Annual Financial Report for the Year Ended 31 March 2023
15 June
2023
NORTHERN 3 VCT PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 MARCH
2023
Northern 3 VCT PLC is a Venture Capital Trust (VCT) managed by
Mercia Fund Management Limited. It invests mainly in unquoted
venture capital holdings and aims to provide long-term tax-free
returns to shareholders through a combination of dividend yield and
capital growth
Financial highlights (comparative figures
as at 31 March 2022):
|
|
Year ended |
Year ended |
|
|
31 March |
31 March |
|
|
2023 |
2022 |
|
|
|
|
Net assets |
|
£113.0m |
£106.9m |
|
|
|
|
Net asset value per share |
|
91.6p |
97.9p |
|
|
|
|
Return per share |
|
|
|
Revenue |
|
(0.1)p |
0.4p |
Capital |
|
(1.5)p |
(0.5)p |
Total |
|
(1.6)p |
(0.1)p |
|
|
|
|
Dividend per share declared in respect of the
period |
|
|
|
Interim dividend |
|
2.0p |
2.0p |
Proposed final dividend |
|
2.5p |
3.0p |
Total |
|
4.5p |
5.0p |
|
|
|
|
Cumulative return to shareholders since
launch |
|
|
|
Net asset value per share |
|
91.6p |
97.9p |
Dividends paid per share* |
|
113.4p |
108.4p |
Net
asset value plus dividends paid per share |
|
205.0p |
206.3p |
|
|
|
|
Mid-market share price at end of period |
|
84.5p |
94.5p |
|
|
|
|
Share price discount to net asset value |
|
7.8% |
3.5% |
|
|
|
|
Annualised tax-free dividend yield (based on net asset
value per share) |
4.6% |
4.7% |
*Excluding proposed final dividend payable on 18 August
2023.
Enquiries:
James Sly / Sarah Williams, Mercia Asset Management PLC – 0330
223 1430
Website: www.mercia.co.uk/vcts/n3vct/
CHAIRMAN’S STATEMENT
Results and dividend
The net asset value (NAV) per share at 31 March 2023 was 91.6
pence compared with 97.9 pence as at 31 March 2022. The total
return per share for the year as shown in the income statement was
minus 1.6 pence (2022: minus 0.1 pence).
Last year we increased the target annual dividend yield to 4.5%
of opening NAV per share. Having already declared an interim
dividend of 2.0 pence per share which was paid in January 2023,
your Directors now propose a final dividend of 2.5 pence. These
payments totalling 4.5 pence (2022: 5.0 pence) are equivalent to
4.6% of the opening NAV. The proposed final dividend will, subject
to approval by shareholders at the Annual General Meeting, be paid
on 18 August 2023.
Sales in the venture portfolio realised £15.4 million on an
initial cost of £6.7 million, producing a gain of £8.7 million.
There was a decrease in the valuation of the Company’s listed
venture holdings of £1.2 million. The volatility in the listed
portfolio was primarily caused by a fall in the musicMagpie PLC
share price.
Our dividend investment scheme, under which dividends can be
re-invested in new ordinary shares free of dealing costs and with
the benefit of the tax reliefs available on new VCT share
subscriptions, continues to operate. Instructions on how to join
the scheme are included within the dividend section of our website,
which can be found here: mercia.co.uk/vcts/n3vct/.
Investment portfolio
The realisation of the older investments made under the
‘pre-2015’ rules continues and constituted 22% of the Company’s
investments as at 31 March 2023. We expect this to provide a number
of profitable future sales. Overall, it was a busy year, with a
number of notable transactions either completed or in progress at
our year end. The highlights during the year were the sales of
Lineup Systems and Ideagen plc which provided returns of 7.8 times
and 9.7 times cost respectively over the course of the
investment.
Despite some reductions in the Directors’ valuations of the
unquoted investments, particularly in consumer businesses, gains in
Evotix (realised shortly after our year-end) and strong
performances by several other portfolio companies resulted in an
unchanged valuation.
New investments have exceeded the previous year’s level, with
£10.3 million provided to nine new venture capital investments and
£5.9 million of follow on capital invested into existing
investments.
Share offers and liquidity
Liquidity increased as a result of the £17.0 million share offer
in April 2022 and, as a result of the public share offer launched
in January 2023, 6,597,040 new ordinary shares were issued in April
2023 for gross proceeds of £6.0 million. Following this offer in
2022/23, and taking into account the increased rate of investment,
the Board is pleased to announce that the Company will produce a
prospectus for an offer in the 2023/24 tax year of £14.0 million,
with an over-allotment facility of £6.0 million. This offer will be
launched in September 2023.
We have maintained our policy of buying back our shares in the
market, where necessary to maintain market liquidity. During the
year 3,383,207 shares, equivalent to approximately 3.1% of the
opening share capital, were purchased for cancellation.
Changes to the performance-related management
fee
Following a review of current arrangements by the Board, a
resolution proposing changes to the Management Agreement in
relation to the performance-related management fee is included in
the circular for the General Meeting. If approved, these changes
will be implemented by a deed of variation to the Company’s
existing Management Agreement.
The changes in VCT legislation in 2015 required the Company to
focus new investment on earlier stage companies which, by their
nature, are higher risk and therefore likely to deliver more
volatile investment returns. Consequently, an adjustment is
proposed to the scheme to ensure that strong returns above a hurdle
are delivered consistently, not just in a single year, with a
requirement that any decline in shareholder NAV must be made good,
before a performance fee is payable to the Manager. As part of
these changes, the Board and the Manager have agreed that at least
80% of any performance fee generated is paid to the VCT investment
team. Full details of the changes are set out in the accompanying
circular.
Responsible Investment
The Company’s approach to Environmental, Social and Governance
(ESG) responsibilities is set out in the annual report.
Geopolitical and other macroeconomic risks
The Company’s investments may be affected by regional events or
politics. A recent example of this is the high-inflation
environment in the aftermath of COVID-19 and the conflict in
Ukraine. The Board has no control over such macro events, and as
the Company’s investments are domiciled in the UK with only a
limited presence in the rest of the world, risks are somewhat
localised to those facing the UK economy. As a result of the
conflict in Ukraine, in the year the Manager undertook a review of
the entire portfolio for links to sanctioned individuals and
companies, took appropriate action where required, and continues to
monitor the situation carefully.
VCT legislation and qualifying status
The Company has continued to meet the stringent and complex
qualifying conditions laid down by HM Revenue & Customs for
maintaining its approval as a VCT. Mercia monitors the position
closely and reports regularly to the Board.
The ‘sunset clause’ was a European state aid requirement when
the VCT scheme received state aid approval, which means that
without a change in legislation, investors will not receive upfront
tax relief when investing in VCTs from 6 April 2025. While the
government has signalled that it will extend the scheme, no formal
legislation has been introduced to enact this commitment. The
Company and the Manager will continue to monitor progress in this
area. The Board considers that the Company, and VCTs more
generally, are successfully delivering against the Government’s
mandate, which is to channel money into higher-risk, early-stage
businesses.
Annual
General
Meeting
The Company’s Annual General Meeting (AGM) will take place on 27
July 2023. We intend to hold the 2023 AGM in person at Reed Smith
LLP, Broadgate Tower, 20 Primrose Street, London, EC2A 2RS.
Following positive comments received from the last meetings, we
also intend to offer remote access for shareholders through an
online webinar facility. Full details and formal notice of the AGM
will be provided separately. The General Meeting regarding the
proposed changes to the performance-related management fee will be
held immediately after the AGM.
Outlook
Access to capital is one of the most important
factors contributing to the success of early stage businesses; we
believe that the Company is well placed to provide that. We are
encouraged by the investment opportunities that we are seeing
despite the various economic concerns.
James Ferguson
Chairman
15
June 2023
Extracts from the audited financial statements
for the year ended 31 March 2023 are set out below.
INCOME STATEMENT
|
Year ended 31 March 2023 |
|
Year ended 31 March 2022 |
|
Revenue |
Capital |
Total |
|
Revenue |
Capital |
Total |
|
£000 |
£000 |
£000 |
|
£000 |
£000 |
£000 |
|
|
|
|
|
|
|
|
Gain/(loss) on disposal of
investments |
- |
1,414 |
1,414 |
|
- |
3,963 |
3,963 |
Unrealised fair value gains/(losses) on investments |
- |
(1,540) |
(1,540) |
|
- |
(2,860) |
(2,860) |
|
- |
(126) |
(126) |
|
- |
1,103 |
1,103 |
|
|
|
|
|
|
|
|
Dividend and interest
income |
732 |
- |
732 |
|
1,438 |
- |
1,438 |
Investment management fee |
(519) |
(1,558) |
(2,077) |
|
(563) |
(1,690) |
(2,253) |
Other
expenses |
(496) |
- |
(496) |
|
(407) |
- |
(407) |
|
|
|
|
|
|
|
|
Return before
tax |
(283) |
(1,684) |
(1,967) |
|
468 |
(587) |
(119) |
|
|
|
|
|
|
|
|
Tax on
return |
122 |
(122) |
- |
|
(1) |
1 |
- |
|
|
|
|
|
|
|
|
Return after tax |
(161) |
(1,806) |
(1,967) |
|
467 |
(586) |
(119) |
|
|
|
|
|
|
|
|
Return per share |
(0.1)p |
(1.5)p |
(1.6)p |
|
0.4p |
(0.5p) |
(0.1)p |
BALANCE SHEET
|
|
31 March 2023 |
31 March 2022 |
|
|
£000 |
£000 |
|
|
|
|
Fixed
assets |
|
|
|
Investments |
|
85,775 |
85,269 |
|
|
|
|
Current
assets |
|
|
|
Debtors |
|
107 |
60 |
Cash
and cash equivalents |
|
27,280 |
21,683 |
|
|
27,387 |
21,743 |
|
|
|
|
Creditors (amounts falling due within one
year) |
|
(169) |
(152) |
|
|
|
|
Net current assets |
|
27,218 |
21,591 |
|
|
|
|
Net assets |
|
112,993 |
106,860 |
|
|
|
|
Capital and
reserves |
|
|
|
Called-up equity share
capital |
|
6,166 |
5,456 |
Share premium |
|
37,344 |
20,909 |
Capital redemption
reserve |
|
771 |
602 |
Capital reserve |
|
63,561 |
64,849 |
Revaluation reserve |
|
4,554 |
13,659 |
Revenue
reserve |
|
597 |
1,385 |
|
|
|
|
Total equity shareholders' funds |
|
112,993 |
106,860 |
|
|
|
|
Net asset value per share |
|
91.6p |
97.9p |
STATEMENT OF CHANGES IN EQUITY
for the year ended 31
March 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
--------------- |
Non-distributable reserves |
----------- |
Distributable reserves |
|
|
Called up share capital |
Share premium |
Capital redemption reserve |
Revaluation reserve* |
Capital reserve |
Revenue reserve |
Total |
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
At 1 April 2022 |
5,456 |
20,909 |
602 |
13,659 |
64,849 |
1,385 |
106,860 |
Return after tax |
- |
- |
- |
(9,105) |
7,299 |
(161) |
(1,967) |
Dividends paid |
- |
- |
- |
- |
(5,614) |
(627) |
(6,241) |
Net proceeds of share
issues |
879 |
16,435 |
- |
- |
- |
- |
17,314 |
Shares purchased for
cancellation |
(169) |
- |
169 |
- |
(2,973) |
- |
(2,973) |
|
|
|
|
|
|
|
|
At 31 March 2023 |
6,166 |
37,344 |
771 |
4,554 |
63,561 |
597 |
112,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 March
2022 |
--------------- |
Non-distributable reserves |
-------------- |
Distributable reserves |
|
|
Called up share capital |
Share premium |
Capital redemption reserve |
Revaluation reserve* |
Capital reserve |
Revenue reserve |
Total |
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
At 1 April 2021 |
5,492 |
19,716 |
502 |
26,105 |
64,263 |
1,465 |
117,543 |
Return after tax |
- |
- |
- |
(12,446) |
11,860 |
467 |
(119) |
Dividends paid |
- |
- |
- |
- |
(9,302) |
(547) |
(9,849) |
Net proceeds of share
issues |
64 |
1,193 |
- |
- |
- |
- |
1,257 |
Shares purchased for
cancellation |
(100) |
- |
100 |
- |
(1,972) |
- |
(1,972) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2022 |
5,456 |
20,909 |
602 |
13,659 |
64,849 |
1,385 |
106,860 |
CASH FLOW STATEMENT
|
|
|
|
|
Year ended |
|
Year ended |
|
31 March 2023 |
|
31 March 2022 |
|
£000 |
|
£000 |
Cash flows from
operating activities |
|
|
|
Return before tax |
(1,967) |
|
(119) |
Adjustments for: |
|
|
|
(Gain)/loss on disposal of
investments |
(1,414) |
|
(3,963) |
Movements in fair value of
investments |
1,540 |
|
2,860 |
(Increase)/decrease in
debtors |
(47) |
|
1,570 |
Increase/(decrease) in
creditors |
17 |
|
(1,633) |
|
|
|
|
Net cash outflow from operating activities |
(1,871) |
|
(1,285) |
|
|
|
|
Cash flows from
investing activities |
|
|
|
Purchase of investments |
(17,699) |
|
(15,360) |
Sale/repayment of
investments |
17,067 |
|
25,495 |
|
|
|
|
Net cash inflow/(outflow) from investing
activities |
(632) |
|
10,135 |
|
|
|
|
Cash flows from
financing activities |
|
|
|
Issue of ordinary shares |
17,815 |
|
1,298 |
Share issue expenses |
(501) |
|
(41) |
Purchase of ordinary shares
for cancellation |
(2,973) |
|
(1,972) |
Equity dividends paid |
(6,241) |
|
(9,849) |
|
|
|
|
Net cash inflow/(outflow) from financing
activities |
8,100 |
|
(10,564) |
|
|
|
|
Increase/(decrease) in
cash and cash equivalents |
5,597 |
|
(1,714) |
|
|
|
|
Cash
and cash equivalents at beginning of year |
21,683 |
|
23,397 |
|
|
|
|
Cash and cash equivalents at end of year |
27,280 |
|
21,683 |
INVESTMENT PORTFOLIO
|
|
Cost |
Valuation |
Like for like valuation increase/ (decrease) over
year** |
% of net assets |
|
|
£000 |
£000 |
% |
by value |
Fifteen largest venture capital investments |
|
|
|
1 |
Evotix (formerly SHE) |
2,487 |
11,383 |
113.7% |
10.1% |
2 |
Volumatic Holdings |
216 |
3,275 |
(1.9)% |
2.9% |
3 |
Grip-UK (t/a Climbing
Hangar) |
3,174 |
3,174 |
0.0% |
2.8% |
4 |
IDOX* |
530 |
2,728 |
(1.3)% |
2.4% |
5 |
Tutora (t/a Tutorful) |
2,449 |
2,552 |
7.6% |
2.3% |
6 |
Rockar |
1,660 |
2,471 |
34.7% |
2.2% |
7 |
Newcells Biotech |
2,229 |
2,265 |
(10.9)% |
2.0% |
8 |
Adludio |
1,950 |
1,950 |
0.0% |
1.7% |
9 |
Biological Preparations
Group |
1,915 |
1,820 |
(15.2)% |
1.6% |
10 |
Gentronix |
805 |
1,805 |
109.3% |
1.6% |
11 |
Clarilis |
1,772 |
1,772 |
(4.4)% |
1.6% |
12 |
Netacea |
1,744 |
1,744 |
0.0% |
1.5% |
13 |
Social Value Portal |
1,722 |
1,722 |
0.0% |
1.5% |
14 |
Administrate |
2,143 |
1,716 |
7.0% |
1.5% |
15 |
Pure Pet Food |
1,601 |
1,665 |
0.3% |
1.5% |
Other venture capital investments |
|
|
|
|
16 |
Turbine Simulated Cell
Technologies |
1,542 |
1,542 |
0.0% |
1.4% |
17 |
Project Glow Topco (t/a
Currentbody.com) |
1,519 |
1,519 |
0.0% |
1.3% |
18 |
Buoyant Upholstery |
907 |
1,464 |
(36.7)% |
1.3% |
19 |
Forensic Analytics |
1,382 |
1,382 |
0.0% |
1.2% |
20 |
Enate |
1,373 |
1,373 |
0.0% |
1.2% |
21 |
Broker Insights |
1,366 |
1,366 |
0.0% |
1.2% |
22 |
Ridge Pharma |
1,345 |
1,347 |
0.2% |
1.2% |
23 |
Optellum |
1,250 |
1,250 |
0.0% |
1.1% |
24 |
Centuro Global |
1,136 |
1,136 |
0.0% |
1.0% |
25 |
Duke & Dexter |
1,113 |
1,121 |
0.7% |
1.0% |
26 |
VoxPopMe |
1,096 |
1,084 |
(11.2)% |
1.0% |
27 |
Send Technology Solutions |
1,049 |
1,049 |
0.0% |
0.9% |
28 |
Wonderush Ltd (t/a
Hownow) |
1,029 |
1,029 |
0.0% |
0.9% |
29 |
Axis Spine Technologies |
1,028 |
1,028 |
0.0% |
0.9% |
30 |
musicMagpie* |
201 |
938 |
(50.0)% |
0.8% |
31 |
Pimberly |
935 |
935 |
0.0% |
0.8% |
32 |
LMC Software |
910 |
910 |
0.0% |
0.8% |
33 |
Locate Bio |
813 |
813 |
0.0% |
0.7% |
34 |
Moonshot |
801 |
801 |
0.0% |
0.7% |
35 |
Fresh Approach (UK)
Holdings |
841 |
784 |
3.5% |
0.7% |
36 |
Naitive Technologies |
721 |
721 |
0.0% |
0.6% |
37 |
Oddbox |
986 |
677 |
(81.6)% |
0.6% |
38 |
Northrow |
1,322 |
676 |
(46.0)% |
0.6% |
39 |
Sen Corporation |
666 |
666 |
0.0% |
0.6% |
40 |
Atlas Cloud |
638 |
638 |
1.0% |
0.6% |
41 |
Eckoh* |
528 |
595 |
(12.5)% |
0.5% |
42 |
Intuitive Holding |
1,293 |
530 |
5.1% |
0.5% |
43 |
Synthesized |
500 |
500 |
0.0% |
0.4% |
44 |
Netcall* |
273 |
490 |
(9.3)% |
0.4% |
45 |
Medovate |
1,591 |
480 |
(67.5)% |
0.4% |
46 |
Thanksbox (t/a Mo) |
1,407 |
468 |
(42.5)% |
0.4% |
47 |
Rego Technologies (t/a Upp)
(formerly Volo) |
2,182 |
431 |
(18.8)% |
0.4% |
48 |
Seahawk Bidco |
433 |
395 |
(15.9)% |
0.4% |
49 |
Nutshell |
665 |
349 |
(32.5)% |
0.3% |
50 |
Adept Telecom |
235 |
332 |
22.2% |
0.3% |
51 |
ECO Animal Health* |
497 |
219 |
(40.6)% |
0.2% |
52 |
Arnlea Holdings |
1,138 |
197 |
9.4% |
0.2% |
53 |
Haystack Dryers |
1,284 |
187 |
59.3% |
0.2% |
54 |
Sorted Holdings |
2,542 |
178 |
7.4% |
0.2% |
55 |
Customs Connect Group |
1,347 |
107 |
4.5% |
0.1% |
56 |
Synectics* |
171 |
98 |
(15.4)% |
0.1% |
57 |
Angle* |
131 |
73 |
(61.0)% |
0.1% |
58 |
Pebble Beach Systems* |
564 |
70 |
0.0% |
0.1% |
59 |
Velocity Composites* |
61 |
23 |
76.4% |
0.0% |
60 |
Quotevine |
1,184 |
- |
(100.0)% |
0.0% |
61 |
Ablatus Therapeutics |
551 |
- |
(100.0)% |
0.0% |
Total venture capital investments |
70,943 |
74,013 |
|
65.5% |
Listed equity investments |
10,278 |
11,762 |
|
10.4% |
Total fixed asset investments |
81,221 |
85,775 |
|
75.9% |
Net current assets |
|
27,218 |
|
24.1% |
Net assets |
|
112,993 |
|
100.0% |
* Quoted on AIM
**This percentage change in ‘like for like’ valuations is a
comparison of the 31 March 2023 valuations with the 31 March 2022
valuations (or where a new investment has been made in the year,
the investment amount), having adjusted for any partial disposals,
loan stock repayments or new and follow-on investments in the
year.
RISK MANAGEMENT
The Board carries out a regular and robust assessment of the
risk environment in which the Company operates and seeks to
identify new risks as they emerge. The principal and emerging risks
and uncertainties identified by the Board which might affect the
Company’s business model and future performance, and the steps
taken with a view to their mitigation, are as follows:
Investment and liquidity risk: investment in
smaller and unquoted companies, such as those in which the Company
invests, involves a higher degree of risk than investment in larger
listed companies because they generally have limited product lines,
markets and financial resources and may be more dependent on key
individuals. The securities of smaller companies in which the
Company invests are typically unlisted, making them illiquid, and
this may cause difficulties in valuing and disposing of the
securities. The Company may invest in businesses whose shares are
quoted on AIM – the fact that a share is quoted on AIM does not
mean that it can be readily traded and the spread between the
buying and selling prices of such shares may be wide.
Mitigation: the Directors aim to limit the risk
attaching to the portfolio as a whole by careful selection, close
monitoring and timely realisation of investments, by carrying out
rigorous due diligence procedures and maintaining a wide spread of
holdings in terms of financing stage and industry sector, within
the rules of the VCT scheme. The Board reviews the investment
portfolio with the Manager on a regular basis.
Financial risk: most of the Company’s
investments involve a medium to long-term commitment and many are
relatively illiquid. Mitigation: the Directors
consider that it is inappropriate to finance the Company’s
activities through borrowing except on an occasional short-term
basis. Accordingly they seek to maintain a proportion of the
Company’s assets in cash or cash equivalents in order to be in a
position to pursue new unquoted investment opportunities and to
make follow-on investments in existing portfolio companies. The
Company has very little direct exposure to foreign currency risk
and does not enter into derivative transactions.
Economic risk: events such as economic
recession or general fluctuation in stock markets, exchange rates
and interest rates may affect the valuation of investee companies
and their ability to access adequate financial resources, as well
as affecting the Company’s own share price and discount to net
asset value. The level of economic risk has been elevated recently
by inflationary pressures, interest rate increases, and supply
shortages Mitigation: the Company invests in a
diversified portfolio of investments spanning various industry
sectors, and maintains sufficient cash reserves to be able to
provide additional funding to investee companies where it is
appropriate and in the interests of the Company to do so. The
Manager typically provides an investment executive to actively
support the board of each unquoted investee company. At all times,
and particularly during periods of heightened economic uncertainty,
the investment executives share best practice from across the
portfolio with investee management teams in order to mitigate
economic risk.
Stock market risk: some of the Company’s
investments are quoted on the London Stock Exchange or AIM and will
be subject to market fluctuations upwards and downwards. External
factors such as the conflict in Ukraine, terrorist activity or
global health crises can negatively impact stock markets worldwide.
In times of adverse sentiment there may be very little, if any,
market demand for shares in smaller companies quoted on AIM.
Mitigation: the Company’s quoted investments are
actively managed by specialist managers, including Mercia in the
case of the AIM-quoted investments, and the Board keeps the
portfolio and the actions taken under ongoing review.
Credit risk: the Company holds a number of
financial instruments and cash deposits and is dependent on the
counterparties discharging their commitment.
Mitigation: the Directors review the
creditworthiness of the counterparties to these instruments and
cash deposits and seek to ensure there is no undue concentration of
credit risk with any one party.
Legislative and regulatory risk: in order to
maintain its approval as a VCT, the Company is required to comply
with current VCT legislation in the UK. Changes to the UK
legislation in the future could have an adverse effect on the
Company’s ability to achieve satisfactory investment returns whilst
retaining its VCT approval. Mitigation: the Board
and the Manager monitor political developments and where
appropriate seek to make representations either directly or through
relevant trade bodies.
Internal control risk: the Company’s assets
could be at risk in the absence of an appropriate internal control
regime which is able to operate effectively even during times of
disruption. Mitigation: the Board regularly
reviews the system of internal controls, both financial and
non-financial, operated by the Company and the Manager. These
include controls designed to ensure that the Company’s assets are
safeguarded and that proper accounting records are maintained.
VCT qualifying status risk: while it is the
intention of the Directors that the Company will be managed so as
to continue to qualify as a VCT, there can be no guarantee that
this status will be maintained. A failure to continue meeting the
qualifying requirements could result in the loss of VCT tax relief,
the Company losing its exemption from corporation tax on capital
gains, to shareholders being liable to pay income tax on dividends
received from the Company and, in certain circumstances, to
shareholders being required to repay the initial income tax relief
on their investment. Mitigation: the investment
manager keeps the Company’s VCT qualifying status under continual
review and its reports are reviewed by the Board on a quarterly
basis. The Board has also retained Philip Hare & Associates LLP
to undertake an independent VCT status monitoring role.
DIRECTORS’ RESPONSIBILITIES
STATEMENT
The Directors are responsible for preparing the annual report
and financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law they are
required to prepare the financial statements in accordance with UK
accounting standards, including FRS 102 ‘The Financial Reporting
Standard applicable in the UK and Republic of Ireland’.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of its profit or
loss for the year.
In preparing these financial statements, the Directors are
required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and estimates that are reasonable and
prudent;
- state whether applicable UK accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
- assess the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
its financial statements comply with the Companies Act 2006. They
are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and corporate governance statement
that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors have confirmed that to the best of our
knowledge:
• the financial statements,
prepared in accordance with the applicable set of accounting
standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
• the Strategic Report and
Directors’ Report includes a fair review of the development and
performance of the business and the position of the issuer,
together with a description of the principal risks and
uncertainties that they face.
The Directors consider the annual report and
accounts, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Company’s position and performance, business model and
strategy.The Directors of the company at the date of this
announcement were Mr J G D Ferguson (Chairman), Mrs A B Brown,
Mr C J Fleetwood, Mr T R Levett and Mr J M O Waddell.
OTHER MATTERS
The financial information set out above does not constitute the
company’s statutory accounts for the years ended 31 March 2023 or
2022 but is derived from those accounts. Statutory accounts for
2022 have been delivered to the registrar of companies, and those
for 2023 will be delivered in due course. The auditor has reported
on those accounts; their reports were (i) unqualified; (ii) did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report; and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
The calculation of the return per share is based on the loss
after tax for the year of £1,967,000 (2022: £119,0000) and on
124,886,897 (2022: 109,817,073) shares, being the weighted average
number of shares in issue during the year
The calculation of net asset value per share as
at 31 March 2023 is based on net assets of £112,993,000 (2022:
£106,860,000) divided by the 123,319,779 (2022: 109,115,361)
ordinary shares in issue at that date.
If approved by shareholders, the proposed final dividend of 2.5
pence per share for the year ended 31 March 2023 will be paid on 18
August 2023 to shareholders on the register at the close of
business on 21 July 2023.
The full annual report including financial statements for the
year ended 31 March 2023 is expected to be made available to
shareholders on or around 26 June 2023 and will be available to the
public at the registered office of the company at Forward House, 17
High Street, Henley-in-Arden B95 5AA and on the company’s
website.
Neither the contents of the Mercia Asset Management PLC website,
nor the contents of any website accessible from hyperlinks on the
Mercia Asset Management PLC website (or any other website), are
incorporated into, or form part of, this announcement.
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