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SVCT Seneca Growth Capital Vct Plc

60.50
0.00 (0.00%)
Last Updated: 00:00:00
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Seneca Growth Capital Vct Plc LSE:SVCT London Ordinary Share GB00BG13MH08 B ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 60.50 59.00 62.00 60.50 60.50 60.50 0.00 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Trust,ex Ed,religious,charty -2.26M -2.75M -0.0950 -6.37 17.5M

Seneca Growth Capital VCT PLC Final Results (3247X)

29/04/2019 8:52am

UK Regulatory


Seneca Growth Capital Vct (LSE:SVCT)
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TIDMHYG TIDMSVCT

RNS Number : 3247X

Seneca Growth Capital VCT PLC

29 April 2019

For immediate release 29 April 2019

Seneca Growth Capital VCT Plc

(formerly Hygea vct plc)

Annual Report and Financial Statements

For the year ended 31 December 2018

and

Notice of Annual General Meeting

The Directors are pleased to announce the audited results of the Company for the year ended 31 December 2018. A copy of the Annual Report and Financial Statements will be made available to shareholders shortly, and extracts are now set out below.

In addition, the Notice of Annual General Meeting ("AGM") is attached at the end of the Report and Financial Statements. The AGM will be held at the offices of Howard Kennedy LLP, No 1 London Bridge, London SE1 9BG on Monday 10 June 2019 at 11.00 am. A copy of both documents will be available on the Company's website: www.senecavct.co.uk

Financial Headlines

 
 Ordinary Shares 
 GBP2.9m   Amount realised during the year from sale of Ordinary share 
            pool investment in Hallmarq Veterinary Imaging Limited 
 89.35p    Ordinary share Net Asset Value ("NAV") plus cumulative dividends 
            paid at 31 December 2018 
 65.1p     Ordinary share NAV at 31 December 2018 
 10.0p     Interim capital dividend declared per Ordinary share during 
            year 
 B Shares 
 GBP4.0m   Amount raised during the year from the issue of B shares 
 GBP0.5m   Amount invested during the year into new investee company by 
            B share pool 
 99.1p     B share NAV as at 31 December 2018 (no dividends paid or declared 
            on the B shares at that date) 
 

Financial Summary

 
                                              Year to                            Year to 
                                          31 December         Year to        31 December 
                                                 2018     31 December               2017 
                                       Ordinary share            2018    (Ordinary share 
                                                 pool    B share pool         pool only) 
-----------------------------------  ----------------  --------------  ----------------- 
 Net assets (GBP'000s)                          5,282           3,999              5,180 
 Return on ordinary activities 
  after tax (GBP'000s)                            102            (36)              (367) 
 Earnings per share                              1.3p          (0.9p)             (4.5p) 
 Net asset value per share                      65.1p           99.1p              63.8p 
 Dividends paid since inception                24.25p               -             24.25p 
 Total return (NAV plus cumulative 
  dividends paid)                              89.35p           99.1p             88.05p 
-----------------------------------  ----------------  --------------  ----------------- 
 

.

Enquiries:

John Hustler, Seneca Growth Capital VCT Plc at john.hustler@btconnect.com

Richard Manley, Seneca Growth Capital VCT Plc at Richard.Manley@senecapartners.co.uk

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014

Please note: page references in the extracts below refer to the page numbers in the Annual Report and Financial Statements

Chairman's Statement

I am pleased to present the 2018 Annual Report to Shareholders.

Overview

2018 has been a successful year of change for the Company. Following the initial allotment of B Shares under the Offer launched on 9 May 2018, we are delighted that Seneca was appointed as the Company's Investment Manager. Funds raised under the Offer totalled GBP5.5 million and five investments have already been made, details of which are set out in the Investment Manager's report. The Offer is now closed and I would like to take this opportunity of welcoming all our new B shareholders. Shareholders may have seen the recent announcement, prior to the last allotment, that the NAV at 31 March 2019 of the Ordinary shares is 51.1p per share and of the B shares is 98.9p per share.

As intimated in my last Chairman's Statement accompanying the 2017 accounts, we anticipated a liquidity event and were delighted to report that in December 2018 we sold the Company's Ordinary share portfolio holding in Hallmarq Veterinary Imaging Limited ('Hallmarq'). This realised a profit over cost of GBP1,807,000 and over carrying value of GBP894,000. As announced at the time of the realisation, it was also possible the Company would receive a small amount of further proceeds that had been deferred at completion and I am pleased to confirm that a further GBP37,666 was received in April 2019 and will be accounted for in the 2019 accounts. We are delighted that this realisation has allowed us to pay an interim dividend of 10p per Ordinary share and our further intentions regarding dividends are detailed below.

Details of the Ordinary share pool's remaining portfolio companies are included below and also in the Investment Manager's Report. The Net Asset Value of the Ordinary shares at 31 December 2018 has now increased to 65.1p per share and the Total Return is now 89.35p per share. As Ordinary shareholders will recall, following the raising of the minimum subscription of B shares in August 2018, the Ordinary share pool will suffer no running costs until July 2021. In addition, the Company's bank loan, which was a liability of the Ordinary share pool, has been repaid using proceeds from the Hallmarq sale and the debenture released.

Details of the B share investment made during the year along with details of the B share investments made since the year end are included in the Investment Manager's Report. The Net Asset Value of the B shares at 31 December 2018 was 99.1p and at that date no dividends had been paid in relation to the B shares.

The Board is also encouraged that as of today's date, the Investment Manager has already invested GBP2.75m of the funds raised under the Offer into 5 companies. This is in line with their expectations for deploying the capital raised under the Offer and indicative of the healthy pipeline of growth capital investment opportunities which Seneca maintains as a result of not only their appointment as the Company's Investment Manager, but also as an active growth capital investor through the EIS funds which they manage. We expect to issue a prospectus for a further B share offer shortly and look forward to the Investment Manager continuing to build a portfolio of diverse growth capital investments which will be attractive to the VCT investment community.

Results and Dividends

During the year, our revenue return on ordinary activities saw a loss of 0.72p per Ordinary share and a loss of 0.45p per B share, both principally as a result of the impact of the Company's running costs. The comparative loss for 2017, which related solely to the Ordinary shares, amounted to 1.5p per share. The Company's running expenses are capped at 3% of the B share NAV until July 2021 and as a result, an amount of GBP18,000 was due to the Company from the Investment Manager at 31 December 2018 which will be deducted from future payments falling due to Seneca.

The Capital return on the Ordinary share portfolio amounted to 2p per share driven by the profit generated on the disposal of our holding in Hallmarq, details of which I referred to above, net of changes to the valuations of some other Ordinary share pool investments. There is no change in the value of the B share portfolio since the first investment only completed on 31 December 2018.

During the year, the nominal value of the Ordinary shares was reduced from 50p per share to 1p per share and the majority of the balance standing to the credit of the Company's share premium account arising on the issue of B shares was reduced. Both of these transactions have given rise to a credit to the Special Distributable Reserve which may be used for the payment of dividends. Further details are included in note 14 on page 68. Your original Ordinary share certificates remain valid.

As previously stated, it is the Board's intention to distribute the majority of the proceeds generated by the Hallmarq exit to Ordinary shareholders, after repayment of the bank loan and retention of an appropriate proportion to cover small follow on investments in the existing Ordinary share portfolio and any costs attributable to the Ordinary share pool. In line with this intention, an interim dividend of 10p per Ordinary share was declared on 28 December 2018 and it is the current intention of the Board to declare a further interim dividend of 18p per Ordinary share in early May (following the filing of the Company's 2018 accounts at Companies House) for payment shortly thereafter.

In addition the Board was pleased to have declared an interim dividend of 1.5p per B share on 6 March 2019, which was paid in April 2019, reducing the NAV of a B share to 97.4p. The Board hopes to be able to continue to declare periodic dividends on the B shares as the B share investment portfolio develops.

Ordinary Share Investment Portfolio Review

The remaining Ordinary share portfolio has seen a reduction in value during the period. As at 31 December 2018 the value stood at GBP2.79m (having been at GBP3.535m at the end of the prior year excluding Hallmarq) with a large proportion of the reduction in the year resulting from the decline in the share price of AIM quoted Scancell Holdings plc ("Scancell') and Omega Diagnostics plc ("Omega") during the year. However, in the Board's opinion, the intrinsic values of both Scancell and Omega remain and we are firmly of the view that the potential upside in these assets merits their continued presence in the portfolio.

The value of the quoted and unquoted sections of the remaining Ordinary share portfolio were roughly equal at 31 December 2018. Scancell, valued at the bid price of 9p, represented 42% of the Ordinary share portfolio as at 31 December 2018. However, by the 31 March 2019 the bid price had reduced to 5.5p and accordingly the percentage of the entire Ordinary share portfolio represented by Scancell has fallen to 30.6%. This was the primary reason for the reduction in the NAV of an Ordinary share (in addition to the dividend of 10p per share that was paid on 25 January 2019) as at 31 March 2019. Details of progress in the Ordinary share pool unquoted portfolio are included in the Investment Manager's Report but the only significant investment, based on the valuations as at 31 December 2018, is OR Productivity Limited which continues to report success in its ambitions within the hospital operating environment.

We have written down the value of Exosect Limited ('Exosect'), which was placed into Administration on 18 October 2018, to nil and reduced the value of Arecor Limited ('Arecor') following their recent fund raising at a discounted price compared to our carrying value. We continue to hold a full provision against our investment in Immunobiology Limited due to share preferences held by other investors. Whilst we are unlikely to recover any value from Exosect, we would hope that the opportunities available to both Arecor and Immunobiology have the potential to realise further value for the Ordinary share portfolio.

The Board remains confident that, overall, the remaining Ordinary share portfolio has the opportunity to realise a significant gain for shareholders but we do not see any immediate opportunities for further realisations.

B Share Investment Portfolio Review

We are delighted to report that the new B share portfolio has now made 5 investments and invested GBP2.75 million. This is a very positive start to the development of the B share investment portfolio and demonstrates that Seneca has access to considerable deal flow with exciting opportunities. Full details are included in their Investment Manager's report

Annual General Meeting

The Company's AGM will be held at 11.00 a.m. on Monday 10 June 2019 at the offices of Howard Kennedy LLP, 1 London Bridge, London SE1 9BG and we look forward to welcoming you to the meeting.

Following the appointment of Seneca as Investment Manager, Charles Breese has indicated that he does not wish to seek re-election to the Board at the AGM. However we are pleased that he has agreed to continue as a consultant until the end of this year in order to facilitate an orderly handover of the relationships with the remaining companies in the Ordinary share portfolio. Charles has been a member of the Company's Board since its inception in 2001 and we thank him very much for his considerable advice and input, especially the benefit of his investment experience, during that time.

The Board has reviewed my performance and has asked me to continue as Chairman. A resolution for my re-election is included in the AGM Notice. A resolution for the re-election of Richard Manley, who was appointed during the year as Seneca's representative, is also included in the AGM Notice.

The Board is currently in the process of identifying a new non-executive Director.

As the Company has now paid interim dividends in respect of both the Ordinary shares and the B shares and is required to pay a further Ordinary share dividend before 12 June 2019 in order to satisfy VCT rules following disposal of the Hallmarq investment on 13 December 2018, no resolutions are included in respect of dividends.

The Notice of the AGM includes resolutions empowering the Directors to issue further B shares and Ordinary shares which will primarily be used to facilitate the launch of another B share offer for the 2019/2020 and 2020/2021 tax years referred to above which requires authorisation for the Directors to be able to allot up to a further 25,000,000 B Shares. Including these resolutions in the AGM business will avoid the Company having to produce and send out a separate circular.

A summary of the resolutions to be proposed by the Company at its Annual General Meeting is included on page 32.

VCT Qualifying Status

Philip Hare & Associates provides the Board with advice on the ongoing compliance with HMRC rules and regulations concerning VCTs; they have confirmed that we remain within all the appropriate VCT qualifying regulations as at 31 December 2018.

Fund Administration

Our administration remains unchanged at present but, as the B share portfolio increases, much of this will migrate to Seneca's Haydock offices, to where we have already moved the Company's Registered Office. Neville Registrars ('Nevilles') will continue to maintain the Register. Our website has now changed to www.senecavct.co.uk which includes all information in respect of both share classes including Annual Reports and notices of meetings. We would remind shareholders who have not opted for electronic communications that this is more efficient and ecologically friendly than receiving paper copies by post. If you wish to take advantage of this facility, please contact Nevilles whose details are on page 75.

Resignation of Auditor

As already announced, James Cowper Kreston ("JCK"), the Company's previous auditor, have decided to withdraw from auditing Public Interest Entities (which includes VCTs) for the time being due to the increasing regulatory landscape and associated costs. As a result JCK have resigned from their role as auditor to the Company. The Company carried out a tender process for the appointment of a new auditor, and the Board, on the recommendation of the Audit Committee, appointed UHY Hacker Young LLP ("UHY") to fill the casual vacancy that had arisen. UHY have audited the Company's annual results for the year ending 31 December 2018, and shareholders will be asked to reappoint them at the AGM for the audit of the accounts for the year ending 31 December 201

Future Prospects

As I have previously indicated, we regard the prospects for the remaining Ordinary share portfolio as good but once again I need to seek shareholders' patience following the significant distributions returned (and intended to be returned) to them in 2019 whilst we await further realisation opportunities for the remaining investments in the Ordinary share portfolio.

We are pleased with the support we have received from existing and new shareholders in respect of the B share fund raising and will be issuing our new prospectus in the near future. Seneca is confident that there remains significant demand from potential investee companies for the type of growth capital that the Company can provide from its B share pool. As such, the Board remains confident of continuing to increase the B share fund in the 2019/20 tax year and foresees being able to invest these funds profitably well within the time limits imposed on VCTs.

Your Board continues to view the future of our Company with confidence.

John Hustler

Chairman

26 April 2019

Investment Manager's Report

Seneca Partners were delighted to be formally appointed as the Company's Investment Manager on 23 August 2018 following the successful first allotment of shares under the B share offer, which was launched on 9 May 2018 to raise in aggregate up to GBP10m.

We are active growth capital investors and since 2012 have invested in excess of GBP50m of growth capital into more than 40 investee companies.

As many of the Company's B shareholders will know, Seneca are head-quartered in the North West of England and as a result of our position as active growth capital investors across the UK we maintain a strong pipeline of investment opportunities. From this pipeline of potential investments we have moved quickly to make our first investments from the Company's B share pool and started the process of building a diverse portfolio of growth capital investments which we hope will provide attractive returns for the benefit of the Company's B shareholders.

We are happy to report that a total of GBP5.5m was raised under the new B share offer in our first year of fundraising of which GBP0.5m had been invested into one investee company as at 31 December 2018.

This first investment was made into the fast growing e-commerce business, SilkFred Limited, which specialises in independent ladies' fashion brands. Seneca first invested in this business via EIS funds which we manage in March 2018 and since that time we have been impressed with the progress it has made and rate with which the business is growing. The December 2018 investment made from the Company's B share pool was part of a larger investment round totalling c.GBP4m and will provide the working capital the business requires to support its continued growth.

Since this first B share pool investment on 31 December 2018 we have also now completed a further 4 investments from the B share pool deploying an additional GBP2.25m and in all of these instances the B share pool has co-invested alongside EIS funds also managed by Seneca. This is a key feature of the B share pool's early investments and brings an ability for the B share pool to participate in larger deals into more established companies than would be possible at this point if the Company's B share pool were to invest on a standalone basis.

Our current investment portfolio is summarised in the table below with additional detail in relation to each investee company included thereafter.

We are very happy with the diverse nature of these initial 5 B share pool investee companies and as it is our intention that the B share portfolio has exposure to both private and AIM quoted companies we are also particularly pleased that we have been able to include an AIM quoted company in these initial investments.

It is our intention to launch another prospectus for a further B share offer in the 2019/2020 tax year in the near future and to continue to raise funds to support the ongoing development of the existing portfolio and to fund new investments.

Shareholders will recall that whilst Seneca Partners are the Company's Investment Manager, responsibility for the management of the Ordinary share pool investments remain with those members of the Board who were serving at the point of Seneca's appointment on 23 August 2018. During the year to 31 December 2018 a profit over original cost of GBP1,807k was realised on the sale of the Ordinary share portfolio's holding in Hallmarq. A further GBP19k profit over cost was realised when 200,000 Scancell shares were sold for liquidity management purposes. During the year former Ordinary share pool investee company Glide was dissolved and the carrying value of the Ordinary share pool's investment in Exosect was written down to nil following the company entering administration in October 2018.

Further details in relation to both Ordinary share pool and B share pool investee companies are included below.

Investment Portfolio - Ordinary shares

 
                                                                                     Carrying                 Movement 
                                                                                     value at              in the year 
                                  Equity          Investment       Unrealised     31 December                       to 
                                    held             at cost    profit/(loss)            2018              31 December 
 Unquoted Investments                  %             GBP'000          GBP'000         GBP'000             2018 GBP'000 
---------------------------  -----------  ------------------  ---------------  --------------  ----------------------- 
 OR Productivity plc                10.3                 765            (101)             664                        - 
---------------------------  -----------  ------------------  ---------------  --------------  ----------------------- 
 Fuel 3D Technologies 
  Limited                           <1.0                 299             (23)             276                        - 
---------------------------  -----------  ------------------  ---------------  --------------  ----------------------- 
 Arecor Limited                      1.3                 142               63             205                     (47) 
---------------------------  -----------  ------------------  ---------------  --------------  ----------------------- 
 Insense Limited                     4.6                 509            (389)             120                        - 
---------------------------  -----------  ------------------  ---------------  --------------  ----------------------- 
 Microarray Limited                  1.8                 132             (65)              67                        - 
---------------------------  -----------  ------------------  ---------------  --------------  ----------------------- 
 ImmunoBiology Limited               2.0                 868            (868)               -                        - 
---------------------------  -----------  ------------------  ---------------  --------------  ----------------------- 
 Exosect Limited                     1.4                 270            (270)               -                    (120) 
---------------------------  -----------  ------------------  ---------------  --------------  ----------------------- 
 Total unquoted investments                            2,985          (1,653)           1,332                    (167) 
---------------------------  -----------  ------------------  ---------------  --------------  ----------------------- 
 
                                                                                                              Movement 
                                                                                     Carrying              in the year 
                                                  Investment       Unrealised        value at                       to 
                                  Shares             at cost    profit/(loss)     31 December              31 December 
 Quoted Investments                 held             GBP'000          GBP'000    2018 GBP'000             2018 GBP'000 
---------------------------  -----------  ------------------  ---------------  --------------  ----------------------- 
 Scancell plc                 13,049,730                 789              385           1,174                    (482) 
---------------------------  -----------  ------------------  ---------------  --------------  ----------------------- 
 Omega Diagnostics plc         2,293,868                 328             (41)             287                     (92) 
---------------------------  -----------  ------------------  ---------------  --------------  ----------------------- 
 Total quoted investments                              1,117              344           1,461                    (574) 
---------------------------  -----------  ------------------  ---------------  --------------  ----------------------- 
 Total investments                                     4,102          (1,309)           2,793                    (741) 
---------------------------  -----------  ------------------  ---------------  --------------  ----------------------- 
 
 

Investment Portfolio - B shares

 
                                                                           Carrying        Movement 
                                                                           value at     in the year 
                                Equity   Investment       Unrealised    31 December              to 
                                  held      at cost    profit/(loss)           2018     31 December 
 Unquoted Investments                %      GBP'000          GBP'000        GBP'000    2018 GBP'000 
----------------------------  --------  -----------  ---------------  -------------  -------------- 
 Silkfred Limited                 <1.0          500                -            500               - 
----------------------------  --------  -----------  ---------------  -------------  -------------- 
 Total unquoted investments                     500                -            500               - 
--------------------------------------  -----------  ---------------  -------------  -------------- 
 

Ordinary Share Pool - Investment Portfolio - Unquoted Investments

   1.   OR Productivity Limited 
 
 Initial investment    March 2011        At the end of 2011, Freehand 2010 (a Seneca Growth 
  date:                                   Capital Ordinary share investee) was acquired 
                                          by OR Productivity plc (ORP) in exchange for 
                                          ORP shares. 
                                          Freehand 2010 owns the intellectual property 
                                          to technology incorporated in a product, FreeHand, 
                                          for robotically controlling the laparoscope (part 
                                          of the camera system) used in the growing sector 
                                          that is keyhole surgery. The business model is 
                                          built upon free placement of the system with 
                                          recurring revenue then being generated from the 
                                          subsequent sale of a consumable per operation. 
                                          Progress made by the company in 2018 includes: 
                                           *    The publishing by Salisbury Hospital in May 2018 of 
                                                information comparing the outcomes from surgery using 
                                                FreeHand held cameras with the results of surgery 
                                                done with a human held camera. Of particular note was 
                                                a 22% average reduction in operating time of 35 
                                                minutes and a 25% average reduction in post-operative 
                                                stay from 2 days to 1.5 days when using FreeHand held 
                                                cameras which are significant reductions, 
                                                particularly at a time when the NHS is experiencing 
                                                staff and bed shortages; 
 
 
 
                                           *    A strategic decision to focus sales efforts on 
                                                accounts capable of undertaking c.1,000 operations 
                                                p.a. with one such account already having been 
                                                secured; and 
 
 
 
                                           *    Progress being made with the company's Development 
                                                Management Services offering with the completion of 
                                                the first stage of a development project for a 
                                                medical device delivering laser ablation of tumors. 
                                                The project saw the development of a robotic 
                                                assistant (based on FreeHand technology) taking 
                                                instructions from both MRI and CT imaging modalities 
                                                and other such projects are in the pipeline. 
 Cost:                 GBP765,000 
                      ---------------- 
 Valuation:            GBP664,000 
                      ---------------- 
 Equity held:          10.3% 
                      ---------------- 
 Last statutory        31 March 
  accounts:             2018 
                      ---------------- 
 Turnover:             GBP163,000 
                      ---------------- 
 Loss before           GBP762,000 
  tax: 
                      ---------------- 
 Net assets:           GBP(1,248,000) 
                      ---------------- 
 Valuation method:     Price of 
                        last fundraise 
                      ---------------- 
 
   2.   Fuel 3D Technologies Limited 
 
 Initial investment   March 2010       In 2014 Fuel 3D was formed to acquire the 
  date:                                 computer 3D imaging IP of Seneca Growth Capital 
                                        Ordinary share investee company, Eykona. The 
                                        initial application for this IP targeted by 
                                        Eykona was measuring the volume of chronic 
                                        wounds, however this has since developed and 
                                        the current application focus is on a) measuring 
                                        tumours in animals used in drug development 
                                        via a product called BioVolume and b) enabling 
                                        the manufacture of products to fit a particular 
                                        individual eg masks used to treat certain 
                                        medical conditions. 
                                        BioVolume is Fuel 3D's lead product and improves 
                                        measurement accuracy, inter-operator consistency, 
                                        animal welfare, cost efficiencies, compliance 
                                        and the success of pre-clinical oncology research. 
                                        Progress made by the company in 2018 includes: 
                                         *    Continued development of BioVolume by combining 3D 
                                              imaging with thermal imaging and paid for trials are 
                                              now being undertaken with a number of pharma 
                                              companies; and 
 
 
                                         *    Using its technology in conjunction with 3D printing 
                                              to make products to fit a particular individual and a 
                                              development project is now underway with a third 
                                              party to facilitate the manufacture of masks for a 
                                              medical application. 
                     --------------- 
 Cost:                GBP299,000 
-------------------  --------------- 
 Valuation:           GBP276,000 
-------------------  --------------- 
 Equity held:         < 1% 
-------------------  --------------- 
 Last statutory       31 December 
  accounts:            2017 
-------------------  --------------- 
 Turnover:            GBP665,000 
-------------------  --------------- 
 Loss before          GBP9.6 million 
  tax: 
-------------------  --------------- 
 Net assets:          GBP4.7 million 
-------------------  --------------- 
 Valuation method:    Price of last 
                       fundraise 
-------------------  --------------- 
 
   3.   Arecor Limited 
 
 Initial investment    January 2008    Arecor was a spin-out from Insense (a Seneca 
  date:                                 Growth Capital Ordinary share investee company 
                                        - see below) to commercialise technology developed 
                                        by Insense for enabling biologics to maintain 
                                        their integrity without the need for refrigeration 
                                        - this both reduces cost and also helps supply 
                                        chain logistics in developing countries where 
                                        temperature monitored cold storage facilities 
                                        are in short supply. 
 
                                        Progress made by the company in 2018 includes: 
 
                                         *    In their financial year to 31 May 2018 they invested 
                                              GBP2.1m in R&D associated with their own product 
                                              development; and 
 
 
 
                                         *    The company also raised GBP6.0m of equity in 
                                              September 2018 to fund the continued development of 
                                              Arecor's own products for diabetes care and during 
                                              2018, the company also filed a Clinical Trial 
                                              Application to conduct a Phase I study in Type 1 
                                              diabetes patients of Arecor's ultra-rapid acting 
                                              insulin product. 
 Cost:                 GBP142,000 
                      -------------- 
 Valuation:            GBP205,000 
                      -------------- 
 Equity held:          1.3% 
                      -------------- 
 Last statutory        31 May 2018 
  accounts: 
                      -------------- 
 Turnover:             GBP1,272,000 
                      -------------- 
 Loss before           GBP1,176,000 
  tax: 
                      -------------- 
 Net assets:           GBP679,000 
                      -------------- 
 Valuation method:     Price of last 
                        fundraise 
                      -------------- 
 
   4.   Insense Limited 
 
 Initial investment    July 2003         Insense is an innovative, biotechnology company 
  date:                                   and was spun-out from Unilever's R&D laboratory 
                                          in 2001. 
 
                                          It has since had two successful spin-outs, 
                                          namely Arecor (see above) and Microarray (see 
                                          below) and current Insense development activity 
                                          is concentrated on dermatology products for 
                                          both professional and consumer applications. 
 
                                          Progress made by the company in 2018 includes: 
 
                                           *    work continuing in conjunction with a leading 
                                                microbiologist to prepare its leading dermatology 
                                                product (fungal nail treatment) for efficacy and 
                                                usability tests with the aim of finalising product 
                                                specification for first-in-man trials. 
 Cost:                 GBP509,000 
                      ---------------- 
 Valuation:            GBP120,000 
                      ---------------- 
 Equity held:          4.6% 
                      ---------------- 
 Last statutory        31 December 
  accounts:             2017 
                      ---------------- 
 Turnover:             GBP18,000 
                      ---------------- 
 Loss before tax:      GBP255,000 
                      ---------------- 
 Net assets:           GBP322,000 
                      ---------------- 
 Valuation method:     Price of 
                        last fundraise 
                      ---------------- 
 
   5.   Microarray Limited 
 
 Initial investment    January 2011       Microarray Ltd is a UK-based specialist wound 
  date:                                    healing company. Founded in 2000, Microarray 
                                           was merged with Archimed,a spin-out from Insense 
                                           (see above) the company is now privately owned. 
 
                                           The company has access to wide ranging expertise 
                                           in the fields of wound dressing product development, 
                                           marketing and sales; electrochemistry and diagnostic 
                                           sensor technologies; biochemistry, oxygen and 
                                           iodine chemistry; enzymology, immunology and 
                                           inflammation. Current research and development 
                                           activities are concentrated on innovative, 
                                           electrochemically-active wound dressings for 
                                           the treatment of chronic wounds and on wound 
                                           care diagnostics. 
 
                                           Microarray owns and continues to develop new 
                                           intellectual property in its specialist fields. 
                                           It works independently and with expert academic 
                                           and industrial partners. 
 
                                           Progress made by the company in 2018 includes: 
 
                                            *    wound sample material being obtained from a Wounds 
                                                 Innovation Centre, where the company is working with 
                                                 a world leading wound clinician; and 
 
 
 
                                            *    interim data from a sizeable trial ongoing with data 
                                                 due in 2019, and the design expected to be frozen in 
                                                 Q3 2019. 
 Cost:                 GBP132,000 
                      ----------------- 
 Valuation:            GBP67,000 
                      ----------------- 
 Equity held:          1.8% 
                      ----------------- 
 Last statutory        31 December 
  accounts:             2017 
                      ----------------- 
 Turnover:             GBP58,000 
                      ----------------- 
 Loss before           GBP1.1 million 
  tax: 
                      ----------------- 
 Net assets:           GBP(2.3 million) 
                      ----------------- 
 Valuation method:     Directors' 
                        valuation 
                      ----------------- 
 
   6.   ImmunoBiology Limited 
 
 Initial investment       November    ImmunoBiology is a biotechnology company that 
  date:                    2005        is focused on developing treatments for illnesses 
                                       such as meningitis, tuberculosis, influenza 
                                       and hepatitis C. The company's technology is 
                                       based on the discovery that a group of proteins 
                                       known as 'heat shock proteins' has a pivotal 
                                       role in controlling the normal immune response 
                                       to infections. 
 
                                       The focus is currently on a vaccine for Pneumococcal 
                                       Disease, for which the challenge is that there 
                                       are >90 strains in circulation but present 
                                       treatments address only a small proportion. 
                                       In 2016 a first in human study demonstrated 
                                       safety in adults. 
 
                                       Progress made by the company in 2018 includes: 
 
                                        *    Preparation for a significant fundraise to finance a 
                                             PnuBioVax Phase II clinical trial, with the objective 
                                             of a successful outcome leading to a shareholder exit 
                                             and in early 2019 also concluded a regional licensing 
                                             agreement. 
 Cost:                  GBP868,000 
                      ------------- 
 Valuation:             GBPnil 
                      ------------- 
 Equity held:           2.0% 
                      ------------- 
 Last statutory         31 May 2018 
  accounts: 
                      ------------- 
 Turnover:              GBPnil 
                      ------------- 
 Loss before            GBP665,000 
  tax: 
                      ------------- 
 Net assets:            GBP532,000 
                      ------------- 
 Valuation method:      Directors' 
                         valuation 
                      ------------- 
 
   7.   Exosect Limited 
 
 Initial investment    January 2010     Exosect was spun-out of Southampton University 
  date:                                  in 2001 to commercialise innovative pest control 
                                         technology and reduce the use of insecticides. 
 
                                         Until 2015, it sought to develop its own pesticide 
                                         products. However, following a change of CEO, 
                                         the strategy was changed whereby the company 
                                         regarded its technology as a platform for 
                                         helping pesticide manufacturers target their 
                                         products more accurately and thereby achieve 
                                         environmental benefits (through enabling a 
                                         50% reduction in active ingredients required 
                                         as currently more than 50% of applied agrochemicals 
                                         do not reach their intended target) with resulting 
                                         cost savings. 
 
                                         Unfortunately this change in strategy ultimately 
                                         proved to be unsuccessful and administrators 
                                         were appointed to the company on 18 October 
                                         2018, with no return being anticipated to 
                                         shareholders. 
 Cost:                 GBP270,000 
                      --------------- 
 Valuation:            GBPnil 
                      --------------- 
 Equity held:          1.4% 
                      --------------- 
 Last statutory        31 December 
  accounts:             2017 
                      --------------- 
 Turnover:             GBP83,000 
                      --------------- 
 Loss before tax:      GBP2.4 million 
                      --------------- 
 Net assets:           GBP(370,000) 
                      --------------- 
 Valuation method:     Investment 
                        fully written 
                        down 
                      --------------- 
 

Ordinary Share Pool - Investment Portfolio - AIM Quoted Investments

   1.   Scancell plc 
 
 Initial investment    December          Scancell is an AIM listed biotechnology company 
  date:                 2003              that is developing a pipeline of therapeutic 
                                          vaccines to target various types of cancer, with 
                                          the first target being melanoma. 
 
                                          The Immunobody platform technology, in effect, 
                                          educates the immune system how to respond - this 
                                          means that the technology can also be licensed 
                                          to pharmaceutical companies to assist the development 
                                          of their own therapeutic vaccines, which is an 
                                          area of emerging importance for which a number 
                                          of big pharmas do not have in-house technology. 
 
                                          In addition, in 2012 a second platform technology, 
                                          Moditope, was announced and is based on exploiting 
                                          the normal immune response to stressed cells, 
                                          and is complementary to the Immunobody platform. 
 
                                          Progress made by the company in 2018 includes: 
 
                                           *    The announcement of a Clinical Development 
                                                Partnership with Cancer Research UK (CRUK) to develop 
                                                SCIB2, for the treatment of patients with solid 
                                                tumours, including non-small cell lung cancer. CRUK 
                                                will fund and sponsor a UK-based Phase I/II clinical 
                                                trial of SCIB2 in combination with a checkpoint 
                                                inhibitor; 
 
 
 
                                           *    The announcement of a collaboration with BioNTech for 
                                                the Moditope product being developed for the 
                                                treatment of lung, triple-negative breast cancer, 
                                                ovarian and endometrial cancers. BioNTech is one of 
                                                Europe's new immuno-oncology power-houses; 
 
 
 
                                           *    The appointment of a new CEO in January 2018. He was 
                                                VP Business Development at Arana when it acquired 
                                                Scancell's monoclonal antibody business in 2006; and 
 
 
 
                                           *    The initiation of preparations for a) a SCIB1- 
                                                checkpoint inhibitor Phase II US combination study in 
                                                late stage melanoma (the study is expected to start 
                                                in H2 2019), and b) a First-in-Human study with 
                                                Modi-1 in patients with triple negative breast cancer, 
                                                ovarian cancer and sarcoma. 
 Cost:                 GBP789,000 
                      ---------------- 
 Valuation:            GBP1,174,000 
                      ---------------- 
 Equity held:          3.4% 
                      ---------------- 
 Last statutory        30 April 
  accounts:             2018 
                      ---------------- 
 Turnover:             GBPnil 
                      ---------------- 
 Loss before           GBP4.9 million 
  tax: 
                      ---------------- 
 Net assets:           GBP13.9 million 
                      ---------------- 
 Valuation method:     Bid price 
                        of 9.0p per 
                        share 
                      ---------------- 
 
   2.   Omega Diagnostics plc 
 
 Initial investment    August 2007            Omega Diagnostics plc ("Omega") is quoted on 
  date:                                        AIM and specialises in Food Intolerance Testing, 
                                               Allergy Testing and HIV Point-of-Care (POC) 
                                               Testing. 
 
                                               Progress made by the company in 2018: 
 
                                                *    In December 2017 the founding CEO stepped down and 
                                                     was replaced by the COO who had joined in August 
                                                     2015, having previously been Managing Director of 
                                                     Axis-Shield Diagnostics. Following a strategic review 
                                                     by the new CEO, a restructuring took place in order 
                                                     to position the group with a profitable core business 
                                                     with attractive organic growth potential (Food 
                                                     Intolerance Testing), and two products under 
                                                     development with significant growth potential 
                                                     (Allergy Testing, and HIV POC Testing). The 
                                                     restructuring involved the closure of the 
                                                     manufacturing site in India and the manual allergy 
                                                     testing business, eliminating EBITDA losses of 
                                                     c.GBP800,000 in 2017/18 in addition to the sale of 
                                                     the low growth/low margin infectious diseases 
                                                     business; and 
 
 
 
                                                *    In addition to the completion of the restructuring, 
                                                     the first sales have been achieved in relation to the 
                                                     automated allergy tests project and the first sales 
                                                     have also been achieved with regard to the HIV POC 
                                                     Testing CD4 350 test (on which development started in 
                                                     2012 and CE marking was achieved in 2017). CE marking 
                                                     of the second test, CD4 200 (which is anticipated to 
                                                     have the greater market potential) was achieved in 
                                                     March 2019. 
 Cost:                 GBP328,000 
                      --------------------- 
 Valuation:            GBP287,000 
                      --------------------- 
 Equity held:          1.8% 
                      --------------------- 
 Last statutory        31 March 2018 
  accounts: 
                      --------------------- 
 Turnover:             GBP13.6 million 
                      --------------------- 
 Loss before           GBP6.9 million 
  tax:                  (incl GBP5.9 
                        million exceptional 
                        charge) 
                      --------------------- 
 Net assets:           GBP17.1 million 
                      --------------------- 
 Valuation method:     Bid price 
                        of 12.5p per 
                        share 
                      --------------------- 
 

B Share Pool - Investment Portfolio - Unquoted Investments as at 31 December 2018

   1.   SilkFred Limited 
 
 Initial investment   December         Silkfred is an online marketplace for independent 
  date:                2018             ladies' fashion brands. The business was founded 
                                        in 2011 with the aim of creating an efficient 
                                        marketplace for emerging fashion designers to 
                                        bring products to market and establish their 
                                        brand in the sector. The business now works 
                                        with c.600 independent brands, selling to over 
                                        500k customers. 
 
                                        Silkfred acts as a central marketing and sales 
                                        platform for these brands, charging commission 
                                        in exchange for these services, and as a result 
                                        the business itself takes minimal inventory 
                                        / working capital risk on new brands, lines 
                                        or products. 
 
                                        The business model revolves around a market 
                                        leading and scalable customer service platform, 
                                        and as such Silkfred are continually investing 
                                        in core infrastructure and constantly seeking 
                                        innovative methods to enhance the customer experience. 
 Cost:                GBP500,000 
                     --------------- 
 Valuation:           GBP500,000 
                     --------------- 
 Equity held:         <1% 
                     --------------- 
 Last statutory       31 December 
  accounts:            2017 
                     --------------- 
 Turnover:            Not disclosed 
                     --------------- 
 Loss before          Not disclosed 
  tax: 
                     --------------- 
 Net assets:          GBP3.5 million 
                     --------------- 
 Valuation method:    At cost 
                     --------------- 
 

B Share Pool - Investment Portfolio - Additional Unquoted Investments as at 26 April 2019

   1.   Fabacus Holdings Limited 
 
 Initial investment    February         Fabacus is an independent software company that 
  date:                 2019             has developed a Complete Product Lifecycle Solution: 
                                         Xelacore, aimed at bringing transparency to 
                                         supply chain networks, with an initial focus 
                                         on resolving the interaction and information 
                                         flow between global licensors and their licensees. 
 
                                         Currently, there is a fundamentally flawed data 
                                         capture process between licensors and licensees; 
                                         and a disconnection from the framework of retail 
                                         standards that have underpinned and continue 
                                         to enable the retail value chain. This has resulted 
                                         in an inability to correctly address known shortcomings 
                                         in respect to data management and hinder the 
                                         needed digital transformation of licensors in 
                                         the digitally evolving retail landscape. 
 
                                         Fabacus's solution, Xelacore, is a modular, 
                                         Software as a Service ("SaaS") solution with 
                                         an intuitive interface and proprietary data 
                                         aggregation and management engine that allows 
                                         all stakeholders to operate on a single unified 
                                         and collaborative platform. It bridges the gaps 
                                         in an inefficient process within the current 
                                         retail ecosystem by creating authenticated, 
                                         enriched universal records that unlock opportunities, 
                                         reduce risk and drive performance for both licensors 
                                         and licensees. 
 Cost:                 GBP500,000 
                      --------------- 
 Equity held:          2.2% 
                      --------------- 
 Last statutory        31 December 
  accounts:             2018 
                      --------------- 
 Turnover:             Not disclosed 
                      --------------- 
 Loss before           Not disclosed 
  tax: 
                      --------------- 
 Net assets:           GBP4.6 million 
                      --------------- 
 
 
   2.   Old St Labs Limited 
 
 Initial investment    March 2019      Old St Labs is a provider of cloud based, supplier 
  date:                                 collaboration tools for large, blue chip customers, 
                                        enabling them to manage key supplier relationships 
                                        and strategic project work. The core product, 
                                        Vizibl, seeks to make supplier collaboration 
                                        much more straight forward, with key focus on 
                                        compliance, savings / efficiency and driving 
                                        growth across the business. 
 
                                        Vizibl is the only SaaS workspace that supports 
                                        collaborative supplier relationships, bringing 
                                        all points of contact together in one place, 
                                        providing visibility across the company and 
                                        eliminating duplication of efforts. Vizibl's 
                                        real-time reporting speeds up decision making, 
                                        drawing on and sharing the expertise of the 
                                        community in the process. The offering taps 
                                        into a growing trend in supplier collaboration, 
                                        having moved on from the initial focus on compliance, 
                                        to an increased emphasis on savings / efficiency, 
                                        and recent developments highlighting the benefits 
                                        in terms of wider growth strategy for large 
                                        customers. 
 
                                        Vizibl provides the infrastructure, governance 
                                        and reporting capabilities to optimise present 
                                        supplier performance and acts as a springboard 
                                        for those collaborative supplier relationships. 
                                        The product is CRM / ERP agnostic, working alongside 
                                        all major software providers to ensure the collaboration 
                                        software is insightful and informative. 
 Cost:                 GBP500,000 
                      -------------- 
 Equity held:          3.44% 
                      -------------- 
 Last statutory        31 March 
  accounts:             2018 
                      -------------- 
 Turnover:             Not disclosed 
                      -------------- 
 Loss before           Not disclosed 
  tax: 
                      -------------- 
 Net assets:           (GBP0.7) 
                        million 
                      -------------- 
 
 
   3.   Qudini Limited 
 
 Initial investment    April 2019       Founded in 2012, Qudini is a B2B software company 
  date:                                  that provides customer experience SaaS solutions 
                                         to organisations in retail, hospitality, the 
                                         public sector and healthcare. 
 
                                         Qudini provides a software solution for appointment 
                                         bookings, queue management, event management 
                                         and task management - enabling businesses to 
                                         improve shop floor operations by managing staff 
                                         activity, breaks and performance, and by assigning 
                                         tasks at store or head office level. 
 
                                         Qudini is aiming to revolutionise digital queue 
                                         and appointment management. It achieves this 
                                         through deployment of its data-centric, cloud-based 
                                         (Amazon Web Services), cross-platform service, 
                                         which improves a business' ability to manage 
                                         the flow of customers awaiting service, using 
                                         algorithms to provide accurate, live data, such 
                                         as estimated wait times. Wait times are relayed 
                                         to the customer typically via an SMS/text sent 
                                         from the Qudini platform. Through integration 
                                         with various software platforms and compatible 
                                         with wide variety of hardware, Qudini enables 
                                         detailed analytics focused on customer trends, 
                                         and provides a unique insight into areas such 
                                         as customer footfall, peak demand times, and 
                                         wait times. 
 Cost:                 GBP500,000 
                      --------------- 
 Equity held:          2.22% 
                      --------------- 
 Last statutory        31 December 
  accounts:             2018 
                      --------------- 
 Turnover:             Not disclosed 
                      --------------- 
 Loss before           Not disclosed 
  tax: 
                      --------------- 
 Net assets:           GBP1.7 million 
                      --------------- 
 
 

B Share Pool - Investment Portfolio - Additional Quoted Investments as at 26 April 2019

   1.   SkinBioTherapeutics Plc 
 
 Initial investment   February         SkinBioTherapeutics is a life science company 
  date:                2019             focused on skin health. The Company's proprietary 
                                        platform technology, SkinBiotix(R), is based 
                                        upon discoveries made by CEO Dr. Cath O'Neill 
                                        and Professor Andrew McBain. 
 
                                        SkinBioTherapeutics' platform applies research 
                                        discoveries made on the activities of lysates 
                                        derived from probiotic bacteria when applied 
                                        to the skin. The Company has shown that the 
                                        SkinBiotix(R) platform can improve the barrier 
                                        effect of skin models, protect skin models from 
                                        infection and repair skin models. Proof of principle 
                                        studies have shown that the SkinBiotix(R) platform 
                                        has beneficial attributes applicable to each 
                                        of these areas. 
 
                                        The aim of the Company is to develop its SkinBiotix(R) 
                                        technology into commercially successful products 
                                        supported by a strong scientific evidence base. 
                                        SkinBioTherapeutics' commercial strategy is 
                                        to engage health and wellbeing and/or pharmaceutical 
                                        companies in early dialogue to build up relationships 
                                        and maintain communication on technical progress 
                                        until one or more commercial deals can be secured. 
 Cost:                GBP750,000 
                     --------------- 
 Equity held:         3.7% 
                       - 4,677,107 
                       shares 
                     --------------- 
 Last statutory       30 June 2018 
  accounts: 
                     --------------- 
 Turnover:            Nil 
                     --------------- 
 Loss before          GBP0.9 million 
  tax: 
                     --------------- 
 Net assets:          GBP3.4 million 
                     --------------- 
 
 

Directors' Report

The Directors present their Report and the audited Financial Statements for the year ended 31 December 2018.

The Directors consider that the Annual Report and Financial Statements, taken as a whole are fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

Review of Business Activities

The Directors are required by s417 of the Companies Act 2006 to include a Business Review to shareholders. This is set out on page 25 and forms part of the Strategic Report. The Chairman's Statement on page 10 to 13, and the Investment Manager's Report on pages 14 to 24 also form part of the Strategic Report.

The purpose of this review is to provide shareholders with a snapshot summary setting out the business objectives of the Company, the Board's strategy to achieve those objectives, the risks faced, the regulatory environment and the key performance indicators used to measure performance.

Directors' Shareholdings - Ordinary shares

The Directors of the Company during the period and their interests (in respect of which transactions are notifiable under Disclosure and Transparency Rule 3.1.2R) in the issued Ordinary shares of 1p (2017: nominal value 50p) are shown in the table below:

 
                     31 December        31 December 
                         2018               2017 
                   Number of Shares   Number of Shares 
----------------  -----------------  ----------------- 
 John Hustler               190,000            190,000 
 Charles Breese             105,000            105,000 
 Richard Roth               209,612            209,612 
 Richard Manley                   -                  - 
----------------  -----------------  ----------------- 
 

All of the Directors' shares were held beneficially. There have been no changes in the Directors' Ordinary share interests between 31 December 2018 and the date of this report.

Directors' Shareholdings - B Shares

The Directors of the Company during the period and their interests (in respect of which transactions are notifiable under Disclosure and Transparency Rule 3.1.2R) in the issued B shares of 1p are shown in the table below:

 
                    31 December        31 December 
                        2018               2017 
                  Number of Shares   Number of Shares 
---------------  -----------------  ----------------- 
 John Hustler                    -                  - 
 Charles Breese                  -                  - 
 Richard Roth               15,000                  - 
 Richard Manley             24,750                  - 
---------------  -----------------  ----------------- 
 

All of the Directors' shares were held beneficially. There have been no changes in the Directors' B share interests between 31 December 2018 and the date of this report.

Directors' and Officers' Liability Insurance

The Company has maintained directors' and officers' liability insurance cover on behalf of the Directors and Company Secretary.

Whistleblowing

The Board has approved a Whistleblowing Policy for the Company, its directors and any employees, consultants and contractors, to allow them to raise concerns, in confidence, in relation to possible improprieties in matters of financial reporting and other matters.

Bribery Act

The Board has approved an Anti-Bribery Policy to ensure full compliance with the Bribery Act 2010 and to ensure that the highest standards of professional and ethical conduct are maintained.

Management

On 23 August 2018 Seneca was appointed as the Company's Investment Manager.

Whilst Seneca has been appointed as the Company's Investment Manager and will be responsible for the management of the Company's B share pool investments, responsibility for the management of the Ordinary share pool investments has been delegated to those members of the board of directors who served immediately prior to 23 August 2018.

Share Issues

During the year, the Company did not issue any Ordinary shares (2017: nil). During the year, the Company issued 4,036,370 B shares raising GBP4.0m (2017: nil). Subsequently an additional 1,351,294 B shares have been issued under the Offer.

Share Capital

The Company's issued Ordinary share capital as at 31 December 2018 was 8,115,376 Ordinary shares of 1p each (31 December 2017: 8,115,376 of 50p each) and 4,036,370 B shares of 1p each (31 December 2017: nil).

Directors

Biographical details of the Directors are shown on page 29.

In accordance with the Articles, John Hustler who has been a director for more than nine years will retire and offer himself for re-election at the forthcoming AGM. Richard Manley has been appointed since the last AGM and will therefore retire and offer himself for re-election at the forthcoming AGM.

The Board is satisfied that, following individual performance appraisals, both the Chairman and Richard Manley, who are retiring, continue to be effective and demonstrate commitment to their roles and therefore offer themselves for re-election with the support of the Board.

Following the appointment of Seneca as Investment Manager, Charles Breese has indicated that he does not wish to seek re-election to the Board at the AGM. However we are pleased that he has agreed to continue as a consultant until the end of this year in order to facilitate an orderly handover of the relationships with the remaining companies in the Ordinary share portfolio.

The Board is cognisant of shareholders' preference for Directors not to sit on the boards of too many listed companies ("over-boarding"). As part of their assessment as to his suitability, the Directors considered Richard Roth's other directorships at the time of his appointment, given that he also sits on the boards of the four Oxford Technology ("OT") VCTs. The Directors noted that those four funds have a common board, and there is an element of overlap in the workload across the four entities, such that the time required is less than would be necessary for four totally separate and listed companies. They also note that Seneca Growth Capital has a number of shared portfolio companies with the OT VCTs. The Board was satisfied that Richard Roth had the time to focus on the requirements of the Company, and this has proven to be the case.

International Financial Reporting Standards

As the Company is not part of a group it is not mandatory for it to comply with International Financial Reporting Standards. The Company does not anticipate that it will voluntarily adopt International Financial Reporting Standards. The Company has adopted Financial Reporting Standard 102 - The Financial Reporting Standard Applicable in the United Kingdom and Republic of Ireland.

Environmental Policy

The Company always makes a full effort to conduct its business in a manner that is responsible to the environment.

Going Concern

The Company's business activities and the factors likely to affect its future performance and position are set out in the Chairman's Statement and Investment Manager's Report on pages 10 to 13 and pages 14 to 24. Further details on the management of financial risk may be found in note 16 to the Financial Statements.

The Board receives regular reports from the Administration Manager and the Directors believe that, as no material uncertainties leading to significant doubt about going concern have been identified, it is appropriate to continue to adopt the going concern basis in preparing the Financial Statements.

As at 31 December 2018 the Company had more than GBP6m of cash and in addition, the other assets of the Company consist mainly of securities, some of which are readily realisable. As such, the Company has adequate financial resources to continue in operational existence for the foreseeable future.

Substantial Shareholdings

At 31 December 2018, two disclosures of major shareholdings had been made to the Company under Disclosure and Transparency Rule 5 (Vote Holder and Issuer Notification Rules).

   --    James Leek has disclosed a shareholding of 4.57% (555,340 shares). 
   --    David Blundell has disclosed a shareholding of 3.04% (369,900 shares). 

Annual General Meeting

The Notice convening the 2019 Annual General Meeting ("AGM") of the Company is set out at the end of this document (and a form of proxy in relation to the meeting is enclosed separately). Part of the business of the AGM will be to consider resolutions in relation to the following matters:

Resolution 6 will seek the re-appointment of UHY Hacker Young LLP as Independent Auditor to the Company.

Resolution 8 will authorise the Directors to allot further B Ordinary shares and Ordinary shares. This would enable the Directors until the next AGM to allot up to 31,000,000 B Ordinary shares in connection with any offer(s) for subscription (and any subsequent top up offer of B Ordinary shares) and up to 405,800 Ordinary shares (for any miscellaneous offers of such shares), representing approximately 575% of the Company's issued B Ordinary share capital and approximately 5% of its issued Ordinary share capital as at 25 April 2019.

Resolution 9 will, under sections 570 of the Act, disapply pre-emption rights in respect of any allotment of the B Ordinary shares and/or Ordinary shares authorised under Resolution 8.

Resolution 10 will authorise the Board, pursuant to the Act, to make one or more market purchases of up to 14.99% of the issued B Ordinary share capital of the Company from time to time. The price paid must not be less than 1p per B Ordinary share, nor more than 5% above the average middle market price of a B Ordinary share for the preceding five business days. Any B Ordinary shares bought back under this authority may be cancelled by the Board.

Resolution 11 will authorise the cancellation of the share premium account of the Company. This share premium account will arise on the issue of further B Ordinary Shares pursuant to any offer for subscription. All of the share premium account at the date of the order made by the Court confirming such cancellation will be cancelled, and will be used to establish a new reserve which may be treated as distributable and which can be used, among other things, to fund the Company's buy-back of shares and the payment of future dividends. In accordance with the VCT Rules, such distributable reserves cannot, however, be utilised for such purposes until after three years from the end of the accounting period in which the relevant shares were issued.

The Directors intend to use the authorities in Resolutions 8 and 9 for the purposes of a further offer for subscription of B Ordinary Shares, though may also subsequently utilise the authorities for further offer(s) for subscription or issue of B Ordinary Shares. The Directors have no current intention to utilise the authority in relation to the Ordinary Shares.

By Order of the Board

Craig Hunter

Company Secretary

26 April 2019

Income Statement

 
                                                                   Combined                        Combined 
                                                            Year to 31 December 2018        Year to 31 December 2017 
-----------------------------------------------  ----- 
                                                          Revenue    Capital     Total    Revenue    Capital     Total 
                                                  Note    GBP'000    GBP'000   GBP'000    GBP'000    GBP'000   GBP'000 
-----------------------------------------------  -----  ---------  ---------  --------  ---------  ---------  -------- 
 
 Gain on disposal of fixed asset investments       10           -        903       903          -         19        19 
 
 Loss on valuation of fixed asset investments      10           -      (716)     (716)          -      (359)     (359) 
 
 Income                                            2            -          -         -          -          -         - 
 
 Performance fee                                   6            -       (26)      (26)          -         91        91 
 
 Investment management fee net of cost cap         3           36       (18)        18          -          -         - 
 
 Other expenses                                    4        (113)          -     (113)      (118)          -     (118) 
-----------------------------------------------  -----  ---------  ---------  --------  ---------  ---------  -------- 
 Return on ordinary activities before tax                    (77)        143        66      (118)      (249)     (367) 
 
 Taxation on return on ordinary activities         7            -          -         -          -          -         - 
 
 Return on ordinary activities after tax                     (77)        143        66      (118)      (249)     (367) 
-----------------------------------------------  -----  ---------  ---------  --------  ---------  ---------  -------- 
 Return on ordinary activities after tax 
 attributable to: 
 Owners of the fund                                          (77)        143        66      (118)      (249)     (367) 
-----------------------------------------------  -----  ---------  ---------  --------  ---------  ---------  -------- 
 

There was no other Comprehensive Income recognised during the year

-- The 'Total' column of the income statement and statement of comprehensive income is the profit and loss account of the Company; the supplementary revenue return and capital return columns have been prepared under guidance published by the Association of Investment Companies.

   --    All revenue and capital items in the above statement derive from continuing operations. 

-- The Company has only one class of business and derives its income from investments made in shares and securities and from bank and money market funds.

The Company has no recognised gains or losses other than the results for the year as set out above.

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

Ordinary Share Income Statement (non-statutory analysis)

 
                                                                Ordinary shares                 Ordinary shares 
                                                            Year to 31 December 2018        Year to 31 December 2017 
-----------------------------------------------  ----- 
                                                          Revenue    Capital     Total    Revenue    Capital     Total 
                                                  Note    GBP'000    GBP'000   GBP'000    GBP'000    GBP'000   GBP'000 
-----------------------------------------------  -----  ---------  ---------  --------  ---------  ---------  -------- 
 
 Gain on disposal of fixed asset investments       10           -        903       903          -         19        19 
 
 Loss on valuation of fixed asset investments      10           -      (716)     (716)          -      (359)     (359) 
 
 Income                                            2            -          -         -          -          -         - 
 
 Performance fee                                   6            -       (26)      (26)          -         91        91 
 
 Investment management fee                         3            -          -         -          -          -         - 
 
 Other expenses                                    4         (59)          -      (59)      (118)          -     (118) 
-----------------------------------------------  -----  ---------  ---------  --------  ---------  ---------  -------- 
 Return on ordinary activities before tax                    (59)        161       102      (118)      (249)     (367) 
 
 Taxation on return on ordinary activities         7            -          -         -          -          -         - 
 
 Return on ordinary activities after tax                     (59)        161       102      (118)      (249)     (367) 
-----------------------------------------------  -----  ---------  ---------  --------  ---------  ---------  -------- 
 Return on ordinary activities after tax 
 attributable to: 
 Owners of the fund                                          (59)        161       102      (118)      (249)     (367) 
-----------------------------------------------  -----  ---------  ---------  --------  ---------  ---------  -------- 
 Earnings per share - basic and diluted            8       (0.7)p       2.0p      1.3p     (1.5)p     (3.0)p    (4.5p) 
-----------------------------------------------  -----  ---------  ---------  --------  ---------  ---------  -------- 
 

B Share Income Statement (non-statutory analysis)

 
                                                                   B shares                        B shares 
                                                            Year to 31 December 2018        Year to 31 December 2017 
-----------------------------------------------  ----- 
                                                          Revenue    Capital     Total    Revenue    Capital     Total 
                                                  Note    GBP'000    GBP'000   GBP'000    GBP'000    GBP'000   GBP'000 
-----------------------------------------------  -----  ---------  ---------  --------  ---------  ---------  -------- 
 
 Gain on disposal of fixed asset investments       10           -          -         -          -          -         - 
 
 Loss on valuation of fixed asset investments      10           -          -         -          -          -         - 
 
 Income                                            2            -          -         -          -          -         - 
 
 Performance fee                                   6            -          -         -          -          -         - 
 
 Investment management fee net of cost cap         3           36       (18)        18          -          -         - 
 
 Other expenses                                    4         (54)          -      (54)          -          -         - 
-----------------------------------------------  -----  ---------  ---------  --------  ---------  ---------  -------- 
 Return on ordinary activities before tax                    (18)       (18)      (36)          -          -         - 
 
 Taxation on return on ordinary activities         7            -          -         -          -          -         - 
 
 Return on ordinary activities after tax                     (18)       (18)      (36)          -          -         - 
-----------------------------------------------  -----  ---------  ---------  --------  ---------  ---------  -------- 
 Return on ordinary activities after tax 
 attributable to: 
 Owners of the fund                                          (18)       (18)      (36)          -          -         - 
-----------------------------------------------  -----  ---------  ---------  --------  ---------  ---------  -------- 
 Earnings per share - basic and diluted            8      (0.45)p    (0.45)p    (0.9)p          -          -         - 
-----------------------------------------------  -----  ---------  ---------  --------  ---------  ---------  -------- 
 

Statement of Changes in Equity

 
                                                                                          Capital 
                                                                              Capital     reserve 
                                                    Special       Capital     reserve     holding 
                          Share      Share    distributable    redemption      gains/      gains/    Revenue 
                        capital    premium          reserve       reserve    (losses)    (losses)    reserve     Total 
                        GBP'000    GBP'000          GBP'000       GBP'000     GBP'000     GBP'000    GBP'000   GBP'000 
--------------------  ---------  ---------  ---------------  ------------  ----------  ----------  ---------  -------- 
 As at 1 January 
  2017                    4,058          -            3,397            38       (121)        (53)    (1,772)     5,547 
 Revenue return on 
  ordinary 
  activities after 
  tax                         -          -                -             -           -           -      (118)     (118) 
 Performance fee 
  allocated 
  as capital 
  expenditure                 -          -                -             -          91           -          -        91 
 Current period 
  gains 
  on disposal                 -          -                -             -          19           -          -        19 
 Current period 
  losses 
  on fair value of 
  investments                 -          -                -             -           -       (359)          -     (359) 
 Prior years' 
  unrealised 
  losses now 
  realised                    -          -                -             -       (421)         421          -         - 
--------------------  ---------  ---------  ---------------  ------------  ----------  ----------  ---------  -------- 
 Balance as at 31 
  December 
  2017                    4,058          -            3,397            38       (432)           9    (1,890)     5,180 
 
 B share issue               40      3,995                -             -           -           -          -     4,035 
 Capital 
  restructuring         (3,977)          -                -         3,977           -           -          -         - 
 Capital reduction            -    (3,427)            7,442       (4,015)           -           -          -         - 
 Revenue return on 
  ordinary 
  activities after 
  tax                         -          -                -             -           -           -       (77)      (77) 
 Expenses charged to 
  capital                     -          -                -             -        (18)           -          -      (18) 
 Performance fee 
  allocated 
  as capital 
  expenditure                 -          -                -             -        (26)           -          -      (26) 
 Current period 
  gains 
  on disposal                 -          -                -             -         903           -          -       903 
 Current period 
  losses 
  on fair value of 
  investments                 -          -                -             -           -       (716)          -     (716) 
 Prior years' 
  unrealised 
  losses now 
  realised                    -          -                -             -         602       (602)          -         - 
--------------------  ---------  ---------  ---------------  ------------  ----------  ----------  ---------  -------- 
 Balance as at 31 
  December 
  2018                      121        568           10,839             -       1,029     (1,309)    (1,967)     9,281 
--------------------  ---------  ---------  ---------------  ------------  ----------  ----------  ---------  -------- 
 

Refer to note 14 for details of the share restructure and capital reduction undertaken in the year.

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

Ordinary Shares - Statement of Changes in Equity

 
                                                                                          Capital 
                                                                              Capital     reserve 
                                                    Special       Capital     reserve     holding 
                          Share      Share    distributable    redemption      gains/      gains/    Revenue 
                        capital    premium          reserve       reserve    (losses)    (losses)    reserve     Total 
                        GBP'000    GBP'000          GBP'000       GBP'000     GBP'000     GBP'000    GBP'000   GBP'000 
--------------------  ---------  ---------  ---------------  ------------  ----------  ----------  ---------  -------- 
 As at 1 January 
  2017                    4,058          -            3,397            38       (121)        (53)    (1,772)     5,547 
 Revenue return on 
  ordinary 
  activities after 
  tax                         -          -                -             -           -           -      (118)     (118) 
 Performance fee 
  allocated 
  as capital 
  expenditure                 -          -                -             -          91           -          -        91 
 Current period 
  gains 
  on disposal                 -          -                -             -          19           -          -        19 
 Current period 
  losses 
  on fair value of 
  investments                 -          -                -             -           -       (359)          -     (359) 
 Prior years' 
  unrealised 
  losses now 
  realised                    -          -                -             -       (421)         421          -         - 
--------------------  ---------  ---------  ---------------  ------------  ----------  ----------  ---------  -------- 
 Balance as at 31 
  December 
  2017                    4,058          -            3,397            38       (432)           9    (1,890)     5,180 
 
 Capital 
  restructuring         (3,977)          -                -         3,977           -           -          -         - 
 Capital reduction            -          -            4,015       (4,015)           -           -          -         - 
 Revenue return on 
  ordinary 
  activities after 
  tax                         -          -                -             -           -           -       (59)      (59) 
 Expenses charged to          -          -                -             -           -           -          -         - 
  capital 
 Performance fee 
  allocated 
  as capital 
  expenditure                 -          -                -             -        (26)           -          -      (26) 
 Current period 
  gains 
  on disposal                 -          -                -             -         903           -          -       903 
 Current period 
  losses 
  on fair value of 
  investments                 -          -                -             -           -       (716)          -     (716) 
 Prior years' 
  unrealised 
  gains now realised          -          -                -             -         602       (602)          -         - 
--------------------  ---------  ---------  ---------------  ------------  ----------  ----------  ---------  -------- 
 Balance as at 31 
  December 
  2018                       81          -            7,412             -       1,047     (1,309)    (1,949)     5,282 
--------------------  ---------  ---------  ---------------  ------------  ----------  ----------  ---------  -------- 
 

B Shares - Statement of Changes in Equity

 
                                                                                          Capital 
                                                                              Capital     reserve 
                                                    Special       Capital     reserve     holding 
                          Share      Share    distributable    redemption      gains/      gains/    Revenue 
                        capital    premium          reserve       reserve    (losses)    (losses)    reserve     Total 
                        GBP'000    GBP'000          GBP'000       GBP'000     GBP'000     GBP'000    GBP'000   GBP'000 
 As at 1 January              -          -                -             -           -           -          -         - 
 2018 
 B share issue               40      3,995                -             -           -           -          -     4,035 
 Capital reduction            -    (3,427)            3,427             -           -           -          -         - 
 Revenue return on 
  ordinary 
  activities after 
  tax                         -          -                -             -           -           -       (18)      (18) 
 Expenses charged to 
  capital                     -          -                -             -        (18)           -          -      (18) 
 Balance as at 31 
  December 
  2018                       40        568            3,427             -        (18)           -       (18)     3,999 
--------------------  ---------  ---------  ---------------  ------------  ----------  ----------  ---------  -------- 
 
 
 Balance Sheet 
                                                                Combined as at        Combined as at 
                                                                31 December 2018      31 December 2017 
                                                       Note    GBP'000    GBP'000    GBP'000    GBP'000 
----------------------------------------------------  -----  ---------  ---------  ---------  --------- 
 
 Fixed asset investments*                              10                   3,293                 5,564 
 Current assets: 
 Debtors                                               11           23                     7 
 Cash at bank and in hand/(Bank overdraft)                       6,446                 (160) 
 Creditors: amounts falling due within 
  one year                                             12        (291)                  (67) 
----------------------------------------------------  -----  ---------  ---------  ---------  --------- 
 Net current assets                                                         6,178                 (220) 
 Creditors: amounts falling due after 
  more than one year                                   12        (190)                 (164) 
 Net assets                                                                 9,281                 5,180 
----------------------------------------------------  -----  ---------  ---------  ---------  --------- 
 
 Called up equity share capital                        13                     121                 4,058 
 Share premium                                         14                     568                     - 
 Special distributable reserve                         14                  10,839                 3,397 
 Capital redemption reserve                            14                       -                    38 
 Capital reserve - realised gains 
  and losses                                           14                   1,029                 (432) 
                         - holding gains and losses    14                 (1,309)                     9 
 Revenue reserve                                       14                 (1,967)               (1,890) 
----------------------------------------------------  -----  ---------  ---------  ---------  --------- 
 Total equity shareholders' funds                                           9,281                 5,180 
----------------------------------------------------  -----  ---------  ---------  ---------  --------- 
 

*At fair value through profit and loss

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

The statements were approved by the Directors and authorised for issue on 26 April 2019 and are signed on their behalf by:

John Hustler

Chairman

Company No: 04221489

 
 Ordinary Share Balance Sheet (non-statutory analysis) 
                                                                Ordinary shares       Ordinary Shares 
                                                                     as at                 as at 
                                                                31 December 2018      31 December 2017 
                                                       Note    GBP'000    GBP'000    GBP'000    GBP'000 
----------------------------------------------------  -----  ---------  ---------  ---------  --------- 
 
 Fixed asset investments*                              10                   2,793                 5,564 
 Current assets: 
 Debtors                                               11            -                     7 
 Cash at bank and in hand/(Bank overdraft)                       2,738                 (160) 
 Creditors: amounts falling due within 
  one year                                             12         (59)                  (67) 
----------------------------------------------------  -----  ---------  ---------  ---------  --------- 
 Net current assets                                                         2,679                 (220) 
 Creditors: amounts falling due after 
  more than one year                                   12        (190)                 (164) 
 Net assets                                                                 5,282                 5,180 
----------------------------------------------------  -----  ---------  ---------  ---------  --------- 
 
 Called up equity share capital                        13                      81                 4,058 
 Share premium                                         14                       -                     - 
 Special distributable reserve                         14                   7,412                 3,397 
 Capital redemption reserve                            14                       -                    38 
 Capital reserve - realised gains 
  and losses                                           14                   1,047                 (432) 
                         - holding gains and losses    14                 (1,309)                     9 
 Revenue reserve                                       14                 (1,949)               (1,890) 
----------------------------------------------------  -----  ---------  ---------  ---------  --------- 
 Total equity shareholders' funds                                           5,282                 5,180 
----------------------------------------------------  -----  ---------  ---------  ---------  --------- 
 Net asset value per share                             9                    65.1p                 63.8p 
                                                             ---------  ---------  ---------  --------- 
 

*At fair value through profit and loss

 
 B Share Balance Sheet (non-statutory analysis) 
                                                                B shares as at        B shares as at 
                                                                31 December 2018      31 December 2017 
                                                       Note    GBP'000    GBP'000    GBP'000    GBP'000 
----------------------------------------------------  -----  ---------  ---------  ---------  --------- 
 
 Fixed asset investments*                              10                     500                     - 
 Current assets: 
 Debtors                                               11           23                     - 
 Cash at bank and in hand                                        3,708                     - 
 Creditors: amounts falling due within 
  one year                                             12        (232)                     - 
----------------------------------------------------  -----  ---------  ---------  ---------  --------- 
 Net current assets                                                         3,499                     - 
 Creditors: amounts falling due after 
  more than one year                                   12            -                     - 
 Net assets                                                                 3,999                     - 
----------------------------------------------------  -----  ---------  ---------  ---------  --------- 
 
 Called up equity share capital                        13                      40                     - 
 Share premium                                         14                     568                     - 
 Special distributable reserve                         14                   3,427                     - 
 Capital redemption reserve                            14                       -                     - 
 Capital reserve - realised gains 
  and losses                                           14                    (18)                     - 
                         - holding gains and losses    14                       -                     - 
 Revenue reserve                                       14                    (18)                     - 
----------------------------------------------------  -----  ---------  ---------  ---------  --------- 
 Total equity shareholders' funds                                           3,999                     - 
----------------------------------------------------  -----  ---------  ---------  ---------  --------- 
 Net asset value per share                             9                    99.1p                     - 
                                                             ---------  ---------  ---------  --------- 
 

*At fair value through profit and loss

Statement of Cash Flows

 
                                                         Combined Year to    Combined Year to 
                                                         31 December 2018    31 December 2017 
                                                 Note             GBP'000             GBP'000 
 Cash flows from operating activities 
 Return on ordinary activities before tax                              66               (367) 
 Adjustments for: 
 Increase in debtors                               11                (16)                 (3) 
 Increase/(Decrease) in creditors                  12                  31                (79) 
 Gain on disposal of fixed assets                  10               (903)                (19) 
 Loss on valuation of fixed asset investments      10                 716                 359 
----------------------------------------------  -----  ------------------  ------------------ 
 Cash from operations                                               (106)               (109) 
 Income taxes paid                                  7                   -                   - 
----------------------------------------------  -----  ------------------  ------------------ 
 Net cash used in operating activities                              (106)               (109) 
 
 Cash flows from investing activities 
 Purchase of fixed asset investments               10               (500)                   - 
 Sale of fixed asset investments                   10               2,958                 134 
----------------------------------------------  -----  ------------------  ------------------ 
 Total cash flows from investing activities                         2,458                 134 
 
 Cash flows from financing activities 
  Issue of B shares                                                 4,035                   - 
 Awaiting B share issue                                               219                   - 
----------------------------------------------  -----  ------------------  ------------------ 
 Total cash flows from financing activities                         4,254                   - 
 
 Increase in cash and cash equivalents                              6,606                  25 
 
 Opening cash and cash equivalents                                  (160)               (185) 
 
 Closing cash and cash equivalents                                  6,446               (160) 
----------------------------------------------  -----  ------------------  ------------------ 
 

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

Ordinary Shares Statement of Cash Flows

 
                                                          Ordinary shares     Ordinary shares 
                                                                  Year to             Year to 
                                                         31 December 2018    31 December 2017 
                                                 Note             GBP'000             GBP'000 
 Cash flows from operating activities 
 Return on ordinary activities before tax                             102               (367) 
 Adjustments for: 
 Decrease/(Increase) in debtors                    11                   7                 (3) 
 Increase/(Decrease) in creditors                  12                  18                (79) 
 Gain on disposal of fixed assets                  10               (903)                (19) 
 Loss on valuation of fixed asset investments      10                 716                 359 
----------------------------------------------  -----  ------------------  ------------------ 
 Cash from operations                                                (60)               (109) 
 Income taxes paid                                  7                   -                   - 
----------------------------------------------  -----  ------------------  ------------------ 
 Net cash used in operating activities                               (60)               (109) 
 
 Cash flows from investing activities 
 Purchase of fixed asset investments               10                   -                   - 
 Sale of fixed asset investments                   10               2,958                 134 
----------------------------------------------  -----  ------------------  ------------------ 
 Total cash flows from investing activities                         2,958                 134 
 
 Cash flows from financing activities 
 Total cash flows from financing activities                             -                   - 
 
 Increase in cash and cash equivalents                              2,898                  25 
 
 Opening cash and cash equivalents                                  (160)               (185) 
 
 Closing cash and cash equivalents                                  2,738               (160) 
----------------------------------------------  -----  ------------------  ------------------ 
 

B Shares Statement of Cash Flows

 
                                                                 B shares            B shares 
                                                                  Year to             Year to 
                                                         31 December 2018    31 December 2017 
                                                 Note             GBP'000             GBP'000 
 Cash flows from operating activities 
 Return on ordinary activities before tax                            (36)                   - 
 Adjustments for: 
 Increase in debtors                               11                (23)                   - 
 Increase in creditors                             12                  13                   - 
 Gain on disposal of fixed assets                  10                   -                   - 
 Loss on valuation of fixed asset investments      10                   -                   - 
----------------------------------------------  -----  ------------------  ------------------ 
 Cash from operations                                                (46)                   - 
 Income taxes paid                                  7                   -                   - 
----------------------------------------------  -----  ------------------  ------------------ 
 Net cash used in operating activities                               (46)                   - 
 
 Cash flows from investing activities 
 Purchase of fixed asset investments               10               (500)                   - 
 Sale of fixed asset investments                   10                   -                   - 
----------------------------------------------  -----  ------------------  ------------------ 
 Total cash flows from investing activities                         (500)                   - 
 
 Cash flows from financing activities 
  Issue of B shares                                                 4,035                   - 
 Awaiting B share issue                                               219                   - 
----------------------------------------------  -----  ------------------  ------------------ 
 Total cash flows from financing activities                         4,254                   - 
 
 Increase in cash and cash equivalents                              3,708                   - 
 
 Opening cash and cash equivalents                                      -                   - 
 
 Closing cash and cash equivalents                                  3,708                   - 
----------------------------------------------  -----  ------------------  ------------------ 
 

Notes to the Financial Statements

   1.         Principal Accounting Policies 

Basis of preparation

The Financial Statements have been prepared under the historical cost convention, except for the measurement at fair value of certain financial instruments, and in accordance with UK Generally Accepted Accounting Practice ("GAAP"), including FRS 102 and with the Companies Act 2006 and the Statement of Recommended Practice (SORP) 'Financial Statements of Investment Trust Companies and Venture Capital Trusts (revised 2014)'.

The principal accounting policies have remained materially unchanged from those set out in the Company's 2017 Annual Report and Financial Statements, apart from an addition to the policy on allocating expenses partly to capital as a result of the introduction of an investment management fee for the B shares, and clarifying the split of costs between the two share pools. A summary of the principal accounting policies is set out below.

The Company held all fixed asset investments at fair value through profit or loss. Accordingly, all interest income, fee income, expenses and gains and losses on investments are attributable to assets held at fair value through profit or loss.

The most important policies affecting the Company's financial position are those related to investment valuation and require the application of subjective and complex judgements, often as a result of the need to make estimates about the effects of matters that are inherently uncertain and may change in subsequent periods. These are discussed in more detail below.

Going Concern

After reviewing the Company's forecasts and expectations, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company therefore continues to adopt the going concern basis in preparing its Financial Statements.

Key judgements and estimates

The preparation of the Financial Statements requires the Board to make judgements and estimates regarding the application of policies affecting the reported amounts of assets, liabilities, income and expenses. Estimates and assumptions mainly relate to the fair valuation of the fixed asset investments particularly unquoted investments. Estimates are based on historical experience and other assumptions that are considered reasonable under the circumstances. The estimates and the assumptions are under continuous review with particular attention paid to the carrying value of the investments.

Investments are regularly reviewed to ensure that the fair values are appropriately stated. Unquoted investments are valued in accordance with current International Private Equity and Venture Capital Valuation (IPEV) guidelines, which can be found on their website at www.privateequityvaluation.com, although this does rely on subjective estimates such as appropriate sector earnings multiples, forecast results of investee companies, asset values of investee companies and liquidity or marketability of the investments held.

Although the Directors believe that the assumptions concerning the business environment and estimate of future cash flows are appropriate, changes in estimates and assumptions could result in changes in the stated values. This could lead to additional changes in fair value in the future.

Functional and presentational currency

The Financial Statements are presented in Sterling (GBP). The functional currency is also Sterling (GBP).

Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts.

Fixed asset investments

The Company's principal financial assets are its investments and the policies in relation to those assets are set out below.

Purchases and sales of investments are recognised in the Financial Statements at the date of the transaction (trade date).

These investments will be managed and their performance evaluated on a fair value basis and information about them is provided internally on that basis to the Board. Accordingly, as permitted by FRS 102, the investments are measured as being fair value through profit or loss on the basis that they qualify as a group of assets managed, and whose performance is evaluated, on a fair value basis in accordance with a documented investment strategy. The Company's investments are measured at subsequent reporting dates at fair value.

In the case of investments quoted on a recognised stock exchange, fair value is established by reference to the closing bid price on the relevant date or the last traded price, depending upon convention of the exchange on which the investment is quoted. In the case of AIM quoted investments this is the closing bid price. In the case of unquoted investments, fair value is established by using measures of value such as the price of recent transactions, earnings multiple, discounted cash flows and net assets. These are consistent with the IPEV guidelines.

Gains and losses arising from changes in fair value of investments are recognised as part of the capital return within the Income Statement and allocated to the capital reserve - holding gains/(losses).

In the preparation of the valuations of assets the Directors are required to make judgements and estimates that are reasonable and incorporate their knowledge of the performance of the investee companies.

Fair value hierarchy

Paragraph 34.22 of FRS 102 regarding financial instruments that are measured in the balance sheet at fair value requires disclosure of fair value measurements dependent on whether the stock is quoted and the level of the accuracy in the ability to determine its fair value. The fair value measurement hierarchy is as follows:

For quoted investments:

Level 1: quoted prices in active markets for an identical asset. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held is the bid price at the Balance Sheet date.

Level 2: where quoted prices are not available (or where a stock is normally quoted on a recognised stock exchange that no quoted price is available), the price of a recent transaction for an identical asset, providing there has been no significant change in economic circumstances or a significant lapse in time since the transaction took place. The Company holds no such investments in the current or prior year.

For investments not quoted in an active market:

Level 3: the fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable data (eg: the price of recent transactions, earnings multiple, discounted cash flows and/or net assets) where it is available and rely as little as possible on entity specific estimates.

There have been no transfers between these classifications in the year (2017: none). The change in fair value for the current and previous year is recognised through the profit and loss account.

Current asset investments

No current asset investments were held at 31 December 2018 or 31 December 2017. Should current assets be held, gains and losses arising from changes in fair value of investments are recognised as part of the capital return within the Income Statement and allocated to the capital reserve - gains/(losses) on disposal.

Income

Investment income includes interest earned on bank balances and from unquoted loan note securities, and dividends. Fixed returns on debt are recognised on a time apportionment basis so as to reflect the effective yield, provided it is probable that payment will be received in due course.

Expenses

All expenses are accounted for on an accruals basis. Expenses are charged wholly to revenue with the exception of the performance fee, which is charged 100% to the capital reserve. In addition, the investment management fee charged to the B shares has been split 25% revenue and 75% capital, in line with industry practice and to reflect the Board's estimated split of investment returns which will be achieved by the company's B shares over the long term. Expenses and liabilities not specific to a share class are allocated to the B share pool for a period of three years from 1 July 2018 in line with the Articles of Association.

Revenue and capital

The revenue column of the Income Statement includes all income and revenue expenses of the Company. The capital column includes gains and losses on disposal and holding gains and losses on investments, as well as those expenses that have been charged as capital costs. Gains and losses arising from changes in fair value of investments are recognised as part of the capital return within the Income Statement and allocated to the appropriate capital reserve on the basis of whether they are realised or unrealised at the balance sheet date.

Taxation

Current tax is recognised for the amount of income tax payable in respect of the taxable profit for the current or past reporting periods using the current tax rate. The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue return on the "marginal" basis as recommended in the SORP.

Deferred tax is recognised on an undiscounted basis in respect of all timing differences that have originated but not reversed at the balance sheet date, except as otherwise indicated.

Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Financial instruments

The Company's principal financial assets are its investments and its cash and the policies in relation to those assets are set out above. Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities. Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument.

Capital management is monitored and controlled using the internal control procedures set out on page 35 of this report. The capital being managed includes equity and fixed-interest investments, cash balances and liquid resources including debtors and creditors.

The Company does not have any externally imposed capital requirements.

Reserves

Called up equity share capital - represents the nominal value of shares that have been issued.

Share premium account - includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium.

Special distributable reserve - includes cancelled share premium and capital redemption reserves available for distribution.

Capital reserve - holding gains and losses - when the Company revalues the investments still held during the period with any gains or losses arising being credited/ charged to the Capital reserve - holding gains and losses.

Capital reserve - gains and losses on disposal - when an investment is sold any balance held on the Capital reserve - holding gains and losses is transferred to the Capital reserve - gains and losses on disposal, as a movement in reserves.

Revenue reserve - represents the aggregate value of accumulated realised profits, less losses and dividends.

Dividends Payable

Dividends payable are recognised as distributions in the Financial Statements when the Company's liability to make payment has been established. This liability is established for interim dividends when they are declared by the Board, and for final dividends when they are approved by the shareholders.

   2.         Income 
 
                                           Year to             Year to 
                                  31 December 2018    31 December 2017 
                                           GBP'000             GBP'000 
------------------------------  ------------------  ------------------ 
 Dividends received                              -                   - 
 Loan note interest receivable                   -                   - 
------------------------------  ------------------  ------------------ 
                                                 -                   - 
------------------------------  ------------------  ------------------ 
 
   3.         Investment Management Fee for B shares 
 
                                                       Year to             Year to 
                                              31 December 2018    31 December 2017 
                                                       GBP'000             GBP'000 
------------------------------------------  ------------------  ------------------ 
 Gross Investment management fee                            24                   - 
 Cost cap refund from Seneca                              (42)                   - 
------------------------------------------  ------------------  ------------------ 
Investment management fee net of cost cap                 (18)                   - 
------------------------------------------  ------------------  ------------------ 
 

Following its appointment on 23 August 2018, Seneca has received a fee of 2% of the weighted average net asset value of the B shares (2017: n/a). Seneca will also be entitled to certain monitoring fees from investee companies and the Board reviews the amounts.

Seneca are entitled to receive a performance incentive fee in relation to the B share pool of an amount equal to 20% of the Shareholder Proceeds arising in respect of any performance period, provided that the payment of such a fee shall also be conditional upon (i) a return being generated on the B share pool for B Shareholders in respect of that performance period of more than 5% per annum (pro-rated if that period is less than a year) and (ii) that such a return calculated for the period from 23 August 2018 to the end of the relevant performance period exceeds 5% per annum.

Shareholder Proceeds are, in relation to the B shares and calculated on a per share basis in relation to the relevant share, all amounts paid by way of dividend or other distributions, share buy backs, proceeds on a sale or liquidation of the Company and any other proceeds or value received or deemed to be received by the holders of the relevant shares (excluding any income tax relief on subscription).

For a three year period with effect from 1 July 2018, expenses are capped at 3% of the weighted average net asset value of the B shares, including the management fee (but excluding any performance fee). (Following this initial period, expenses are capped at 3% of the Company's total net asset value, including the assets in the Ordinary share pool). Accordingly Seneca reduced its management fee by GBP42,000 in the year to 31 December 2018 (2017: n/a).

Expenses are charged wholly to revenue with the exception of the (gross) investment management fee which has been charged 75% to the capital reserve in line with industry practice.

   4.         Other Expenses 
 
                                                                                           Year to             Year to 
                                                                                  31 December 2018    31 December 2017 
                                                                                           GBP'000             GBP'000 
------------------------------------------------------------------------------  ------------------  ------------------ 
 Directors' remuneration                                                                        41                  38 
 Fees payable to the Company's auditor for the audit of the Financial 
  Statements                                                                                    14                   8 
 Fees payable to the Company's auditor for other services - tax compliance                       -                   1 
 Legal and professional expenses                                                                38                  41 
 Accounting and administration services                                                          9                  14 
 Other expenses                                                                                 11                  16 
------------------------------------------------------------------------------  ------------------  ------------------ 
                                                                                               113                 118 
------------------------------------------------------------------------------  ------------------  ------------------ 
 

All expenses were charged to the Ordinary shares for the period to 30 June 2018. In line with the offer for subscription for B shares, and following the initial allotment of B shares on 23 August 2018, all the Company's general expenses are chargeable to the B share pool for a period of three years from 1 July 2018 (subject to the cost cap discussed in note 3). Any expenditure related specifically to assets in one pool is chargeable to that pool.

   5.         Directors' Remuneration 
 
                                      Year to             Year to 
                             31 December 2018    31 December 2017 
                                          GBP                 GBP 
-------------------------  ------------------  ------------------ 
 Directors' emoluments: 
 John Hustler (Chairman)               12,750              12,750 
 Charles Breese                        12,750              12,750 
 Richard Roth                          15,250              12,750 
 Richard Manley                             -                   - 
                                       40,750              38,250 
-------------------------  ------------------  ------------------ 
 

Richard Manley, a director of the Investment Manager, has elected to waive his Director's fee, until the Company's operating costs are less than the expenses cost cap.

Included in the figure above for Richard Roth is GBP2,500 for work undertaken in relation to the setting up of the new B share structure and preparation of the offer for subscription as detailed in the Directors' Remuneration Report. Apart from this, none of the Directors received any other remuneration from the Company during the year.

Certain Directors may become entitled to receive a share of the Performance Incentive Fee related to the Ordinary share pool as detailed in the Directors' Remuneration Report on page 39 and in note 6.

The Company has no employees other than non-executive Directors. The average number of non-executive Directors in the year was three (2017: three). Richard Manley joined the Board on 23 August 2018 which increased the number of directors for the remainder of the year from 3 to 4.

   6.         Performance fees for Ordinary shares 

The Commercial Advisory Committee took over management of the Company's investments on 30 July 2007, and at that time, a revised Performance Incentive Scheme was implemented, such that its members would be entitled to 20% of all cash returns above the initial net cost to subscribing shareholders of 80p.

On 7 October 2015, this scheme was varied such that any returns above the 31 December 2014 levels would be subject to a hurdle, and the share to the CAC reduced from 20% to 10%. The hurdle is a compound 6% per annum on any amounts below the latest hurdle still due to be paid to shareholders (i.e. in recognition of dividends paid, actual returns to shareholders will be subtracted from the compounding threshold in the year these are paid).

The Total Gross Return at 31 December 2014 on which the performance fee liability of GBP702,000 was calculated was 123.3p, resulting in the quoted net asset value of 114.6p. For the purposes of this note 6, Total Gross Return is defined as the total return made by the fund, before the deduction of any dividend payments or accruals and/or payments made relating to any potential (or actual) performance incentive fee.

Any dividends paid above 80p will be split 80% to shareholders and 20% to the members of the CAC as at 31 December 2014 (i.e. 25% of all dividends paid to shareholders), until shareholders have received dividends totalling 114.6p.

A performance fee may be payable on any further dividends above this level, but only if the hurdle applicable at that time has been met.

As at 31 December 2018, the Total Gross Return is 91.68p, and so 2.34p per share totalling GBP190,000 has been accrued (31 December 2017, 90.1p, 2.02p and GBP164,000).

Assuming the only dividends paid on the Ordinary shares in the year are the 10p dividend per share paid on 25 January 2019, and the 18p per share expected to be declared soon after this Annual Report has been submitted to Companies House, the Total Gross Return would need to exceed 152.9p at 31 December 2019 before any fee above GBP702,000 could be due, and at that time, it would be 10% of any cash payments made above this threshold. If such a performance fee is not triggered (as it has not been in this financial year) the hurdle, net of dividends paid, increments by a compound annual growth rate of 6%, applied quarterly.

   7.         Tax on Ordinary Activities 

The corporation tax charge for the period was GBPnil (2017: GBPnil).

The current rate of tax is the small companies' rate of corporation tax at 19% (2017: 19.25 %)

 
                                                                                 Year to             Year to 
 Current tax reconciliation:                                            31 December 2018    31 December 2017 
                                                                                 GBP'000             GBP'000 
--------------------------------------------------------------------  ------------------  ------------------ 
 Return on Ordinary activities before tax                                             66               (367) 
--------------------------------------------------------------------  ------------------  ------------------ 
 Current tax at 19% (2017: 19.25%)                                                    13                (71) 
 Gains/losses not subject to tax                                                    (36)                  65 
 Excess management expenses carried forward                                           23                   6 
--------------------------------------------------------------------  ------------------  ------------------ 
 Total current tax charge and tax on results of ordinary activities                    -                   - 
 

The company has excess management expenses of GBP2,741,000 (2017: GBP2,619,000) to carry forward to offset against future taxable profits.

Approved VCTs are exempt from tax on capital gains within the Company. Since the Directors intend that the Company will continue to conduct its affairs so as to maintain its approval as a VCT, no current deferred tax has been provided in respect of any capital gains or losses arising on the revaluation or disposal of investments.

   8.         Earnings per Share 

The earnings per Ordinary share is based on 8,115,376 (31 December 2017: 8,115,376) shares, being the weighted average number of Ordinary shares in issue during the year, and a return for the year totalling GBP102,000 (31 December 2017: (GBP367,000)).

The earnings per B share is based on 3,412,545 (31 December 2017: nil) shares, being the weighted average number of B shares in issue since 23 August 2018, and a return for the year totalling (GBP36,000) (31 December 2017: nil).

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.

   9.         Net Asset Value per Share 

The calculation of NAV per Ordinary share as at 31 December 2018 is based on 8,115,376 Ordinary shares in issue at that date (31 December 2017: 8,115,376).

The calculation of NAV per B share as at 31 December 2018 is based on 4,036,370 B shares in issue at that date (31 December 2017: nil).

   10.        Fixed Asset Investments 

Ordinary shares

 
                                                                  Level 3: 
                                                   Level 1:       Unquoted          Total 
                                     AIM-quoted investments    investments    investments 
                                                    GBP'000        GBP'000        GBP'000 
---------------------------------  ------------------------  -------------  ------------- 
 Valuation and net book amount: 
 Book cost as at 1 January 2018                       1,129          4,426          5,555 
 Cumulative revaluation                                 906          (897)              9 
---------------------------------  ------------------------  -------------  ------------- 
 Valuation at 1 January 2018                          2,035          3,529          5,564 
 
 Movement in the year: 
 Purchases at cost                                        -              -              - 
 Disposal proceeds                                     (31)        (2,927)        (2,958) 
 Gain/(loss) on disposal                                  6            897            903 
 Revaluation in year                                  (549)          (167)          (716) 
---------------------------------  ------------------------  -------------  ------------- 
 Valuation at 31 December 2018                        1,461          1,332          2,793 
 
 Book cost at 31 December 2018                        1,117          2,985          4,102 
 Revaluation to 31 December 2018                        344        (1,653)        (1,309) 
 
 Valuation at 31 December 2018                        1,461          1,332          2,793 
---------------------------------  ------------------------  -------------  ------------- 
 

B Shares

 
                                                                   Level 3: 
                                                    Level 1:       Unquoted          Total 
                                      AIM-quoted investments    investments    investments 
                                                     GBP'000        GBP'000        GBP'000 
---------------------------------  -------------------------  -------------  ------------- 
 Valuation and net book amount: 
 Book cost as at 1 January 2018                            -              -              - 
 Cumulative revaluation                                    -              -              - 
---------------------------------  -------------------------  -------------  ------------- 
 Valuation at 1 January 2018                               -              -              - 
 
 Movement in the year: 
 Purchases at cost                                         -            500            500 
 Disposal proceeds                                         -              -              - 
 Gain/(loss) on disposal                                   -              -              - 
 Revaluation in year                                       -              -              - 
---------------------------------  -------------------------  -------------  ------------- 
 Valuation at 31 December 2018                             -            500            500 
 
 Book cost at 31 December 2018                             -            500            500 
 Revaluation to 31 December 2018                           -              -              - 
 
 Valuation at 31 December 2018                             -            500            500 
---------------------------------  -------------------------  -------------  ------------- 
 

Further details of the fixed asset investments held by the Company are shown within the Investment Manager's Report on pages 14 to 24.

All investments are initially measured at fair value through profit or loss, and all capital gains or losses on investments are so measured. The changes in fair value of such investments recognised in these Financial Statements are treated as unrealised holding gains or losses.

   11.        Debtors 
 
                                   31 December 2018   31 December 2017 
                                            GBP'000            GBP'000 
--------------------------------  -----------------  ----------------- 
 Prepayments and accrued income                  23                  7 
--------------------------------  -----------------  ----------------- 
                                                 23                  7 
--------------------------------  -----------------  ----------------- 
 
   12.        Creditors 
 
                                              31 December 2018   31 December 2017 
                                                       GBP'000            GBP'000 
-------------------------------------------  -----------------  ----------------- 
 Amounts falling due within one year 
 Accruals                                                   43                 34 
 Trade creditors                                             -                  4 
 Awaiting B share issue                                    219                  - 
 Other creditors                                            29                 29 
-------------------------------------------  -----------------  ----------------- 
 Total amounts falling due within one year                 291                 67 
-------------------------------------------  -----------------  ----------------- 
 
 Amounts falling due after one year 
 Accruals                                                  190                164 
-------------------------------------------  -----------------  ----------------- 
 Total amounts falling due after one year                  190                164 
-------------------------------------------  -----------------  ----------------- 
 

The amount falling due after more than one year relates to the potential liability for a performance fee on the Ordinary share portfolio. More details are in note 6.

   13.        Share Capital 
 
                                                                    31 December 2018   31 December 2017 
                                                                             GBP'000            GBP'000 
-----------------------------------------------------------------  -----------------  ----------------- 
 Allotted and fully paid up: 
 8,115,376 Ordinary shares of 1p (2017: 8,115,376 shares of 50p)                  81              4,058 
  4,036,370 B Ordinary shares of 1p (2017 : nil)                                  40                  - 
-----------------------------------------------------------------  -----------------  ----------------- 
                                                                                 121              4,058 
-----------------------------------------------------------------  -----------------  ----------------- 
 

The capital of the Company is managed in accordance with its investment policy with a view to the achievement of its investment objective as set on page 8.

During the year, the Company did not issue, nor buy back, any Ordinary shares. On 5 April 2018, following approval at the Company's annual general meeting, the nominal value of the Ordinary shares was reduced from 50p to 1p. More details are included in the Chairman's Statement on page 10 and in note 14.

The Company issued a total of 4,036,370 B Ordinary shares at prices between 99.7p and 105.8p per B Ordinary share. pursuant to an offer for subscription for B shares launched on 9 May 2018 to raise, in aggregate, up to GBP10 million with an over-allotment facility of up to a further GBP10 million (before issue costs). The Company has not bought back any B Ordinary shares.

   14.        Movement in Shareholders' Funds 
 
 
                                                               Year ended 
                                                Year ended    31 December 
                                          31 December 2018           2017 
                                                   GBP'000        GBP'000 
--------------------------------------  ------------------  ------------- 
 Shareholders' funds at start of year                5,180          5,547 
 Return on ordinary activities after 
  tax                                                   66          (367) 
 Increase due to issue of B shares                   4,035              - 
--------------------------------------  ------------------  ------------- 
 Shareholders' funds at end of year                  9,281          5,180 
--------------------------------------  ------------------  ------------- 
 
 

The analysis of changes in equity by the various reserves are shown in the Statement of Changes in Equity on page 50.

When the Company revalues its investments during the period, any gains or losses arising are credited/charged to the Income Statement. Changes in fair value of investments held are then transferred to the capital reserve - holding gains/(losses). When an investment is sold any balance held on the capital reserve - holding gains/(losses) reserve is transferred to the capital reserve - gains/(losses) on disposal as a movement in reserves.

The purpose of the special distributable reserve was to create a reserve which will be capable of being used by the Company to pay dividends and for the purpose of making repurchases of its own shares in the market with a view to narrowing the discount at which the Company's shares trade to net asset value, providing shareholder authority has been granted.

During 2010, the Company revoked investment company status in order to allow payment of dividends from distributable reserves. During 2018, the Company effected a capital reduction exercise, whereby the nominal value of its Ordinary shares was reduced from 50p to 1p, creating a capital redemption reserve. The Company also issued 4,036,370 B shares at a premium. On 7 December 2018, following shareholder approval, the Company sought, and received approval from the High Court to the reduction of the amount standing to the credit of the Capital Redemption Reserve of the Company by GBP4,014,135 and of the Share Premium Account of the Company by GBP3,427,184, thereby creating additional distributable reserves of GBP7,441,319. Distributable reserves are represented by the special distributable reserve, the capital reserve gains/(losses) on disposal and the revenue reserve reduced by negative holding reserves (if any) which total GBP8,592,000 as at 31 December 2018 (2017: GBP1,075,000). Although the distributable reserves total GBP8,592,000 as at 31 December 2018, only GBP5,181,000 is actually able to be distributed as the reserves contain GBP 3,427,000 from the cancellation of the share premium account on the newly issued B shares, which cannot be distributed until the beginning of 2022 without breaching VCT rules.

An interim capital dividend of 10 pence per Ordinary share for the year to 31 December 2018 was paid on 25 January 2019, reducing shareholder funds by GBP811,537.60.

   15.        Financial Instruments 

The Company's financial instruments comprise equity investments, cash balances and liquid resources including debtors and creditors.

Classification of financial instruments

The Company held the following categories of financial instruments, all of which are included in the balance sheet at fair value, at 31 December 2018 and 31 December 2017:

 
                                                          31 December 2018   31 December 2017 
                                                                   GBP'000            GBP'000 
-------------------------------------------------------  -----------------  ----------------- 
 Financial assets at fair value through profit or loss 
 Fixed asset investments                                             3,293              5,564 
-------------------------------------------------------  -----------------  ----------------- 
 Total                                                               3,293              5,564 
 
 Financial assets measured at amortised cost 
 Cash at bank and in hand                                            6,446                  - 
 Debtors                                                                23                  7 
-------------------------------------------------------  -----------------  ----------------- 
 Total                                                               6,469                  7 
 
 Financial liabilities measured at amortised cost 
 Bank Overdraft                                                          -              (160) 
 Creditors                                                            (29)               (33) 
-------------------------------------------------------  -----------------  ----------------- 
 Total                                                                (29)              (193) 
 

Fixed asset investments (see note 10) are valued at fair value. Unquoted investments are carried at fair value as determined by the Directors in accordance with current venture capital industry guidelines. The fair value of all other financial assets and liabilities is represented by their carrying value in the balance sheet. The Directors believe that the fair value of the assets held at the year end is equal to their book value.

The Company's creditors and debtors are recognised at fair value which is usually the transaction cost or net realisable value if lower.

As at 31 December 2017, the Company had an overdraft facility of GBP200,000 with the Royal Bank of Scotland, which was converted into a loan in April 2018, both of which were secured by a debenture. The loan was a liability of the Ordinary share pool and was repaid at the end of August 2018 once the company had access to the funds from the initial allotment of B shares, and the debenture was released. The funds in the B share pool have since been replenished from the proceeds from the Ordinary share pool's sale of its investment in Hallmarq.

   16.        Financial Risk Management 

In carrying on its investment activities, the Company is exposed to various types of risk associated with the financial instruments and markets in which it invests. The most significant types of financial risk facing the Company are market risk, credit risk and liquidity risk. The Company's approach to managing these risks is set out below together with a description of the nature and amount of the financial instruments held at the balance sheet date.

Market risk

The Company's strategy for managing investment risk is determined with regard to the Company's investment objective, as outlined on page 8. The management of market risk is part of the investment management process. The Company's portfolio is managed with regard to the possible effects of adverse price movements and with the objective of maximising overall returns to shareholders in the medium term. Investments in unquoted companies, by their nature, usually involve a higher degree of risk than investments in companies quoted on a recognised stock exchange, though the risk can be mitigated to a certain extent by diversifying the portfolio across business sectors and asset classes. The overall disposition of the Company's assets is regularly monitored by the Board.

Details of the Company's investment portfolio at the balance sheet date are set out on page 15.

19.7% (2017: 68.1%) by value of the Company's net assets comprise investments in unquoted companies held at fair value. The valuation methods used by the Company include the application of a price/earnings ratio derived from listed companies with similar characteristics, and consequently the value of the unquoted element of the portfolio can be indirectly affected by price movements on the London Stock Exchange. A 10% overall increase in the valuation of the unquoted investments at 31 December 2018 would have increased net assets and the total return for the year by GBP183,000 (2017: GBP353,000) disregarding the impact of the performance fee; an equivalent change in the opposite direction would have reduced net assets and the total return for the year by the same amount.

15.7% (2017: 39.3%) by value of the Company's net assets comprises equity securities quoted on AIM. A 10% increase in the bid price of these securities as at 31 December 2018 would have increased net assets and the total return for the year by GBP146,000 (2017: GBP204,000) disregarding the impact of the performance fee; a corresponding fall would have reduced net assets and the total return for the year by the same amount.

Credit risk

There were no significant concentrations of credit risk to counterparties at 31 December 2018 or 31 December 2017.

Credit risk 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 Board carries out a regular review of counterparty risk. The carrying values of financial assets represent the maximum credit risk exposure at the balance sheet date.

Liquidity risk

The Company's financial assets include investments in unquoted equity securities which are not traded on a recognised stock exchange and which generally are illiquid. They also include investments in AIM-quoted companies, which, by their nature, involve a higher degree of risk than investments on the main market. As a result, the Company may not be able to realise some of its investments in these instruments quickly at an amount close to their fair value in order to meet its liquidity requirements, or to respond to specific events such as deterioration in the creditworthiness of any particular issuer.

The Company's liquidity risk is managed and monitored on a continuing basis by the Board in accordance with policies and procedures laid down by the Board.

   17.        Events After the Balance Sheet Date 

Since 31 December 2018:

Pursuant to the Offer, the Company has made the following allotments of B shares:

 
            Date                       Number of shares allotted              Allotment price range 
            7 March 2019               643,278                                99.1p to 102.2p per share 
            3 April 2019               442,148                                99.1p to 104.9p per share 
             5 April 2019               241,485                                97.6p to 103.3p per share 
            25 April 2019              24,383                                 102.5p per share 
 

As at 26 April 2019, the Company had a total of 5,387,664 B shares in issue

The Company has also made the following new investments from the B share pool

 
            Company Name                     Date of Investment              Amount 
                                                                              subscribed 
            Fabacus Holdings                 15 February 2019                GBP500,000 
             Limited 
                                 ------------------------------  ----------------------- 
            SkinBioTherapeutics              21 February 2019                GBP750,000 
             Plc 
                                 ------------------------------  ----------------------- 
            Old St Labs Limited              28 March 2019                   GBP500,000 
                                 ------------------------------  ----------------------- 
            Qudini Limited                   4 April 2019                    GBP500,000 
                                 ------------------------------  ----------------------- 
 
   18.        Contingencies, Guarantees and Financial Commitments 

There were no contingencies, guarantees or financial commitments as at 31 December 2018 (2017: GBPnil).

   19.        Related Party Transactions 

The Board acted as the investment manager of the Company until Seneca were appointed on 23 August 2018. No remuneration has been paid to the Board during the year in its capacity as investment manager. Certain Directors are entitled to participate in a performance bonus as detailed in note 6. Seneca have earnt GBP24,000 in management fees since 23 August 2018 (2% of the weighted average net assets of the B share portfolio). No payment has been made to Seneca, as GBP42,000 is recoverable from Seneca as a result of the cost cap, as detailed in note 3. Therefore at the year end, GBP18,000 was due from Seneca, which will be deducted from fees to be paid to them for services in 2019 (2017: nil).

Seneca accrued GBP19,997 (2017: GBPnil) transaction fees and directors' fees from investee companies. Seneca may also become entitled to a performance fee. See note 3 to the financial statements for more information on these fees.

As detailed in the offer for subscription document dated 9 May 2018, Seneca (as promoters of the offer) are entitled to charge the Company up to 5.5% of investors' subscriptions. A total of GBP40,596 has been paid to Seneca, based on the allotments of GBP4,035,000 as at 31 December 2018 (2017: n/a).

Charles Breese is a director of OR Productivity and received GBPnil from OR Productivity in fees for his support during the year (2017: GBPnil).

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

FR UWAARKOASUUR

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April 29, 2019 03:52 ET (07:52 GMT)

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