Maven Income and Growth VCT 2 PLC Annual Financial Report (8711N)

TIDMMIG2

RNS Number : 8711N

Maven Income and Growth VCT 2 PLC

11 May 2018

Maven Income and Growth VCT 2 PLC

The Directors announce the Company's results for the year ended 31 January 2018

Highlights for the Year

   --      NAV total return at the year end of 97.55p per share (2017: 99.24p) 

-- NAV at year end of 40.47p per share (2017: 50.52p), after payment of dividends totalling 8.36p per share during the year

   --      Annual dividends 6.11p per share (2017: 4.25p) 
   --      Eight new VCT qualifying investments completed 
   --      Profitable exits achieved from SPS (EU) and John McGavigan 

Chairman's Statement

On behalf of your Board, I am pleased to announce the results for the year to 31 January 2018. During the reporting period considerable progress has been achieved in the construction of the long term portfolio, with the addition of eight new VCT qualifying investments in companies operating across a wide range of high growth industries and sectors. In addition, a number of profitable exits were completed from some of the more mature investee companies. However, one of the larger portfolio company holdings suffered a write-down in value, which impacted upon the financial performance for the full year.

The annual dividend was 6.11p per share, representing a yield of 16.38%, based on the share price at the year end. This enhanced level of distributions reflects a number of profitable realisations, and was also required in order to ensure your Company's ongoing compliance with the VCT legislation. Whilst this level of annual distributions is not expected to be maintained, your Board remains committed to making distributions when realisations are achieved and to paying regular tax-free income to Shareholders.

During the year, your Company has made encouraging progress against a backdrop of economic uncertainty, largely related to the ongoing negotiations regarding the UK's intended withdrawal from the European Union (EU), and an evolving regulatory environment. Over the past few years, the framework under which VCTs operate has become increasingly complex, with further new legislation announced in the 2017 Autumn Budget Statement. However, your Board believes that the Manager has the depth of experience and breadth of skill to ensure that your Company continues to respond appropriately and remains well positioned to deliver future growth.

The majority of the companies in the investee portfolio have continued to trade in line with plan throughout the year and the continued progress achieved by a number of established private company holdings has enabled the valuations of certain assets to be increased. The Board is encouraged to note that after a number of years of exceptionally challenging market conditions, the portfolio companies with exposure to the oil & gas services sector are seeing an improvement in trading, with financial performance showing an increase over the comparative period in the prior year. The valuations of a number of these assets had previously been reduced in response to market conditions, and the conservative valuation of these holdings will be maintained until there is evidence of a sustained market recovery. Elsewhere in the portfolio, there are a small number of investments that are operating behind plan, or where a market adjustment has impacted upon performance and, as a result, the valuations of these assets have been reduced. A detailed analysis of portfolio developments can be found in the Investment Manager's Review in the Annual Report. The impact of these on the overall financial performance of the Company is summarised in the Directors' Report.

It is pleasing to report on the addition of eight carefully selected growth oriented companies to the portfolio during the reporting period. The pipeline of new opportunities remains strong and is supported by the Manager's expanded nationwide office network, which is delivering a regular supply of prospective investments. The Board is, however, aware of the challenges that VCT managers are facing with regard to securing Advance Assurance from HM Revenue & Customs (HMRC) for new investments, and notes that this has resulted in a number of potential transactions being lost during the year. The Directors welcomed the announcement in the 2017 Autumn Budget Statement that the Advanced Assurance process will be revised, as this should markedly improve the timescales for transaction approval.

Given the maturing profile of a number of assets in the portfolio, there has been significant sale and realisation activity during the year. Most notably, in December 2017, exits were achieved from SPS (EU), the UK's largest provider of promotional merchandise and John McGavigan, a manufacturer and supplier of plastic components for the global automotive industry, delivering total returns over the life of the investments of 2.5 times and 4.2 times cost respectively. The Board is aware that discussions are progressing regarding further potential exits from a number of the more mature holdings in the portfolio, although there can be no certainty that these will lead to profitable realisations.

In light of the evolving legislative environment for VCTs, the Directors believe it is important that Shareholders are aware of the longer term implications arising from the Finance (No. 2) Act 2015 and the further amendments in the Finance Act 2018. The changes to the VCT rules that were enacted in November 2015 specifically prohibit participation in management buy-outs or acquisition based transactions. They also restrict the ability of VCTs to support older companies, including existing portfolio holdings, unless certain conditions are met. As a result, VCT managers are required to focus on the provision of development capital to younger or earlier stage companies which, given their inherent lack of maturity, have a different risk profile. In addition, transaction structures are now required to contain a greater proportion of equity, where previously higher levels of interest bearing debt was permitted. As the portfolio evolves, and a greater proportion of holdings are invested in earlier stage companies, there is likely to be an impact on income levels. This could result in dividend payments being subject to variation in terms of quantum and timing, and may ultimately be driven by realisation activity, and the requirement to comply with the VCT rules. The Board and the Manager will ensure that this transition is managed carefully in line with your Company's investment objective.

Regulatory Developments

During the summer of 2017, the Patient Capital Review was formally extended to consider the effectiveness and value for money provided by the VCT and Enterprise Investment Scheme sector. The Manager contributed to this consultation on behalf of its VCT clients and it was widely anticipated that, as a result of this review, the 2017 Autumn Budget Statement would include a number of amendments.

The Directors were encouraged that the measures announced in the 2017 Autumn Budget Statement were intended to preserve the attractive fundamentals of the VCT scheme, which continues to provide a valuable bridge between private capital and the UK SME sector. The availability of long-term patient capital, in line with Government objectives at what is an increasingly important time for the UK economy, gives comfort to small businesses and ensures that entrepreneurial companies can continue to access equity finance, and allows investors to benefit from their success.

Whilst there were no changes to tax reliefs, or the minimum holding period for these reliefs, and VCT dividends will maintain their tax-free status, a number of less favourable changes were announced, some of which had been anticipated. As expected, the focus is to continue to move towards supporting higher risk investments, and includes the introduction of a 'risk to capital' based test, certain sector exclusions and measures designed to assist the financing of knowledge-intensive companies. The percentage of funds that a VCT must hold in qualifying investments will increase from 70% to 80% from 6 April 2019, with a shorter time period for the investment of newly raised funds. In order to assist with this requirement, the add-back period on sales will be increased from six to twelve months.

The Autumn Budget Statement also announced that HMRC anticipates being able to improve its approval process for Advance Assurance clearance during the early part of 2018. This is a welcome development as it should help the rate of new investment and allow VCT managers to continue to build their portfolios without unnecessary delay, whilst complying with the qualifying requirements. The Finance Act 2018 received Royal Assent in March 2018 and the Board and the Manager will continue to consider the implications and take these developments into account when planning future strategy.

In January 2018 two major new pieces of legislation were introduced; the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation and the Second Markets in Financial Instruments Directive (MiFID II), which came into force on 1 and 3 January 2018 respectively. PRIIPs requires a Key Information Document (KID) to be published by the Company; the form and content of the KID is strictly prescribed and includes specific information on investment risks, performance and costs, which must be provided to all potential investors to enable them to compare the performance of different VCTs. With regard to MiFID II, the main practical change for investment companies is the requirement for the Manager to report all transactions in quoted shares, including share buy-backs as well as those in underlying investments, to the Financial Conduct Authority to assist in its continued efforts to combat market abuse.

The General Data Protection Regulation comes into force on 25 May 2018, replacing the Data Protection Act 1998. This regulation enforces the principle of 'privacy by design and by default' and enshrines new rights for individuals, including the right to be forgotten and to data portability. The Manager is working with the third parties that process Shareholders' personal data to ensure that their rights under the new regulation are respected.

Dividends

As previously highlighted, the Directors considered it necessary to distribute an enhanced level of interim dividends during the financial year. This was a result of a build-up of distributable reserves, including the proceeds from recent profitable realisations, and the requirement to ensure ongoing compliance with the VCT regulations.

The first interim dividend in respect of the year ended 31 January 2018, of 3.41p per Ordinary Share and comprising capital only, was paid on 15 September 2017 to Shareholders on the register at close of business on 25 August 2017. The second interim dividend of 2.70p per Ordinary Share, comprising 0.70p of revenue and 2.0p of capital, was paid on 26 January 2018 to Shareholders on the register at close of business on 5 January 2018. No final dividend is proposed and, therefore, total distributions for the financial year were 6.11p per Ordinary Share, representing a yield of 16.38% based on the year-end closing mid-market price of 37.30p. The effect of paying dividends is to reduce the NAV of the Company by the total cost of the distribution.

Since the Company's launch, and after receipt of the two interim dividends noted above, Shareholders will have received 57.08p per share in tax-free dividends. Decisions on future distributions will take into consideration the availability of surplus revenue, the adequacy of reserves, the proceeds from any further realisations and the VCT qualifying levels of the portfolio, all of which are kept under close review by the Board and the Manager.

Share Buy-backs

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 10% to 20% of the prevailing NAV per share.

Strategy

The Directors are monitoring the strategic options for your Company in light of the recent regulatory changes, the Company's increased rate of distribution, and the resultant impact on NAV. This strategic review remains at an early stage and the Board will ensure Shareholders are updated fully on any developments in due course.

Annual General Meeting (AGM)

As Shareholders are aware, AGMs have been held in Glasgow and London in alternate years in order to allow a wide range of Shareholders the opportunity to meet the Directors and the Manager. The 2018 AGM will be held in the Glasgow office of Maven Capital Partners UK LLP on 13 June 2018, and the Notice of Annual General Meeting can be found in the Annual Report.

The Future

The portfolio is currently transitioning from a concentration in more established companies completed prior to the VCT rule changes in 2015, towards a focus on younger companies that are active in emerging industries and offer higher growth and return potential. This hybrid portfolio offers investors a blended exposure to a wide range of assets with different income and capital return potential. The over-riding objective is to continue to increase the portfolio in size and breadth in order to deliver consistently positive returns, and at the same time ensure the payment of regular dividends to Shareholders.

John Lawrence MBE

Chairman

11 May 2018

Business Report

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.

Investment Objective

Under an investment policy approved by the Directors, the Company aims to achieve long-term capital appreciation and generate income for Shareholders.

Business Model and Investment Policy

Under an investment policy approved by the Directors, the Company intends to achieve its objective by:

-- investing the majority of its funds in a diversified portfolio of shares and securities in smaller, unquoted UK companies and AIM/NEX quoted companies which meet the criteria for VCT qualifying investments and have strong growth potential;

-- investing no more than GBP1 million in any company in one year and no more than 15% of the Company's assets by cost in one business at any time; and

-- borrowing up to 15% of net asset value, if required and only on a selective basis, in pursuit of its investment strategy.

Principal Risks and Uncertainties

The principal risks and uncertainties facing the Company are as follows:

Investment Risk

Many of the Company's investments are in small and medium sized unquoted UK companies and AIM/NEX quoted companies which, by their nature, carry 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 robust and 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:

   --      diversifying across a large number of companies; 
   --      diversifying across a range of economic sectors; 
   --      actively and closely monitoring the progress of investee companies; 
   --      co-investing with other clients of the Manager; 

-- ensuring valuations of underlying investments are made accurately and fairly (see Notes to the Financial Statements 1(e) and 1(f) for further detail);

   --      taking steps to ensure that share price discount is managed appropriately; and 

-- choosing and appointing an FCA authorised investment manager with the appropriate skills, experience and resources to achieve the investment objectives above, with ongoing monitoring to ensure the Manager is performing in line with expectations.

Financial and Liquidity Risk

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 listed investments 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.

Economic Risk

The valuation of investment companies may be affected by underlying economic conditions such as fluctuating interest rates and the availability of bank finance.

The economic and market environment is kept under constant review and the investment strategy of the Company adapted so far as is possible to mitigate emerging risks.

Credit Risk

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.

Internal Control Risk

The Board reviews regularly the system of internal controls, both financial and non-financial, operated by the Company, the Manager and other key third party outsourcers such as the Custodian, Company Secretary and Registrar. These include controls designed to ensure that the Company's assets are safeguarded, that all records are complete and accurate and that the third parties have adequate controls in relation to the prevention of data protection and cyber security failings.

VCT Qualifying Status Risk

The Company operates in a complex regulatory environment and faces a number of related risks, including:

-- becoming subject to capital gains tax on the sale of its investments as a result of a breach of Section 274 of the Income Tax Act 2007;

-- loss of VCT status and consequent loss of tax reliefs available to Shareholders as a result of a breach of the VCT Regulations;

-- loss of VCT status and reputational damage as a result of serious breach of other regulations such as the FCA Listing Rules and the Companies Act 2006; and

-- increased investment restrictions resulting from the EU State Aid Rules, incorporated by the Finance (No. 2) Act 2015 and the Finance Act 2018.

The Board works closely with the Manager to ensure compliance with all applicable and upcoming legislation, such that VCT qualifying status is maintained. Further information on the management of this risk is detailed under other headings in this Business Report.

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 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 Guidance 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, which regulates the management of alternative investment funds, including VCTs, introduced a new authorisation and supervisory regime for all investment companies in the EU. The Company is approved by the FCA as an internally managed small registered 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 Link Asset Services to act on its behalf to report annually to HMRC and ensure compliance with this legislation.

Political Risk

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 exists in Article 50 of the Lisbon Treaty, which was invoked on 29 March 2017. The full political, economic and legal consequences of the referendum vote are not yet known. It is possible that investments in the UK may be more difficult to value and assess for suitability of risk, harder to buy or sell, and 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.

On a regular basis, the Board reviews the political situation, together with any associated changes to the economic, regulatory and legislative environment in order to ensure that any risks arising are mitigated as effectively as possible.

An explanation of certain economic and financial risks and how they are managed is also contained in Note 16 to the Financial Statements.

Statement of Compliance with Investment Policy

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 the 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 2018 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 in the Annual Report 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 in the Annual Report 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, or as otherwise required.

Key Performance Indicators

At each Board Meeting the Directors consider a number of APMs to assess the Company's success in achieving its investment objective. These APMs are key performance indicators that enable Shareholders and prospective investors to gain an understanding of its business, and are as follows:

   --      NAV total return; 
   --      cumulative dividends paid; 
   --      share price discount to NAV; 
   --      investment income; and 
   --      operational expenses. 

The NAV total return is a measure of the Shareholder value that includes current NAV per share and total dividends paid to date. Cumulative dividends paid is the total amount of both capital and income distributions paid since the launch of the Company. The Directors seek to pay dividends to comply with the VCT rules taking account of the level of distributable reserves, profitable realisations in each accounting period and the Company's future cash flow projections. The share price discount to NAV is the percentage by which the mid-market price of an investment is lower than its net asset value per share.

A historical record of some of these measures is shown in the Financial Highlights in the Annual Report and changes in the profile of the portfolio are reflected in the Summary of Investment Changes. Definitions of the APMs can be found in the Glossary.

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. Further information can be found in the Annual Report in Notes 2 and 4 to the Financial Statements.

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.

Valuation Process

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.

Share Buy-backs

At the forthcoming AGM, the Board will seek the necessary Shareholder authority to continue to conduct a share buy-back programme under appropriate circumstances.

Employee, Environmental and Human Rights Policy

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.

Independent Auditor

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 in the Annual Report.

Future Strategy

The Board and the Manager intend to maintain the policies set out above for the year ending 31 January 2019, as it is believed that these are in the best interests of Shareholders.

Approval

This 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

11 May 2018

Income Statement

For the Year Ended 31 January 2018

 
                                           Year ended 31 January         Year ended 31 January 
                                                            2018                          2017 
                                     Revenue   Capital     Total   Revenue   Capital     Total 
                                     GBP'000   GBP'000   GBP'000   GBP'000   GBP'000   GBP'000 
----------------------------------  --------  --------  --------  --------  --------  -------- 
(Losses)/gains on investments              -     (688)     (688)         -     1,070     1,070 
Income from investments                  678         -       678       627         -       627 
Other income                               9         -         9         4         -         4 
Investment management fees              (45)     (404)     (449)      (70)     (632)     (702) 
Other expenses                         (249)         -     (249)     (302)         -     (302) 
----------------------------------  --------  --------  --------  --------  --------  -------- 
Net return on ordinary activities        393   (1,092)     (699)       259       438       697 
before taxation 
Tax on ordinary activities              (65)        65         -      (51)        51         - 
----------------------------------  --------  --------  --------  --------  --------  -------- 
Return attributable to Equity 
 Shareholders                            328   (1,027)     (699)       208       489       697 
----------------------------------  --------  --------  --------  --------  --------  -------- 
 
  Earnings per share (pence)            0.81    (2.54)    (1.73)      0.51      1.19      1.70 
----------------------------------  --------  --------  --------  --------  --------  -------- 
 

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 earnings per share figures are relevant. The basic and diluted earnings per share are, therefore, identical.

The accompanying Notes are an integral part of the Financial Statements.

Statement of Changes in Equity

For the Year Ended 31 January 2018

 
                              Share    Capital                          Special          Capital 
                    Share   premium    reserve  Capital reserve   distributable       redemption    Revenue 
                  capital   account   realised       unrealised         reserve          reserve    reserve      Total 
                  GBP'000   GBP'000    GBP'000          GBP'000         GBP'000          GBP'000    GBP'000    GBP'000 
--------------  ---------  --------  ---------  ---------------  --------------  ---------------  ---------  --------- 
At 31 January 
 2017               4,058     9,473   (11,894)              454          17,618              346        447     20,502 
Net return              -         -        798          (1,825)               -                -        328      (699) 
Dividends 
 paid                   -         -    (3,023)                -               -                -      (363)    (3,386) 
Repurchase 
 and 
 Cancellation 
 of shares           (25)         -          -                -            (96)               25          -       (96) 
--------------  ---------  --------  ---------  ---------------  --------------  ---------------  ---------  --------- 
At 31 January 
 2018               4,033     9,473   (14,119)          (1,371)          17,522              371        412     16,321 
--------------  ---------  --------  ---------  ---------------  --------------  ---------------  ---------  --------- 
 

For the Year Ended 31 January 2017

 
                              Share    Capital      Capital         Special      Capital 
                    Share   premium    reserve      reserve   distributable   redemption    Revenue 
                  capital   account   realised   unrealised         reserve      reserve    reserve      Total 
                  GBP'000   GBP'000    GBP'000      GBP'000         GBP'000      GBP'000    GBP'000    GBP'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                   -         -    (1,454)            -               -            -      (287)    (1,741) 
Repurchase 
 and 
 cancellation 
 of shares           (51)         -          -            -           (224)           51          -      (224) 
--------------  ---------  --------  ---------  -----------  --------------  -----------  ---------  --------- 
At 31 January 
 2017               4,058     9,473   (11,894)          454          17,618          346        447     20,502 
--------------  ---------  --------  ---------  -----------  --------------  -----------  ---------  --------- 
 

The accompanying Notes are an integral part of the Financial Statements.

Balance Sheet

As at 31 January 2018

 
                               31 January 2018  31 January 2017 
                                       GBP'000          GBP'000 
-----------------------------  ---------------  --------------- 
Fixed assets 
Investments at fair value 
 through profit or loss                 12,276           17,111 
 
  Current assets 
Debtors                                    315              273 
Cash                                     3,764            3,334 
-----------------------------  ---------------  --------------- 
                                         4,079            3,607 
Creditors 
Amounts falling due within 
 one year                                 (34)            (216) 
-----------------------------  ---------------  --------------- 
Net current assets                       4,045            3,391 
-----------------------------  ---------------  --------------- 
Net assets                              16,321           20,502 
-----------------------------  ---------------  --------------- 
 
  Capital and reserves 
Called up share capital                  4,033            4,058 
Share premium account                    9,473            9,473 
Capital reserve - realised            (14,119)         (11,894) 
Capital reserve - unrealised           (1,371)              454 
Special distributable 
 reserve                                17,522           17,618 
Capital redemption reserve                 371              346 
Revenue reserve                            412              447 
-----------------------------  ---------------  --------------- 
Net assets attributable 
 to 
 Ordinary Shareholders                  16,321           20,502 
-----------------------------  ---------------  --------------- 
 
  Net asset value per 
  Ordinary Share (pence)                 40.47            50.52 
-----------------------------  ---------------  --------------- 
 

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 11 May 2018 and were signed on its behalf by:

John Lawrence MBE

Director

The accompanying Notes are an integral part of the Financial Statements.

Cash Flow Statement

For the Year Ended 31 January 2018

 
                                      Year ended        Year ended 
                                 31 January 2018   31 January 2017 
                                         GBP'000           GBP'000 
------------------------------  ----------------  ---------------- 
Net cash flows from operating 
 activities                                (918)           (1,516) 
Cash flows from investing 
 activities 
Investment income received                   626               621 
Deposit interest received                      9                 4 
Purchase of investments                  (1,837)           (5,492) 
Sale of investments                        6,032            10,994 
------------------------------  ----------------  ---------------- 
Net cash flows from investing 
 activities                                4,830             6,127 
------------------------------  ----------------  ---------------- 
 
  Cash flows from financing 
  activities 
Equity dividends paid                    (3,386)           (1,741) 
Repurchase of Ordinary 
 Shares                                     (96)             (224) 
==============================  ================  ================ 
Net cash flows from financing 
 activities                              (3,482)           (1,965) 
==============================  ================  ================ 
 
Net increase in cash                         430             2,646 
------------------------------  ----------------  ---------------- 
Cash at beginning of 
 year                                      3,334               688 
Cash at end of year                        3,764             3,334 
------------------------------  ----------------  ---------------- 
 

The accompanying Notes are an integral part of the Financial Statements.

Notes to the Financial Statements

For the Year Ended 31 January 2018

1. Accounting Policies

   (a)   Basis of preparation 

The Financial Statements have been prepared under the historical cost convention, as modified by the revaluation of investments, and in accordance with 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 Association of Investment Companies (the AIC) in November 2014.

   (b)   Income 

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.

   (c)   Expenses 

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:

-- expenses which are incidental to the acquisition and disposal of an investment are charged to capital; and

-- expenses are charged to realised capital reserves where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect the investment management fee has been allocated 10% to revenue and 90% to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth.

   (d)   Taxation 

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.

   (e)   Investments 

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.

1. For early stage investments completed in the reporting period, fair value is determined using the Price of Recent Investment Method, except that adjustments are made when there has been a material change in the trading circumstances of the investee company.

2. Whenever practical, recent investments will be valued by reference to a material arm's length transaction or a quoted price.

3. Mature companies are valued by applying a multiple to their prospective earnings to determine the enterprise value of the company.

3.1 To obtain a valuation of the total ordinary share capital held by management and the institutional investors, the value of third party debt, institutional loan stock, debentures and preference share capital is deducted from the enterprise value. The effect of any performance related mechanisms is taken into account when determining the value of the ordinary share capital.

3.2 Preference shares, debentures and loan stock are valued using the Price of Recent Investment Method. When a redemption premium has accrued, this will only be valued if there is a reasonable prospect of it being paid. Preference shares which carry a right to convert into ordinary share capital are valued at the higher of the Price of Recent Investment Method basis and the price/earnings basis, both described above.

4. In the absence of evidence of a deterioration, or strong defensible evidence of an increase in value, the fair value is determined to be that reported at the previous balance sheet date.

5. All unlisted investments are valued individually by the portfolio management team of Maven. The resultant valuations are subject to detailed scrutiny and approval by the Directors of the Company.

6. In accordance with normal market practice, investments listed on the Alternative Investment Market or a recognised stock exchange are valued at their bid market price.

   (f)    Fair value measurement 

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.

-- Level 1 - the unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.

-- Level 2 - inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.

-- Level 3 - inputs are unobservable (ie for which market data is unavailable) for the asset or liability.

   (g)   Gains and losses on investments 

When the Company sells or revalues its investments during the year, any gains or losses arising are credited/charged to the Income Statement.

   (h)   Critical accounting judgements and key sources of estimation uncertainty 

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. In the opinion of the Board and the Manager, there are no critical accounting judgements.

Reserves

Share premium account

The share premium account represents the premium above nominal value received by the Company on issuing shares net of issue costs.

Capital reserves

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.

Special distributable reserve

The total cost to the Company of the repurchase and cancellation of shares is represented in the special distributable reserve account.

Capital redemption reserve

The nominal value of shares repurchased and cancelled is represented in the capital redemption reserve.

Revenue reserve

The revenue reserve represents accumulated profits retained by the Company that have not been distributed to Shareholders as a dividend.

Earnings per share

 
                                Year ended        Year ended 
                           31 January 2018   31 January 2017 
------------------------  ----------------  ---------------- 
The returns per share 
 have been 
based on the following 
 figures: 
Weighted average number 
 of Ordinary Shares             40,509,549        40,948,352 
Revenue return                  GBP328,000        GBP208,000 
Capital return              (GBP1,027,000)        GBP489,000 
------------------------  ----------------  ---------------- 
Total return                  (GBP699,000)        GBP697,000 
------------------------  ----------------  ---------------- 
 

NAV per Ordinary Share

NAV per Ordinary Share as at 31 January 2018 has been calculated using the number of Ordinary Shares in issue at that date of 2018: 40,334,617 (2017: 40,584,617).

Directors' Responsibility Statement

The Directors believe that, to the best of their knowledge:

-- the Financial Statements have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as at 31 January 2018 and for the year to that date;

-- the Directors' Report includes a fair review of the development and performance of the Company, together with a description of the principal risks and uncertainties that it faces; and

-- 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.

Other Information

The Annual General Meeting will be held on Wednesday 13 June 2018, commencing at 10.30am, at Maven Capital Partners UK LLP, Kintyre House, 205 West George Street, Glasgow, G2 2LW.

Copies of this announcement, and of the Annual Report and Financial Statements for the year ended 31 January 2018, will be available to the public at the offices of Maven Capital Partners UK LLP, Kintyre House, 205 West George Street, Glasgow G2 2LW; at the registered office of the Company, Fifth Floor, 1-2 Royal Exchange Buildings, London EC3V 3LF and on the Company's website at www.mavencp.com/migvct2.

The Annual Report and Financial Statements for the year ended 31 January 2018 will be issued to Shareholders and filed with the Registrar of Companies in due course.

The financial information contained within this Announcement does not constitute the Company's statutory Financial Statements as defined in the Companies Act 2006. The statutory Financial Statements for the year ended 31 January 2017 have been delivered to the Registrar of Companies and contained an audit report which was unqualified and did not constitute statements under S498(2) or S498(3) of the Companies Act 2006.

Neither the content of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

The Annual Report will be submitted to the National Storage Mechanism and will be available for inspection at: www.morningstar.co.uk/uk/NSM .

By order of the Board

Maven Capital Partners UK LLP

Secretary

11 May 2018

This information is provided by RNS

The company news service from the London Stock Exchange

END

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(END) Dow Jones Newswires

May 11, 2018 11:05 ET (15:05 GMT)