automotive industry, John McGavigan, continues to outperform expectations. The current year has seen a further significant increase in profitability across its operations both in China and Scotland, which has been achieved through top line growth enhanced by the benefits of a number of productivity improvement projects implemented earlier in the year. The order book remains strong, with a number of significant projects secured in recent months, increasing the visibility of the future prospects for the business. Given the solid performance and growth achieved, the management team is considering potential acquisitions and is also moving its premises in China in anticipation of capacity constraints in the region in the short to medium term.
Torridon (Gibraltar) is an established general insurer, which trades through its subsidiary Elite Insurance. The business is registered in Gibraltar and is authorised to write 12 general insurance business classes across 14 EU/EEA States. Elite has delivered impressive growth over recent years and now has 30 lines of insurance, with the UK business representing 62% of total sales. The business focuses on high margin niche lines, requiring considerable expertise and underwriting skills as well as holding strong distribution relationships.
The UK's largest provider of promotional merchandise, SPS (EU), has achieved excellent growth under private equity ownership since Maven clients invested in February 2014. Operational improvements have enhanced profitability following the successful implementation of a new enterprise resource planning system. The complementary acquisitions of HPP and TEC, completed in the year to 31 December 2015, have been successfully integrated within the group and are delivering a positive profit contribution. The company has invested in sales resource to help penetrate the European market, and this region is starting to contribute to group performance. The balance sheet remains healthy and the business has reduced its core term debt.
DPP provides mechanical and electrical maintenance and installation services mainly to the leisure, hospitality and retail sectors in the south of England and Wales. The company differentiates itself by employing a large and highly responsive team of skilled engineers. The business has made considerable progress over the past 12 months by enhancing operational procedures and reducing costs, which has led to a significant improvement in profitability. A number of new contracts were secured during the year and the outlook is positive, which is highly encouraging given the challenges experienced during 2014 when DPP lost a key customer. The company has no external bank debt and was able to make a voluntary partial repayment of Maven client loan notes during the period.
Vodat Communications Group is a leading supplier of communications infrastructure to the UK retail industry, with customers including high street names such as Poundland, Welcome Break, Ted Baker and SuperGroup. Vodat supplies data networks, IP telephony, wi-fi solutions and fixed line connectivity to retail customers. Following the Maven led management buy-out in 2012, the business has achieved positive growth and added a number of new customer contracts. Vodat benefits from high levels of contracted revenue, which underpins future growth, and is highly cash generative with no external bank debt.
International catalyst handling specialist, CatTech International is currently trading strongly. Whilst the improvement in performance is largely attributable to three sizeable projects in Kazakhstan, Iran and Venezuela that are unlikely to recur, the underlying profitability of the business has seen a significant turnaround from the performance of the previous two years. The outlook remains positive with a number of tenders currently progressing. There is no bank debt in the business and the cash position is healthy.
As well as reflecting the good trading performance highlighted above, your Board has also reduced the valuations of Flexlife, Glacier Energy Services and HCS Control Systems Group. These companies are active in the energy services sector, which has endured several years of difficult market conditions. Encouragingly, Maven has seen signs of improved activity across the industry as a whole in recent months, nevertheless a conservative approach to valuations has been adopted until there is evidence of a sustained recovery.
The Manager has continued to work closely with the portfolio companies that have exposure to the oil & gas market, including providing help to penetrate new markets and win additional customers, whilst working with management teams to reduce costs against a backdrop of lower activity levels. Most of the portfolio companies in this sector are now operating with a lean cost base and limited or no external debt and, consequently, are well placed to benefit from any market recovery.
Maven has avoided investing in exploration or production based assets, preferring those businesses focused on operational expenditure, particularly relating to essential health and safety, where a recovery in activity is often much less sensitive to the oil price.
In addition, the valuations of the investments in CHS Engineering Systems and Claven have been reduced.
During the year, your Company provided development capital to six new private companies operating across a range of sectors:
Chic Lifestyle, an inventory management system provider for the travel market, trading under the brand Chic Retreats, allows small-scale independent operators to control the live distribution of boutique hotel rooms and luxury villas, and manage reservations in real time through leading traffic generators. The investment will enable Chic to further develop its technology and strengthen its position within core European and North American markets.
Growth Capital Ventures, a developer and provider of online platforms that connect businesses seeking finance, with individuals that have capital to invest. The investment will enable the business to accelerate its growth plans by investing in technology to achieve scale in this expanding market.
The March 2016 Budget Statement imposed restrictions on the ability of VCTs to make certain new non-qualifying investments for liquidity purposes, including treasury bills and other government securities. In response to these changes, the Directors agreed to the Company investing a total of £1,036,000 across five private equity investment trusts and six real estate investment trusts. These are permitted investments under the amended legislation, and give your Company further exposure to asset classes that the Manager is familiar with, having existing knowledge of the respective portfolios and fund managers. The investments have been carefully selected and recommended by Maven and have income characteristics that should help to support future dividend payments by your Company.
The Board and the Manager are highly cognisant of the importance of maintaining an effective liquidity management policy and are currently reviewing a range of other permitted income generating options with a view to maximising the returns from monies held prior to investment.
Strategic Report
The following investments have been completed during the period:
| Investment cost |
||||
|---|---|---|---|---|
| Date | Sector | £'000 | Website | |
| Unlisted | ||||
| Chic Lifestyle Limited (trading as Chic Retreats) |
October 2016 | Leisure & hotels | 224 | www.chicretreats.com |
| Growth Capital Ventures Limited | November 2016 | Investment companies | 100 | www.growthcapitalventures.co.uk |
| QikServe Limited | December 2016 | Software & computer services |
298 | www.qikserve.com |
| Rockar 2016 Limited (trading as Rockar) |
July 2016 | Automobiles & parts | 483 | www.rockar.com |
| The GP Service (UK) Limited | April 2016 | Health | 398 | www.thegpservice.co.uk |
| Whiterock Group Limited | December 2016 | Technology | 209 | www.whiterockgroup.net |
| Total unlisted | 1,712 | |||
| Private equity investment trusts | ||||
| Apax Global Alpha Limited | September 2016 | Investment companies | 99 | www.apaxglobalalpha.com |
| F&C Private Equity Investment Trust PLC |
September 2016 | Investment companies | 103 | www.fandc.com |
| HgCapital Trust PLC | September 2016 | Investment companies | 100 | www.hgcapitaltrust.com |
| Princess Private Equity Holding Limited |
September 2016 | Investment companies | 98 | www.princess-privateequity.net |
| Standard Life Private Equity Trust PLC |
September 2016 | Investment companies | 43 | www.slcapital.com |
| Total private equity investment trusts | 443 | |||
| Real estate investment trusts | ||||
| British Land Company PLC | November 2016 | Investment companies | 99 | www.britishland.com |
| Custodian REIT PLC | November 2016 | Investment companies | 99 | www.custodianreit.com |
| Regional REIT Limited | November 2016 | Investment companies | 99 | www.regionalreit.com |
| Schroder REIT Limited | November 2016 | Investment companies | 99 | www.srei.co.uk |
| Standard Life Investment Property Income Trust Limited |
November 2016 | Investment companies | 99 | www.standardlifeinvestments.com |
| Target Healthcare REIT PLC | November 2016 | Investment companies | 98 | www.targethealthcarereit.co.uk |
| Total real estate investment trusts | 593 | |||
| UK treasury bills | ||||
| Treasury Bill 12 September 20161 | March 2016 | 2,744 | ||
| Total UK treasury bills | 2,744 | |||
| Total investments | 5,492 |
1 Purchased prior to the change in liquidity management rules on 6 April 2016.
Your Company has co-invested in some or all of the above transactions with Maven Income and Growth VCT, Maven Income and Growth VCT 3, Maven Income and Growth VCT 4, Maven Income and Growth VCT 5, Maven Income and Growth VCT 6 and Maven Investor Partners. At the period end, the portfolio stood at 65 unlisted and quoted investments at a total cost of £16.66 million.
A number of profitable realisations were achieved during the period. In December 2016, Maven achieved a full exit from plastics manufacturer Nenplas, through a trade sale to a German acquirer at a premium to carrying value. The exit achieved a total return of 5.0 times for investors in the 2006 buy-out of Homelux Nenplas. This is the second profitable realisation for Maven clients following the demerger process in March 2013, which achieved a partial exit for the Maven VCTs through the sale of the Homelux DIY products division to US firm QEP.
In September 2011, Maven VCTs funded the management buy-out of Dantec Hose, a global manufacturer of flexible composite hoses for bespoke petrochemical, marine and industrial applications. Throughout the period of investment, Maven supported the business in implementing a number of significant financial and operational improvements, which resulted in geographical and sectoral expansion of the customer base. An offer for the business was received from a German trade buyer and the sale completed in February 2016, achieving a 2.1 times total return over the investment period.
Further realisations have been achieved through the partial repayment of loan notes by DPP, the successful refinancing of Maven Capital (Llandudno) and the complete exit from Kelvinlea.
As at the date of this Annual Report, the Manager is engaged with several investee companies and prospective acquirers at various stages of a potential exit process, although there can be no certainty that these discussions will lead to profitable sales.
| The table below gives details of all realisations during the reporting period: | |
|---|---|
| -------------------------------------------------------------------------------- | -- |
| Year first invested |
Complete/ partial exit |
Cost of shares disposed of £'000 |
Value at 31 January 2016 £'000 |
Sales proceeds £'000 |
Realised gain/(loss) £'000 |
Gain/(loss) over 31 January 2016 value £'000 |
|
|---|---|---|---|---|---|---|---|
| Unlisted | |||||||
| Assecurare Limited | 2014 | Complete | 300 | 300 | 300 | - | - |
| Broadwave Engineering Limited | 2014 | Complete | 300 | 300 | 300 | - | - |
| Ensco 969 Limited (trading as DPP)1 | 2013 | Partial | 90 | 90 | 90 | - | - |
| Kelvinlea Limited | 2013 | Complete | 56 | 56 | 69 | 13 | 13 |
| LCL Hose Limited (trading as Dantec Hose)1 | 2011 | Complete | 219 | 325 | 338 | 119 | 13 |
| Llanllyr Water Company Limited | 2002 | Complete | 41 | 35 | 41 | - | 6 |
| Maven Capital (Llandudno) LLP | 2013 | Complete | 336 | 336 | 336 | - | - |
| Maven Co-invest Exodus Limited Partnership (invested in Six Degrees Group) |
2011 | Complete | - | - | 4 | 4 | 4 |
| Nenplas Holdings Limited1 | 2013 | Complete | 524 | 1,711 | 1,866 | 1,342 | 155 |
| Westway Services Holdings (2014) Limited | 2014 | Complete | - | - | 5 | 5 | 5 |
| Total unlisted | 1,866 | 3,153 | 3,349 | 1,483 | 196 | ||
| Quoted | |||||||
| Gocompare.com Group PLC | 2016 | Complete | - | - | 3 | 3 | 3 |
| Software Radio Technology PLC | 2005 | Complete | 6 | 4 | 9 | 3 | 5 |
| Tangent Communications PLC | 2007 | Complete | 99 | 9 | 31 | (68) | 22 |
| Total quoted | 105 | 13 | 43 | (62) | 30 | ||
| UK treasury bills | |||||||
| Treasury Bill 14 March 2016 | 2015 | Complete | 1,995 | 1,999 | 2,000 | 5 | 1 |
| Treasury Bill 21 March 2016 | 2015 | Complete | 1,448 | 1,449 | 1,450 | 2 | 1 |
| Treasury Bill 20 June 2016 | 2015 | Complete | 1,447 | 1,447 | 1,450 | 3 | 3 |
| Treasury Bill 12 September 20162 | 2016 | Complete | 2,744 | N/A | 2,750 | 6 | N/A |
| Total UK treasury bills | 7,634 | 4,895 | 7,650 | 16 | 5 | ||
| Total disposals | 9,605 | 8,061 | 11,042 | 1,437 | 231 |
1 Proceeds exclude yield and redemption premiums received, which are disclosed as revenue for financial reporting purposes.
2 Holdings acquired and realised during the period.
The table above includes the redemption of loan notes by a number of investee companies.
The Manager is cautiously optimistic about the year ahead, notwithstanding the political and economic uncertainty surrounding the UK's intended exit from the EU, and the changes introduced through the enactment of the revised VCT legislation. The progress achieved by your Company during the reporting period demonstrates the strength and resilience of the investee company portfolio and its ability to sustain positive Shareholder returns. The Manager believes that the current pipeline of prospective new investments provides your Company with the opportunity to further broaden the portfolio, and expects a number of these transactions to complete in the first half of the current financial year, subject to receiving advance assurance from HMRC on a case by case basis.
The immediate investment strategy being applied by the Manager is to continue to expand the asset base of your Company by both size and sector through the utilisation of existing cash resources and, at the same time, build a blended portfolio of investments in more established companies, completed prior to the legislation changes, along with a number of new investments in carefully selected younger companies capable of higher growth, with commensurately higher return potential. The Manager believes that this approach to portfolio development will allow Shareholders to benefit from a balanced and diverse asset base capable of sustaining both capital and income returns in the years ahead.
Maven Capital Partners UK LLP Manager 12 May 2017
Strategic Report
As at 31 January 2017
Torridon (Gibraltar) Limited Grantham www.elite-insurance.co.uk
Maven Income and Growth VCT Maven Income and Growth VCT 3 Maven Income and Growth VCT 4 Maven Income and Growth VCT 6 Maven Investor Partners
Lemac No. 1 Limited (trading as John McGavigan) Glasgow www.mcgavigan.com
Maven Income and Growth VCT Maven Income and Growth VCT 3 Maven Income and Growth VCT 4 Maven Income and Growth VCT 6
| Cost (£'000) | 198 | |||
|---|---|---|---|---|
| Valuation (£'000) | 1,323 | |||
| Basis of valuation | Earnings | |||
| Equity held | 2.2% | |||
| Income received (£'000) | 177 | |||
| First invested | January 2010 | |||
| Year ended | 31 March1 | |||
| 2016 (£'000) | 2015 (£'000) | |||
| Sales | 163,753 | 160,423 | ||
| EBITDA2 | 8,675 6,720 |
|||
| Net assets | 47,870 | 37,624 |
Torridon was established to acquire Elite Insurance, a national supplier of financial and legal insurance products and litigation services in a public-to-private transaction in 2010. Elite provides a range of over 30 lines, including before-the-event, after-the-event and clinical negligence products, as well as medico legal reports and psychological reports to a client base of principally UK based solicitors.
| Cost (£'000) | 376 | ||
|---|---|---|---|
| Valuation (£'000) | 1,179 | ||
| Basis of valuation | Earnings | ||
| Equity held | 4.9% | ||
| Income received (£'000) | 163 | ||
| First invested | December 2010 | ||
| Year ended | 31 December | ||
| 2016 (£'000) | 2015 (£'000) | ||
| Sales | 22,744 | 19,332 | |
| EBITDA2 | 5,032 | 2,642 | |
| Net assets | 6,233 | 2,915 |
John McGavigan is a manufacturer and supplier of decorative assemblies and interior parts for the global automotive industry, with a high proportion of the European market. The business supplies tier 1 manufacturers such as Bosch, Visteon, Continental and Yazaki, with components used by global brand car makers producing affordable high volume cars, including Ford, GM, Jaguar Land Rover and Toyota. The principal focus of operations is the design, manufacture and supply of parts, and it also provides a logistics management service, enabling just-in-time supply to manufacturing facilities across the world.
*Excluding three acquisition vehicles in the portfolio at 31 January 2017.
| Cost (£'000) | 364 | |
|---|---|---|
| Valuation (£'000) | 697 | |
| Basis of valuation | Earnings | |
| Equity held | 3.0% | |
| Income received (£'000) | 74 | |
| First invested | February 2014 | |
| Year ended | 31 December | |
| 2015 (£'000) | 20143 (£'000) |
|
| Sales | 21,995 | 16,731 |
| EBITDA2 | 2,302 | 1,864 |
| Net assets/(liabilities) | 2,188 | 1,878 |
SPS is a market-leading supplier in the promotional merchandise market and operates out of a modern 90,000 ft2 site with manufacturing, branding and storage facilities. The business focuses on new product development, innovative product sourcing, investment in branding technology and a clear commitment to operational and service excellence. SPS is now the UK's largest provider of promotional merchandise, supplying to more than 2,000 independent distributors in the UK and Europe.
| Cost (£'000) | 748 | |
|---|---|---|
| Valuation (£'000) | 685 | |
| Basis of valuation | Earnings | |
| Equity held | 9.1% | |
| Income received (£'000) | 110 | |
| First invested | January 2007 | |
| Year ended | 31 December | |
| 2015 (£'000) | 2014 (£'000) | |
| Sales | 2,485 | 2,635 |
| EBITDA2 | 312 | 405 |
| Net assets/(liabilities) | (2,490) | (1,921) |
Martel is one of the leading UK manufacturers of custom built compact printer and display units to a global customer base, across a range of industries including automotive, medical, transport and retail. The business differentiates itself from other printer suppliers by offering a complete design and build service for low volume/high customisation printer solutions. Martel offers in-house software and tooling design expertise, as well as injection moulding and surface mount capabilities.
SPS (EU) Limited Blackpool
www.spseu.com
Maven Income and Growth VCT Maven Income and Growth VCT 3 Maven Income and Growth VCT 4 Maven Income and Growth VCT 5 Maven Income and Growth VCT 6 Maven Investor Partners
Martel Instruments Holdings Limited Durham
www.martelinstruments.com
Maven Income and Growth VCT Maven Income and Growth VCT 3 Maven Income and Growth VCT 4 Maven Income and Growth VCT 5 Maven Income and Growth VCT 6
Ensco 969 Limited (trading as DPP) Southampton www.dpp.ltd.uk
Maven Income and Growth VCT Maven Income and Growth VCT 3 Maven Income and Growth VCT 4 Maven Income and Growth VCT 5 Maven Income and Growth VCT 6 Maven Investor Partners
CatTech International Limited Scunthorpe www.cat-tech.com
Maven Income and Growth VCT Maven Income and Growth VCT 3 Maven Income and Growth VCT 4 Maven Income and Growth VCT 5 Maven Income and Growth VCT 6 Maven Investor Partners
| Cost (£'000) | 584 | ||
|---|---|---|---|
| Valuation (£'000) | 584 | ||
| Basis of valuation | Earnings | ||
| Equity held | 2.5% | ||
| Income received (£'000) | 153 | ||
| First invested | March 2013 | ||
| Year ended | 31 October | ||
| 2016 (£'000) | 2015 (£'000) | ||
| Sales | 9,289 | 8,461 | |
| EBITDA2 | 796 | 351 | |
| Net assets | 2,090 | 2,531 |
DPP provides planned and reactive maintenance to the leisure, hospitality and retail sectors in the south of England and Wales. The business has grown from being a heating contractor into a service provider across the mechanical, electrical, HVAC and ventilation sectors, providing maintenance services under medium term contracts alongside project work for minor and major refurbishment programmes.
| Cost (£'000) | 323 | ||
|---|---|---|---|
| Valuation (£'000) | 507 | ||
| Basis of valuation | Earnings | ||
| Equity held | 3.1% | ||
| Income received (£'000) | 152 | ||
| First invested | March 2012 | ||
| Year ended | 31 December | ||
| 2015 (£'000) | 2014 (£'000) | ||
| Sales | 6,416 | 7,881 | |
| EBITDA2 | 40 | 424 | |
| Net assets/(liabilities) | (898) | (657) |
CatTech provides niche industrial services to oil refineries and petrochemical plants across the major international markets with offices in the UK, China, Singapore and Thailand. The business has developed a range of proprietary products for servicing essential equipment and improving catalyst handling. CatTech operates in a sector where the ability to maintain operational efficiency is critical, with an increasing focus on health and safety, and only a limited number of specialists worldwide that have the skilled personnel and specialist equipment to undertake catalyst handling projects.
| Cost (£'000) | 483 | |
|---|---|---|
| Valuation (£'000) | 483 | |
| Basis of valuation | Cost | |
| Equity held | 2.7% | |
| Income received (£'000) | Nil | |
| First invested | July 2016 | |
| This company has not yet produced its first report and accounts | ||
Rockar was established in 2012 with the aim of revolutionising the retail car buying market. The business model is a disruptive retail proposition which gives customers access to all the services of a traditional dealership online, or at one of Rockar's digital stores in high footfall shopping centres. The stores have created a convenient place for customers to view cars at their leisure without the pressure to buy. Rockar has also developed its on-line Buy-Button solution, which helps car manufacturers digitalise their traditional route to market and enables consumers to complete the entire purchase on-line, including options for part-exchange and finance.
| Cost (£'000) | 434 | |
|---|---|---|
| Valuation (£'000) | 434 | |
| Basis of valuation | Earnings | |
| Equity held | 1.7% | |
| Income received (£'000) | 93 | |
| First invested | March 2011 | |
| Year ended | 31 March | |
| 2016 (£'000) | 2015 (£'000) | |
| Sales | 22,692 | 25,949 |
| EBITDA2 | 1,109 | 2,609 |
| Net assets | (3,824) | 735 |
Glacier provides specialist services for energy infrastructure including on-site machining; well overlay for pressure control equipment; non-destructive testing; and heat transfer equipment repair and refurbishment. Glacier has a strong international presence in key energy markets, including the North Sea, the Middle East and West Africa, and focuses on developing products in the areas of production and processing equipment, intervention and pipeline components.
Rockar 2016 Limited (trading as Rockar) Newbald www.rockar.com
Maven Income and Growth VCT Maven Income and Growth VCT 3 Maven Income and Growth VCT 4 Maven Income and Growth VCT 5 Maven Income and Growth VCT 6
Glacier Energy Services Holdings Limited Aberdeen www.glacier.co.uk
Maven Income and Growth VCT Maven Income and Growth VCT 3 Maven Income and Growth VCT 4 Maven Income and Growth VCT 5 Maven Income and Growth VCT 6 Maven Investor Partners
Strategic Report
Vodat Communications Group Limited Stockport www.vodat-int.com
Maven Income and Growth VCT Maven Income and Growth VCT 3 Maven Income and Growth VCT 4 Maven Income and Growth VCT 5 Maven Income and Growth VCT 6 Maven Investor Partners
www.lambertcontracts.co.uk
Maven Income and Growth VCT Maven Income and Growth VCT 3 Maven Income and Growth VCT 4 Maven Income and Growth VCT 5 Maven Investor Partners
| Cost (£'000) | 299 | ||
|---|---|---|---|
| Valuation (£'000) | 413 | ||
| Basis of valuation | Earnings | ||
| Equity held | 3.5% | ||
| Income received (£'000) | 114 | ||
| First invested | March 2012 | ||
| Year ended | 31 March | ||
| 2016 (£'000) | 2015 (£'000) | ||
| Sales | 8,500 | 7,200 | |
| EBITDA2 | 657 | 103 | |
| Net assets | 1,759 | 1,860 |
Vodat provides managed network and communications solutions to business customers, with a particular focus on the UK retail sector. The business offers a range of products and services, including secure real-time data networks, telephone and VOIP services, card payment solutions, mobile marketing campaigns, wi-fi and disaster recovery services. Vodat's products enable retailers to reduce costs, boost store productivity and increase sales. The business provides services to over 7,000 retail sites and achieves a high level of customer retention. The established customer base includes Poundland, Welcome Break, Ted Baker and SuperGroup.
| Cost (£'000) | 408 | ||
|---|---|---|---|
| Valuation (£'000) | 408 | ||
| Basis of valuation | Earnings | ||
| Equity held | 6.1% | ||
| Income received (£'000) | 110 | ||
| First invested | June 2013 | ||
| Year ended | 30 April | ||
| 2016 (£'000) | 2015 (£'000) | ||
| Sales | 11,062 | 9,297 | |
| EBITDA2 | 187 | 280 | |
| Net assets | 1,001 | 1,675 |
Lambert is a leading specialist contractor in insurance reinstatement, property maintenance and fire protection and has long standing relationships with many of the UK's best known insurance companies, loss adjustors and property managers. The company provides 24/7 property maintenance, repairs and construction services as part of an integrated offering to homes and business owners aimed at minimising disruption. Services range from restoring premises damaged by fire, flood, water and smoke, carrying out general maintenance and restoration, through to providing specialist advice on fire safety contracts.
1Results for Elite Insurance Company Limited.
²Earnings before interest, tax, depreciation and amortisation.
3 For the period from 10 February 2014 to 27 December 2014. Holding company acquired the trading company part way through the year.
Maven offices
Ten largest investments
As at 31 January 2017
| Valuation £'000 |
Cost £'000 |
% of net assets |
% of equity held |
% of equity held by other clients1 |
|
|---|---|---|---|---|---|
| Unlisted | |||||
| Torridon (Gibraltar) Limited | 1,323 | 198 | 6.5 | 2.2 | 37.8 |
| (formerly Torridon Capital Limited) | |||||
| Lemac No. 1 Limited (trading as John McGavigan) | 1,179 | 376 | 5.7 | 4.9 | 31.9 |
| Majenta Logistics Limited | 750 | 750 | 3.6 | 9.9 | 39.9 |
| Vectis Technology Limited | 750 | 750 | 3.6 | 9.9 | 39.9 |
| SPS (EU) Limited | 697 | 364 | 3.4 | 3.0 | 39.5 |
| Martel Instruments Holdings Limited | 685 | 748 | 3.3 | 9.1 | 35.2 |
| Ensco 969 Limited (trading as DPP) | 584 | 584 | 2.8 | 2.5 | 32.0 |
| CatTech International Limited | 507 | 323 | 2.5 | 3.1 | 26.9 |
| Onyx Logistics Limited | 500 | 500 | 2.4 | 9.9 | 39.9 |
| Rockar 2016 Limited (trading as Rockar) | 483 | 483 | 2.4 | 2.7 | 11.1 |
| Glacier Energy Services Holdings Limited | 434 | 434 | 2.1 | 1.7 | 26.0 |
| Vodat Communications Group Limited | 413 | 299 | 2.0 | 3.5 | 38.3 |
| Lambert Contracts Holdings Limited | 408 | 408 | 2.0 | 6.1 | 58.6 |
| Constant Progress Limited | 400 | 400 | 2.0 | 7.8 | 42.0 |
| Equator Capital Limited | 400 | 400 | 2.0 | 7.8 | 42.0 |
| Toward Technology Limited | 400 | 400 | 2.0 | 7.8 | 42.0 |
| The GP Service (UK) Limited | 398 | 398 | 1.9 | 4.9 | 27.6 |
| JT Holdings (UK) Limited (trading as Just Trays) | 392 | 299 | 1.9 | 3.3 | 26.7 |
| Flow UK Holdings Limited | 374 | 374 | 1.8 | 4.5 | 30.5 |
| Fathom Systems Group Limited | 355 | 355 | 1.7 | 4.0 | 56.0 |
| CB Technology Group Limited | 347 | 347 | 1.7 | 7.1 | 71.9 |
| GEV Holdings Limited | 336 | 336 | 1.6 | 2.1 | 33.9 |
| HCS Control Systems Group Limited | 305 | 423 | 1.5 | 3.4 | 33.1 |
| QikServe Limited | 298 | 298 | 1.5 | 3.0 | 17.0 |
| Castlegate 737 Limited (trading as Cursor Controls) | 277 | 224 | 1.4 | 2.3 | 45.2 |
| R&M Engineering Group Limited | 268 | 357 | 1.3 | 4.0 | 66.6 |
| Maven Co-invest Endeavour Limited Partnership | 261 | 227 | 1.3 | 5.0 | 95.0 |
| (invested in Global Risk Partners) | |||||
| RMEC Group Limited | 249 | 249 | 1.2 | 1.6 | 48.5 |
| Metropol Communications Limited | 225 | 225 | 1.1 | 9.9 | 39.9 |
| Chic Lifestyle Limited (trading as Chic Retreats) | 224 | 224 | 1.1 | 6.7 | 40.1 |
| CHS Engineering Services Limited | 223 | 249 | 1.1 | 2.2 | 21.2 |
| Flexlife Group Limited | 223 | 249 | 1.1 | 1.0 | 13.6 |
| Whiterock Group Limited | 209 | 209 | 1.0 | 4.5 | 20.5 |
| TC Communications Holdings Limited | 180 | 309 | 0.9 | 2.6 | 27.4 |
| Attraction World Holdings Limited | 153 | 12 | 0.7 | 3.4 | 35.0 |
| Claven Holdings Limited | 139 | 139 | 0.7 | 9.5 | 40.5 |
| ISN Solutions Group Limited | 115 | 181 | 0.6 | 2.6 | 52.4 |
| Endura Limited | 114 | 114 | 0.6 | 0.3 | 5.5 |
| Llanllyr Water Company Limited2 | 105 | 123 | 0.5 | - | - |
| Growth Capital Ventures Limited | 100 | 100 | 0.5 | 2.8 | 19.9 |
| Lawrence Recycling & Waste Management Limited | 52 | 367 | 0.3 | 4.0 | 58.0 |
| Other unlisted investments | 90 | 968 | 0.4 | ||
| Total unlisted | 15,925 | 14,773 | 77.7 |
As at 31 January 2017
| Valuation £'000 |
Cost £'000 |
% of net assets |
% of equity held |
% of equity held by other clients1 |
|
|---|---|---|---|---|---|
| Quoted | |||||
| Cello Group PLC | 50 | 53 | 0.3 | 0.1 | 0.4 |
| Plastics Capital PLC | 31 | 25 | 0.2 | 0.1 | 1.3 |
| Vianet Group PLC (formerly Brulines Group PLC) | 24 | 31 | 0.1 | 0.1 | 1.4 |
| esure Group PLC | 10 | - | - | - | - |
| Work Group PLC | 8 | 251 | - | 1.1 | 2.0 |
| Other quoted investments | - | 488 | - | ||
| Total quoted | 123 | 848 | 0.6 | ||
| Private equity investment trusts | |||||
| Apax Global Alpha Limited | 109 | 99 | 0.6 | - | 0.1 |
| Princess Private Equity Holding Limited | 108 | 98 | 0.5 | - | 0.1 |
| HgCapital Trust PLC | 106 | 100 | 0.5 | - | 0.1 |
| F&C Private Equity Investment Trust PLC | 104 | 103 | 0.5 | 0.1 | 0.3 |
| Standard Life European Private Equity Trust PLC | 48 | 43 | 0.2 | - | - |
| Total private equity investment trusts | 475 | 443 | 2.3 | ||
| Real estate investment trusts | |||||
| Custodian REIT PLC | 102 | 99 | 0.5 | - | 0.2 |
| Schroder REIT Limited | 98 | 99 | 0.5 | - | 0.2 |
| Standard Life Investment Property Income | 98 | 99 | 0.5 | - | 0.2 |
| Trust Limited | |||||
| Regional REIT Limited | 97 | 99 | 0.5 | - | 0.2 |
| Target Healthcare REIT PLC | 97 | 98 | 0.5 | - | 0.2 |
| British Land Company PLC | 96 | 99 | 0.4 | - | - |
| Total real estate investment trusts | 588 | 593 | 2.9 | ||
| Total investments | 17,111 | 16,657 | 83.5 |
1 Other clients of Maven Capital Partners UK LLP.
2 Secured loan notes in respect of deferred consideration.
| Directors' Report | 33 |
|---|---|
| Directors' Remuneration Report | 37 |
| Statement of Corporate Governance | 41 |
| Statement of Directors' Responsibilities | 45 |
| Report by the Audit and Risk Committees | 46 |
| Independent Auditor's Report to the Members of Maven Income and Growth VCT 2 PLC |
49 |
The Directors submit their Annual Report together with the Financial Statements of the Company for the year ended 31 January 2017. A summary of the financial results for the year and the proposed final dividend can be found in the Financial Highlights on pages 5 and 6.
The Company's affairs have been conducted, and will continue to be conducted, in a manner to satisfy the conditions to enable it to continue to obtain approval as a venture capital trust under Section 274 of the Income Tax Act 2007.
The Company's Ordinary Shares are listed on the Premium segment of the Official List and traded in the main market of the London Stock Exchange. Further details are provided in the Corporate Summary.
As a venture capital trust pursuant to Section 274 of the Income Tax Act 2007, the rules of the FCA in relation to non-mainstream investment products do not apply to the Company.
The Company's business activities, together with the factors likely to affect its future development and performance, are set out in this Directors' Report. The financial position of the Company is described in the Chairman's Statement within the Strategic Report. In addition, Note 16 to the Financial Statements includes: the Company's objectives, policies and processes for managing its financial risks; details of its financial instruments; and its exposures to market price risk, interest rate risk, liquidity risk, credit risk and price risk sensitivity. The Directors believe that the Company is well placed to manage its business risks.
Having made suitable enquiries, the Directors have a reasonable expectation that the Company has adequate financial resources to enable it to continue in operational existence for the foreseeable future and, accordingly, they have continued to adopt the going concern basis when preparing the Annual Report and Financial Statements.
In accordance with Provision C.2.2 of the UK Corporate Governance Code published in April 2016, the Board has assessed the Company's prospects for the five year period to 31 January 2022. This period has been considered appropriate for a VCT business when considering the principal risks facing the Company.
In making this statement, the Board carried out a robust assessment of the principal business risks facing the Company as set out in the Business Report, including those that might threaten its business model, future performance, solvency, or degree of liquidity (particularly within the unquoted portfolio). The Board also considered the Company's ability to raise new funds and invest those proceeds. Its assessment took account of the availability and likely effectiveness of the mitigating actions that could be taken to avoid or reduce the impact of the underlying risks, including the Manager adapting its investment process to take account of the more restrictive VCT rules. The Board's review has considered the principal risks, including compliance with the new VCT rules, which were identified by the Manager. The Board concentrated its efforts on the major factors that affect the economic, regulatory and political environment, including the EU State Aid Rules. The Board has also considered the Company's cash flow projections and underlying assumptions from the five years to 31 January 2022, and considers them to be realistic and fair.
Based on the Company's processes for monitoring income and expenses, share price discount and its ongoing review of the investment objective and policy, asset allocation, sector weightings and portfolio risk profile, the Board has concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five years ending 31 January 2022.
The Company's financial instruments comprise its investment portfolio, cash balances and debtors and creditors that arise directly from its operations, including accrued income and purchases and sales awaiting settlement. The main risks that the Company faces arising from its financial instruments are disclosed in Note 16 to the Financial Statements.
The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emission producing sources under the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013.
The Statement of Corporate Governance, which supports this Directors' Report, is shown on pages 41 to 44.
Biographies of the Directors who held office at the year end are shown in the Your Board section of this Annual Report along with their interests in the shares of the Company, which are also shown below. No Director has a service contract with the Company and no contract or arrangement significant to the Company's business and in which any of the Directors is interested has subsisted during the year.
In accordance with the Articles of Association, Directors must offer themselves for re-election at least once every three years and, accordingly, The Hon Robert Kissin will retire by rotation at the AGM and, being eligible, offers himself for re-election. In accordance with corporate governance best practice, Bill Nixon retires at the Annual General Meeting, and, being eligible, offers himself for annual re-election.
The Board confirms that, following a formal process of evaluation, the performance of each of the Directors seeking re-election continues to be effective and demonstrates commitment to the role. The Board, therefore, believes that it is in the best interests of Shareholders that each of the Directors wishing to retain office is re-elected, and Resolutions to this effect will be proposed at the AGM.
Bill Nixon is managing partner of Maven Capital Partners UK LLP, which is entitled to receive investment management and secretarial fees, which are disclosed in Notes 3 and 4 to the Financial Statements respectively. No other contract or arrangement significant to the Company's business, and in which any of the Directors is interested, has subsisted during the year.
The Directors who held office during the year and their interests in the share capital of the Company are as follows:
| 31 January 2017 Ordinary Shares of 10p each |
31 January 2016 Ordinary Shares of 10p each |
|
|---|---|---|
| John Lawrence MBE (Chairman) | 10,155 | 10,155 |
| The Hon Robert Kissin | 10,000 | 10,000 |
| Peter Linthwaite | 5,000 | - |
| Bill Nixon | 321,585 | 321,585 |
All of the interests shown above are beneficial and as at 5 May 2017, being the last practicable date prior to the publication of this Annual Report, there had been no changes to the above share interests since the end of the Company's financial year.
Each Director has a statutory duty to avoid a situation where he has, or could have, a direct or indirect interest which conflicts, or may conflict with the interests of the Company. A Director will not be in breach of that duty if the relevant matter has been authorised by the Board in accordance with the Company's Articles of Association and this includes any co-investment made by the Directors in entities in which the Company also has an interest.
The Board has an approved protocol for identifying and dealing with conflicts and has resolved to conduct a regular review of actual or possible conflicts. No new material conflicts or potential conflicts were identified during the year.
At 31 January 2017, the only Shareholders known to the Company to be directly or indirectly interested in 3.0% or more of its issued Ordinary Share capital were as follows:
| Number of Ordinary Shares held |
% of issued share capital |
|
|---|---|---|
| Hargreaves Lansdown Nominees Limited |
2,349,185 | 5.79 |
At 5 May 2017, the Shareholders known to be directly or indirectly interested in 3.0% or more of the Company's issued Ordinary Share capital were as follows:
| Number of Ordinary Shares held |
% of issued share capital |
|
|---|---|---|
| Hargreaves Lansdown Nominees Limited |
2,379,579 | 5.86 |
Maven Capital Partners UK LLP (Maven) acted as Manager and Secretary to the Company during the year ended 31 January 2017 and the investment management, performance and secretarial fees are disclosed in Notes 3 and 4 to the Financial Statements respectively.
The principal terms of the Management and Administration Deed agreed with Maven are as follows:
The investment management agreement is terminable, by either party, on the expiry of one year's notice. In the event that the Company terminates the Manager's appointment, the Manager is entitled to an amount equivalent to twelve months' fees. Furthermore, the Company may terminate the agreement without compensation due if:
For the year ending 31 January 2018, and unchanged from the year ended 31 January 2017, investment management, performance and secretarial fees payable to Maven will be calculated and charged on the following basis:
Independent from the above arrangements, the sum of £16,000 (2017: £16,000) plus VAT per annum will be paid to the Manager in respect of Bill Nixon's role as a Director of the Company. Maven may also receive, from investee companies, fees in relation to arranging transactions, monitoring of business progress and for providing non-executive directors for their boards.
In addition, in order to ensure that the Manager's staff are appropriately incentivised in relation to the management of the portfolio, a co-investment scheme allows individuals to participate in new investments in portfolio companies alongside the Company. All such investments are made through a nominee and under terms agreed by the Board. The terms of the scheme ensure that all investments are made on identical terms to those of the Company and that no selection of investments will be allowed.
Total investment by participants in the co-investment scheme is set at 5% of the aggregate amount of ordinary shares subscribed for, except where the only securities to be acquired by the Company are ordinary shares or are securities quoted on AIM or ISDX, in which case the co-investment percentage will be 1.5%. Any dilution of the Company's interests is, therefore, minimal and the Directors believe that the scheme provides a useful incentive which closely aligns the interests of key individuals within the Manager's staff with those of the Shareholders.
In light of investment performance achieved by the Manager, together with the standard of company secretarial and administrative services provided, the Board considers that the continued appointment of the Manager and Secretary on the stated terms is in the best interests of the Company and its Shareholders.
It should be noted that, as at 5 May 2017, Maven, Bill Nixon and certain of the Manager's other executives held, in aggregate, 1,142,841 of the Company's Ordinary Shares, representing 2.82% of the issued capital as at that date.
Following a tender process undertaken during the year under review, it is intended that the Company's independent Auditor, Deloitte LLP, should continue in office and Resolution 7 to propose its reappointment will be proposed at the 2017 AGM, along with Resolution 8, to authorise the Directors to fix its remuneration. Non-audit fees for tax compliance services amounting to £5,000 were paid to Deloitte LLP during the year under review (2016: £5,000). The Directors have received confirmation from the Auditor that it remains independent and objective. The Directors have also reviewed the Auditor's procedures in connection with the provision of non-audit services and remain satisfied that objectivity and independence are being safeguarded by Deloitte LLP.
As far as the Directors who held office at the date of approval of this Annual Report are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the Company's Auditor is unaware, and each of the Directors has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.
During the year ended 31 January 2017, the Company bought back 505,000 of its own Ordinary Shares for cancellation (2016: nil), representing 1.23% of the Ordinary Shares in issue as at 29 April 2016, being the last practicable date prior to publication of the previous Annual Report.
A Special Resolution, numbered 11 in the Notice of Meeting, will be put to Shareholders at the 2017 AGM for their approval to renew the Company's authority to purchase in the market a maximum of 6,083,634 Ordinary Shares (14.99% of the shares in issue at 5 May 2017). This authority shall expire either on the date of the AGM in 2018 or after a period of 15 months from the passing of the Resolution, whichever is the first to occur.
Purchases of shares will be made within guidelines established from time to time by the Board, but only if it is considered that such purchases would be to the advantage of the Company and its Shareholders when taken as a whole. Purchases will be made in the market at prices below the prevailing NAV per share. Under the Listing Rules of the FCA, the maximum price that may be paid on the exercise of this authority must not exceed 105% of the average of the mid-market quotations for the shares over the five business days immediately preceding the date of purchase. The minimum price that may be paid is 10p per share. In making purchases, the Company will deal only with member firms of the London Stock Exchange. Any shares which are purchased will be cancelled. The Board intends to use this authority to continue its buy-back policy.
Purchases of shares by the Company will be made from distributable reserves and will normally be paid out of cash balances held by the Company from time to time. As any purchases will be made at a discount to NAV at the time of purchase, the NAV of the remaining Ordinary Shares in issue should increase as a result of any such purchase. Shares will not be purchased by the Company in the period from the end of the Company's relevant financial period up to and including the earlier of an announcement of all price sensitive information in respect of the relevant period or the release of the full results.
During the year under review no new Ordinary Shares were allotted (2016: 6,801,438 under an Offer for Subscription and 44,247 under a Dividend Investment Scheme). An Ordinary Resolution, numbered 9 in the Notice of Annual General Meeting, will be put to Shareholders at the 2017 AGM for their approval for the Company to issue up to an aggregate nominal amount of £405,846 (equivalent to 4,058,460 Ordinary Shares or 10% of the total issued share capital at 5 May 2017).
Issues of new Ordinary Shares may only be made at, or at a premium to, NAV per share, thus ensuring existing investors will not be financially disadvantaged by such issues. The proceeds of any issue may be used to purchase the Company's shares in the market or to fund further investments in accordance with the Company's investment policy. This authority shall expire either on the date of the AGM in 2018 or after a period of 15 months from the passing of the Resolution, whichever is the first to occur.
When shares are to be allotted for cash, Section 561(1) of the Companies Act 2006 provides that existing Shareholders have pre-emption rights and that the new shares are offered first to such Shareholders in proportion to their existing shareholdings. However, Shareholders can, by special resolution, authorise the Directors to allot shares otherwise than by a pro rata issue to existing Shareholders. A Special Resolution, numbered 10 in the Notice of Annual General Meeting, will, if passed, give the Directors power to allot Ordinary Shares up to an aggregate nominal amount of £405,846 (equivalent to 4,058,460 Ordinary Shares or 10% of the total issued share capital at 5 May 2017) as if Section 561(1) does not apply. This is the same amount of share capital that the Directors are seeking the authority to allot pursuant to Resolution 9. This authority shall expire either on the date of the AGM in 2018 or after a period of 15 months from the passing of the Resolution, whichever is the first to occur.
As at 31 January 2017, the Company's share capital amounted to 40,584,617 Ordinary Shares of 10p each and there were also 40,584,617 Ordinary Shares in issue as at 5 May 2017. Further details are included in Note 12 to the Financial Statements.
Other than those set out in this Directors' Report, there are no further related party transactions that require to be disclosed.
Other than those referred to above and in the Strategic Report, there have been no events since 31 January 2017 that require disclosure.
The AGM will be held on 14 June 2017, and the Notice of Annual General Meeting is on pages 70 to 74 of this Annual Report. The Notice of Annual General Meeting also contains a Resolution that seeks authority for the Directors to convene a general meeting, other than an annual general meeting, on not less than fourteen days' clear notice, although it is anticipated that such authority would only be exercised under exceptional circumstances.
The Board encourages Shareholders to vote at the AGM and votes can be submitted by hard copy proxy form, via CREST or electronically using the Registrar's Share Portal Service at www.capitashareportal.com. Please refer to the notes to the Notice of Annual General Meeting on pages 70 to 74 of this Annual Report.
The Directors consider that all of the Resolutions to be put to the AGM are in the best interests of the Company and its Shareholders as a whole. Your Board will be voting in favour of them and unanimously recommends that you do so as well.
By order of the Board Maven Capital Partners UK LLP Secretary
12 May 2017
This report has been prepared in accordance with the requirements of Section 421 of the Companies Act 2006 and the Enterprise and Regulatory Reform Act 2013. An Ordinary Resolution for the approval of this Report, which includes a section on the Company's policy for the remuneration of its Directors, will be put to the Members of the Company at the forthcoming AGM. The law requires the Company's Auditor to audit certain disclosures provided. Where disclosures have been audited, they are indicated as such and the Auditor's opinion is included in their report on pages 49 to 53 of this Annual Report.
The Directors have established a Remuneration Committee comprising all of the independent Directors and with The Hon Robert Kissin as its Chairman. As all of the Directors are non-executive, the Principles of the UK Code on Corporate Governance in respect of executive directors' remuneration do not apply.
At 31 January 2017, the Company had four non-executive Directors and their biographies are shown in the Your Board section of this Annual Report. The names of the Directors who served during the year, together with the fees paid during that period, are shown in the table on page 39.
| Date of original appointment |
Date of previous re-election |
Due date for re-election |
|
|---|---|---|---|
| John Lawrence MBE (Chairman) |
11 January 2001 | 15 June 2016 | 2018 AGM |
| The Hon Robert Kissin | 1 September 2004 | 17 June 2015 | 14 June 2017 |
| Peter Linthwaite | 16 September 2015 | 15 June 2016 | 2019 AGM |
| Bill Nixon | 1 November 2005 | 15 June 2016 | 14 June 2017 |
The dates of appointment of the Directors in office as at 31 January 2017 and the dates on which they will next be proposed for re-election are as follows:
During the year ended 31 January 2017, the Board was not provided with advice or services by any person in respect of its consideration of the Directors' remuneration. However, in the application of the Boards policy on Directors' remuneration, as defined below, the Committee expects, from time to time, to review the fees paid to the directors of other venture capital trust companies.
The previous change to the level of Directors' remuneration was made during the year ended 31 January 2016, when the Remuneration Committee carried out a review of the remuneration policy and of the level of Directors' fees and concluded that, with effect from 1 February 2016, the amounts payable per annum should increase by £1,500 for each Director. It was also agreed that the policy would be to continue to review these rates from time to time and, at a Meeting held during the year ended 31 January 2017, the Remuneration Committee carried out a further review and recommended that the rate of remuneration for each Director should be maintained at its current level.
The Company's policy is that the remuneration of the Directors, all of whom are non-executive, should reflect the experience of the Board as a whole and be fair and comparable to that of other venture capital trusts with a similar capital structure and similar investment objectives. Directors are remunerated in the form of fees, payable quarterly in arrears, to the Director personally or to a third party specified by him or her. The fees for the Directors are determined within the limits set out in the Company's Articles of Association, which limit the aggregate of the fees payable to the Directors to £100,000 per annum, and the approval of Shareholders in a general meeting would be required to change this limit.
It is intended that the fees payable to the Directors should reflect their duties, responsibilities, and the value and amount of time committed to the Company's affairs, and should also be sufficient to enable candidates of a high quality to be recruited and retained. Non-executive Directors do not receive bonuses, pension benefits, share options, long-term incentive schemes or other benefits, and the fees are not specifically related to the Directors' performance, either individually or collectively.
A copy of this Remuneration Policy may be inspected by Members of the Company at its registered office.
It is the Board's intention that the above remuneration policy will be put to a Shareholders' vote at least once every three years and, as a Resolution was last approved at the AGM held in 2014, an Ordinary Resolution for its approval will be proposed at the AGM to be held in 2017. At the AGM held in June 2014, the results in respect of the Ordinary Resolution to approve the Directors' Remuneration Policy were as follows:
| Percentage of | Percentage of | Number of | |
|---|---|---|---|
| votes cast for | votes cast against | votes withheld | |
| Remuneration Policy (2014 AGM) | 96.4 | 3.6 | 65,660 |
The Company purchases and maintains liability insurance covering the Directors and Officers of the Company. This insurance is not a benefit in kind, nor does it form part of the Directors' remuneration.
The Directors' Interests in the share capital of the Company are shown in the Directors' Report on page 34. There is no requirement for Directors to hold shares in the Company.
The Board is responsible for the Company's investment strategy and performance, although the day to day management of the Company's investment portfolio is delegated to the Manager through the Management and Administration Deed, as referred to in the Directors' Report.
The graph below compares the total returns on an investment of £100 in the Ordinary Shares of the Company, for each annual accounting period for the ten years to 31 January 2017, assuming all dividends are reinvested, with the total shareholder return on a notional investment of £100 made up of shares of the same kind and number as those by reference to which the FTSE AIM All-share index is calculated. This index was chosen for comparison purposes as it is the most relevant to the Company's investment portfolio.
Source: Maven/London Stock Exchange.
Please note that past performance is not necessarily a guide to future performance.
The Company does not have any employees and Directors' remuneration comprises solely of Directors' fees. The Directors' fees for the years ended 31 January 2017 and 31 January 2016, and projected fees for the year ending 31 January 2018, respectively are as follows:
| Year ending 31 January 2018 £ |
Year ended 31 January 2017 £ |
Year ended 31 January 2016 £ |
|
|---|---|---|---|
| John Lawrence MBE (Chairman)1 | 19,400 | 19,400 | 16,624 |
| The Hon Robert Kissin | 16,000 | 16,000 | 14,500 |
| Peter Linthwaite2 | 16,000 | 16,000 | 5,442 |
| David MacLellan2 | - | - | 9,058 |
| Charles Nicolson3 | - | - | 6,719 |
| Bill Nixon4 | 16,000 | 16,000 | 14,500 |
| Total | 67,400 | 67,400 | 66,843 |
1 John Lawrence was appointed Chairman on 17 June 2015.
2David MacLellan stood down on 16 September 2015 and was replaced by Peter Linthwaite.
3Charles Nicolson stood down at the conclusion of the AGM on 17 June 2015.
4Mr Nixon's remuneration is payable to the Manager and is subject to VAT.
The above amounts exclude any employers' national insurance contributions, if applicable. No other forms of remuneration were received by the Directors and no Director has received any taxable expenses, compensation for loss of office or non-cash benefits for the year ended 31 January 2017 (2016: £nil).
The chart below shows, for the years ending 31 January 2016 and 31 January 2017, the cost of Directors' fees compared with the level of dividend distribution.
As noted in the Strategic Report, all of the Directors are non-executive and, therefore, the Company does not have a chief executive officer, nor does it have any employees. In the absence of a chief executive officer or employees, there is no related information to disclose.
Directors do not have service contracts, but new Directors are provided with a letter of appointment. The terms of appointment provide that Directors should retire and be subject to re-election at the first AGM after their appointment. Thereafter, the Company's Articles of Association require all Directors to retire by rotation at least every three years. There is no notice period and no provision for compensation upon early termination of appointment, save for any arrears of fees which may be due.
During the year ended 31 January 2017, no communication has been received from Shareholders regarding Directors' remuneration. The remuneration policy and the level of fees payable is reviewed annually by the Remuneration Committee and it is intended that the current policy will continue for the year ending 31 January 2018.
An Ordinary Resolution to approve this Directors' Remuneration Report for the year ended 31 January 2017 will be put to Shareholders at the 2017 AGM. At the AGM held in June 2016, the results in respect of an Ordinary Resolution to approve the Directors' Remuneration Report for the year ended 31 January 2016 were as follows:
| Percentage of | Percentage of | Number of | |
|---|---|---|---|
| votes cast for | votes cast against | votes withheld | |
| Remuneration Report (2016 AGM) | 90.6 | 9.4 | 25,426 |
The Directors' Remuneration Report for the year ended 31 January 2017 was approved by the Board of Directors and signed on its behalf by:
The Hon Robert Kissin Director 12 May 2017
The Company is committed to, and is accountable to the Company's Shareholders for, a high standard of corporate governance. The Board has put in place a framework for corporate governance that it believes is appropriate for a venture capital trust and which enables it to comply with the UK Corporate Governance Code (the Code), published in April 2016. The Code is available from the website of the Financial Reporting Council (FRC) at www.frc.org.uk.
The Company has discontinued its membership of the Association of Investment Companies (AIC) and, therefore, no longer applies the principles of the AIC Code of Corporate Governance. This Statement of Corporate Governance supports the Directors' Report.
This statement describes how the main principles identified in the Code have been applied by the Company throughout the year, as is required by the Listing Rules of the FCA.
The Board is of the opinion that the Company has complied fully with the main principles identified in the Code, except as set out below:
Other than set out below, the Board considers that these provisions are not relevant to the Company, and has, therefore, not reported further in respect of them.
The Board currently consists of four male non-executive Directors, the majority of whom are considered to be independent of the Manager. Bill Nixon is not considered to be independent because of his position as managing partner of Maven. The independent non-executive Directors are free of any relationship which could materially interfere with the exercise of their independent judgement. The biographies of the Directors appear in the Your Board section of this Annual Report and indicate their high level and range of investment, industrial, commercial and professional experience.
John Lawrence was independent of the Manager at the time of his appointment as a Director on 11 January 2001 and as Chairman on 17 June 2015 and continues to be so by virtue of his lack of connection with the Manager and the absence of cross-directorships with his fellow Directors.
The Board sets the Company's values and objectives and ensures that its obligations to Shareholders are met. It has formally adopted a schedule of matters which are required to be brought to it for decision, thus ensuring that it maintains full and effective control over appropriate strategic, financial, operational and compliance issues. These matters include:
As required by the Companies Act 2006 and permitted by the Articles of Association (Articles), Directors notify the Company of any situation which might give rise to the potential for a conflict of interest, so that the Board may consider and, if appropriate, approve such situations. A register of potential conflicts of interest for Directors is reviewed regularly by the Board and the Directors notify the Company whenever there is a change in the nature of a registered conflict, or whenever a new conflict situation arises.
Following implementation of the Bribery Act 2010, the Board adopted appropriate procedures.
There is an agreed procedure for Directors to take independent professional advice, if necessary, at the Company's expense.
The Directors have access to the advice and services of the Secretary through its appointed representatives who are responsible to the Board for:
An induction meeting will be arranged by the Manager on the appointment of any new Director, covering details about the Company, the Manager, legal responsibilities and venture capital industry matters. Directors are provided, on a regular basis, with key information on the Company's policies, regulatory and statutory requirements and internal controls. Changes affecting Directors' responsibilities are advised to the Board as they arise.
John Lawrence is Chairman of the Company and of the Management Engagement Committee; The Hon Robert Kissin is Chairman of the Nomination and Remuneration Committees; and Peter Linthwaite is Chairman of the Audit and Risk Committees. The Directors consider that each has the skills and experience relevant to their respective roles.
The Board meets at least four times each year and, between Meetings, maintains regular contact with the Manager.
The primary focus of quarterly Board Meetings is a review of investment performance and related matters including asset allocation, peer group information and industry issues. During the year ended 31 January 2017, the Board held four full Board Meetings and two Board Committee Meetings. In addition, there were four Meetings of the Risk Committee, two Meetings of the Audit Committee and one Meeting each of the Management Engagement, Nomination and Remuneration Committees.
| Directors have attended Board and Committee Meetings during the year ended 31 January 20171 | as follows: |
|---|---|
| --------------------------------------------------------------------------------------------- | ------------- |
| Board | Board Committee |
Audit Committee |
Management Engagement Committee |
Committee | Nomination Remuneration Committee |
Risk Committee |
|
|---|---|---|---|---|---|---|---|
| John Lawrence MBE (Chairman) |
4 (4) | 2 (2) | 2 (2) | 1 (1) | 1 (1) | 1 (1) | 4 (4) |
| The Hon Robert Kissin | 4 (4) | 2 (2) | 2 (2) | 1 (1) | 1 (1) | 1 (1) | 4 (4) |
| Peter Linthwaite | 4 (4) | 2 (2) | 1 (1) | 1 (1) | 1 (1) | 1 (1) | 4 (4) |
| Bill Nixon2 | 4 (4) | 2 (2) | - (-) | - (-) | - (-) | - (-) | - (-) |
1 The number of meetings which the Directors were eligible to attend is in brackets.
2 Bill Nixon is not a member of the Audit, Management Engagement, Nomination, Remuneration or Risk Committees.
To enable the Board to function effectively and allow Directors to discharge their responsibilities, full and timely access is given to all relevant information. In the case of Board Meetings, this consists of a comprehensive set of papers, including the Manager's review and discussion documents regarding specific matters. The Directors make further enquiries when necessary.
The Board and its Committees have undertaken a process for their annual performance evaluation, using questionnaires and discussion to ensure that Directors have devoted sufficient time and contributed adequately to the work of the Board and its Committees. The Chairman is subject to evaluation by his fellow Directors.
All non-executive Directors are appointed for an initial period of three years, subject to re-election and Companies Act provisions and, in accordance with the Articles, stand for election at the first AGM following their appointment. The Articles state that Directors must offer themselves for re-election at least once every three years. However, Bill Nixon is subject to annual re-election in view of his position as managing partner of Maven.
The Board subscribes to the view that long-serving Directors should not be prevented from forming part of an independent majority. It does not consider that a Director's tenure necessarily reduces his ability to act independently and, following formal performance evaluations, believes that each Director is independent in character and judgement and that there are no relationships or circumstances which are likely to affect the judgement of any Director.
The Board's policy on tenure is that continuity and experience are considered to add significantly to the strength of the Board and, as such, no limit on the overall length of service of any of the Company's Directors, including the Chairman, has been imposed. The Company has no executive Directors or employees.
Each of the Committees has been established with written terms of reference and comprise all of the independent Directors, each of whom is free from any relationship that would interfere with important judgement in carrying out their responsibilities. The terms of reference of the Committees, which are available on request from the Registered Office of the Company, are reviewed and re-assessed for their adequacy at each Meeting.
The Audit Committee is chaired by Peter Linthwaite. The role and responsibilities of the Committee are detailed in a joint report by the Audit and Risk Committees on pages 46 to 48.
The Management Engagement Committee, which is chaired by John Lawrence, is responsible for the annual review of the management contract with the Manager, details of which are shown in the Directors' Report. One Meeting was held during the year ended 31 January 2017, at which the Committee recommended the continued appointment of Maven Capital Partners UK LLP as Manager of the Company.
The Nomination Committee, which is chaired by The Hon Robert Kissin, held one Meeting during the year ended 31 January 2017. The Committee makes recommendations to the Board on the following matters:
the identification and nomination of candidates to fill Board vacancies, as and when they arise, for the approval of the Board;
the re-appointment of any non-executive Director at the conclusion of their specified term of office;
At its Meeting in December 2016, the Nomination Committee recommended the re-election of The Hon Robert Kissin and Bill Nixon. Accordingly, Resolutions 5 and 6 will be put to the 2017 AGM.
The performance of the Board, Committees and individual Directors was evaluated through an assessment process, led by the Chairman and the performance of the Chairman was evaluated by the other Directors. While the Company does not have a formal policy on diversity, Board diversity forms part of the responsibilities of the Committee.
Where a venture capital trust has only non-executive directors, the Code principles relating to directors' remuneration do not apply. However, the Company does have a Remuneration Committee, which is chaired by The Hon Robert Kissin. The Committee held one Meeting during the year ended 31 January 2017 to review the policy for, and the level of, Directors' Remuneration.
The level of remuneration of the Directors has been set in order to attract and retain individuals of a calibre appropriate to the future development of the Company. Details of the remuneration of each Director and of the Company's policy on Directors' Remuneration are provided in the Directors' Remuneration Report.
The Risk Committee is chaired by Peter Linthwaite. The role and responsibilities of the Committee are detailed in a joint Report by the Audit and Risk Committees on pages 46 to 48.
The Board has contractually delegated to external agencies, including the Manager, certain services: the management of the investment portfolio, the custodial services (which include the safeguarding of assets), the registration services and the day to day accounting and company secretarial requirements. Each of these contracts was entered into after full and proper consideration by the Board of the quality and cost of services offered. The Board receives and considers reports from the Manager and other external agencies on a regular basis. In addition, ad hoc reports and information are supplied to the Board as requested.
The FRC published the UK Stewardship Code (the Stewardship Code) for institutional shareholders on 2 July 2010 and this was revised in September 2012. The purpose of the Stewardship Code is to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and assist institutional investors in the efficient exercise of their governance responsibilities.
The Board is aware of its duty to act in the interests of the Company and the Directors believe that the exercise of voting rights lies at the heart of regulation and the promotion of good corporate governance. The Directors, through the Manager, would wish to encourage companies in which investments are made to adhere to best practice in the area of corporate governance. The Manager believes that, where practicable, this can be best achieved by entering into a dialogue with investee company management teams to encourage them, where necessary, to improve their governance policies. Therefore, the Board has delegated responsibility for monitoring the activities of portfolio companies to the Manager and has given it discretionary powers to vote in respect of the holdings in the Company's investment portfolio.
The Directors and the Manager are aware of their duty to act in the interests of the Company and acknowledge that there are risks associated with investment in companies which fail to conduct business in a socially responsible manner. Therefore, the Directors and the Manager take account of the social, environmental and ethical factors that may affect the performance or value of the Company's investments. Maven and the Directors believe that a company run in the long-term interests of its shareholders should manage its relationships with its employees, suppliers and customers and behave responsibly towards the environment and society as a whole.
The Company places a great deal of importance on communication with its Shareholders, who are all welcome to attend and participate in the AGM. The Notice of Annual General Meeting sets out the business of the AGM and the Resolutions are explained more fully in the Explanatory Notes to the Notice of Annual General Meeting as well as in the Directors' Report and the Directors' Remuneration Report. Separate Resolutions are proposed for each substantive issue and Shareholders have the opportunity to put questions to the Board and the Manager. The results of proxy voting are relayed to Shareholders after the Resolutions have been voted on by a show of hands. Nominated persons, often the beneficial owners of shares held for them by nominee companies, may attend Shareholder Meetings and are invited to contact the registered Shareholder, normally a nominee company, in the first instance in order to be nominated to attend the Meeting and to vote in respect of the shares held for them. In general, a venture capital trust has few major shareholders.
As recommended under the Code, the Annual Report is normally published at least twenty business days before the AGM. Annual and Interim Reports and Financial Statements are distributed to Shareholders and other parties who have an interest in the Company's performance.
Shareholders and potential investors may obtain up-to-date information on the Company through the Manager and the Secretary, and the Company responds to letters from Shareholders on a wide range of issues. In order to ensure that the Directors develop an understanding of the views of Shareholders, correspondence between Shareholders and the Manager or the Chairman is copied to the Board. The Company's web pages are hosted on the Manager's website, and can be visited at www.mavencp.com/migvct2 from where Annual and Interim Reports, Stock Exchange Announcements and other information can be viewed, printed or downloaded. Further information about the Manager can be obtained from www.mavencp.com.
The Statement of Directors' Responsibilities in respect of the Financial Statements is on page 45; and the Statement of Going Concern and the Viability Statement are included in the Directors' Report on pages 33 and 34. The Independent Auditor's Report is on pages 49 to 53.
By order of the Board Maven Capital Partners UK LLP Secretary
12 May 2017
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law, the Directors have elected to prepare the Financial Statements in accordance with FRS 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland. The Financial Statements are required by law to give a true and fair view of the state of affairs of the Company and of the net return of the Company for that period.
In preparing these Financial Statements, the Directors are required to:
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report (including a report on remuneration policy) and Corporate Governance Statement that comply with applicable law and regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's webpages, which are hosted on the Manager's website. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
The Directors are also responsible for ensuring that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary to assess the Company's position and performance, business model and strategy.
The Directors believe that, to the best of their knowledge:
By order of the Board Maven Capital Partners UK LLP Secretary
12 May 2017
The Board is satisfied that at least one member of the Audit Committee has recent and relevant financial experience, and that the Audit Committee, as a whole, has competence relevant to the sector in which the Company operates.
The principal responsibilities of the Audit Committee include:
The Committee met twice during the year under review, in March and September 2016, and at each Meeting considered the key risks detailed below and in the Business Report, and the corresponding internal control and risk reports provided by the Manager which included the Company's risk management framework. No significant weaknesses in the control environment were identified and it was also noted that there had not been any adverse comment from the Auditor and that the Auditor had not identified any significant issues in its audit report. The Committee, therefore, concluded that there were no significant issues which required to be reported to the Board.
At its meeting in March 2016, the Committee reviewed the draft Annual Report and Financial Statements for the year ended 31 January 2016, along with the amount of the final dividend for the year then ended.
At its meeting in September 2016, the Committee reviewed the Half Yearly Report for the six months ended 31 July 2016 and also considered the performance, tenure and independence of Deloitte LLP (Deloitte) as Auditor, as part of a formal tender process that included two other potential providers. The Committee concluded that it was satisfied with the performance of Deloitte and recommended its continued appointment.
Subsequent to the year end, the Committee also considered the draft Annual Report and Financial Statements for the year ended 31 January 2017 and provided advice to the Board that it considered that the Annual Report and Financial Statements, taken as a whole, was fair, balanced and understandable and provided the information necessary for Shareholders to assess the Company's position and performance, business model and strategy.
It is recognised that the portfolio forms a significant element of the Company's assets and that there are different risks associated with listed and unlisted investments. The primary risk that requires the particular attention of the Committee is that unlisted investments are not recognised and measured in line with the Company's stated accounting policy on the valuation of investments as set out in Note 1(e) to the Financial Statements on pages 58 and 59. In accordance with that policy, unlisted investments are valued by the Manager and are subject to scrutiny and approval by the Directors. Investments listed on a recognised stock exchange are valued at their bid market price.
The Audit Committee has considered the assumptions and judgements in relation to the valuation of each quoted and unquoted investment and is satisfied that they are appropriate.
The basis of valuation across the portfolio as at 31 January 2017 was as follows:
| Investment | % of net assets by value |
Valuation basis |
|---|---|---|
| Listed investment trusts | 5.2 | Bid price1 |
| AIM/ISDX quoted | 0.6 | Bid price1 |
| Unlisted | 77.7 | Directors' valuation2 |
| Total investment | 83.5 |
1 London Stock Exchange closing market quote.
2Directors' valuation represents an independent third party valuation of either: (i) an earnings multiple basis; (ii) cost; or (iii) a provision against cost where there may be a diminution in value due to a company's underperformance. Where an earnings multiple or cost is not appropriate, or other overriding factors apply, a discounted cash flow or net asset value basis may be applied.
The Committee recommended the investment valuations, representing 83.5% of net assets as at 31 January 2017, to the main Board for approval. In addition, the revenue generated from dividend income and loan stock interest has been considered by the Board on a quarterly basis and the Directors are satisfied that the levels of income recognised are in line with revenue estimates.
As part of its annual review of audit services, the Committee considers the performance, cost effectiveness and general relationship with the Auditor. In addition, the Committee reviews the independence and objectivity of the external auditor. The Company first appointed Deloitte, then Deloitte & Touche LLP, as Auditor for the year ended 31 January 2008.
The Independent Auditor's Report is on pages 49 to 53 and it should be noted that Deloitte rotates the Senior Statutory Auditor responsible for the audit every five years. The Senior Statutory Auditor was last changed after the conclusion of the audit for the year ended 31 January 2012. Details of the amounts paid to the Auditor during the year for audit and other services are set out in Note 4 to the Financial Statements.
During the year ended 31 January 2017, alongside the other Maven managed VCTs, the Board agreed to put audit services out to tender and, during that process, the Audit Committee considered the FRC Guidance on Audit Tenders and carried out a review of auditors active in the VCT sector. A shortlist comprising three firms was considered and these firms were invited to present to the Audit Committee. One firm withdrew due to other commitments and, accordingly, the shortlist comprised BDO LLP and Deloitte LLP. Both audit firms presented to a representative of the Audit Committee in London in July 2016 and, after careful consideration, the Audit Committee recommended to the Board that Deloitte LLP be re-appointed as Auditor in respect of the audit for the year ended 31 January 2017. This recommendation was based on Deloitte's knowledge of the VCT sector, its particular knowledge of the underlying investee companies and the competitive fee proposed.
The Company has in place a policy governing and controlling the provision of non-audit services by the external Auditor, so as to safeguard their independence and objectivity.
Shareholders are asked to approve the re-appointment, and the Directors' authority to fix the remuneration, of the Auditor at each Annual General Meeting. Any non-audit work, other than interim reviews, requires the specific approval of the Audit Committee in each case. Non-audit work, where independence may be compromised or conflicts arise, is prohibited. There are no contractual obligations which restrict the Committee's choice of Auditor. The Committee has concluded that Deloitte is independent of the Company and recommended that a Resolution for the re-appointment of Deloitte as independent Auditor should be put to the 2017 AGM.
The Risk Committee held four meetings during the year under review. The responsibilities of the Committee are:
it to perform its role effectively and in accordance with the relevant professional standards;
The Committee will review the Terms of Reference at least once each year.
The Board of Directors of Maven Income and Growth VCT 2 PLC has overall responsibility for the Company's system of internal control and for reviewing its effectiveness, and has considered the requirement for an internal audit function as recommended by Code provision 3.6. However, as the Directors have delegated the investment management, company secretarial and administrative functions of the Company to the Manager, the Board considers that it is appropriate for the Company's internal controls to be monitored by the Manager, rather than by the Company itself.
The Directors have confirmed that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company, which has been in place up to the date of approval of the this Annual Report. The process is reviewed regularly by the Board and accords with internal control guidance issued by the FRC.
The Board has reviewed the effectiveness of the system of internal control and, in particular, the process for identifying and evaluating the significant risks affecting the Company and the policies and procedures by which these risks are managed.
The Directors have delegated the management of the Company's assets to the Manager and this embraces implementation of the system of internal control, including financial, operational and compliance controls, and the risk management framework and internal control systems are
monitored and supported by the compliance function of the Manager, which undertakes periodic examination of business processes, including compliance with the terms of the Management and Administration Deed, and ensures that recommendations to improve controls are implemented.
Risks are identified through the risk management framework by each function within the Manager's activities. Risk is considered in the context of the guidance issued by the FRC and includes financial, regulatory, market, operational and reputational risk. This helps the Manager's risk model identify those functions most appropriate for review. Any errors or weaknesses identified are reported to the Company and timetables are agreed for implementing improvements to systems. The implementation of any remedial action required is monitored and feedback provided to the Board.
The key components designed to provide effective internal control for the year under review, and up to the date of this report, are:
The internal control systems are intended to meet the Company's particular needs and the risks to which it is exposed. Accordingly, these systems are designed to manage, rather than eliminate, the risk of failure to achieve business goals and, by their nature, can provide reasonable, but not absolute, assurance against material misstatement or loss.
In terms of the assessment of the key risks facing the Company, it is recognised that the investment portfolio forms a significant element of its assets. The recognition, ownership and valuation of the investment portfolio is therefore an area of particular attention for the Committee. Specifically, the risk is that investments are not recognised and measured in line with the Company's stated accounting policy on the valuation of investments as set out in Note 1(e) to the Financial Statements on pages 58 and 59.
As revenue generated from dividend income and loan stock interest is the major source of revenue and a significant item in the Income Statement, another key risk relates to the recognition of investment income and, specifically, that the Company does not recognise income in line with its stated policy. The maintenance of VCT status is another key risk that the Company has to consider and the approach to address each of these key risks is set out below.
The Company uses the services of an independent Custodian (JP Morgan Chase Bank) to hold the quoted investment assets of the Company. An annual internal control report is received from the Custodian which provides details of the Custodian's control environment. The investment portfolio is reconciled regularly by the Manager and the reconciliation is also reviewed by the Independent Auditor. The portfolio is reviewed and verified by the Manager on a regular basis and management accounts, including a full portfolio listing, are considered at the quarterly meetings of the Board. The portfolio is also audited annually by the Independent Auditor.
The valuation of investments is undertaken in accordance with the Company's stated accounting policy as set out in Note 1(e) to the Financial Statements on pages 58 and 59. Unlisted investments are valued by the Manager and are subject to scrutiny and approval by the Directors. Investments listed on a recognised stock exchange are valued at their bid market price.
The Committee considered and challenged the assumptions and significant judgements in relation to the valuation of each quoted and unquoted investment and was satisfied that they were appropriate. The Committee was also satisfied that there were no issues associated with the existence and ownership of the investments which required to be addressed.
The recognition of dividend income and loan stock interest is undertaken in accordance with accounting policy Note 1(b) to the Financial Statements on page 58. Management accounts are reviewed by the Board on a quarterly basis and discussion takes place with the Manager at the quarterly Board Meetings regarding the revenue generated from dividend income and loan stock. The Committee is satisfied that the levels of income recognised are in line with revenue estimates and that there were no issues associated with revenue recognition which required to be addressed.
Compliance with the VCT regulations is monitored continually by the Manager and is reviewed by the Committee on a quarterly basis. The Committee concluded that there were no issues associated with the maintenance of VCT status that required to be addressed.
The principal risks and uncertainties faced by the Company, and the Board's strategy for managing these, are also covered in the Business Report on pages 13 and 14.
Peter Linthwaite Director 12 May 2017
In our opinion the Financial Statements:
The Financial Statements comprise the Income Statement, Statement of Changes in Equity, Balance Sheet, Cash Flow Statement, and the related Notes 1 to 16. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland".
| Key risks | The key risks that we identified in the current year were: • Valuation of unlisted investments • Existence of listed and unlisted investments • Compliance with VCT regulations |
|---|---|
| Materiality | The materiality that we used in the current year was £407,000 which was determined on the basis of 2% of the net asset value of the Company at the year end. |
| Scoping | We continue to design our audit by determining materiality and assessing risks of material misstatement in the Financial Statements. |
| Significant changes in our approach |
Due to recent changes in VCT regulations, we have included a key risk regarding compliance with VCT regulations in the current year. Other than the addition of this key risk and the related audit procedures to address it, we have not identified any significant changes in the business environment from the prior year that have resulted in a significant change in our approach. |
As required by the Listing Rules we have reviewed the Directors' statement regarding the appropriateness of the going concern basis of accounting and the Directors' statement on the longer-term viability of the Company contained within the Directors' Report on pages 33 and 34 of this Annual Report.
We are required to state whether we have anything material to add or draw attention to in relation to:
We confirm that we have nothing material to add or draw attention to in respect of these matters.
We agreed with the Directors' adoption of the going concern basis of accounting and we did not identify any such material uncertainties. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Company's ability to continue as a going concern.
We are required to comply with the Financial Reporting Council's Ethical Standards for Auditors and confirm that we are independent of the Company and we have fulfilled our other ethical responsibilities in accordance with those standards. We also confirm we have not provided any of the prohibited non-audit services referred to in those standards.
The assessed risks of material misstatement described below are those that had the greatest effect on our audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team.
Within this report, new risks are identified with and risks which are the same as the prior year are identified with .
| Risk description | Refer to Note 1(e) of Accounting Policies on pages 58 and 59 and Note 8 on page 63 of the Notes to the Financial Statements. The Company holds unlisted investments that are valued in accordance with the revised International |
|---|---|
| Private Equity and Venture Capital Valuation (IPEVCV) Guidelines. These unlisted investments represent £15.9 million or 77.7% (2016: £16.6 million or 76.2%) of the entity's total net assets. The valuation of the unlisted investments held by the Company is considered a key risk since judgement is required in order to determine the fair value – for example, judgement is required to ascertain the level of maintainable earnings for any given company as well as the multiplier to be applied to investments in different sectors. |
|
| Under the new VCT regulations, investments are more likely to be earlier stage companies, with a lack of financial performance history. Their valuation is therefore exposed to a greater degree of judgement. Due to the prevailing economic conditions in the oil & gas sector, investments with activities in this market have been subject to an increased focus and assessment. |
|
| How the scope of | Our testing to address this risk has included: |
| our audit responded to the risk |
• assessment of the design and implementation of key controls relating to valuation of unlisted investments; |
| • assessment of the valuation methodology applied for compliance with the IPEVCV Guidelines and |
|
| review of the assumptions adopted for each unquoted investment; | |
| • agreement of the carrying value of the cash acquisition vehicles to supporting bank statements; and • review of a sample of unquoted investee company data (e.g. financial information and capital structures) to supporting documentation. |
| Risk description | Refer to Note 1(e) of Accounting Policies on pages 58 and 59 and Note 8 on page 63 of the Notes to the Financial Statements. The Company holds both listed and unlisted investments. These investments represent £17.1 million or 83.5% (2016: £21.6 million or 99.3%) of the entity's total net assets. The ownership of the listed and unlisted investments held by the Company is considered a key risk since if investments are not recorded in line with the holdings per the loan note certificates or custodian confirmation, this could result in a misstatement of the assets held. |
|---|---|
| How the scope of our audit responded to the risk |
Our testing to address this risk included: • assessment of the design and implementation of key controls relating to existence of listed and unlisted investments; • obtaining share certificates for unlisted shares and loan notes held by the Manager and reconciling these to the portfolio listing; • agreeing quoted investment ownership to reports from the underlying custodian; and • confirming that the Manager has processes and controls in place to monitor compliance during the year. In addition to the above, we also tested a sample of purchases and sales of investments during the year, which supports our work performed on this risk. |
| Key observations | Based on our testing, we conclude that key controls around the existence of listed and unlisted investments were adequately designed and implemented. We conclude that the Company has appropriate title to the investments reported in the Financial Statements. |
| Risk description | Refer to the assessment of the VCT Qualifying Status Risk in the Governance Report on page 48. The Company must comply with Section 274 of the Income Tax Act 2007 to maintain VCT status. Failure to comply would result in the VCT losing its corporation tax exemption on chargeable gains, with investors' gains also no longer being exempt from income tax. With the introduction of changes by the Finance Act (No. 2) 2015 in November 2015, ensuring compliance with VCT rules has become increasingly complex to administer, with close monitoring required of the use of monies and monitoring of qualifying or non-qualifying investments. |
|---|---|
| How the scope of our audit responded to the risk |
Our testing to address this risk included: • assessment of the design and implementation of key controls relating to monitoring compliance with VCT regulations, including new controls and processes in place over the pre-trade identification of qualifying investments and the ongoing review of VCT Section 274 compliance; • reviewing the year-end compliance statement to assess whether the Company satisfies the Income Tax Act 2007 Section 274 criteria at the year end and for all other quarter-ends in the year and for consistency with the investments holding of the Company; and • reviewing whether each of the criteria that must be met to retain VCT status have been complied with through re-performance of the relevant calculations and review of the qualifying investment listings. |
| Key observations | Based on our testing and enquiries with management, we conclude that controls in place to monitor the compliance with VCT regulations were adequately designed and implemented. We noted no issues to report on the Company's compliance with the VCT regulations. |
These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We define materiality as the magnitude of misstatement in the Financial Statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:
| Materiality | £407,000 (2016: £432,000) |
|---|---|
| Basis for determining materiality |
2% of net asset value |
| Rationale for the benchmark applied |
Net asset value is the primary measure used by the Shareholders in assessing the performance of the Company, and this is a generally accepted auditing benchmark used for companies in this industry. |
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £8,000 (2016: £8,400), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the Financial Statements.
Our audit was scoped by obtaining an understanding of the entity and its environment, including internal control, and assessing the risks of material misstatement. Audit work to respond to the risks of material misstatement was performed directly by the audit engagement team.
In our opinion, based on the work undertaken in the course of the audit:
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified any material misstatements in the Strategic Report and the Directors' Report.
| Matters on which we are required to report by exception | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| --------------------------------------------------------- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- |
| Adequacy of explanations received and accounting records Under the Companies Act 2006 we are required to report to you if, in our opinion: |
We have nothing to report in respect of these matters. |
|
|---|---|---|
| • we have not received all the information and explanations we require for our audit; or |
||
| • adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or |
||
| • the Financial Statements are not in agreement with the accounting records and returns. |
||
| Directors' remuneration Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors' remuneration have not been made or the part of the Directors' Remuneration Report to be audited is not in agreement with the accounting records and returns. |
We have nothing to report arising from these matters. |
|
| Corporate Governance Statement Under the Listing Rules we are also required to review part of the Corporate Governance Statement relating to the Company's compliance with certain provisions of the UK Corporate Governance Code. |
We have nothing to report arising from our review. |
|
| Our duty to read other information in the Annual Report Under International Standards on Auditing (UK and Ireland), we are required to report to you if, in our opinion, information in the Annual Report is: |
We confirm that we have not identified any such inconsistencies or misleading statements. |
|
| • materially inconsistent with the information in the audited Financial Statements; or |
||
| • apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company acquired in the course of performing our audit; or |
||
| • otherwise misleading. |
||
| In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the Directors' statement that they consider the Annual Report is fair, balanced and understandable and whether the Annual Report appropriately discloses those matters that we communicated to the Audit Committee which we consider should have been disclosed. |
As explained more fully in the Directors' Responsibilities Statement, the Directors are responsible for the preparation of the Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). We also comply with International Standard on Quality Control 1 (UK and Ireland). Our audit methodology and tools aim to ensure that our quality control procedures are effective, understood and applied. Our quality controls and systems include our dedicated professional standards review team and independent partner reviews.
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
An audit involves obtaining evidence about the amounts and disclosures in the Financial Statements sufficient to give reasonable assurance that the Financial Statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the Financial Statements. In addition, we read all the financial and nonfinancial information in the Annual Report to identify material inconsistencies with the audited Financial Statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Andrew Partridge CA (Senior Statutory Auditor) For and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor Glasgow, United Kingdom
12 May 2017
| Income Statement | 55 |
|---|---|
| Statement of Changes in Equity | 55 |
| Balance Sheet | 56 |
| Cash Flow Statement | 57 |
| Notes to the Financial Statements | 58 |
For the Year Ended 31 January 2017
| Revenue £'000 |
Year ended 31 January 2017 Capital £'000 |
Total £'000 |
Revenue £'000 |
Year ended 31 January 2016 Capital £'000 |
Total £'000 |
||
|---|---|---|---|---|---|---|---|
| Gains on investments | 8 | - | 1,070 | 1,070 | - | 3,085 | 3,085 |
| Income from investments | 2 | 627 | - | 627 | 1,025 | - | 1,025 |
| Other income | 2 | 4 | - | 4 | - | - | - |
| Investment management fees | 3 | (70) | (632) | (702) | (116) | (1,041) | (1,157) |
| Other expenses | 4 | (302) | - | (302) | (188) | - | (188) |
| Net return on ordinary activities before taxation | 259 | 438 | 697 | 721 | 2,044 | 2,765 | |
| Tax on ordinary activities | 5 | (51) | 51 | - | (119) | 119 | - |
| Return attributable to Equity Shareholders | 208 | 489 | 697 | 602 | 2,163 | 2,765 | |
| Earnings per share (pence) | 0.51 | 1.19 | 1.70 | 1.48 | 5.33 | 6.81 |
All gains and losses are recognised in the Income Statement.
All items in the above statement are derived from continuing operations. The Company has only one class of business and one reportable segment, the results of which are set out in the Income Statement and Balance Sheet. The Company derives its income from investments made in shares, securities and bank deposits.
There are no potentially dilutive capital instruments in issue and therefore no diluted returns per share figures are relevant. The basic and diluted earnings per share are therefore identical.
The total column of this Statement is the Profit and Loss Account of the Company.
For the Year Ended 31 January 2017
| Notes | capital £'000 |
Share Share premium account £'000 |
Capital reserve realised £'000 |
Capital reserve unrealised £'000 |
Special distributable redemption reserve £'000 |
Capital reserve £'000 |
Revenue reserve £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|---|---|---|
| At 31 January 2016 | 4,109 | 9,473 | (11,296) | 821 | 17,842 | 295 | 526 | 21,770 | |
| Net return | - | - | 856 | (367) | - | - | 208 | 697 | |
| Dividends paid | 6 | - | - | (1,454) | - | - | - | (287) (1,741) | |
| Repurchase and cancellation of shares | 12 | (51) | - | - | - | (224) | 51 | - | (224) |
| At 31 January 2017 | 4,058 | 9,473 | (11,894) | 454 | 17,618 | 346 | 447 | 20,502 |
| For the Year Ended 31 January 2016 | Notes | capital £'000 |
Share Share premium account £'000 |
Capital reserve realised £'000 |
Capital reserve unrealised £'000 |
Special distributable redemption reserve £'000 |
Capital reserve £'000 |
Revenue reserve £'000 |
Total £'000 |
|---|---|---|---|---|---|---|---|---|---|
| At 31 January 2015 | 3,424 | 6,174 | (11,223) | 3,987 | 17,842 | 295 | 335 | 20,834 | |
| Net return | - | - | 5,329 | (3,166) | - | - | 602 | 2,765 | |
| Dividends paid | 6 | - | - | (5,402) | - | - | - | (411) (5,813) | |
| Share issue | 12 | 685 | 3,299 | - | - | - | - | - | 3,984 |
| At 31 January 2016 | 4,109 | 9,473 | (11,296) | 821 | 17,842 | 295 | 526 | 21,770 |
The accompanying Notes are an integral part of the Financial Statements.
As at 31 January 2017
| Notes | 31 January 2017 £'000 |
31 January 2016 £'000 |
|
|---|---|---|---|
| Fixed assets | |||
| Investments at fair value through profit or loss | 8 | 17,111 | 21,591 |
| Current assets | |||
| Debtors | 10 | 273 | 221 |
| Cash | 3,334 | 688 | |
| 3,607 | 909 | ||
| Creditors | |||
| Amounts falling due within one year | 11 | (216) | (730) |
| Net current assets | 3,391 | 179 | |
| Net assets | 20,502 | 21,770 | |
| Capital and reserves | |||
| Called up share capital | 12 | 4,058 | 4,109 |
| Share premium account | 13 | 9,473 | 9,473 |
| Capital reserve - realised | 13 | (11,894) | (11,296) |
| Capital reserve - unrealised | 13 | 454 | 821 |
| Special distributable reserve | 13 | 17,618 | 17,842 |
| Capital redemption reserve | 13 | 346 | 295 |
| Revenue reserve | 13 | 447 | 526 |
| Net assets attributable to Ordinary Shareholders | 20,502 | 21,770 | |
| Net asset value per Ordinary Share (pence) | 14 | 50.52 | 52.98 |
The Financial Statements of Maven Income and Growth VCT 2 PLC, registered number 4135802, were approved and authorised for issue by the Board of Directors on 12 May 2017 and were signed on its behalf by:
John Lawrence MBE Director
The accompanying Notes are an integral part of the Financial Statements.
For the Year Ended 31 January 2017
| Notes | Year ended 31 January 2017 £'000 |
Year ended 31 January 2016 £'000 |
|
|---|---|---|---|
| Net cash flows from operating activities | 15 | (1,516) | (1,034) |
| Cash flows from investing activities | |||
| Investment income received | 621 | 1,065 | |
| Deposit interest received | 4 | - | |
| Purchase of investments | (5,492) | (27,006) | |
| Sale of investments | 10,994 | 28,244 | |
| Net cash flows from investing activities | 6,127 | 2,303 | |
| Cash flows from financing activities | |||
| Equity dividends paid | 6 | (1,741) | (5,813) |
| Issue of Ordinary Shares | - | 3,984 | |
| Repurchase of Ordinary Shares | (224) | - | |
| Net cash flows from financing activities | (1,965) | (1,829) | |
| Net increase/(decrease) in cash | 2,646 | (560) | |
| Cash at beginning of year | 688 | 1,248 | |
| Cash at end of year | 3,334 | 688 |
The accompanying Notes are an integral part of the Financial Statements.
For the Year Ended 31 January 2017
The Financial Statements have been prepared under FRS 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland and in accordance with the Statement of Recommended Practice for Investment Trust Companies and Venture Capital Trusts (the SORP) issued by the AIC in November 2014.
Dividends receivable on equity shares and unit trusts are treated as revenue for the period on an ex-dividend basis. Where no ex-dividend date is available dividends receivable on or before the year end are treated as revenue for the period. Provision is made for any dividends not expected to be received. The fixed returns on debt securities and non-equity shares are recognised on a time apportionment basis so as to reflect the effective interest rate on the debt securities and shares. Provision is made for any fixed income not expected to be received. Interest receivable from cash and short term deposits and interest payable are accrued to the end of the year.
All expenses are accounted for on an accruals basis and charged to the Income Statement. Expenses are charged through the revenue account except as follows:
Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the Financial Statements which are capable of reversal in one or more subsequent periods.
Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences are expected to reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
The tax effect of different items of income/gain and expenditure/loss is allocated between capital reserves and revenue account on the same basis as the particular item to which it relates using the Company's effective rate of tax for the period.
UK corporation tax is provided at amounts expected to be paid/recovered using the tax rates and laws that have been enacted or substantively enacted at the balance sheet date.
In valuing unlisted investments the Directors follow the criteria set out below. These procedures comply with the revised International Private Equity and Venture Capital Valuation Guidelines (IPEVCV) for the valuation of private equity and venture capital investments. Investments are recognised at their trade date and are designated by the Directors as fair value through profit and loss. At subsequent reporting dates, investments are valued at fair value, which represents the Directors' view of the amount for which an asset could be exchanged between knowledgeable and willing parties in an arm's length transaction. This does not assume that the underlying business is saleable at the reporting date or that its current shareholders have an intention to sell their holding in the near future.
A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or expires.
Fair value is defined as the price that the Company would receive upon selling an investment in a timely transaction to an independent buyer in the principal or the most advantageous market of the investment. A three-tier hierarchy has been established to maximise the use of observable market data and minimise the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable.
Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on best information available in the circumstances.
The three-tier hierarchy of inputs is summarised in the three broad levels listed below.
When the Company sells or revalues its investments during the year, any gains or losses arising are credited/charged to the Income Statement.
Disclosure is required of judgements and estimates made by the Board and the Manager in applying the accounting policies that have a significant effect on the Financial Statements. The area involving the highest degree of judgement and estimates is the valuation of unlisted investments recognised in Note 8 and explained in Note 1 (e) above.
| 2. Income | Year ended 31 January 2017 £'000 |
Year ended 31 January 2016 £'000 |
|---|---|---|
| Income from investments: | ||
| UK franked investment income | 2 | 125 |
| UK unfranked investment income | 625 | 900 |
| 627 | 1,025 | |
| Other income: | ||
| Bank interest | 4 | - |
| Total income | 631 | 1,025 |
| 3. Investment management fees | Year ended 31 January 2017 | Year ended 31 January 2016 | |||||
|---|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
||
| Investment management fees at 2.5% | 53 | 475 | 528 | 58 | 521 | 579 | |
| Performance fees | 17 | 157 | 174 | 69 | 620 | 689 | |
| VAT reclaim on performance fees | - | - | - | (11) | (100) | (111) | |
| 70 | 632 | 702 | 116 | 1,041 | 1,157 |
Details of the fee basis are contained in the Directors' Report on page 35.
| 4. Other expenses | Revenue £'000 |
Year ended 31 January 2017 Capital £'000 |
Total £'000 |
Revenue £'000 |
Year ended 31 January 2016 Capital £'000 |
Total £'000 |
|---|---|---|---|---|---|---|
| Secretarial fees | 68 | - | 68 | 67 | - | 67 |
| VAT reclaim on secretarial fees | - | - | - | (70) | - | (70) |
| Directors' remuneration | 71 | - | 71 | 70 | - | 70 |
| Fees to Auditor - audit services | 18 | - | 18 | 18 | - | 18 |
| Fees to Auditor - tax compliance services | 5 | - | 5 | 5 | - | 5 |
| Bad debts written off | 30 | - | 30 | - | - | - |
| Miscellaneous expenses | 110 | - | 110 | 98 | - | 98 |
| 302 | - | 302 | 188 | - | 188 |
| 5. Tax on ordinary activities | Year ended 31 January 2017 | Year ended 31 January 2016 | |||||
|---|---|---|---|---|---|---|---|
| Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
||
| Corporation tax | (51) | 51 | - | (119) | 119 | - |
The tax assessed for the period is 20% (2016: 20%).
| Year ended 31 January 2017 Revenue Capital Total |
Year ended 31 January 2016 Revenue Capital Total |
||||||
|---|---|---|---|---|---|---|---|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Return on ordinary activities before tax | 259 | 438 | 697 | 721 | 2,044 | 2,765 | |
| Revenue return on ordinary activities multiplied by standard rate of corporation tax |
51 | 88 | 139 | 144 | 409 | 553 | |
| Non taxable UK dividend income | - | - | - | (25) | - | (25) | |
| Gains on investments | - | (214) | (214) | - | (617) | (617) | |
| Increase in excess management expenses | - | 75 | 75 | - | 89 | 89 | |
| 51 | (51) | - | 119 | (119) | - |
Losses with a tax value of £521,401 (2016: £453,937) are available to carry forward against future trading profits. These have not been recognised as a deferred tax asset as recoverability is not sufficiently certain.
| 6. Dividends | Year ended 31 January 2017 £'000 |
Year ended 31 January 2016 £'000 |
|---|---|---|
| Revenue dividends | ||
| Final dividend for year ended 31 January 2016 of 0.50p (2015: 0.20p) paid on 24 June 2016 |
205 | 82 |
| Interim dividend for year ended 31 January 2017 of 0.20p (2016: 0.80p) paid on 28 October 2016 |
82 | 329 |
| 287 | 411 | |
| Capital dividends | ||
| Final dividend for year ended 31 January 2016 of 1.75p (2015: 1.95p) paid on 24 June 2016 |
719 | 800 |
| Interim dividend for year ended 31 January 2017 of 1.80p (2016: 1.20p) paid on 28 October 2016 |
735 | 493 |
| Special dividend for year ended 31 January 2017 of Nil (2016: 10.00p) |
- | 4,109 |
| 1,454 | 5,402 | |
| Dividends We set out below the final dividends proposed in respect of the financial year, which reflect the requirements of Section 274 of the Income Tax Act 2007. Revenue available for distribution by way of dividends |
||
| for the year | 208 | 602 |
| Revenue dividends Final revenue dividend proposed for the year ended 31 January 2017 of 0.20p (2016: 0.50p) payable on 23 June 2017 |
81 | 205 |
| 81 | 205 | |
| Capital dividends Final capital dividend proposed for the year ended 31 January 2017 of 2.05p (2016: 1.75p) payable |
||
| on 23 June 2017 | 832 | 719 |
| 832 | 719 | |
| 7. Earnings per share | Year ended 31 January 2017 | Year ended 31 January 2016 |
| The returns per share have been based on the following figures: |
Weighted average number of Ordinary Shares 40,948,352 40,602,938 Revenue return £208,000 £602,000 Capital return £489,000 £2,163,000 Total return £697,000 £2,765,000
| 8. Investments Year ended 31 January 2017 |
|||||
|---|---|---|---|---|---|
| Listed (quoted Prices) £'000 |
AIM/ISDX (quoted prices) £'000 |
AIM/ISDX (unobservable inputs) £'000 |
Unlisted (unobservable inputs) £'000 |
Total £'000 |
|
| Valuation at 31 January 2016 | 4,908 | 114 | - | 16,569 | 21,591 |
| Unrealised (gain)/loss | (18) | 588 | 251 | (1,642) | (821) |
| Cost at 31 January 2016 | 4,890 | 702 | 251 | 14,927 | 20,770 |
| Movements during the year: | |||||
| Purchases | 3,780 | - | - | 1,712 | 5,492 |
| Sales proceeds | (7,653) | (40) | - | (3,349) | (11,042) |
| Realised gain/(loss) | 19 | (65) | - | 1,483 | 1,437 |
| Cost at 31 January 2017 | 1,036 | 597 | 251 | 14,773 | 16,657 |
| Unrealised gain/(loss) | 37 | (484) | (251) | 1,152 | 454 |
| Valuation at 31 January 2017 | 1,073 | 113 | - | 15,925 | 17,111 |
Note 1(f) defines the three tier hierarchy of investments, and the significance of the information used to determine their fair value, that is required by Financial Reporting Standard 102 Section 11 "Basic Financial Instruments". Listed and AIM/ISDX securities are categorised as Level 1 and unlisted investments as Level 3.
FRS 102 requires disclosure, by class of financial instrument, if the effect of changing one or more inputs to reasonably possible alternative assumptions would result in a significant change to the fair value measurement. The information used in determination of the fair value of Level 3 to the specific underlying investments is chosen with reference to the circumstances and position of each investee company.
The Directors are of the view that there are no reasonably possible alternative assumptions that will have a significant effect on the valuation of the unlisted portfolio.
| The portfolio valuation Held at market valuation |
31 January 2017 £'000 |
31 January 2016 £'000 |
|---|---|---|
| UK treasury bills | - | 4,895 |
| Investment trusts | 1,063 | - |
| Listed investments | 10 | 13 |
| AIM quoted equities | 113 | 114 |
| 1,186 | 5,022 | |
| Unlisted at Directors' valuation: Unquoted unobservable equities |
6,893 | 6,412 |
| Unquoted unobservable fixed income | 9,032 | 10,157 |
| 15,925 | 16,569 | |
| Total | 17,111 | 21,591 |
| Realised gains based on historical basis Unrealised movement |
1,437 (367) |
6,251 (3,166) |
| Gains on investments | 1,070 | 3,085 |
The principal activity of the Company is to select and hold a portfolio of investments in unlisted securities. Although the Company will, in some cases, be represented on the board of the investee company, it will not take a controlling interest or become involved in the management. The size and structure of companies with unlisted securities may result in certain holdings in the portfolio representing a participating interest without there being any partnership, joint venture or management consortium agreement.
At 31 January 2017, the Company held no shares amounting to 20% or more of the equity capital of any of the unlisted or quoted undertakings. The Company does hold shares or units amounting to more than 3% or more of the nominal value of the allotted shares or units of any class in certain investee companies.
Details of equity percentages held are shown in the Investment Portfolio Summary on pages 30 and 31.
| 10. Debtors | 31 January 2017 £'000 |
31 January 2016 £'000 |
|---|---|---|
| Prepayments and accrued income | 225 | 221 |
| Other debtors | 48 | - |
| 273 | 221 |
| 11. Creditors | 31 January 2017 £'000 |
31 January 2016 £'000 |
|---|---|---|
| Accruals | 216 | 730 |
| 216 | 730 |
| 12. Share capital | 31 January 2017 | 31 January 2016 | ||
|---|---|---|---|---|
| Number | £'000 | Number | £'000 | |
| At 31 January the authorised share capital comprised: | ||||
| Allotted, issued and fully paid | ||||
| Ordinary Shares of 10p each: | ||||
| Balance brought forward | 41,089,617 | 4,109 | 34,243,932 | 3,424 |
| Repurchased and cancelled during year | (505,000) | (51) | - | - |
| 40,584,617 | 4,058 | 34,243,932 | 3,424 | |
| Issued during the year | - | - | 6,845,685 | 685 |
| 40,584,617 | 4,058 | 41,089,617 | 4,109 |
During the year 505,000 Ordinary Shares (2016: Nil) of 10p each were repurchased by the Company at a cost of £224,185 (2016: £Nil) and cancelled.
During the year the Company issued no Ordinary Shares (2016: 6,801,438 at prices ranging from 58.03p to 61.43p per share under an Offer for Subscription; and 44,247 at a price of 58.91p per share under a DIS election).
The share premium account represents the premium above nominal value received by the Company on issuing shares net of issue costs.
Gains or losses on investments realised in the year that have been recognised in the Income Statement are transferred to the capital reserve realised account on disposal. Furthermore, any prior unrealised gains or losses on such investments are transferred from the capital reserve unrealised account to the capital reserve realised account on disposal. Increases and decreases in the fair value of investments are recognised in the Income Statement and are then transferred to the capital reserve unrealised account. The capital reserve realised account also represents capital dividends, capital investment management fees and the tax effect of capital items.
The total cost to the Company of the repurchase and cancellation of shares is represented in the special distributable reserve account.
The nominal value of shares repurchased and cancelled is represented in the capital redemption reserve.
The revenue reserve represents accumulated profits retained by the Company that have not been distributed to Shareholders as a dividend.
The net asset value per Ordinary Share and the net asset value attributable to the Ordinary Shares at the year end, calculated in accordance with the Articles of Association, were as follows:
| Ordinary Shares | 50.52 | 20,502 | 52.98 | 21,770 |
|---|---|---|---|---|
| p | £'000 | p | £'000 | |
| share | attributable | share | attributable | |
| value per | value | value per | value | |
| Net asset | Net asset | Net asset | Net asset | |
| 31 January 2017 | 31 January 2016 |
The number of Ordinary Shares used in this calculation is set out in Note 12.
| 15. Reconciliation of net return to cash generated by operations |
Year ended 31 January 2017 £'000 |
Year ended 31 January 2016 £'000 |
|---|---|---|
| Net Return | 697 | 2,765 |
| Adjustment for: | ||
| Gains on investments | (1,070) | (3,085) |
| Income from investments | (627) | (1,025) |
| Other income | (4) | - |
| Operating cash flow before movement in working capital |
(1,004) | (1,345) |
| Decrease in prepayments | 2 | 2 |
| Decrease in debtors | - | 21 |
| (Decrease)/increase in accruals | (514) | 288 |
| Cash utilised by operations | (1,516) | (1,034) |
The Company's financial instruments comprise equity and fixed interest investments, cash balances and debtors and creditors that arise directly from its operations, for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. The Company holds financial assets in accordance with its investment policy of investing mainly in a portfolio of VCT qualifying unquoted and AIM/ISDX quoted securities. The Company may not enter into derivative transactions in the form of forward foreign currency contracts, futures and options without the written permission of the Directors. No derivative transactions were entered into during the period.
The main risks the Company faces from its financial instruments are: (i) market price risk, being the risk that the value of investment holdings will fluctuate as a result of changes in market prices caused by factors other than interest rates; (ii) interest rate risk; (iii) liquidity risk; (iv) credit risk; and (v) price risk sensitivity.
In line with the Company's investment objective, the portfolio comprises mainly Sterling currency securities and, therefore, foreign currency risk is minimal.
The Manager's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures below exclude short term debtors and creditors which are included in the Balance Sheet at fair value.
The Company's investment portfolio is exposed to market price fluctuations, which are monitored by the Manager in pursuance of the investment objective as set out on page 13. Adherence to investment guidelines and to investment and borrowing powers set out in the Management and Administration Deed mitigates the risk of excessive exposure to any particular type of security or issuer. These powers and guidelines include the requirement to invest in a number of companies across a range of industrial and service sectors at varying stages of development, to closely monitor the progress of the investee companies and to appoint a non-executive director to the board of each company. Further information on the investment portfolio (including sector analysis, concentration and deal type analysis) is set out in the Analysis of Unlisted and Quoted Portfolio, the Investment Manager's Review, the Summary of Investment Changes, the Investment Portfolio Summary and the Largest Investments by Valuation.
The interest rate risk profile of financial assets at the balance sheet date was as follows:
| At 31 January 2017 | Fixed interest £'000 |
Floating rate £'000 |
Non interest bearing £'000 |
|---|---|---|---|
| Sterling | |||
| Unlisted and AIM/ISDX | 9,032 | - | 7,016 |
| Investment trusts | - | - | 1,063 |
| Cash | - | 3,334 | - |
| 9,032 | 3,334 | 8,079 |
| At 31 January 2016 | Fixed interest £'000 |
Floating rate £'000 |
Non interest bearing £'000 |
|---|---|---|---|
| Sterling | |||
| Unlisted and AIM/ISDX | 10,157 | - | 6,539 |
| UK treasury bills | - | - | 4,895 |
| Cash | - | 688 | - |
| 10,157 | 688 | 11,434 |
The unlisted fixed interest assets have a weighted average life of 1.25 years (2016: 2.03 years) and a weighted average interest rate of 7.99% (2016: 7.86%). The floating rate assets consist of cash. These assets are earning interest at prevailing money market rates. The non-interest bearing assets represent the equity element of the portfolio. All assets and liabilities of the Company are included in the Balance Sheet at fair value.
The maturity profile of the Company's financial assets at the balance sheet date was as follows:
| At 31 January 2017 | Within 1 year £'000 |
Within 1-2 years £'000 |
Within 2-3 years £'000 |
Within 3-4 years £'000 |
Within 4-5 years £'000 |
More than 5 years £'000 |
Total £'000 |
|---|---|---|---|---|---|---|---|
| Unlisted | 2,842 | 3,734 | 186 | 1,890 | 380 | - | 9,032 |
| 2,842 | 3,734 | 186 | 1,890 | 380 | - | 9,032 |
| At 31 January 2016 | Within 1 year £'000 |
Within 1-2 years £'000 |
Within 2-3 years £'000 |
Within 3-4 years £'000 |
Within 4-5 years £'000 |
More than 5 years £'000 |
Total £'000 |
|---|---|---|---|---|---|---|---|
| UK treasury bills | 4,895 | - | - | - | - | - | 4,895 |
| Unlisted | 5,359 | 1,882 | 185 | 2,731 | - | - | 10,157 |
| 10,254 | 1,882 | 185 | 2,731 | - | - | 15,052 |
Due to their nature, unlisted investments may not be readily realisable and, therefore, a portfolio of listed assets and cash is held to offset this liquidity risk. Note 8 details the three-tier hierarchy of inputs used as at 31 January 2017 in valuing the Company's investments carried at fair value.
The Company, generally, does not hold significant cash balances and any cash held is with reputable banks with high quality external credit ratings.
This is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company.
The Company's financial assets exposed to credit risk amounted to the following:
| 31 January 2017 £'000 |
31 January 2016 £'000 |
|
|---|---|---|
| Investments in unlisted debt securities | 9,032 | 10,157 |
| UK treasury bills | - | 4,895 |
| Investment trusts | 1,063 | - |
| Cash | 3,334 | 688 |
| 13,429 | 15,740 |
All assets which are traded on a recognised exchange, are held by JP Morgan Chase (JPM), the Company's custodian. Cash balances are held by JPM, RBS and Clydesdale. Should the credit quality or the financial position of any of these institutions deteriorate significantly the Manager will move these assets to another financial institution.
The Manager evaluates credit risk on unlisted debt securities and financial commitments and guarantees prior to investment, and as part of the ongoing monitoring of investments. In doing this, it takes into account the extent and quality of any security held. Typically, unlisted debt securities have a fixed charge over the assets of the investee company in order to mitigate the gross credit risk. The Manager receives management accounts from investee companies, and members of the investment management team sit on the boards of investee companies. This enables the close identification, monitoring and management of investment specific credit risk.
There were no significant concentrations of credit risk to counterparties at 31 January 2017 or 31 January 2016.
The following details the Company's sensitivity to a 10% increase or decrease in the market prices of AIM/ISDX quoted securities, with 10% being the Manager's assessment of a reasonable possible change in market prices.
At 31 January 2017, if market prices of listed or AIM/ISDX quoted securities had been 10% higher or lower and with all other variables held constant, the increase or decrease in net assets attributable to Ordinary Shareholders for the year would have been £12,300 (2016: £12,700) due to the change on valuation of financial assets at fair value through profit or loss.
At 31 January 2017, 77.7% (2016: 76.2%) of net assets comprised investments in unquoted companies held at fair value attributable to Ordinary Shareholders. The valuation of unquoted investments reflects a number of factors, including the performance of the investee company itself and the wider market. Therefore, it is not considered meaningful to provide a sensitivity analysis on the net asset position and total return for the year.
| Notice of Annual General Meeting | 70 |
|---|---|
| Explanatory Notes to the Notice of Annual General Meeting |
75 |
| Your Notes | 76 |
Notice is hereby given that the Annual General Meeting of Maven Income and Growth VCT 2 PLC (the Company; Registered in England and Wales with registered number 4135802) will be held at 10.30 am on Wednesday 14 June 2017 at Fifth Floor, 1-2 Royal Exchange Buildings, London EC3V 3LF for the purposes of considering and, if thought fit, passing the following Resolutions:
c) in each case where the proceeds may be used in whole or part to purchase existing Ordinary Shares and shall expire at the conclusion of the next annual general meeting of the Company or on the expiry of 15 months from the passing of this Resolution, whichever is the first to occur, save that the Company may, before such expiry, make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such offer or agreement as if the power conferred hereby had not expired.
By order of the Board Maven Capital Partners UK LLP Secretary Fifth Floor 1-2 Royal Exchange Buildings London EC3V 3LF
12 May 2017
1) To be entitled to attend and vote at the Meeting (and for the purposes of the determination by the Company of the votes that may be cast in accordance with Regulation 41 of the Uncertified Securities Regulations 2001), only those members registered in the Company's register of members at 10.30 am on 12 June 2017 (or, if the Meeting is adjourned, close of business on the date which is two business days before the adjourned Meeting) shall be entitled to attend and vote at the Meeting. Changes to the register of members of the Company after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the Meeting.
2) Information regarding the Meeting, including the information required by Section 311A of the Companies Act 2006, is available from www.mavencp.com/migvct2.
3) If you wish to attend the Meeting in person, please bring some form of identification.
8) A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Meeting.
9) A form of proxy is enclosed with this document. The notes to the proxy form explain how to direct your proxy to vote or withhold their vote on each Resolution. To appoint a proxy using the proxy form, the form must be completed, signed and sent or delivered to the Company's registrars, Capita Asset Services, at The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU so as to be received by Capita Asset Services no later than 10.30 am on 12 June 2017 or by close of business on a date two business days prior to that appointed for any adjourned Meeting or, in the case of a poll taken subsequent to the date of the Meeting or adjourned Meeting, so as to be received no later than 24 hours before the time appointed for taking the poll. In the case of a member which is a company, the proxy form must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority) must be included with the proxy form. For the purposes of determining the time for delivery of proxies, no account has been taken of any part of a day that is not a working day.
10) You may submit your proxy electronically using the Capita Share Portal service at www.capitashareportal.com. Shareholders can use this service to vote or appoint a proxy on-line. The same voting deadline of 48 hours (excluding non-working days) before the time of the meeting applies as if you were using your personalised Form of Proxy to vote or appoint a proxy by post to vote for you. Shareholders will need to use the unique personal identification Investor Code printed on your share certificate. Shareholders should not show this information to anyone unless they wish to give proxy instructions on their behalf.
11) CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so for the Meeting and any adjournment(s) of it by using the procedures described in the CREST Manual (available from https:// www.euroclear.com/site/ public/EUI). CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message (a CREST Proxy Instruction) must be properly authenticated in accordance with Euroclear UK & Ireland Limited's (EUI) specifications and must contain the information required for such instructions, as described in the CREST Manual. The message must be transmitted so as to be received by the issuer's agent (ID: RA10) by 10.30 am on 12 June 2017. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.
CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time.
In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5) (a) of the Uncertificated Securities Regulations 2001.
12) In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company's register of members in respect of the joint holding, the first-named being the most senior.
13) To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off times for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy appointment received after the relevant cut-off time will be disregarded. Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another hardcopy proxy form, please contact Capita Asset Services at the address shown in note 9. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence.
14) In order to revoke a proxy instruction you will need to inform the Company by sending a signed hard copy notice clearly stating your intention to revoke your proxy appointment to Capita Asset Services, at the address shown in note 9. In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the revocation notice is signed, or a duly certified copy of such power or authority, must be include with the revocation notice. The revocation notice must be received by Capita Asset Services no later than 48 hours before the Meeting. If you attempt to revoke your proxy appointment but the revocation is received after the time specified then, subject to the paragraph directly below, your proxy appointment will remain valid. Appointment of a proxy does not preclude you from attending the Meeting and voting in person. If you have appointed a proxy and attend the Meeting in person, your proxy appointment will automatically be terminated.
15) A corporation which is a member can appoint one or more corporate representatives who may exercise, on its behalf, all its powers as a member provided that no more than one corporate representative exercises powers over the same share.
16) As at 5 May 2017, the Company's issued share capital comprised 40,584,617 Ordinary shares of 10p each. Each Ordinary Share carries the right to one vote at a General Meeting of the Company and, therefore, the total number of voting rights in the Company on 5 May 2017 is 40,584,617. The website referred to in note 2 will include information on the number of shares and voting rights.
19) In order to be able to exercise the members' rights under note 18, the relevant request must be made by a member or members having a right to vote at the Meeting and holding at least 5% of total voting rights of the Company, or at least 100 members having a right to vote at the Meeting and holding, on average, at least £100 of paid up share capital. For information on voting rights, including the total number of voting rights, see note 16 above and the website referred to in note 2.
22) Copies of the letters of appointment of the Directors of the Company and a copy of the Articles of Association of the Company will be available for inspection at the registered office of the Company and at Kintyre House, 205 West George Street, Glasgow G2 2LW from the date of this notice until the end of the Meeting.
An explanation of the Resolutions to be proposed at the Annual General Meeting is set out below. Resolutions 1 to 9 will be proposed as Ordinary Resolutions requiring the approval of more than 50% of the votes cast and Resolutions 10 to 12 will be proposed as Special Resolutions requiring the approval of 75% or more of the votes cast.
The Directors seek approval to receive the Directors' Report and audited Financial Statements for the year ended 31 January 2017 which are included within the Annual Report.
The Board seeks the approval of the Directors' Remuneration Report for the year ended 31 January 2017, which is also included within the Annual Report.
The Board seeks the approval of its remuneration policy to be applied during the three-year period ending 31 January 2020.
The Company's Shareholders will be asked to approve a final dividend of 2.25p per Ordinary Share for the year ended 31 January 2017 for payment on 23 June 2017 to Shareholders on the register at the close of business on 26 May 2017.
The Hon Robert Kissin will retire by rotation at the Annual General Meeting in accordance with the Articles of Association and, being eligible, is offering himself for re-election.
Bill Nixon, as a non-independent Director, retires annually in accordance with corporate governance best practice and is proposed for re-election.
Shareholders will be asked to approve the re-appointment of Deloitte LLP as the Company's Auditor, with Deloitte LLP having expressed their willingness to remain in office.
Shareholders will be asked to give the Directors' authority to fix the remuneration of Deloitte LLP.
The Directors are seeking authority pursuant to Section 551 of the Act for the Company to allot Ordinary Shares or rights to subscribe for Ordinary Shares up to an aggregate nominal value of £405,846. This amounts to 4,058,460 Ordinary Shares representing approximately 10% of the issued share capital as at 5 May 2017 (this being the latest practicable date prior to the publication of this Annual Report). This authority will be used for the purposes set out in Resolution 9. The authority conferred by Resolution 9 will expire at the
conclusion of the next Annual General Meeting of the Company or on the expiry of 15 months from the passing of the Resolution, whichever is the first to occur.
Shareholders will be asked to grant authority to the Directors to allot Ordinary Shares; (i) on a pre-emptive basis to existing Shareholders as far as possible, subject to excluding circumstances where it is impractical to apply the strict prorating; and (ii) otherwise allot Ordinary Shares or rights to subscribe for Ordinary Shares up to an aggregate nominal value of £405,846 (representing approximately 10% of the issued share capital as at 5 May 2017, this being the latest practicable date prior to the publication of this Annual Report) as if the preemption rights of Section 561 of the Act did not apply, in each case where the proceeds may be used in whole or part to purchase existing Ordinary Shares. The authority conferred by Resolution 10 will expire at the conclusion of the next Annual General Meeting of the Company or on the expiry of 15 months from the passing of the Resolution, whichever is the first to occur.
The Board may use the authorities conferred under Resolutions 9 and 10 to allot further Ordinary Shares or rights to subscribe for them.
Shareholders will be asked to authorise the Company to make market purchases of up to 6,083,634 Ordinary Shares (representing approximately 14.99% of the issued share capital as at 5 May 2017, this being the latest practicable date prior to the publication of this Annual Report). The Resolution sets out the minimum and maximum prices that can be paid, exclusive of expenses, and Ordinary Shares bought back may be cancelled or held in treasury as may be determined by the Board. The authority conferred by Resolution 11 will expire at the conclusion of the next Annual General Meeting of the Company or on the expiry of 15 months from the passing of the Resolution, whichever is the first to occur. Once held in treasury, such Ordinary Shares may be sold for cash or cancelled. The Board may use this authority to allow the Company to continue to operate its share buy-back policy.
The Directors propose to preserve the Company's ability to call general meetings (other than annual general meetings) on 14 clear days' notice, as previously approved by Shareholders at the last Annual General Meeting. Resolution 12 seeks such approval and would be effective until the Company's next Annual General Meeting when it would be intended that a similar Resolution be proposed. It is anticipated that, if confirmed, such authority will only be used in exceptional circumstances. The Company will also need to meet the requirements for electronic voting before it can call a general meeting on 14 days' notice.
| Directors | John Lawrence MBE (Chairman) The Hon Robert Kissin Peter Linthwaite Bill Nixon |
|---|---|
| Manager and Secretary | Maven Capital Partners UK LLP Kintyre House 205 West George Street Glasgow G2 2LW Telephone: 0141 306 7400 E-mail: [email protected] |
| Registered Office | Fifth Floor 1-2 Royal Exchange Buildings London EC3V 3LF |
| Registered in England and Wales Company Registration Number: 4135802 | |
| Website | www.mavencp.com/migvct2 |
| Registrars | Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU |
| Website: www.capitaassetservices.com | |
| Shareholder Portal: www.capitashareportal.com | |
| Shareholder Helpline: 0333 300 1566 (Lines are open 9.00am until 5.30pm, Monday to Friday; calls are charged at the standard geographic rates and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate) |
|
| Auditor | Deloitte LLP |
| Bankers | J P Morgan Chase Bank |
| Stockbrokers | Shore Capital Stockbrokers Limited Telephone: 020 7647 8132 |
| VCT Adviser | Philip Hare & Associates LLP |
Maven Capital Partners UK LLP Kintyre House 205 West George Street Glasgow G2 2LW
Authorised and Regulated by The Financial Conduct Authority
Tel: 0141 306 7400
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