Annual Financial Report for the Year Ended 31 March 2023
15/06/2023 15:00
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15 June 2023
NORTHERN 2 VCT PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MARCH 2023
Northern 2 VCT PLC is a Venture Capital Trust (VCT) managed by Mercia Fund
Management Limited. It invests mainly in unquoted venture capital holdings in
growing UK companies and aims to provide long-term tax-free returns to
shareholders through a combination of dividend yield and capital growth.
Financial highlights (comparative figures as at 31 March 2022):
Year ended Year ended
31 March 31 March
2023 2022
Net assets £109.6m £104.9m
Net asset value per share 59.0p 64.4p
Return per share
Revenue ( 0.2)p 0.2p
Capital ( 1.7)p 0.4p
Total ( 1.9)p 0.6p
Dividend per share declared in respect of the period
Interim dividend 2.0p 2.0p
Proposed final dividend 1.3p 1.6p
Total 3.3p 3.6p
Cumulative return to shareholders since launch
Net asset value per share 59.0p 64.4p
Dividends paid per share* 136.0p 132.4p
Net asset value plus dividends paid per share 195.0p 196.8p
Mid-market share price at end of period 54.5p 61.5p
Share price discount to net asset value 7.6% 4.5%
Annualised tax-free dividend yield (based on net asset value per share) 5.1% 5.0%
*Excluding proposed final dividend payable on 18 August 2023
Enquiries:
James Sly / Sarah Williams, Mercia Asset Management PLC – 0330 223 1430
Website: www.mercia.co.uk/vcts/n2vct/
CHAIR’S STATEMENT
Uncertainty in the economic landscape persisted over the past year.
Inflationary pressures resulted in interest rate increases and volatility in
the financial markets which presented challenges. While consumer facing
companies have been particularly impacted by the high-inflation environment,
many quoted equity indices experienced large declines and company valuations
across most sectors fell from previous highs.
Against this challenging backdrop, it is pleasing to report that the valuation
of our unquoted portfolio increased in the year, supported by a number of
excellent exits both in the year and immediately post year end. Realisation of
our unquoted investments in the year generated proceeds of £12.1 million,
delivering a £6.2 million return on initial cost of £5.9 million. Investment
activity has remained high, with £16.0 million invested in 27 promising early
stage businesses.
Despite declining business confidence generally, our public share offer of £6
million was fully subscribed and I would like to thank existing shareholders
for their continued support and warmly welcome new investors. Proceeds from
the share offer together with sales proceeds from investments mean that the
Company is well positioned both to pursue new opportunities to support small
and medium businesses and to work with existing portfolio companies to realise
their growth plans.
Results and dividend
In the year ended 31 March 2023 the Company delivered a return of minus 1.9
pence per share (2022: 0.6 pence), equivalent to minus 3.0% of the opening net
asset value (NAV) per share. Gains in the unquoted portfolio were offset by
declines in our listed investments, particularly musicMagpie, a legacy AIM
investment that was impacted both by challenging trading conditions and the
repricing of AIM shares generally. The NAV per share as at 31 March 2023,
after deducting dividends paid during the year totalling 3.6 pence, was 59.0
pence compared with 64.4 pence as at 31 March 2022.
Several investment realisations were completed during the year, with a number
of notable transactions either completed or in progress as at the balance
sheet date. One particular highlight after the balance sheet date was the sale
of Evotix, sold in May 2023, for proceeds of £11.5 million compared to an
original cost of £2.5 million, a 4.6x return, which is particularly welcome
as it was an early-stage investment made since the VCT rule changes in 2015;
the realised value has been represented in the Directors’ unquoted
valuations as at the balance sheet date. Other highlights were the sales of
Lineup Systems and Knowledgemotion that registered returns of 7.8 times and
1.7 times cost respectively over their lifetimes (inclusive of loan interest
received). These gains contributed to an overall increase of £0.6 million in
the Directors’ valuation of the unquoted portfolio.
The unquoted valuations were also impacted by a number of write-downs
including the failure of Channel Mum, which was unfortunately put into
liquidation after facing challenging trading conditions. In addition, the
Company’s investment in Axial was sold at a loss following its loss of
several large contracts.
In 2018 we set an objective of paying an annual dividend representing a yield
of at least 5% of the opening NAV per share in each year whilst endeavouring
to protect the NAV from erosion over the medium term. Over the three years
since 31 March 2020 the NAV per share has increased by 10% from 53.5 pence to
59.0 pence, after taking account of dividend payments totalling 14.6 pence
over the same period. We have therefore broadly continued to meet our
objective.
Having already declared an interim dividend of 2.0 pence per share which was
paid in January 2023, your Directors now propose a final dividend of 1.3 pence
per share. The total of 3.3 pence per share is equivalent to 5.1% of the
opening NAV of 64.4 pence per share. The proposed final dividend will be paid
on 18 August 2023, subject to approval by shareholders at the Annual General
Meeting.
The target dividend yield will remain subject to regular review and the level
of future dividend distributions will continue to reflect the level of returns
generated by the Company in the medium term, the timing of investment
realisations, the availability of distributable reserves and continuing
compliance with the VCT scheme rules.
Investment portfolio
The Company continues to be a generalist investor, with large allocations in
the software, healthcare/bio-technology and consumer sectors. The older
investments made under the ‘pre 2015’ rules continue to be realised, and
comprised 19% by value of the Company’s investments as of the balance sheet
date. This mature portfolio will continue to reduce as a percentage of overall
capital invested as we realise our holdings in these investments, and we
expect that it will continue to provide a series of profitable exits in the
years to come, supporting the overall return of the Company.
Over the year the Company saw reductions in the valuations of its listed
investments, notably the continued fall in value of AIM listed musicMagpie and
the listed portfolio of investments, in line with the decline in investment
markets generally. Overall, the value of the Company’s listed investments
declined by £1.9 million of which £1.0 million was MusicMagpie. Despite the
marked-to-market losses of the listed portfolio that is held to generate a
yield on cash pending investment, the portfolio has generated annualised total
returns of 3.1% since investment in 2018 and has therefore provided a positive
contribution to NAV in what has been a very low interest rate environment.
Your Directors always consider the state of the investment markets and how
these might impact the valuations of the unquoted venture portfolio and have
updated valuations to reflect current market conditions where appropriate.
Investment levels have remained high and exceeded the previous year’s record
breaking deployment level, with £10.0 million of capital provided to 9 new
venture capital investments and £6.0 million of follow on capital invested
into 19 existing portfolio investments, including a second tranche of
investment into one company that was new in the year (previous year: £14.7
million combined).
Share offer and liquidity
As a result of the public share offer launched in January 2023, 10,290,184 new
ordinary shares were issued in April 2023 for gross proceeds of £6.0 million.
Following the smaller non-prospectus top-up offer in 2022/23, and taking into
account the increased rate of investment that has now been sustained for a
second successive year, the Board is pleased to announce that the Company will
launch a prospectus offer in the 2023/24 tax year for £14.0 million, with an
over-allotment facility of £6.0 million. This offer will launch in September
2023, and full details will be published shortly.
Our dividend investment scheme continues to operate. This enables shareholders
to invest their dividends in new ordinary shares free of dealing costs and
with the benefit of the tax reliefs available on new VCT share subscriptions.
During the year around 15% of total dividends were reinvested by shareholders.
We have maintained our policy of being willing to buy back the Company’s
shares in the market when necessary in order to maintain liquidity, at a 5%
discount to NAV. During the year, a total of 4,673,456 shares were repurchased
for cancellation, equivalent to approximately 2.5% of the opening share
capital.
Changes to the performance-related management fee (‘performance fees’)
Following a review of current arrangements by the Board, included in the
Circular for the upcoming General Meeting is a resolution proposing changes to
the Management Agreement in relation to the performance-related management fee
with the Manager. If approved by shareholders, these changes will be
implemented by a deed of variation to the Company’s existing Management
Agreement.
The changes in VCT legislation in 2015 required the Company to focus new
investment on earlier stage companies which, by their nature, are higher risk
and therefore likely to deliver more volatile investment returns. A number of
changes are proposed in order to better align future performance fees with
shareholder returns as well as to bring the performance fee methodology more
in line with other market participants and to harmonise its application across
the Northern VCTs. The changes are designed to ensure strong returns above a
hurdle are delivered consistently, not just in a single year, with a
requirement that any decline in shareholder NAV must be made wholly good
before a performance fee is payable to the Manager. Full details of the
changes are set out in the accompanying Circular for the General Meeting,
which will be held immediately after the Annual General Meeting on 29 July
2023.
Responsible Investment
The Company is mindful of its Environmental, Social and Governance (ESG)
responsibilities and we have outlined our evolving approach in the annual
report.
VCT legislation and qualifying status
The Company has continued to meet the stringent and complex qualifying
conditions laid down by HM Revenue & Customs for maintaining its approval as a
VCT. The Manager monitors the position closely and reports regularly to the
Board. Philip Hare & Associates LLP has continued to act as independent
adviser to the Company on VCT taxation matters.
The upcoming 2025 ‘sunset clause’ was a European state aid requirement
when the VCT scheme received state aid approval, which means that without a
change in legislation investors will not receive upfront tax relief when
investing in VCTs from 6 April 2025. While the government has signalled that
it will extend the scheme, to date no formal legislation has been introduced
to enact this commitment. The Company and the Manager will continue to monitor
progress in this area. The Board considers that the Company, and VCTs more
generally, are successfully delivering against the Government’s mandate,
which is to channel money into higher-risk, early-stage businesses.
Another issue facing VCTs and similar schemes such as the Enterprise
Investment Scheme is the ‘Financial Health Test’ that has been enforced
more narrowly over the past twelve months. This test states that where a
company is investing outside of its initial investing period, if more than
half of an investee company’s subscribed share capital has disappeared as a
result of accumulated losses, then no further capital may be invested. In
reality a number of early stage businesses need to be funded for longer than
that initial period, making losses originally to fund growth. The Manager has
performed a detailed review of the portfolio, and while the Company’s
portfolio is relatively unaffected at the current time, your Board will
continue to monitor the situation carefully.
Whilst no further amendments to the VCT legislation were announced by the
Chancellor in his 2023 Budget statement, it is possible that further changes
will be made in the future. We will continue to work closely with the Manager
to maintain compliance with the scheme rules at all times.
Board of directors
Your board recognises the need to consider succession planning and with due
regard to developing its diversity. We are determined to only ever appoint
when we have found high quality, value adding and experienced people who will
contribute to the Board in the interests of shareholders. As previously
announced, Ranjan Ramparia joined as a director in the year.
As part of the process of refreshing itself, which your board has been
undertaking over the last few years, senior non-executive director, Frank
Neale is not seeking re-election and retires at the AGM. As he stands down I
want to thank him for his extraordinary contribution to the success of the
Company over many years. It would be difficult to overstate the knowledge and
expertise Frank Neale had brought to the board’s deliberations, for which we
are very appreciative. His wisdom and guidance will be much missed.
As reported in previous years, the Board goes through a rigorous appraisal
process both collectively and individually during which it considers the
independence of each director in the light of their performance at, and
between, board meetings and when engaging with the Manager. Shareholders can
be assured that with the benefit of their wide experience and expertise your
directors act of behalf of shareholders in challenging the Manager in respect
of the strategic direction of the Company, the investment portfolio, the
valuation of unquoted assets, performance-related management fees, fund
raising and any other matter likely to impact the development of the Company.
All of the Directors who served throughout the year, with the exception of
Frank Neale who is retiring from the Board, will be seeking re-election at the
2023 AGM in accordance with the AIC Code of Corporate Governance.
Annual General Meeting
The Company’s Annual General Meeting (AGM) will take place on 28 July 2023.
The AGM usually provides an excellent opportunity for shareholders, directors
and the Manager to meet in person, exchange views and comment. We intend to
hold the 2023 AGM in person at Reed Smith LLP, Broadgate Tower, 20 Primrose
Street, London, EC2A 2RS. Following positive feedback received from the last
three years, we also intend to offer remote access for shareholders through an
online webinar facility for those who would prefer not to travel. Please note
that shareholders attending remotely must register their votes ahead of time,
as it will not be possible to count votes from online participants at the AGM.
Full details and formal notice of the AGM are set out in a separate document.
The General Meeting regarding the proposed changes to the performance-related
management fee will be held immediately after the AGM.
Outlook
Despite a challenging macroeconomic outlook with high inflation and rising
interest rates, we will continue to provide patient capital to support
innovative early stage businesses in the UK. Your board is encouraged by the
continued strong deployment rates, and will continue to invest throughout the
economic cycle.
Your board has confidence in the overall diversity of the portfolio and
believes that it will continue to generate long term shareholder value.
We thank our investors for their continuing support.
David Gravells
Chair 15
June 2023
Extracts from the audited financial statements for the year ended 31 March
2023 are set out below.
Income statement
Year ended 31 March 2023 Year ended 31 March 2022
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gain/(loss) on disposal of investments - (219) (219) - 4,491 4,491
Unrealised fair value gains/(losses) on investments - (1,302) (1,302) - (2,265) (2,265)
- (1,521) (1,521) - 2,226 2,226
Dividend and interest income 598 - 598 1,314 - 1,314
Investment management fee (505) (1,514) (2,019) (541) (1,621) (2,162)
Other expenses (522) - (522) (455) - (455)
Return before tax (429) (3,035) (3,464) 318 605 923
Tax on return 109 (109) - (3) 3 -
Return after tax (320) (3,144) (3,464) 315 608 923
Return per share (0.2)p (1.7)p (1.9)p 0.2p 0.4p 0.6p
Balance sheet
31 March 2023 31 March 2022
£000 £000
Fixed assets
Investments 80,314 77,878
Current assets
Debtors 118 43
Cash and cash equivalents 29,318 27,086
29,436 27,129
Creditors (amounts falling due within one year) (174) (153)
Net current assets 29,262 26,976
Net assets 109,576 104,854
Capital and reserves
Called-up equity share capital 9,282 8,145
Share premium 38,165 21,952
Capital redemption reserve 849 615
Capital reserve 59,176 63,642
Revaluation reserve 2,015 9,765
Revenue reserve 89 735
Total equity shareholders' funds 109,576 104,854
Net asset value per share 59.0p 64.4p
Statement of changes in equity
for the year ended 31 March 2023
--------- Non Distributable reserves ------------ Distributable Reserves
Called up share capital Share premium Capital redemption reserve Revaluation reserve* Capital reserve Revenue reserve Total
£000 £000 £000 £000 £000 £000 £000
At 1 April 2022 8,145 21,952 615 9,765 63,642 735 104,854
Return after tax - - - (7,750) 4,606 (320) (3,464)
Dividends paid - - - - (6,408) (326) (6,734)
Net proceeds of share issues 1,371 16,213 - - - - 17,584
Shares purchased for cancellation (234) - 234 - (2,664) - (2,664)
At 31 March 2023 9,282 38,165 849 2,015 59,176 89 109,576
Year ended 31 March 2022
At 1 April 2021 8,102 20,175 511 22,343 63,547 822 115,500
Return after tax - - - (12,578) 13,186 315 923
Dividends paid - - - - (11,703) (402) (12,105)
Net proceeds of share issues 147 1,837 - - - - 1,984
Shares purchased for cancellation (104) (60) 104 - (1,388) - (1,448)
At 31 March 2022 8,14 5 21,952 615 9,765 63,642 735 104,854
Statement of cash flows
for the year ended 31 March 2023
Year ended Year ended
31 March 2023 31 March 2022
£000 £000
Cash flows from operating activities
Return before tax (3,464) 923
Adjustments for:
(Gain)/loss on disposal of investments 219 (4,491)
Movements in fair value of investments 1,302 2,265
(Increase)/decrease in debtors (75) 1,619
Increase/(decrease) in creditors 21 (1,654)
Net cash outflow from operating activities (1,997) (1,338)
Cash flows from investing activities
Purchase of investments (17,600) (16,414)
Sale/repayment of investments 13,643 27,840
Net cash inflow/(outflow) from investing activities (3,957) 11,426
Cash flows from financing activities
Issue of ordinary shares 18,075 1,984
Share issue expenses (491) (60)
Purchase of ordinary shares for cancellation (2,664) (1,388)
Equity dividends paid (6,734) (12,105)
Net cash inflow/(outflow) from financing activities 8,186 (11,569)
Increase/(decrease) in cash and cash equivalents 2,232 (1,481)
Cash and cash equivalents at beginning of year 27,086 28,567
Cash and cash equivalents at end of year 29,318 27,086
Investment portfolio
Cost Valuation Like for like valuation increase/ (decrease) over year** % of net assets
£'000 £'000 % by value
Fifteen largest venture capital investments
1 Evotix (formerly SHE) 2,518 11,529 113.7% 10.5%
2 Volumatic Holdings 216 3,275 (1.9)% 3.0%
3 Grip-UK (t/a Climbing Hangar) 3,213 3,213 0.0% 2.9%
4 Gentronix 1,164 2,630 109.9% 2.4%
5 Rockar 1,766 2,630 34.7% 2.4%
6 Tutora (t/a Tutorful) 2,490 2,595 7.6% 2.4%
7 Newcells Biotech 2,257 2,293 (10.9)% 2.1%
8 Biological Preparations Group 2,166 2,069 (15.2)% 1.9%
9 Adludio 1,916 1,916 0.0% 1.7%
10 Clarilis 1,828 1,828 (4.4)% 1.7%
11 Administrate 2,148 1,720 7.0% 1.6%
12 Buoyant Upholstery 1,057 1,707 (36.7)% 1.6%
13 Netacea 1,683 1,683 0.0% 1.5%
14 Social Value Portal 1,680 1,680 0.0% 1.5%
15 Pure Pet Food 1,605 1,669 0.3% 1.5%
Other venture capital investments
16 Project Glow Topco (t/a Currentbody.com) 1,544 1,544 0.0% 1.4%
17 Turbine Simulated Cell Technologies 1,503 1,503 0.0% 1.4%
18 Enate 1,394 1,394 0.0% 1.3%
19 Ridge Pharma 1,387 1,390 0.2% 1.3%
20 Forensic Analytics 1,357 1,357 0.0% 1.2%
21 Broker Insights 1,318 1,318 0.0% 1.2%
22 Optellum 1,206 1,206 0.0% 1.1%
23 Duke & Dexter 1,132 1,140 0.7% 1.0%
24 Centuro Global 1,109 1,109 0.0% 1.0%
25 VoxPopMe 1,114 1,102 (11.3)% 1.0%
26 musicMagpie* 222 1,037 (50.0)% 0.9%
27 Send Technology Solutions 1,023 1,023 0.0% 0.9%
28 Wonderush Ltd (t/a Hownow) 1,009 1,009 0.0% 0.9%
29 Axis Spine Technologies 1,002 1,002 0.0% 0.9%
30 Pimberly 918 918 0.0% 0.8%
31 Fresh Approach (UK) Holdings 951 886 3.5% 0.8%
32 LMC Software 877 877 0.0% 0.8%
33 Moonshot 812 812 0.0% 0.7%
34 Locate Bio 798 798 0.0% 0.7%
35 Naitive Technologies 731 731 0.0% 0.7%
36 Oddbox 1,002 689 (81.6)% 0.6%
37 Northrow 1,342 686 (46.0)% 0.6%
38 Atlas Cloud 648 648 1.0% 0.6%
39 Sen Corporation 643 643 0.0% 0.6%
40 Intuitive Holding 1,508 618 5.1% 0.6%
41 Medovate 1,611 486 (67.5)% 0.4%
42 Synthesized 482 482 0.0% 0.4%
43 Thanksbox (t/a Mo) 1,411 469 (42.5)% 0.4%
44 Rego Technologies (t/a Upp) (formerly Volo) 2,223 440 (19.0)% 0.4%
45 Seahawk Bidco 479 436 (15.9)% 0.5%
46 Nutshell 675 354 (32.5)% 0.3%
47 Adept Telecom* 235 332 22.2% 0.3%
48 Arnlea Holdings 1,287 223 9.4% 0.3%
49 Haystack Dryers 1,497 218 59.3% 0.2%
50 Sorted Holdings 2,716 190 7.4% 0.2%
51 Customs Connect Group 1,433 113 4.5% 0.2%
52 Angle* 134 75 (61.0)% 0.1%
53 Velocity Composites* 96 39 (15.0)% 0.1%
54 Quotevine 1,186 - (100.0)% 0.0%
55 Ablatus Therapeutics 559 - (100.0)% 0.0%
Total venture capital investments 70,281 71,734 65.5%
Listed equity investments 8,019 8,580 7.8%
Total fixed asset investments 78,300 80,314 73.3%
Net current assets 29,262 26.7%
Net assets 109,576 100.0%
*Listed on AIM
**This percentage change in ‘like for like’ valuations is a comparison of
the 31 March 2023 valuations with the 31 March 2022 valuations (or where a new
investment has been made in the year, the investment amount), having adjusted
for any partial disposals, loan stock repayments or new and follow-on
investments in the year.
Risk management
The Board carries out a regular and robust assessment of the risk environment
in which the Company operates and seeks to identify new risks as they emerge.
The principal and emerging risks and uncertainties identified by the Board
which might affect the Company’s business model and future performance, and
the steps taken with a view to their mitigation, are as follows:
Investment and liquidity risk: investment in smaller and unquoted companies,
such as those in which the Company invests, involves a higher degree of risk
than investment in larger listed companies because they generally have limited
product lines, markets and financial resources and may be more dependent on
key individuals. The securities of smaller companies in which the Company
invests are typically unlisted, making them illiquid, and this may cause
difficulties in valuing and disposing of the securities. The Company may
invest in businesses whose shares are quoted on AIM – the fact that a share
is quoted on AIM does not mean that it can be readily traded and the spread
between the buying and selling prices of such shares may be wide.
Mitigation: the Directors aim to limit the risk attaching to the portfolio as
a whole by careful selection, close monitoring, active management of portfolio
issues, and timely realisation of investments, by carrying out rigorous due
diligence procedures and maintaining a wide spread of holdings in terms of
financing stage and industry sector, within the rules of the VCT scheme. The
Board reviews the investment portfolio with the Manager on a regular basis.
Financial risk: most of the Company’s investments involve a medium to
long-term commitment and many are illiquid.
Mitigation: the Directors consider that it is inappropriate to finance the
Company’s activities through borrowing except on an occasional short-term
basis. Accordingly they seek to maintain a proportion of the Company’s
assets in cash or cash equivalents in order to be in a position to pursue new
unquoted investment opportunities and to make follow-on investments in
existing portfolio companies. The Company has very little direct exposure to
foreign currency risk and does not enter into derivative transactions.
Economic risk: events such as economic recession or general fluctuation in
stock markets, exchange rates and interest rates may affect the valuation of
investee companies and their ability to access adequate financial resources,
as well as affecting the Company’s own share price and discount to net asset
value. The level of economic risk has been elevated recently by inflationary
pressures, interest rate increases, and supply shortages.
Mitigation: the Company invests in a diversified portfolio of investments
spanning various industry sectors, and maintains sufficient cash reserves to
be able to provide additional funding to investee companies where it is
appropriate and in the interests of the Company to do so. The Manager
typically provides an investment executive to actively support the Board of
each unquoted investee company. At all times, and particularly during periods
of heightened economic uncertainty, the investment executives share best
practice from across the portfolio with investee management teams in order to
mitigate economic risk.
Stock market risk: some of the Company’s investments are quoted on the
London Stock Exchange or AIM and will be subject to market fluctuations
upwards and downwards. External factors such as the terrorist activity,
political activity or global health crises can negatively impact stock markets
worldwide. In times of adverse sentiment there may be very little, if any,
market demand for shares in smaller companies quoted on AIM.
Mitigation: the Company’s quoted investments are actively managed by
specialist managers, including Mercia in the case of the AIM-quoted
investments, and the Board keeps the portfolio and the actions taken under
ongoing review.
Credit risk: the Company holds a number of financial instruments and cash
deposits and is dependent on the counterparties discharging their commitment.
Mitigation: the Directors review the creditworthiness of the counterparties to
these instruments and cash deposits and seek to ensure there is no undue
concentration of credit risk with any one party.
Legislative and regulatory risk: in order to maintain its approval as a VCT,
the Company is required to comply with current VCT legislation in the UK.
Changes to UK legislation in the future could have an adverse effect on the
Company’s ability to achieve satisfactory investment returns whilst
retaining its VCT approval.
Mitigation: the Board and the Manager monitor political developments and where
appropriate seek to make representations either directly or through relevant
trade bodies.
Internal control risk: the Company’s assets could be at risk in the absence
of an appropriate internal control regime which is able to operate effectively
even during times of disruption.
Mitigation: the Board regularly reviews 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 proper accounting records are maintained.
VCT qualifying status risk: while it is the intention of the Directors that
the Company will be managed so as to continue to qualify as a VCT, there can
be no guarantee that this status will be maintained. A failure to continue
meeting the qualifying requirements could result in the loss of VCT tax
relief, the Company losing its exemption from corporation tax on capital
gains, to shareholders being liable to pay income tax on dividends received
from the Company and, in certain circumstances, to shareholders being required
to repay the initial income tax relief on their investment.
Mitigation: the Manager keeps the Company’s VCT qualifying status under
continual review and its reports are reviewed by the Board on a quarterly
basis. The Board has also retained Philip Hare & Associates LLP to undertake
an independent VCT status monitoring role.
Directors’ Responsibilities
The Directors are responsible for preparing the annual report and financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law they are required to prepare the financial
statements in accordance with UK accounting standards, including FRS 102
‘The Financial Reporting Standard applicable in the UK and Republic of
Ireland’.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of its profit or loss for the year.
In preparing these financial statements, the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and estimates that are reasonable and prudent;
* state whether applicable UK accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements;
* assess the Company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern; and
* use the going concern basis of accounting unless they either intend to
liquidate the Company or to cease operations, or have no realistic alternative
but to do so.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that its financial statements comply with the Companies
Act 2006. They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the Company and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors’ Remuneration
Report and Corporate Governance Statement that complies with that law and
those regulations.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s website.
Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
The Directors have confirmed that to the best of their knowledge:
• the financial statements, prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company; and
• the Strategic Report and Directors' Report includes a fair review of
the development and performance of the business and the position of the
issuer, together with a description of the principal risks and uncertainties
that they face.
The Directors consider the annual report and accounts, taken as a whole, is
fair, balanced and understandable and provides the information necessary for
shareholders to assess the Company’s position and performance, business
model and strategy.
The directors of the company at the date of this announcement were Mr D P A
Gravells (Chair), Mr S P Devonshire, Miss C A McAnulty, Mr F L G Neale and
Miss R K Ramparia.
OTHER MATTERS
The above summary of results for the year ended 31 March 2023 does not
constitute statutory financial statements within the meaning of Section 435 of
the Companies Act 2006 and has not been delivered to the Registrar of
Companies. Statutory financial statements will be filed with the Registrar of
Companies in due course; the independent auditor’s report on those financial
statements under Section 495 of the Companies Act 2006 is unqualified, does
not include any reference to matters to which the auditor drew attention by
way of emphasis without qualifying the report and does not contain a statement
under Section 498 (2) or (3) of the Companies Act 2006.
The calculation of the return per share is based on the loss after tax for the
year of £3,464,000 (2022: profit of £923,000) and on 187,331,778 (2022:
162,327,282) shares, being the weighted average number of shares in issue
during the year.
The calculation of net asset value per share as at 31 March 2023 is based on
net assets of £109,576,000 (2022: £104,854,000) divided by the 185,640,724
(2022: 162,907,914) ordinary shares in issue at that date.
If approved by shareholders, the proposed final dividend of 1.3 pence per
share for the year ended 31 March 2023 will be paid on 18 August 2023 to
shareholders on the register at the close of business on 21 July 2023.
The full annual report including financial statements for the year ended 31
March 2023 is expected to be made available to shareholders on or around 26
June 2023 and will be available to the public at the registered office of the
company at Forward House, 17 High Street, Henley-in-Arden B95 5AA and on the
Company’s website.
The contents of the Mercia Asset Management PLC website and the contents of
any website accessible from hyperlinks on the Mercia Asset Management PLC
website (or any other website) are not incorporated into, nor form part of,
this announcement