Full year Results and Notice of AGM
19 December 2023
HARGREAVE HALE AIM VCT PLC(the
“Company” or the “VCT”)
Full Year Results and Notice of
AGM
Hargreave Hale AIM VCT plc announces its results for the year
ended 30 September 2023.
The Company also announces that its 2024 Annual General Meeting
will be held at 4:45pm on 8 February 2024 at 88 Wood Street,
London, EC2V 7QR.
The Company’s Annual Report and Financial Statements for the
year ended 30 September 2023 and the formal Notice of the Annual
General Meeting will be posted to shareholders who have elected to
receive hard copies and in accordance with Listing Rule 9.6.1
copies of the documents have been submitted to the UK Listing
Authority and will shortly be available to view on the Company's
corporate website
at https://www.hargreaveaimvcts.co.uk and have also
been submitted to the UK Listing Authority and will be shortly
available for inspection from the National Storage Mechanism
athttps://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Strategic report
The report has been prepared by the Directors in
accordance with the requirements of Section 414A of the
Companies Act 2006.
Financial highlights for the year ended
30 September 2023
Net asset value (NAV) per share |
NAV total return |
Tax free dividends paid in the period |
Share price total return |
Ongoing charges ratio |
46.34p |
-14.70%(1) |
5.00p |
-23.51%(1) |
2.24%(1) |
• £13.6 million
invested in Qualifying Companies in the year.
• 91.65% invested
by VCT tax value in Qualifying Investments at 30 September
2023.
• Final dividend of
1.50 pence per share proposed for the year end.
• Offer for
subscription closed to further applications on 10 February
2023, having raised £40 million.
• New Offer for
subscription launched on 7 September 2023 to raise
£20 million, together with an over‑allotment facility to raise
up to a further £20 million.
Summary financial data |
2023 |
2022 |
NAV (£m) |
151.92 |
160.51 |
NAV per share (p) |
46.34 |
60.19 |
NAV total return (%)(1) |
-14.70 |
-33.42 |
Market capitalisation (£m) |
140.96 |
167.32 |
Share price (p) |
43.00 |
62.75 |
Share price discount/premium to NAV per share (%)(1) |
-7.21 |
+4.25(2) |
Share price 5 year average discount to NAV per share
(%)(1) |
-5.64 |
-5.65 |
Share price total return (%)(1) |
-23.51 |
-28.06 |
(Loss)/gain per share for the year (p) |
-9.32 |
-33.42 |
Dividends paid per share (p) |
5.00 |
6.65 |
Ongoing charges ratio (%)(1) |
2.24 |
2.06 |
(1) Alternative
performance measure definitions and illustrations can be found in
this report.
(2) The
FY22 year end premium to NAV is a function of the year end NAV
of 60.19 pence per share and the year end share price.
Financial Calendar
Financial calendar |
|
Record date for final dividend |
5 January 2024 |
Payment of final dividend |
15 February 2024 |
Annual General Meeting |
8 February 2024 |
Announcement of half-yearly results for the six months ending
31 March 2024 |
June 2024 |
Payment of interim dividend (subject to Board approval) |
July 2024 |
Chair’s statement
Introduction
I would like to welcome shareholders who joined
us as a result of the recent offers for subscription. As always, we
are grateful to new and existing shareholders who continue to
support the VCT, despite the difficult times we continue to live
through.
The financial year started with some significant
headwinds, including high inflation, a dislocation in the UK
Government bond market and a forecast by the Bank of England that
the United Kingdom would endure the longest recession of the last
100 years. Whilst we would not wish to downplay the hardship
that followed, the economy was stronger than predicted, in part due
to Government intervention in the energy market over the winter. UK
consumer confidence staged a partial recovery off historic lows,
employment remained strong and, towards the end of the period under
review, UK real wage growth turned positive.
As I noted in our interim report, uncertainty is
a theme that we have all learned to live with these past few years.
To this list, we must now add the implications of the terrible
events that continue to unfold in Israel and Gaza.
Whilst we are encouraged that much of the deep
pessimism that permeated markets at the start of the financial year
did not manifest, we remain mindful of the macro-economic backdrop,
both here and abroad. The cost of borrowing has changed
dramatically within the year, impacting the financial sector and
companies with high levels of debt. Last year, this manifested
itself within the UK pension industry. This year, stress emerged in
parts of the US and European banking system. Remote as this might
seem, it affected companies closer to home, particularly
pre-clinical and clinical stage companies within the life sciences
industry that were reliant upon funding from Silicon Valley Bank
(SVB). Those exposed to SVB became more cautious with their
budgets, which in turn reduced demand for the products and services
sold into them. Several of our portfolio companies have seen weaker
trading as a consequence of this.
When launching the 2022 offer for subscription,
we were cautious about the short-term outlook but spoke about the
opportunity for value creation over the medium term. Our experience
over the period under review is consistent with that view.
Generating short-term performance has been very difficult with the
market applying asymmetrical responses to news flow: positive
updates are not getting full recognition whilst those that
disappoint are often treated harshly. Stock market liquidity is a
major contributory factor. With many active managers now deep into
their third year of outflows, there are few institutional buyers of
shares in small UK companies. Taken together, this has left the
sector in deep value territory.
The malaise that continues to hang over markets
in the UK and elsewhere has heavily impacted the primary markets in
which companies raise new capital through the sale of new shares.
With valuations so depressed and very little capital available for
investment (away from VCTs), very few companies have undertaken an
initial public offering (IPO). On AIM there were just 3 VCT
qualifying initial public offerings within the year. Despite this,
we are pleased to report that we deployed capital into VCT
qualifying companies ahead of budget, highlighting the importance
of having a defined pool of capital, a diversified portfolio and a
flexible investment policy.
Performance
As described in more detail in the Investment
Manager’s report, this has been a second consecutive difficult year
for performance. In contrast to last year, when we suffered a
substantial (unrealised) loss of value across investments in public
and private companies, this year the material declines were
confined to the portfolio of investments in public companies. The
value of the investments in private companies were protected by the
difficult decisions made last year and, in some cases, better
trading. Although the markets demand a cautious approach, we are
hopeful that we might start to see some value recovery within the
private companies in the current year. It is worth reiterating at
this point that the predominant factor that drove down the
valuations in our investments in private companies last year was
the broad based (and deep) de-rating of publicly listed
companies.
Whilst higher interest rates are a source of
concern for many and likely to weigh on economic activity, they
have also made a significant positive impact on the income
generated from within the VCT, either from cash held on deposit or
from recently acquired short-dated fixed income investments.
Investment grade fixed income assets were a feature of the
investment portfolio for a number of years during and after the
financial crisis until negative real yields (and therefore high
prices) forced us to exit those positions. We have been able to use
the sell off in the bond market this year to rebuild positions that
will continue to generate substantial income for the VCT for
several years.
At 30 September 2023, the NAV per share was
46.34 pence which, after adjusting for the dividends paid in
the year of 5 pence, gives a NAV total return for the year of
-14.70%(1). The NAV total return (dividends reinvested) for the
year was -15.93%(1) compared with -8.28% in the FTSE AIM All-Share
Index Total Return (also calculated on a dividends Index reinvested
basis). The Directors consider this to be the most appropriate
benchmark from a shareholder’s perspective, however, due to the
range of assets held within the investment portfolio and the
investment restrictions placed on a VCT it is not wholly
comparable.
The earnings per share total return for the year
was a loss of 9.32 pence (comprising a revenue profit of
0.27 pence and a capital loss of 9.59 pence). Revenue
income increased by 168% to £2.6m as a result of an increase in
dividends received from non-qualifying equity, non-qualifying fixed
income investments and bank interest. Interest accrued on loan
note instruments increased after the Investment Manager made
two follow on (qualifying) investments into Kidly Ltd.
For the first time, income received into the revenue account
exceeded expenses, resulting in a revenue profit for the year of
0.27 pence per share (FY22: -0.36 pence per
share).
The share price decreased from 62.75 pence
to 43.00 pence over the reporting period which, after
adjusting for dividends paid, gives a share price total return of
-23.51%1, the fall amplified by the normalisation of the share
price, having briefly traded at a premium at the close of the last
financial year.
Investments
The Investment Manager invested
£13.6 million into 10 Qualifying Companies during the period.
The fair value of Qualifying Investments at 30 September 2023
was £89.1 million (58.7% of NAV) invested in 63 AIM companies
and 5(2) unquoted companies. At the year end, the fair value of
non-qualifying equities and the Marlborough Special Situations Fund
was £15.4 million (10.1% of NAV) and £8.3 million (5.4%
of NAV) respectively, with most of the non-qualifying equities
listed within the FTSE 350 and offering good levels of
liquidity should the need arise. £17.4 million (11.4% of NAV)
was held in short-dated investment grade corporate bonds,
£2.0 million (1.3% of NAV) was invested in a UK Government
bond exchange traded fund and £19.2 million (12.7% of NAV)
held in cash at the period end. Further information can be found in
the Investment Manager’s report.
Dividend
The Directors continue to maintain their policy
of targeting a tax free dividend yield equivalent to 5% of the year
end NAV per share.
In the 12-month period to 30 September
2023, the Company paid dividends totalling 5 pence
(2022: 6.65 pence). A special dividend of 2 pence
and a final dividend of 2 pence (2021: 3.15 pence)
in respect of the 2022 financial year was paid on 10 February
2023 and an interim dividend of 1.00 penny (2022: 1 penny) was
paid on 28 July 2023.
A final dividend of 1.50 pence is proposed
(2022: 2 pence) which, subject to shareholder approval at
the Annual General Meeting, will be paid on 15 February 2024
to ordinary shareholders on the register on 5 January
2024.
Dividend re-investment
scheme
Shareholders may elect to reinvest their
dividend by subscribing for new shares in the Company. Further
information can be found in the shareholder information
section.
On 10 February 2023, 1,836,516 ordinary
shares were allotted at a price of 54.95 pence per share,
which was calculated in accordance with the terms and conditions of
the dividend reinvestment scheme (DRIS), on the basis of the last
reported NAV per share as at 20 January 2023, to shareholders
who elected to receive shares under the DRIS as an alternative to
the final dividend for the year ended 30 September 2022 and
special dividend announced on 19 December 2022.
On 28 July 2023, 591,318 ordinary shares
were allotted at a price of 49.29 pence per share, which was
calculated in accordance with the terms and conditions of the DRIS,
on the basis of the last reported NAV per share as at 7 July
2023, to shareholders who elected to receive shares under the DRIS
as an alternative to the interim dividend for the year ended
30 September 2023.
Share Buybacks
To maintain compliance with the discount control
and management of share liquidity policy, the Company purchased
through share buybacks 7,183,338 ordinary shares (nominal value
£71,833) during the 2023 financial year at a cost of £3,636,841
(average price: 50.63 pence per share).
As at 18 December 2023, a further 2,039,414
shares have been repurchased post the year end at a cost of
£873,229 (average price: 42.82 pence per share).
(1) Alternative performance measure definitions
and illustrations can be found in the glossary of terms.
(2) Excluding companies in administration or at
risk of administration with zero value.
Share price discount
The Company aims to improve liquidity and to
maintain a discount of approximately 5 per cent. to the last
published NAV per share (as measured against the mid-price) by
making secondary market purchases of its shares in accordance with
parameters set by the Board.
We continued to operate the discount control and
management of share liquidity policy effectively during the period.
As at 30 September 2023, the Company had 1 and 5 year
average share price discounts of 6.06% and 5.64% respectively.
The Company’s share price was trading at a
discount of 7.21%(1) as at 30 September 2023 compared to a
premium of +4.25%(1) as at 30 September 2022, this being
calculated using the closing mid-price of the Company’s shares on
30 September 2023 as a percentage of the year end net asset
value per share, as published on 5 October 2023.
As at 15 December 2023, the discount to NAV
was 6.71% of the last published NAV per share.
Offer for subscription
The Directors of the Company announced on
5 September 2022 the launch of an offer for subscription for
shares to raise up to £20 million, together with an
over-allotment facility of up to a further £30 million. On
10 February 2023, the Company announced it had received valid
applications of approximately £40 million. The Board decided
not to utilise any further sums under the over-allotment facility
and therefore the offer for subscription was closed to further
applications. The offer resulted in gross funds being received of
£40 million and the issue of 66 million shares.
New Offer for subscription
The Directors of the Company announced on
7 September 2023 the launch of a new offer for subscription
for shares to raise up to £20 million, together with an
over-allotment facility of up to a further £20 million. The
offer was approved by shareholders of the Company at a general
meeting on 11 October 2023.
On 18 December 2023, the Company had
allotted 17.6 million shares raising gross proceeds of
£8.1 million. The Company has received valid applications for
a further £0.5 million. Future decisions by the Board about
the potential use of the over-allotment facility, in part or in
full, will be made with advice from the Investment Manager and
subject to investor demand and the deployment of capital into VCT
qualifying companies.
Cancellation of share
premium
At the general meeting of the Company held on
7 October 2022, a special resolution was passed approving the
cancellation of the Company’s share premium account to expand the
size of the Company’s distributable reserves.
We are pleased to confirm the cancellation of
the share premium account of the Company was approved by the High
Court of Justice in England and Wales and, accordingly, the amount
standing to the credit of the share premium account (£133.2m) of
the Company as at 9 May 2023 was cancelled.
Cost efficiency
The Board reviews costs incurred by the Company
on a regular basis and is focused on maintaining a competitive
ongoing charges ratio (OCR). The year end ongoing charges ratio was
2.24%(1) (FY22: 2.06%(1)) when calculated in accordance with
the AIC’s “Ongoing Charges” methodology. The increase in the OCR is
principally driven by the fall in the average net assets across the
year that followed the drop in the NAV per share. Other factors
included an increase in the number of independent non-executive
directors to five and below inflation increases in remuneration.
The Company also made modest investments to improve shareholder
communication through investments into the Company’s website, video
updates and an increased number of shareholder events. The Ongoing
Charges methodology divides ongoing expenses by average net
assets.
Board remuneration
Following a review of Board remuneration, and
taking into account peer group analysis and inflation, the Board
has agreed to increase its remuneration by 5%, effective from
1 October 2023. The annual remuneration of the Chair will
increase to £41,000, the independent non-executive directors to
£32,000 and the non-independent non-executive director, Oliver
Bedford, to £29,500.
An additional fee of £1,500 will continue to be
paid to the Chair of the Management and Service Provider Engagement
Committee. The Chair of the Audit Committee will continue to
receive an additional fee of £3,000.
Investment Manager
On 2 November 2022, the Company’s
Investment Manager changed its name from Hargreave Hale Limited
(trading as Canaccord Genuity Fund Management) to Canaccord Genuity
Asset Management Limited (CGAM).
(1) Alternative performance measure definitions
and illustrations can be found in the glossary of terms.
Annual General Meeting
Shareholders are invited to attend the Company’s
Annual General Meeting (AGM) to be held at 4.45 pm on
8 February 2024 at 88 Wood Street, London, EC2V 7QR.
The AGM will be followed by a presentation from the Investment
Manager and a drinks reception.
Those shareholders who are unable to attend the
AGM in person are encouraged to raise any questions in advance with
the Company Secretary at HHV.CoSec@jtcgroup.com. The deadline for
the advance submission of questions is 5.00 p.m. on
1 February 2024. Answers will be published on the Company’s
website on 8 February 2024.
Shareholder Engagement
Shareholder engagement is given a high priority
by the Board. Following a recent review, the Board agreed to
significantly improve the website and develop new content
(including video content) for shareholders to provide more
information about the Company’s activities and performance. The new
website is live at www.hargreaveaimvcts.co.uk.
The Company is working hard to make new, better
and more accessible content and hope that shareholders will find
the output useful. The website also introduces new functionality to
allow shareholders to request by email updates on shareholder
events, the performance of the Company (interim management
statements, fact sheets and video updates) and information on the
Company’s fundraising activities.
In addition to this, the Board wants to provide
shareholders with more opportunities to meet directly with the
Directors and the CGAM VCT management team. As a result, the number
of in‑person events has been increased with the introduction of
three new in-person quarterly updates in February, May and August
to sit alongside the AGM in February and the annual shareholder
event in November. The Board will look to run an event outside of
London in the current financial year to improve access for those
unable to attend London based events. The Board is aware that
increased engagement carries a cost; we therefore hope shareholders
will be able to attend at least one of these events. Further
information on future events and recordings of previous updates can
be found on the Company’s website.
Whilst the Board strongly encourages
shareholders to make use of everything the website has to offer,
the Directors recognise that it is not for everyone. Should you
prefer, you can of course continue to communicate with the Chair,
any other member of the Board or the Investment Manager by writing
to the Company, for the attention of the Company Secretary.
Within the 2023 financial year, the Investment
Manager gave three presentations covering the 12 months to
30 September 2022 on 23 November 2022, the 6 months
to 31 March 2023 on 21 June 2023 and the 3 months to
30 June 2023 on 16 August 2023.
Subsequent to the year end, the Investment
Manager gave a presentation covering the 12 months to
30 September 2023 on 29 November 2023. The well attended
shareholder event was once again held at Everyman Cinema,
Broadgate, City of London. It included presentations and a
pre-recorded interview with several guest speakers and
contributions from a number of portfolio companies, including a
panel discussion and a presentation from the Investment Manager’s
VCT team. The event concluded with the screening of a feature film.
Summary recordings of the Investment Manager’s presentations are
available to view on the Company’s website
https://www.hargreaveaimvcts.co.uk.
The next shareholder event will be held at the
Investment Manager’s offices at 88 Wood Street,
London EC2V 7QR following the conclusion of the AGM to be
held at 4.45 pm on 8 February 2024. The presentation will
cover the 3 months to 31 December 2023. Shareholders are
asked to register their interest in attending the shareholder event
through the Company’s website (www.hargreaveaimvcts.co.uk) or by
emailing aimvct@canaccord.com.
Electronic communications
As ever, we are respectfully asking shareholders
to opt into electronic communications and update their dividend
payment preference from cheque to bank transfer. Switching to the
digital delivery of shareholder communications and dividend
distributions is more cost efficient and more secure whilst also
helping to reduce our environmental footprint.
The Company no longer prints and distributes
interim reports to shareholders. The interim results continue to be
available for download on the Company’s website
(www.hargreaveaimvcts.co.uk) and a summary of the results are
published via a Regulatory Information Service on the London Stock
Exchange. Where necessary, the Administrator can produce and send
out a hard copy.
To support the digital experience, the Company
has invested in an upgraded website to improve the experience and
include more regular updates to the content, including recorded
updates from the manager and portfolio companies. Much of the new
content will be available for distribution by email. You can
register your interest in (and opt out of) email updates through
the Company’s website.
Shareholders are also encouraged to make use of
Equiniti’s shareview portal, which can be used to monitor their
investment, review their transaction history, see information on
dividend payments and update their communication preferences.
Electronic Voting
Electronic proxy voting is available for
shareholders to register the appointment of a proxy and voting
instructions for any general meeting of the Company once notice has
been given. This service assists the Company to make further
printing and production cost savings, reduce our environmental
footprint and streamline the voting process for investors.
Regulatory update
There were no major changes to VCT legislation
during the period under review.
On 23 September 2022, the Government
announced that it intended to extend the sunset clause that, if not
otherwise repealed or extended, would result in the withdrawal of
the upfront 30% income tax relief for new investment into VCTs from
6 April 2025.
The sunset clause, introduced as part of the
2015 EU State aid review, does not affect the Capital Gains Tax
relief or tax free dividend payments, nor does it affect investors’
income tax relief on VCT investments made before 6 April
2025.
On 22 November 2023, the Chancellor of the
Exchequer announced as part of the Autumn Statement the intention
to extend the VCT and EIS schemes to 5 April 2035. The
Government will introduce new legislation as part of a future
finance bill.
Consumer Duty
The Financial Conduct Authority (FCA) introduced
the Consumer Duty on 31 July 2023 to improve the standard of
care provided by firms that are involved in the manufacture or
supply of products and services to retail clients.
Consumer Duty comprises a new principle and
suite of other rules and guidance to be followed by firms involved
in the manufacture and distribution of a product to put consumers
in a better position to take responsibility for meeting their
financial needs and objectives. For consumers, this should:
• give confidence
that firms are acting in good faith, in line with their
interests;
• allow them to
make informed choices about products and services that are fit for
purpose and designed to meet a designated target market;
• improve the
information available to assist with the review of the products and
services most likely to meet their needs;
• support the
correct delivery of benefits that consumers should reasonably
expect from the product and services they subscribe to;
• improve the
standard of customer service; and
• help them obtain
fair value from financial products and services.
As the Company is not regulated by the FCA, it
falls outside of the FCA’s new Consumer Duty regulation. However,
CGAM and Canaccord Genuity Wealth Limited (CGWL) are regulated
companies and in scope, respectively as the designated manufacturer
and distributor of the Company. In its capacity as manufacturer,
CGAM has conducted a fair value assessment and a target market
assessment. Having reviewed both reports, the Board is satisfied
that CGAM and CGWL have complied with their obligations.
Two of the four pillars that underpin Consumer
Duty relate to consumer understanding and consumer support.
Although the Board is satisfied that these
obligations are met in full, the Company’s website has been
upgraded to enhance the services and benefits derived from an
investment in the Company. As noted above, the Board and Investment
Manager have jointly agreed to host more shareholder events to
support the delivery of the consumer understanding outcome, one of
the key outcomes described under the Consumer Duty.
VCT status
I am pleased to report that the Company
continues to perform well against the requirements of the
legislation and at the period end, the investment test was 91.65%
(2022: 84.85%) against an 80% requirement when measured using
HMRC’s methodology. The increase in the investment test percentage
reflects progress made in deploying capital raised through the 2022
offer and the return of capital to shareholders through the payment
of a 2 pence per share special dividend on 10 February
2023 following the successful exit from Ideagen plc. The
Company satisfied all other tests relevant to its status as a
Venture Capital Trust.
Key information document
In accordance with the Packaged Retail
Investment and Insurance Products (“PRIIPs”)
regulations, the Company’s Key Information Document
(“KID”) is published on the Company’s website at
www.hargreaveaimvcts.co.uk/document-library/.
Risk review
The Board has reviewed the risks facing the
Company. Further detail can be found in the principal and emerging
risks and uncertainties section.
Outlook
Whilst we continue to navigate an uncertain
economic and geopolitical outlook, recent news suggests that
monetary policy is likely to become more accommodating as we
progress through the year, helping to lay the foundations for a
sustainable recovery in value.
When it finally emerges, a change of sentiment
in public markets will benefit our investments in both public and
private companies. Until then, we draw comfort from a number of
factors: first, the majority of portfolio companies continue
to provide updates that are in line with expectations; second,
there is a substantial amount of growth on offer from within the
portfolio, even in these more difficult times; third, a review of
valuation metrics within the qualifying portfolio highlights the
deep value on offer; and finally, a significant majority of
qualifying companies are well funded and commercially robust.
David BrockChair
18 December 2023
The Company and its business
model
The Company was incorporated and registered in
England and Wales on 16 August 2004 under the Companies
Act 1985, registered number 05206425.
The Company has been approved as a Venture
Capital Trust by HMRC under Section 259 of the Income Taxes
Act 2007. The shares of the Company were first admitted to the
Official List of the UK Listing Authority and trading on the
London Stock Exchange on 29 October 2004 and can be found
under the TIDM code “HHV”. The Company is premium listed.
In common with many other VCTs, the Company
revoked its status as an investment company as defined in
Section 266 of the Companies Act 1985 on 23 May 2006
to facilitate the payment of dividends out of capital profits.
The Company’s principal activity is to invest in
a diversified portfolio of qualifying small UK based companies,
primarily trading on AIM, with a view to generating capital returns
and income from its portfolio and to make distributions from
capital and income to shareholders whilst maintaining its status as
a VCT.
The Company is registered as a small UK
Alternative Investment Fund Manager (AIFM) with a Board comprising
of six non-executive directors, five of whom are independent.
Canaccord Genuity Asset Management Limited acts as investment
manager whilst Canaccord Genuity Wealth Limited (CGWL) acts as
administrator and custodian. JTC (UK) Limited provides company
secretarial services.
The Board has overall responsibility for the
Company’s affairs including the determination of its investment
policy. However, the Board exercises these responsibilities through
delegation to Canaccord Genuity Asset Management Limited, Canaccord
Genuity Wealth Limited and JTC (UK) Limited as it considers
appropriate.
The Directors have managed and continue to
manage the Company’s affairs in such a manner as to comply with
Section 259 of the Income Taxes Act 2007.
Investment objectives, policy and
strategy
Investment objectives
The investment objectives of the Company are to
generate capital gains and income from its portfolio and to make
distributions from capital or income to shareholders whilst
maintaining its status as a Venture Capital Trust.
Investment policy
The Company intends to achieve its investment
objectives by making Qualifying Investments in companies listed on
AIM, private companies and companies listed on the AQSE Growth
Market, as well as Non-Qualifying Investments as allowed by the VCT
Rules.
Qualifying investments
The Investment Manager will maintain a
diversified portfolio of Qualifying Investments which may include
equities and fixed income securities as permitted by the VCT Rules.
Investments will primarily be made in companies listed on AIM but
may also include private companies that meet the Investment
Manager’s criteria and companies listed on the AQSE Growth Market.
These small companies have a permanent establishment in the UK and,
whilst of high risk, will have the potential for significant
capital appreciation.
To maintain its status as a VCT, the Company
must have 80 per cent. by value as measured by the VCT
Rules of all of its investments in Qualifying Investments
throughout accounting periods of the VCT beginning no later than
three years after the date on which those shares are issued. To
provide some protection against an inadvertent breach of this rule,
the Investment Manager targets a threshold of approximately
85 per cent.
Non-Qualifying Investments
The Non-Qualifying Investments must be permitted
by the VCT Rules and may include equities and exchange traded
funds listed on the main market of the London Stock Exchange, fixed
income securities, bank deposits that are readily realisable, the
Marlborough Special Situations Fund and the Marlborough UK
Micro-Cap Growth Fund. Subject to the investment controls below,
the allocation to each of these investment classes will vary to
reflect the Investment Manager’s view of the market environment and
the deployment of funds into Qualifying Companies. The market value
of the Non‑Qualifying Investments (excluding bank deposits) will
vary between nil and 50 per cent. of the net assets of the
Company.
The value of funds held in bank deposits will
vary between nil and 30 per cent. of the net assets of the
Company.
Investment controls
The Company may make co-investments in investee
companies alongside other funds, including other funds managed by
the Investment Manager.
Other than bank deposits, no individual
investment shall exceed 10 per cent. of the Company’s net
assets at the time of investment.
Borrowings
The Articles permit the Company to borrow up to
15 per cent. of its adjusted share capital and reserves (as
defined in the Articles). However, it is not anticipated that the
Company will have any borrowings in place and the Directors do not
intend to utilise this authority.
To the extent that any future changes to the
Company’s investment policy are considered to be material,
shareholder consent to such changes will be sought. Such consent
applies to the formal investment policy described above and not the
investment process set out below.
Investment process and
strategy
The Investment Manager follows a stock specific
investment approach based on fundamental analysis of the investee
company.
The Investment Manager’s fund management team
has significant reach into the market and meets with large numbers
of companies each week. These meetings provide insight into
investee companies, their end markets, products and services, and
competition. Investments are monitored closely and the Investment
Manager usually meets or engages with their senior leadership team
at least twice each year. Where appropriate the Company may
co-invest alongside other funds managed by the Investment
Manager.
The key selection criteria used in deciding
which investments to make include, inter alia:
• the strength and
depth of the management team;
• the business
strategy;
• a prudent
approach to financial management and forecasting;
• a strong balance
sheet;
• profit margins,
cash flows and the working capital cycle;
• barriers to entry
and the competitive landscape; and
• the balance of
risk and reward over the medium and long term.
Qualifying Investments
Investments are made to support the growth and
development of a Qualifying Company. The Investment Manager will
maintain a diversified portfolio that balances opportunity with
risk and liquidity. Qualifying Investments will primarily be made
in companies listed on AIM but may also include private companies
and companies listed on the AQSE Growth Market. Seed funding is
rarely provided and only when the senior leadership team includes
proven business leaders known to the Investment Manager.
Working with advisers, the Investment Manager
will screen opportunities, often meeting management teams several
times prior to investment to gain a detailed understanding of the
company. Investments will be sized to reflect the risk and
opportunity over the medium and long term. In many cases, the
Investment Manager will provide further funding as the need arises
and the investment matures. When investing in private companies,
the Investment Manager will shape the investment to meet the
investee company’s needs whilst balancing the potential for capital
appreciation with risk management.
Investments will be held for the long term
unless there is a material adverse change, evidence of structural
weakness, or poor governance and leadership. Partial realisations
may be made where necessary to balance the portfolio or, on
occasion, to capitalise on significant mispricing within the stock
market.
Non-Qualifying Investments
The Investment Manager’s VCT team works closely
with the Investment Manager’s wider fund management team to deliver
the investment strategy when making Non-Qualifying Investments, as
permitted by the VCT Rules. The Investment Manager will vary the
exposure to the available asset classes to reflect its view of the
equity markets, balancing the potential for capital appreciation
with risk management, liquidity and income.
The Non-Qualifying Investments will typically
include a focused portfolio of direct investments in companies
listed on the main market of the London Stock Exchange. The
portfolio will mix long term structural growth with more tactical
investment to exploit short term mispricing within the market. The
use of the Marlborough Special Situations Fund and the Marlborough
UK Micro-Cap Fund enables the Company to maintain its exposure to
small UK companies whilst the Investment Manager identifies
opportunities to invest the proceeds of fundraisings into
Qualifying Companies.
The Investment Manager may use certain exchange
traded funds listed on the Main Market of the London Stock Exchange
to gain exposure to asset classes not otherwise accessible to the
Company.
Environmental, social and governance
considerations
Approach
The Company regards the development of a clearly
defined and integrated ESG management system as an important pillar
for the long-term success of its business, as well as for its
investee companies.
The Investment Manager believes that companies
with strong governance, sustainable business models and balanced
workforces are more likely to create value over the long term
whilst reducing investment risk, benefiting the wider UK economy
and society and generating positive shareholder returns.
ESG in the investment
process
Holding meaningful stakes in investee companies
provides the Investment Manager with the opportunity and
responsibility to positively influence investee company behaviour,
both at the point of investment and during the time in which the
Company is a shareholder.
Due diligence
The Investment Manager assesses ESG factors
across the portfolio. For Qualifying Companies, the Investment
Manager will use the information provided to develop an
individualised ESG risk map to identify issues and track
behavioural themes. The Investment Manager regularly engages with
senior management teams and boards to identify and raise issues of
note, provide a forum for positive feedback and promote change
where necessary.
Engagement, exclusions and divestment
policies
As part of its investment strategy, the Company
has adopted policies covering exclusions and divestment to describe
behaviours that fall outside of the Company’s expectations of
investee companies. The Investment Manager has adopted an
engagement policy to create a clear framework that defines how it
will interact with investee companies.
The Investment Manager
The Investment Manager adheres to its own ESG
investment and stewardship policies. These include an ESG Policy,
an Engagement Policy, a Conflicts of Interest Policy and a
Stewardship Policy that, together with the investment mandate and
the Company’s ESG approach, inform the Company’s approach.
CGAM is a signatory of the United Nations
Principles of Responsible Investment (UN PRI) and HM Treasury’s
Women in Finance Charter.
Risk management
The structure of the Company’s investment
portfolio and its investment strategy, has been developed to
mitigate risk where possible. Key risk mitigation strategies are as
follows:
• The Company has a
broad portfolio of investments to reduce stock specific risk.
• Flexible
allocations to non-qualifying equities, exchange traded funds
listed on the Main Market of the London Stock Exchange, fixed
income securities, bank deposits that are readily realisable, the
Marlborough Special Situations Fund and the Marlborough UK
Micro-Cap Fund allow the Investment Manager to adjust portfolio
risk without compromising liquidity.
• Regular meetings
with investee companies aid the close monitoring of investments to
identify potential risks and allow corrective action where
possible.
• Regular Board
meetings and dialogue with the Directors, along with policies to
control conflicts of interest and co-investment with the
Marlborough fund mandates, support strong governance.
Further information can be found in this
report.
Key performance indicators
The Directors consider the following Key
Performance Indicators (KPIs) to assess whether the Company is
achieving its strategic objectives. The Directors believe these
measures help shareholders assess how effectively the Company is
applying its investment policy and are satisfied the results give a
fair indication of whether the Company is achieving its investment
objectives and policy. The KPIs are established industry
measures.
Further commentary on the performance of these
KPIs has been discussed in the Chair’s statement and Investment
Manager’s report.
1 NAV
and share price total returns
The Board monitors NAV and share price total
return to assess how the Company is meeting its objective of
generating capital gains and income from its portfolio and making
distributions to shareholders. The NAV per share decreased from
60.19 pence to 46.34 pence resulting in a loss to
ordinary shareholders of -8.85 pence per share (-14.70%)(1)
after adjusting for dividends paid in the year.
The Board considers peer group and benchmark
comparative performance. Due to the very low number of AIM VCTs,
the Board reviews performance against the generalist VCTs as well
as the AIM VCTs to provide a broader peer group for comparison
purposes. Performance is also measured against the FTSE AIM
All-Share Index Total Return. With 91% of the portfolio of
Qualifying Investments in companies listed on AIM, the Directors
consider this to be the most appropriate benchmark. However, HMRC
derived investment restrictions and investments in private
companies, main market listed companies and bonds mean that the
index is not a wholly comparable benchmark for performance.
Rolling Returns to end Sep 2023 |
1Y |
3y |
5y |
10y |
NAV total return |
-14.70% |
-15.30% |
-17.18% |
29.11% |
Share price total return |
-23.51% |
-10.53% |
-15.87% |
35.53% |
NAV total return (dividends reinvested) (1) |
-15.93% |
-22.40% |
-25.80% |
18.49% |
Share price total return (dividends reinvested) (1) |
-24.80% |
-18.58% |
-25.16% |
23.65% |
FTSE AIM All-Share Index Total Return |
-8.28% |
-21.23% |
-29.50% |
4.21% |
Source: Canaccord Genuity Asset
Management Ltd
(1) The NAV total
return (dividends reinvested) and share price total return
(dividends reinvested) measures have been included to improve
comparability with the FTSE AIM All-Share Index Total Return which
is also calculated on that basis.
Reflecting the difficult market conditions that
continued to dominate through the financial year, and in common
with the AIM VCT peer group, the Company reported a significant
reduction in the NAV per share. The NAV total return fell behind
the benchmark over the year; however, it remains ahead of the
benchmark over three, five and ten years but behind the average of
the AIM VCT peer group over the same time horizons. The steep falls
in valuations of companies listed on AIM, which have heavily
impacted the performance of the Company and its AIM VCT peers, have
not been mirrored in the Generalist VCT sector, which has reported
a very modest average decline of –0.05% over the period under
review (source: Morningstar). The divergence of performance
across the two peer groups is particularly notable across the two
years since the start of the bear market with the AIM VCT sector
returning an average loss of 42.1% against the average loss within
the Generalist VCT sector of -1.1%. AIM has fallen by 42.0% over
the same two-year period. It is difficult to account for the
strongly divergent performance although the possible use of
investment structures not accessible to investors in public
companies may account for some of the difference.
(1) Alternative performance measure definitions
and illustrations can be found in the glossary of terms.
Further detailed information on peer group
performance is available through Morningstar
(https://www.morningstar.co.uk) and the AIC
(https://www.theaic.co.uk/aic/statistics).
2. Share
price discount to NAV per share
The Company uses secondary market purchases of
its shares to improve the liquidity in its shares and support the
discount. The discount to NAV per share is an important influence
on a selling shareholder’s eventual return. The Company aims to
maintain a discount of approximately 5 per cent. to the last
published NAV per share (as measured against the mid-price).
The Company’s shares traded at a discount of
7.21%(1) as at 30 September 2023 (2022: 4.25%(1) premium)
when calculated with reference to the 30 September 2023 NAV
per share. The 1 and 5 year average share price discounts were
6.06%(1) and 5.64%(1) respectively.
The Company’s shares are priced against the last
published NAV per share with the market typically adjusting the
price to reflect the NAV after its publication. In line with the
Company’s valuation policy, the Company aims to publish the quarter
end NAV per share within 5 business days of the period end to allow
time for the Investment Manager and Board to review and agree the
valuation of the private companies held within the investment
portfolio.
The Company’s share price on 30 September
2023 reflected the last published NAV per share prior to the year
end, which was released on 26 September 2023. The
30 September 2023 NAV was reported on 5 October 2023,
following the review of the valuations of the private
companies.
As at 15 December 2023, the discount to NAV
was 6.71% of the last published NAV per share.
3. Ongoing
charges ratio
The ongoing charges of the Company were 2.24%(1)
(2022: 2.06%(1)) of the average net assets of the Company
during the financial year to 30 September 2023.
The increase in the OCR is principally driven by
the fall in the average net assets across the year that followed
the drop in the NAV per share. Other factors included below
inflation increases in board remuneration and an increase in the
number of non-executive directors from five to six. There were also
modest investments made to improve shareholder communication
through investments into the Company’s website, video updates and
an increased number of shareholder events. The Ongoing Charges
methodology divides ongoing expenses by average net assets.
The Company’s ongoing charges ratio remains
competitive against the wider VCT industry and similar to other AIM
VCTs. This ratio is calculated using the AIC’s “Ongoing Charges”
methodology and, although based on historical information, it
provides shareholders with an indication of the likely future cost
of managing the fund.
Cost control and efficiency continues to be a
key focus for the Board. Although the OCR increased within the
year, the Board is pleased to report that the Company’s expenses
incurred within the year were below budget.
(1) Alternative performance measure definitions
and illustrations can be found in the glossary of terms.
4. Dividends
per share
The Company’s policy is to target a tax free
dividend yield equivalent to 5% of the year end NAV per share. The
Board remains committed to maintaining a steady flow of dividend
distributions to shareholders.
A total of 5.00 pence per share
(2022: 6.65 pence) of dividends was paid during the year,
comprised of a special dividend of 2.00 pence per share paid
on 10 February 2023, a final dividend of 2.00 pence in
respect of the previous financial year (2021: 3.15 pence)
paid on 10 February 2023 and an interim dividend of 1.00 penny
(2022: 1.00 penny) paid on 28 July 2023.
A final dividend of 1.50 pence per share
will be proposed at the Annual General Meeting. If approved by
shareholders, the payment of the interim, final and special
dividends in respect of the financial year to 30 September
2023 would represent a distribution to shareholders of 9.7% of the
30 September 2023 NAV per share.
The below table demonstrates how the Board has
been able to consistently pay dividends in line with the 5% target
and dividend policy.
Dividends paid/payable by financial year |
Year |
Year end NAV |
Dividends |
Yield |
Additional information |
pence per share |
2010/11 |
61.14 |
4.00 |
6.5% |
|
2011/12 |
61.35 |
3.25 |
5.3% |
|
2012/13 |
71.87 |
3.75 |
5.2% |
|
2013/14 |
80.31 |
4.25 |
5.3% |
|
2014/15 |
74.64 |
4.00 |
5.4% |
|
2015/16 |
75.93 |
4.00 |
5.3% |
|
2016/17 |
80.82 |
4.00 |
4.9% |
|
2017/18 |
87.59 |
5.40 |
6.2% |
Including special dividend of 1 penny. |
2018/19 |
70.60 |
3.75 |
5.3% |
|
2019/20 |
73.66 |
5.40 |
7.3% |
Including a special dividend of 1.75 pence. |
2020/21 |
100.39 |
7.40 |
7.4% |
Including a special dividend of 2.50 pence. |
2021/22 |
60.19 |
3.00 |
5.0% |
|
2022/23 |
46.34 |
4.50 |
9.7% |
Including a special dividend of 2.00 pence and proposed final
dividend of 1.50 pence. |
(1) Alternative performance measure definitions
and illustrations can be found in the glossary of terms.
5. Compliance
with VCT regulations
A VCT must be approved by HMRC at all times and,
in order to retain its status, the Company must meet a number of
tests as set out by the VCT legislation. Throughout the year ended
30 September 2023 the Company continued to meet these
tests.
The investment test increased from 84.85% to
91.65% in the financial year. The increase in the investment test
percentage reflects progress made in deploying capital raised
through the 2022 offer and the return of capital to shareholders
through the payment of a 2 pence per share special dividend on
10 February 2023 following the successful exit from
Ideagen plc. The investment test remains comfortably ahead of
the 80% threshold that applies to the Company and ahead of the
target of 85% as set out in the Company’s investment policy.
The Company invested £13.6 million into 10
Qualifying Companies, 4 of which were investments into new
Qualifying Companies. The Board is pleased with the level of new
Qualifying Investment, which was ahead of expectations.
The Board believes that the Company will
continue to meet the HMRC defined investment test and other
qualifying criteria on an ongoing basis.
For further details please refer to the
Investment Manager’s report.
Principal and emerging risks and
uncertainties
The Directors acknowledge that they are
responsible for the effectiveness of the Company’s risk management
and internal controls and periodically review the principal risks
faced by the Company at Board meetings. The Board may fulfil these
responsibilities through delegation to Canaccord Genuity Asset
Management Limited and Canaccord Genuity Wealth Limited as it
considers appropriate. The principal risks facing the Company,
together with mitigating actions taken by the Board, are set out
below:
Risk |
Potential consequence |
How the Board mitigates risk |
Changes During the Year |
Venture Capital Trust approval risk. The Company
operates in a complex regulatory environment and faces a number of
related risks. A breach of Section 259 of the Income Taxes
Act 2007 could result in the disqualification of the Company
as a VCT. |
Loss of VCT approval could lead to the Company losing its exemption
from corporation tax on capital gains, shareholders losing their
tax reliefs and, in certain circumstances, being required to repay
the initial tax relief on their investment. |
To reduce this risk, the Board has appointed an investment manager
with significant experience in the management of venture capital
trusts. The Investment Manager regularly provides the Board with
written and verbal reports. The Board also appointed Philip
Hare & Associates LLP to monitor compliance with
regulations and provide half-yearly compliance reports to the
Board. |
No change. |
Investment risk. Many of the Company’s investments
are held in small, high risk companies which are either listed on
AIM or privately held. |
Investment in poor quality companies could reduce the capital and
income return to shareholders. Investments in small companies are
often illiquid and may be difficult to realise. |
The Board has appointed an investment manager with significant
experience of investing in small companies. The Investment Manager
maintains a broad portfolio of investments across a wide range of
industries and sectors. Individual Qualifying Investments rarely
exceed 5% of net assets. The Investment Manager holds regular
company meetings to monitor investments and identify potential
risk. The VCT’s liquidity is monitored on a regular basis by the
Investment Manager and reported to the Board quarterly and as
necessary. |
No change. Changes in monetary or fiscal policy have undermined
consumer, business and investor confidence with negative impacts on
profitability, investment and stock market performance. The higher
cost of borrowing is starting to impact the cost of debt for
companies and consumers. Whilst still subdued, UK consumer and
business confidence has recovered off lows as energy prices,
inflation and supply chain frictions all eased. Whilst the economy
has outperformed expectations for this year, the outlook remains
weak. |
Compliance risk. The Company is required to comply
with the FCA Listing Rules and the Disclosure Guidance and
Transparency Rules, the Companies Act, Accounting Standards, the
General Data Protection Regulation and other legislation. The
Company is also a small registered Alternative Investment Fund
Manager (“AIFM”) and has to comply with the
requirements of the AIFM Directive. |
Failure to comply with these regulations could result in a
delisting of the Company’s shares, financial penalties, a qualified
audit report or loss of shareholder trust. |
Board members have considerable experience of operating at senior
levels within quoted businesses. They have access to a range of
advisors including solicitors, accountants and other professional
bodies and take advice when appropriate. CGWL provides compliance
oversight to both the Administrator and the Investment Manager and
reports to the Board on a quarterly basis. |
No change. |
Operational risk and outsourcing. Failure in the
Investment Manager, Administrator, Custodian, Company Secretary or
other appointed third party systems and controls or disruption to
its business as a result of operational failure, environmental
hazards or cyber security attacks. |
Failures could put the assets of the Company at risk or result in
reduced or inaccurate information being passed to the Board or
shareholders. Quality standards may be reduced through lack of
understanding or loss of control. |
The Company has in place a risk matrix and a set of internal
policies which are reviewed on a regular basis. It has written
agreements in place with its third-party service providers. The
Board, through the Management and Service Provider Engagement
Committee, receives regular reports from the Investment Manager,
Administrator and custodian to provide assurance that they operate
appropriate control and oversight systems and have in place
training and other defence measures to mitigate the risk of cyber
attack. Additionally, the Board receives a control report from the
Company’s registrars on an annual basis. Where tasks are outsourced
to other third parties, reputable firms are used and performance is
reviewed periodically by the Management and Service Provider
Engagement Committee |
No change. |
Key personnel risk. A change in the key personnel
involved in the management of the portfolio. |
Potential impact on investment performance. |
The Board discusses key personnel risk and resourcing with the
Investment Manager periodically. The VCT team within the Investment
Manager comprises two fund managers and two investment analysts,
which helps mitigate this risk. |
No change. |
Exogenous risks such as economic, political, financial,
climate change and health. Economic risks include
recession and sharp changes in interest rates. Political risks
include the terms of the UK’s exit from the European Union or a
change in government policy causing the VCT scheme to be brought to
an end. A condition of the European Commission’s State aid approval
of the UK’s VCT and EIS schemes in 2015 was the introduction of a
retirement date for the current schemes at midnight on 5 April
2025 (the ‘Sunset Clause’). If the relevant legislation is not
renewed or replaced with similar or equivalent legislation, new
investors will not be able to claim income tax relief for
investments into new shares issued by VCTs after 5 April 2025.
Climate change presents environmental, geopolitical, regulatory and
economic risks. In the long term, some companies may have
restrictions imposed on their operational model that reduce
revenues and profit margins and increases their cost of
capital. |
Instability or changes arising from these risks could have an
impact on stock markets and the value of the Company’s investments
so reducing returns to shareholders. A failure to renew or replace
the relevant sections of the Finance (No 2) Act 2015 with
similar or equivalent legislation would make it more difficult for
the Company to attract new capital whilst continuing to operate
under its current investment policy. Companies may face
restrictions on emissions, water consumption and increased risk of
environmental hazards. |
Regular dialogue with the manager provides the Board with assurance
that the Investment Manager is following the investment policy
agreed by the Board and appraises the Board of the portfolio’s
current positioning in the light of prevailing market conditions.
The Company’s investment portfolio is well diversified and the
Company has no gearing. The Board regularly reviews investment test
forecasts and liquidity analysis, including under stress scenarios,
to monitor current and anticipate future performance against HMRC
legislation and to ensure the Company has, and will continue to
have, access to sufficient liquidity and distributable reserves to
maintain compliance with its key policies. The Board keeps abreast
of current thinking through contact with industry associations and
its advisors. The Investment Manager undertakes a review of ESG
factors as part of the investment process. Climate change, or the
need to limit its impact, will result in technological innovation
as young companies seek to develop solutions and create
opportunities for value creation for existing or new Qualifying
Companies. |
No change. The Bank of England increased base rates by 300bps to
5.25% during the financial year, significantly increasing the cost
of debt for companies and and households with floating rate debt.
Companies and households with savings benefitted. The full impact
of this is yet to be felt. In the Autumn Statement 2023, the
Government confirmed its intention to extend the sunset clause by
10 years to 5 April 2035. Legislation is expected to be
introduced through the next Finance Bill and passed into law in
early 2024. The wars in Ukraine and the Middle East present a range
of risks that may have profound economic and social consequences if
they impact access to certain commodities or much higher
prices. |
Additional risks and further details of the
above risks and how they are managed are explained in note 15
of the financial statements. Trends affecting future developments
are discussed in the Chair’s statement and the Investment Manager’s
report.
Long term viability
statement
—In accordance with provision 36 of the AIC Code
of Corporate Governance, the Directors have carried out a robust
assessment of the Company’s current position and its emerging and
principal risks. This assessment has been carried out over a longer
period than the 12 months required by the ‘Going Concern’
provision. The Board conducted this review for a period of five
years, which was selected because it:
• is consistent
with investors’ minimum holding period to retain the 30% income tax
relief;
• exceeds the time
allowed to deploy funds raised under the current offer in
accordance with VCT legislation; and
• is challenging to
forecast beyond five years with sufficient accuracy to provide
actionable insight.
The Board considers the viability of the Company
as part of its continuing programme of monitoring risk. The Company
has a detailed risk control framework, documented procedures and
forecasting model in place to reduce the likelihood and impact of
risk taking that exceeds the levels agreed by the Board. These
controls are reviewed by the Board and Investment Manager on a
regular basis.
The Board has considered the Company’s financial
position and its ability to meet its liabilities as they fall due
over the next five years. Forecasts and stress tests have been used
to support their assessment and the following factors have been
considered in relation to the Company’s future viability:
• the Company
maintains a highly diversified portfolio of Qualifying
Investments;
• the Company is
well invested against the HMRC investment test (91.65% at
30 September 2023) and the Board believes the Investment
Manager will continue to have access to sufficient numbers of
investment opportunities to maintain compliance with the HMRC
investment test;
• the Company held
£19.2 million in cash at the year end;
• the Company has
distributable reserves of £134.4 million at 30 September
2023, equivalent to 41 pence per share;
• the Company has a
portfolio of Non-Qualifying Investments, most of which are listed
in the FTSE 350 and offer good levels of liquidity should the
need arise;
• the financial
position of the Company at 30 September 2023 was strong with
no debt or gearing;
• the offer for
subscription launched on 7 September 2023 has provided further
liquidity for deployment in line with the Company’s policies and to
meet future expenses;
• the ongoing
charges ratio of the Company at the year end was 2.24%;
• the Company has
procedures and forecast models in place to identify, monitor and
control risk, portfolio liquidity and other factors relevant to the
Company’s status as a VCT; and
• the Investment
Manager and the Company’s other key service providers have
contingency plans in place to manage operational disruptions.
In assessing the Company’s future viability, the
Board has assumed that investors will wish to continue to have
exposure to the Company’s activities, that performance will be
satisfactory and the Company will continue to have access to
sufficient capital.
Based on this assessment, the Directors have a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the next
five years.
Other matters
Dividend policy
The Company’s dividend policy is to target a tax
free dividend yield equivalent to 5% of the year end NAV per share.
The ability to pay dividends is dependent on the Company’s
available distributable reserves and cash resources, the Act, the
Listing Rules and the VCT Rules. The policy is non-binding and
at the discretion of the Board. Dividend payments may vary from
year to year in both quantum and timing. The level of dividend paid
each year will depend on the performance of the Company’s
portfolio. In years where there is strong investment performance,
the Directors may consider a higher dividend payment, including the
payment of special dividends. In years where investment performance
is not as strong, the Directors may reduce or even pay no
dividend.
Discount control policy and management
of share liquidity
The Company aims to improve liquidity and to
maintain a discount of approximately 5 per cent. to the last
published NAV per share (as measured against the mid-price) by
making secondary market purchases of its shares in accordance with
parameters set by the Board.
This policy is non-binding and at the discretion
of the Board. Its operation depends on a range of factors including
the Company’s liquidity, shareholder permissions, market conditions
and compliance with all laws and regulations. These factors may
restrict the effective operation of the policy and prevent the
Company from achieving its objectives.
Diversity
The Board comprises three male non-executive
directors and three female non-executive directors with a diverse
range of experience, skills, length of service and backgrounds. The
Board considers diversity when reviewing Board composition and has
made a commitment to consider diversity when making future
appointments. The Board will always appoint the best person for the
job. It will not discriminate on the grounds of gender, race,
ethnicity, religion, sexual orientation, age or physical
ability.
Environmental Social and Governance
(ESG) and Considerations
The Board seeks to maintain high standards of
conduct with respect to environmental, social and governance issues
and to conduct the Company’s affairs responsibly.
The Company does not have any employees or
offices and so the Board does not maintain any specific policies
regarding employee, human rights, social and community issues but
does expect the Investment Manager to consider them when fulfilling
their role. As the Company used less than 40MWh of energy during
the period it is exempt from the Streamlined Energy and Carbon
Reporting requirements.
The Company, whilst exempt, continues to monitor
and develop its approach to the recommendations of the Task Force
on Climate related Financial Disclosures.
The management of the Company’s investment
portfolio has been delegated to its Investment Manager Canaccord
Genuity Asset Management Ltd. The Company has adopted specific
policies on divestment and excluded activities and it expects the
Investment Manager to take account of ESG considerations in its
investment process for the selection and ongoing monitoring of
underlying investments. The Board has also given the Investment
Manager discretion to exercise voting rights on resolutions
proposed by investee companies.
The Investment Manager continues to strengthen
its approach to ESG issues.
To minimise the direct impact of its activities
the Company offers electronic communications where acceptable to
reduce the volume of paper it uses and uses Carbon Balanced paper
manufactured at a FSC accredited mill to print its financial
reports. Vegetable based inks are used in the printing process
where appropriate.
Prospects
The prospects and future development of the
Company are discussed in detail in the outlook section of the
Chair’s statement.
The strategic report is approved, by order of
the Board of Directors.
David BrockChair
18 December 2023
Summary of VCT regulations
To maintain its status as a VCT, the Company
must be approved by HMRC and comply with a number of conditions. A
summary of the most important conditions are detailed below:
VCTs’ obligations
VCTs must:
• have 80 per
cent. (by VCT tax value) of all funds raised from the issue of
shares invested in Qualifying Investments throughout accounting
periods of the VCT beginning no later than three years after the
date on which those shares are issued;
• have at least
70 per cent. by VCT tax value of Qualifying Investments in
Eligible Shares which carry no preferential rights (unless
permitted under VCT Rules);
• have at least
30 per cent. of all new funds raised by the Company invested
in Qualifying Investments within 12 months of the end of the
accounting period in which the Company issued the shares;
• have no more than
15 per cent. by VCT tax value of its investments in a single
company (as valued in accordance with the VCT Rules at the
date of investment);
• derive most of
its income from shares and securities, and, must not retain more
than 15 per cent. of its income derived from shares and
securities in any accounting period; and
• have their shares
listed on the main market of the London Stock Exchange or a
European regulated Stock Exchange.
VCTs must not:
• make a Qualifying
Investment in any company that:
○ has (as a result
of the investment or otherwise) received more than £5 million
from State aid investment sources in the 12 months prior to
the investment (£10 million for Knowledge Intensive
Companies);
○ has (as a result
of the investment or otherwise) received more than £12 million
from State aid investment sources in its lifetime (or
£20 million for Knowledge Intensive Companies);
○ in general has
been generating commercial revenues for more than 7 years (or
10 years for Knowledge Intensive Companies); or
○ will use the
investment to fund an acquisition of another company (or its trade
and assets).
• make any
investment which is not a Qualifying Investment unless permitted by
section 274 ITA; and/or
• return capital to
shareholders before the third anniversary of the end of the
accounting period during which the subscription for shares
occurs.
Qualifying Investments
A Qualifying Investment consists of new shares
or securities issued directly to the VCT by a Qualifying Company
that at the point of investment:
• has gross assets
not exceeding £15 million prior to investment and
£16 million post investment;
• carries out
activities which are regarded as a Qualifying Trade;
• is a private
company or is listed on AIM or the AQSE Growth Market;
• has a permanent
UK establishment;
• is not controlled
by another company;
• will deploy the
money raised for the purposes of the organic growth and development
of a Qualifying Trade within 2 years;
• has fewer than
250 employees (or fewer than 500 employees in the case of certain
Knowledge Intensive Companies);
• in general, has
not been generating commercial sales for more than 7 years
(ten years for Knowledge Intensive Companies);
• has not received
more than the permitted annual and lifetime limits of risk finance
State aid investment; and
• has not been set
up for the purpose of accessing tax reliefs or is in substance a
financing business.
The Finance Act 2018 introduced a
principles-based approach known as the risk to capital condition to
establish whether the activities or investments of an investee
company can qualify for VCT tax reliefs. This condition has two
parts:
• whether the
investee company has an objective to grow and develop over the long
term; and
• whether there is
a significant risk that there could be a loss of capital to the
investor of an amount exceeding the net return.
Investment Manager’s report
Introduction
This report covers the 2022/23 financial year,
1 October 2022 to 30 September 2023. The Investment
Manager’s report contains references to movements in the NAV per
share and NAV total return per share. Movements in the NAV per
share do not necessarily mirror the earnings per share reported in
the accounts and elsewhere, which convey the profit after tax of
the Company within the reported period as a function of the
weighted average number of shares in issue for the period.
Investment performance measures contained in
this report are calculated on a pence per share basis and
include realised and unrealised gains and losses.
Investment report
Starting from a very low base, investor
sentiment showed tentative signs of recovery as investors became
more confident that inflation was close to peaking and, with it,
the interest rate tightening cycle that had done so much damage to
risk assets in 2022. The failure in March 2023 of Silicon
Valley Bank, several US regional banks and Credit Suisse challenged
the developing thesis and the markets swiftly moved to price in a
series of rate cuts by the Federal Reserve throughout the second
half of the year. A series of subsequent data points highlighted a
substantially more robust US economy which would require US
interest rates to remain higher for longer. This dynamic had
implications for risk assets globally.
The UK economy has experienced something
similar, proving to be substantially stronger this year than most
predicted. Inflation has remained disappointingly high, forcing the
Bank of England (“BoE”) into a more hawkish
position with many homeowners protected by fixed rate mortgages and
now benefitting from higher interest payments on their savings. UK
inflation (“CPI”) peaked at 11.1% in
October 2022 but has since steadily declined, reaching 6.7% in
September.
UK consumer confidence remains low, albeit
substantially better than at the start of the financial year. The
September reading did, however, suggest that higher interest rates
might finally start to take their toll. There are other signs too
that tighter monetary policy is starting to impact with retail
sales weakening and unemployment starting to trend higher, whilst
remaining low by historical standards.
With the Bank of England raising interest rates
seven times within the year to 5.25%, the focus has shifted to the
outlook for rate cuts. Currently, the market is forecasting that
the BoE remains on hold until mid‑2024. This is substantially
better than the forecast at the start of the financial year, but
also much higher than predicted in the Spring following the failure
of SVB. These huge swings in the outlook have been mirrored in the
US and, to a lesser extent, in Europe making it difficult for a
range of asset classes from equities to bonds and foreign
exchange.
Sadly, these factors continue to depress
appetite for investment into high-risk growth equity. AIM continues
to endure a particularly difficult period, having now fallen by
41.6% in the two years to 30 September 2023. By any measure,
this is a long and uncomfortable bear market. Although trading
varies quite significantly by sector, price action is heavily
influenced by technical factors with many UK institutional
shareholders still having to manage sustained outflows. This
dynamic is not unique to AIM. Small companies are struggling in
other territories too, with the Russell 2000 (US small companies)
and MSCI Europe Small Cap Index both posting positive returns over
the period under review whilst remaining negative over two
years.
The risk averse environment and constant need
for liquidity has again led to a material underperformance by AIM
(-9.95%) over the year relative to other domestic indices such as
the FTSE 100 (+10.36%) and FTSE 250 (+6.47%).
Performance
In the 12 months to 30 September 2023,
the audited NAV per share decreased from 60.19 pence to
46.34 pence, a NAV total return to investors of
-8.85 pence per share after adding back the 5.00 pence of
dividends paid in the year and which translates to a loss of
-14.70%.
The qualifying investments made a net loss of
-7.99 pence per share whilst the non-qualifying investments
loss was –0.32 pence per share. The -0.54 pence adjusting
balance was the net of the investment in Marlborough Special
Situations Fund, running costs and investment income.
Corporate news flow was mixed across the year.
After a difficult winter, when many companies faced weaker trading
or pressure on margins, primarily due to macro-economic factors,
many companies reported trading improved through the spring and
summer. September included an unusually high number of poor
updates, although our analysis suggests this was mostly due to
company specific factors rather than a weakening economy or
tightening of financial conditions. We report below on those
companies that were the most significant contributors to
performance. In particular, we note that three of the most
significant detractors (Zoo Digital, Maxcyte and Tortilla Mexican
Grill) are companies that have previously delivered strong
contributions to the NAV; we are hopeful that their share prices
can recover with time.
Equipmake (+44.0%, +0.75 pence per share)
reported that revenues in the 12 months to May 2023 grew
by 34% to £5.1m. The company also announced two contracts to
convert diesel buses into battery powered buses and a £3.2m grant
to develop its electric powertrain technology for the off-highway
sector in partnership with Caterpillar. The company is forecast to
increase revenues by 163% to £13.4m in the current year. Profits
are not expected until 2026. The company is expected to close the
current year with £2.0m of net cash.
Following an activist campaign launched by
founder Jonathan Milner, Abcam (+38.0%, +0.25 pence per share)
launched a strategic review that resulted in a $24 per share
takeover offer from Danaher. The exit price represents an increase
of 7,086% (71x) over the book cost of the investment.
Following a two-year legal process, PCI-PAL
(+21.7%, +0.21 pence per share) received a favourable ruling
from the UK High Court, comprehensively defeating the patent
infringement claims from competitor Sycurio. Whilst this is a clear
positive and a strong endorsement of the company’s IP position, the
ruling may yet be subject to appeal. Sycurio filed similar claims
in the US courts, which may be heard in 2024. The company continues
to trade well with 2024 revenue growth subject to some modest
revision to £19.1m (previously: £20.0m), equivalent to +28%
YOY. The company is expected to report a maiden profit within the
current financial year and close the year with net cash of
£0.3m.
XP factory (+37.5%, +0.17 pence per share)
reported strong growth in both H1’23 revenues (£18.6m, +130% YoY)
and adjusted EBITDA (£2.4m, +120%). The company continues to roll
out its escape room and competitive socialising concepts across the
UK. Although trading within the current year remains strong, the
company has moderated the new openings planned in FY25 and beyond.
The company has a good balance sheet with net cash of £3.6m
(30 June 2023).
Diaceutics (+28.8%, +0.15 pence per share)
reported H1’23 revenues of £9.9m (+32% YoY) and an EBITDA loss of
£0.2m. Net cash was £17.9m. Recurring revenues grew by 66% to £4.6m
as more customers signed annual or multi-year licences for the
company’s DXRX platform. The forward order book of £24.1m provides
good cover of the current year forecast. The company also announced
that the founder would move from his current CEO role into a
business development role with the current COO moving into the CEO
role.
Long running strikes (screenwriters and actors)
in the US have materially affected the commissioning of new content
for distribution through streaming platforms, leading to a
substantial drop off in demand for Zoo Digital’s (-69.2%,
-1.14 pence per share) localisation and media services and
several significant forecast revisions. On current projections,
revenues will fall by 50% this year to $45m. Whilst the short-term
outlook remains uncertain, production has resumed with the company
expecting to return to growth in early 2024. There are no changes
to medium term guidance. The company is well funded following a
$15.5m fundraise in April 2023.
The commercial impact of last year’s dispute
with Azerion continues to cast a long shadow over Bidstack (-90.0%,
-0.90 pence per share), highlighting profound issues with the
company’s operational model, leadership and governance structures.
A Dutch court will review Azerion’s decision to withhold payment.
In the meantime, a substantially weaker balance sheet has left the
company exposed.
Following a very successful year in 2022 that
included three profit upgrades, Maxcyte (-55.4%, -0.73 pence
per share) has been the victim of a notably weaker end market
following the failure of Silicon Valley Bank. The significant
tightening of financial conditions within the healthcare sector has
caused many clinical and pre-clinical companies to adopt a more
cautious approach to investment, leading the company to
substantially revise its expectations for this year across several
updates. Disappointing as this is, Maxcyte’s long-term prospects
remain attractive, underpinned by an expanding partnership
portfolio with potential pre-commercial milestones valued at over
$1.6b and future royalties. The company’s shares have been savagely
de-rated, at one point valuing the company at $264m with year-end
net cash forecast to be approximately $200m. Post period end, the
FDA approved Casgevy for the treatment of severe sickle cell
disease, the first time a therapy developed using Maxcyte’s flow
electroporation technology has been approved by the FDA. The
approval will trigger further milestone payments and significant
royalties from 2025.
Initially, the outlook looked promising for
Polarean (-76.9%, -0.70 pence per share) with the company
receiving (in December 2022) FDA clearance for Xenoview, its
drug-device combination product that allows MRI scanners to provide
detailed evaluation of lung function. In subsequent updates, the
company reduced its assumptions for revenue growth and increased
its guidance on costs. The company has appointed a new CEO with
prior experience in driving adoption within the medical equipment
sector. The company has net cash of $9.9m but will need additional
funding in 2024.
A desire to defend its value proposition at the
cost of margins led Tortilla Mexican Grill (-51.7%,
-0.56 pence per share) to issue revised profit guidance in
late 2022 as inflationary pressures (food, labour and energy) ate
into margins. Subsequent updates have remained consistent with the
revised forecasts with the company reporting revenue growth of 22%
in the 6 months to June 2023. The company continues to
use its strong balance sheet to expand its UK footprint with 8 new
sites to be opened in 2023. The medium-term opportunity remains
compelling.
We entered the year expecting to see an increase
in the number of companies undertaking an initial public offering
in the second half of the financial year. This has not come to pass
with the low valuations and the continued flow of capital out of
open-ended funds increasing the risk of a poor outcome and acting
as a deterrent to new entrants. Investor confidence and appetite
for risk was depressed by a broad range of factors (higher interest
rates, US regional banking crisis, war in the Middle East) and will
need to improve before the market becomes more attractive to new
listings.
We invested £13.6m through 12 Qualifying
Investments into 10 Qualifying Companies that included 2 IPOs, 2
new investments into companies listed on AIM, 6 follow on
investments into existing AIM portfolio companies and 2 further
investments into Kidly. The most significant new investments
included Engage XR, Fadel and Itaconix. We reduced our investments
in Bidstack, Eneraqua, Equipmake, Faron Pharmaceuticals, Smoove and
Zoo Digital. We made complete exits from Diurnal, In The Style and
Yourgene.
Portfolio structure
The VCT is comfortably through the HMRC defined
investment test and ended the period at 91.65% invested as measured
by the HMRC investment test. By market value, the VCT had a 58.7%
weighting to Qualifying Investments at year-end.
The allocation to non-qualifying equity
investments increased from 7.7% to 10.1% within the year. In line
with the investment policy, we made investments in the Marlborough
Special Situations Fund as a temporary home for proceeds from
fundraising, increasing the allocation from 2.1% to 5.4%.
The non-qualifying direct equity investments,
which are mostly held in FTSE 350 companies contributed
-0.08 pence per share. Within the period, JD Sports returned
+72.4% (+0.17 pence per share), Bytes Technology returned
+18.8% (+0.09 pence per share) and Bodycote returned +40.3%
(+0.09 pence per share). The largest losses from within the
non-qualifying portfolio came from NCC (-63.4%, -0.18 pence
per share), Diversified Energy (-37.6%, -0.12 pence per share)
and Harbour Energy (-41.0%, -0.10 pence per share).
We took advantage of the significant increase in
fixed income yields to invest in six short-dated investment grade
bonds and a short-dated UK Gilts exchange trade fund. As a result,
the allocation to non-qualifying fixed income increased from nil to
12.7% whilst the cash weighting fell from 26.1% to 12.7%.
The Company invests across all available
investment sectors, although VCT legislation tends to promote
investment into sectors such as technology, healthcare and consumer
discretionary. In respect of the Qualifying investment portfolio,
the weightings to these three sectors changed slightly over the
year as a consequence of additional investment and share price
performance, taking their respective shares to 37.5%, 20.6% and
13.7%. The weighting to the industrial sector increased from 14.9%
to 17.9%.
The HMRC investment tests are set out in
Chapter 3 of Part 6 Income Tax Act 2007, which
should be read in conjunction with this investment manager’s
report. Funds raised by VCTs are first included in the investment
tests from the start of the accounting period containing the third
anniversary of the date on which the funds were raised. Therefore,
the allocation of qualifying investments as defined by the
legislation can be different to the portfolio weighting as measured
by market value relative to the net assets of the VCT.
Share Buy Backs & Discount
Control
7,183,338 shares were acquired in the year at an
average price of 50.63 pence per share. The share price
increased by 0.5% and traded at a discount of 6.78% following the
publication of the 30 September 2023 NAV on 5 October
2023.
Post period end update
The NAV per share has decreased from
46.34 pence to 45.45 pence in the period to
8 December 2023, a decrease of 1.92%.
As at 15 December 2023, the share price of
42.40 pence represented a discount of 6.71% to the last
published NAV per share.
The start of the new financial year was
particularly difficult with global markets selling off in the face
of higher oil prices and further increases in the cost of capital,
most obviously exemplified by the march higher in US 10-year
Treasury Yields. For a variety of reasons, the bond markets turned
in November with yields falling sharply. This was in part a
consequence of comments made by several members of the Federal Open
Market Committee that the market took to be dovish in nature. Both
bonds and equities rallied. In the UK, inflation fell further post
period to 4.6% in October. Having fallen 6.4% in October, the AIM
All-share index rebounded by 5.0% in November.
Whilst the war in Israel and Gaza is yet to
materially challenge markets, it only adds to the general sense of
unease with investors concerned about the risks that would follow
were it to escalate from a localised conflict into a regional
war.
There is considerable debate about the ‘neutral’
rate for monetary policy, the level at which interest rates are
neither seeking to restrain or stimulate economic activity. The
debate is not as abstract as it might appear, with important
ramifications for the risk-free rate and the cost of capital, both
of which have increased substantially in the year and are factors
in assessing company valuations. When central banks return to the
neutral rate, and where it is set, are therefore important when
establishing the path to a recovery in value. The outlook for the
UK economy will impact some companies within the portfolio, but
surprisingly few. As we have said in the past, many portfolio
companies continue to develop new products and services, with
success determined by technical and operational excellence, and
access to capital.
Whilst it is disappointing to again report on
difficult markets, a weak economy and negative performance, we
remain convinced that the portfolio contains a broad array of
companies with a range of maturities and a shared ambition to grow
revenues and deliver profitable outcomes to their shareholders. For
now, the market is unwilling or unable to appropriately recognise
value. The stasis will not persist forever and valuations will
recover. In the meantime, the portfolio contains substantial
amounts of growth at unreasonably low prices.
We have completed one new qualifying investment
post period end. Deal flow on AIM remains very subdued. We expect
this to remain the case through the early part of 2024, before
improving in the second half of the new financial year. In the
meantime, we continue to review large numbers of investment
opportunities in private companies.
For further information please contact:
Oliver BedfordLead Fund
Manager
18 December 2023
Investment portfolio
summary
As at 30 September 2023
|
Net Assets % at 30.09.23 |
Cost £000 |
Cumulative Movement in value £000 |
Valuation £000 |
Change in Value for the Year
£000(1) |
Market |
COI(2) |
Qualifying Investments |
|
|
|
|
|
|
|
Equipmake Holdings plc |
5.02 |
3,662 |
3,969 |
7,631 |
2,501 |
AIM |
No |
Eagle Eye Solutions Group plc |
2.99 |
1,642 |
2,903 |
4,545 |
(173) |
AIM |
Yes |
PCI-PAL plc |
2.55 |
2,280 |
1,596 |
3,876 |
692 |
AIM |
Yes |
Abcam plc |
2.02 |
55 |
3,007 |
3,062 |
843 |
AIM |
No |
Learning Technologies Group plc |
1.90 |
2,238 |
649 |
2,887 |
(1,834) |
AIM |
No |
Infinity Reliance Ltd (My 1st Years)(3) |
1.81 |
2,500 |
243 |
2,743 |
— |
Unlisted |
Yes |
Surface Transforms plc |
1.76 |
1,744 |
929 |
2,673 |
(1,188) |
AIM |
Yes |
Engage XR Holdings plc |
1.59 |
3,453 |
(1,036) |
2,417 |
(1,036) |
AIM |
Yes |
Cohort plc |
1.54 |
619 |
1,718 |
2,337 |
152 |
AIM |
Yes |
Fadel Partners, Inc |
1.51 |
2,300 |
— |
2,300 |
— |
AIM |
No |
XP Factory plc |
1.40 |
4,068 |
(1,939) |
2,129 |
581 |
AIM |
Yes |
Diaceutics plc |
1.38 |
1,550 |
550 |
2,100 |
469 |
AIM |
Yes |
Maxcyte Inc |
1.23 |
1,270 |
605 |
1,875 |
(2,325) |
AIM |
Yes |
C4X Discovery Holdings plc |
1.18 |
2,300 |
(500) |
1,800 |
(199) |
AIM |
No |
Aquis Exchange plc |
1.18 |
765 |
1,024 |
1,789 |
398 |
AIM |
Yes |
Zoo Digital Group plc |
1.16 |
2,159 |
(399) |
1,760 |
(3,806) |
AIM |
Yes |
Tortilla Mexican Grill plc |
1.15 |
1,125 |
625 |
1,750 |
(1,875) |
AIM |
Yes |
Beeks Financial Cloud Group plc |
1.09 |
1,038 |
623 |
1,661 |
(925) |
AIM |
Yes |
Team Internet Group plc |
1.09 |
588 |
1,067 |
1,655 |
243 |
AIM |
Yes |
Intelligent Ultrasound Group plc |
1.09 |
1,550 |
103 |
1,653 |
119 |
AIM |
No |
Itaconix plc |
1.09 |
3,025 |
(1,376) |
1,649 |
(1,376) |
AIM |
No |
SCA Investments Ltd (Gousto) |
1.02 |
2,484 |
(929) |
1,555 |
(1,228) |
Unlisted |
Yes |
Craneware plc |
0.95 |
125 |
1,316 |
1,441 |
(441) |
AIM |
Yes |
Zappar Ltd |
0.94 |
1,600 |
(171) |
1,429 |
— |
Unlisted |
No |
Instem plc |
0.92 |
297 |
1,105 |
1,402 |
417 |
AIM |
Yes |
Belvoir Group plc |
0.86 |
762 |
539 |
1,301 |
30 |
AIM |
Yes |
Arecor Therapeutics plc |
0.80 |
1,687 |
(471) |
1,216 |
(320) |
AIM |
No |
Bivictrix Therapeutics Plc |
0.78 |
1,600 |
(420) |
1,180 |
(420) |
AIM |
No |
Idox plc |
0.75 |
135 |
1,007 |
1,142 |
(22) |
AIM |
Yes |
Ilika plc |
0.73 |
1,636 |
(526) |
1,110 |
(888) |
AIM |
No |
Equals Group plc |
0.72 |
750 |
345 |
1,095 |
253 |
AIM |
Yes |
AnimalCare Group plc |
0.67 |
720 |
298 |
1,018 |
(407) |
AIM |
Yes |
Eden Research plc |
0.67 |
1,355 |
(339) |
1,016 |
(45) |
AIM |
No |
Blackbird plc |
0.64 |
606 |
364 |
970 |
(858) |
AIM |
No |
The Property Franchise Group plc |
0.60 |
377 |
534 |
911 |
(17) |
AIM |
Yes |
OneMedia iP Group plc |
0.59 |
1,141 |
(245) |
896 |
(244) |
AIM |
Yes |
Tristel plc |
0.56 |
543 |
310 |
853 |
252 |
AIM |
No |
Skillcast Group plc |
0.53 |
1,570 |
(764) |
806 |
(42) |
AIM |
No |
EKF Diagnostics Holdings plc |
0.53 |
565 |
239 |
804 |
(390) |
AIM |
No |
Crimson Tide plc |
0.50 |
1,260 |
(504) |
756 |
— |
AIM |
Yes |
Nexteq plc |
0.48 |
1,209 |
(479) |
730 |
(250) |
AIM |
No |
Rosslyn Data Technologies plc |
0.47 |
1,345 |
(629) |
716 |
(299) |
AIM |
Yes |
Creo Medical Group plc |
0.47 |
2,329 |
(1,616) |
713 |
(506) |
AIM |
Yes |
Crossword Cybersecurity plc |
0.47 |
2,039 |
(1,332) |
707 |
(864) |
AIM |
Yes |
Polarean Imaging plc |
0.45 |
2,081 |
(1,391) |
690 |
(2,297) |
AIM |
No |
Hardide plc |
0.42 |
3,566 |
(2,928) |
638 |
(232) |
AIM |
Yes |
Globaldata plc |
0.39 |
173 |
424 |
597 |
40 |
AIM |
Yes |
Verici DX plc |
0.35 |
1,939 |
(1,405) |
534 |
(463) |
AIM |
No |
Eneraqua Technologies plc |
0.33 |
1,401 |
(895) |
506 |
(702) |
AIM |
No |
Faron Pharmaceuticals Oy |
0.33 |
1,133 |
(638) |
495 |
269 |
AIM |
No |
Tan Delta Systems plc |
0.31 |
504 |
(39) |
465 |
(39) |
AIM |
No |
Intercede Group plc |
0.30 |
305 |
157 |
462 |
72 |
AIM |
Yes |
Velocys plc |
0.23 |
2,220 |
(1,866) |
354 |
(1,372) |
AIM |
No |
Strip Tinning Holdings plc |
0.22 |
1,054 |
(712) |
342 |
28 |
AIM |
No |
Angle plc |
0.22 |
1,158 |
(825) |
333 |
(1,182) |
AIM |
No |
K3 Business Technology Group plc |
0.22 |
270 |
60 |
330 |
(39) |
AIM |
Yes |
Kidly Ltd |
0.21 |
1,660 |
(1,334) |
326 |
(793) |
Unlisted |
No |
Bidstack Group plc |
0.21 |
2,733 |
(2,419) |
314 |
(2,915) |
AIM |
No |
Smoove plc |
0.20 |
621 |
(316) |
305 |
83 |
AIM |
No |
Science in Sport plc |
0.19 |
1,479 |
(1,191) |
288 |
(96) |
AIM |
No |
Everyman Media Group plc |
0.14 |
600 |
(394) |
206 |
(186) |
AIM |
Yes |
Trakm8 Holdings plc |
0.09 |
486 |
(352) |
134 |
(18) |
AIM |
No |
MYCELX Technologies Corporation |
0.09 |
361 |
(230) |
131 |
73 |
AIM |
Yes |
Renalytix AI plc |
0.03 |
82 |
(43) |
39 |
2 |
AIM |
Yes |
Fusion Antibodies plc |
0.02 |
624 |
(588) |
36 |
(280) |
AIM |
No |
Gfinity plc |
0.02 |
2,026 |
(1,998) |
28 |
(266) |
AIM |
Yes |
Osirium Technologies plc |
0.01 |
858 |
(845) |
13 |
(5) |
AIM |
No |
Flowgroup plc |
— |
26 |
(26) |
— |
— |
Unlisted |
No |
Honest Brew Ltd |
— |
2,800 |
(2,800) |
— |
— |
Unlisted |
No |
Laundrapp Ltd |
— |
2,450 |
(2,450) |
— |
— |
Unlisted |
No |
Mporium Group plc |
— |
33 |
(33) |
— |
— |
Unlisted |
No |
Airportr Technologies Ltd(3) |
— |
1,888 |
(1,888) |
— |
(529) |
Unlisted |
No |
Infoserve Group plc(4) |
— |
— |
— |
— |
— |
Unlisted |
No |
Total – equity Qualifying Investments |
56.36 |
100,597 |
(14,972) |
85,625 |
(25,875) |
|
|
Qualifying fixed income investments |
|
|
|
|
|
|
|
Kidly Ltd (convertible loan notes) |
1.58 |
2,400 |
— |
2,400 |
— |
Unlisted |
No |
Osirium Technologies plc (convertible loan notes) |
0.53 |
800 |
— |
800 |
44 |
AIM |
No |
Rosslyn Data Technologies plc (convertible loan notes) |
0.20 |
300 |
— |
300 |
— |
AIM |
No |
Honest Brew Ltd (loan notes) |
— |
300 |
(300) |
— |
— |
Unlisted |
No |
Total qualifying fixed income investments |
2.31 |
3,800 |
(300) |
3,500 |
44 |
|
|
Total Qualifying Investments |
58.67 |
104,397 |
(15,272) |
89,125 |
(25,831) |
|
|
Non qualifying investments |
|
|
|
|
|
|
|
Funds |
|
|
|
|
|
|
|
Marlborough Special Situations Fund |
5.44 |
9,717 |
(1,449) |
8,268 |
(1,125) |
Unlisted |
|
iShares plc ISHRS UK Gilts 0-5Yr ETF GBP (Dist) |
1.30 |
2,001 |
(23) |
1,978 |
(24) |
Main |
|
Total non-qualifying funds |
6.74 |
11,718 |
(1,472) |
10,246 |
(1,149) |
|
|
Hollywood Bowl Group plc |
0.98 |
1,566 |
(81) |
1,485 |
194 |
Main |
Yes |
Bodycote plc |
0.97 |
1,534 |
(66) |
1,468 |
296 |
Main |
No |
Chemring Group plc |
0.82 |
1,362 |
(113) |
1,249 |
(59) |
Main |
Yes |
Bytes Technology Group plc |
0.75 |
747 |
400 |
1,147 |
304 |
Main |
Yes |
WH Smith plc |
0.71 |
1,220 |
(145) |
1,075 |
63 |
Main |
Yes |
Ashtead Group plc |
0.66 |
1,116 |
(116) |
1,000 |
(115) |
Main |
Yes |
BAE Systems plc |
0.65 |
782 |
206 |
988 |
180 |
Main |
No |
National Grid plc |
0.65 |
1,041 |
(61) |
980 |
(61) |
Main |
No |
TP ICAP Group plc |
0.63 |
1,022 |
(69) |
953 |
(70) |
Main |
Yes |
Rotork plc |
0.58 |
944 |
(69) |
875 |
176 |
Main |
Yes |
Energean plc |
0.53 |
926 |
(126) |
800 |
(126) |
Main |
No |
Diversified Energy Company plc |
0.48 |
1,050 |
(324) |
726 |
(402) |
Main |
Yes |
XP Power plc |
0.47 |
743 |
(35) |
708 |
(35) |
Main |
Yes |
The Watches of Switzerland Group plc |
0.44 |
1,216 |
(549) |
667 |
(246) |
Main |
Yes |
On the Beach Group plc |
0.38 |
1,304 |
(722) |
582 |
(81) |
Main |
No |
Wickes Group plc |
0.23 |
585 |
(242) |
343 |
42 |
Main |
No |
Tortilla Mexican Grill plc |
0.12 |
161 |
29 |
190 |
(204) |
Main |
Yes |
MYCELX Technologies Corporation |
0.10 |
298 |
(146) |
152 |
85 |
AIM |
Yes |
Genagro Services Ltd |
— |
— |
— |
— |
1 |
Unlisted |
Yes |
Total – equity
non-qualifyinginvestments |
10.15 |
17,617 |
(2,229) |
15,388 |
(58) |
|
|
Fixed income – bonds |
|
|
|
|
|
|
|
Royal Bank of Canada 5.000% SNR NTS 24/01/28 |
1.90 |
3,045 |
(161) |
2,884 |
(161) |
Main |
No |
British Telecommunications plc 5.75% BDS 17/12/28 |
1.96 |
3,158 |
(173) |
2,985 |
(173) |
Main |
No |
Barclays plc 3.25% NTS 12/02/27 |
1.78 |
2,876 |
(169) |
2,707 |
(169) |
Main |
No |
NatWest Markets plc 6.375% NTS 08/11/27 |
1.93 |
3,051 |
(122) |
2,929 |
(122) |
Main |
No |
Next Group plc 4.375% BDS 02/10/26 |
1.89 |
2,980 |
(108) |
2,872 |
(108) |
Main |
No |
Marks & Spencer plc 3.000% NTS 08/12/23 |
1.96 |
2,999 |
(15) |
2,984 |
(15) |
Main |
No |
Total non-qualifying fixed income – bonds |
11.42 |
18,109 |
(748) |
17,361 |
(748) |
|
|
Total – non-qualifying investments |
28.31 |
47,444 |
(4,449) |
42,995 |
(1,955) |
|
|
Total investments |
86.98 |
151,841 |
(19,721) |
132,120 |
(27,786) |
|
|
Cash at bank |
12.65 |
|
|
19,231 |
|
|
|
Prepayments & accruals |
0.37 |
|
|
569 |
|
|
|
Net assets |
100.00 |
|
|
151,920 |
|
|
|
(1) The change in
fair value has been adjusted for additions and disposals in the
year and as such does not reconcile to the unrealised total in
note 7. The difference is £0.7 million which is the total
of 16 full investment disposals in the year.
(2) COI – Co
investments with other funds managed by the Investment Manager at
30 September 2023.
(3) Different
classes of shares held in unlisted companies within the portfolio
have been aggregated.
(4) Impaired fully
through the profit and loss account and therefore shows a zero
cost.
The investments listed below are either listed,
headquartered or registered outside the UK:
|
Listed |
Headquartered |
Registered |
Listed Investments: |
|
|
|
Abcam plc |
UK/USA |
UK |
UK |
Bytes Technology Group plc |
UK/South Africa |
UK |
UK |
Crimson Tide |
UK/Republic of Ireland |
UK |
UK |
Craneware plc |
UK |
UK/USA |
UK |
Engage XR plc |
UK/Ireland |
Ireland |
Ireland |
Fadel Partners plc |
UK |
USA |
USA |
Faron Pharmaceuticals Oy |
UK/Finland |
Finland |
Finland |
Itaconix plc |
UK |
USA |
UK |
Maxcyte Inc |
UK/USA |
USA |
USA |
Mycelx Technologies Corporation plc |
UK |
USA |
USA |
Polarean Imaging plc |
UK |
USA |
UK |
Renalytix AI plc |
UK/USA |
USA |
UK |
Verici DX plc |
UK |
UK/USA |
UK |
XP Power Ltd |
UK |
Singapore |
Singapore |
Unlisted private companies: |
|
|
|
Genagro Ltd(1) |
— |
UK |
Jersey |
(1) Companies
awaiting liquidation.
Top ten investments
As at 30 September 2023 (by market
value)
The top 10 investments are shown below. Each
investment is valued by reference to the bid price or, in the case
of unquoted companies, the IPEV guidelines using one or more
valuation techniques according to the nature, facts and
circumstances of the investment. Forecasts, where given, are drawn
from a combination of broker research and/or Bloomberg consensus
forecasts and exclude amortisation, share based payments and
exceptional items. Forecasts are in relation to a period end for
which the company results are yet to be released. Published
accounts are used for private companies or public companies with no
published broker forecasts. The net asset figures and net cash
values are from published accounts in most cases.
Equipmake Holdings plc |
Share Price: 9.0p |
Investment date |
July 2022 |
Forecasts for the year to |
May 2024 |
Equity held |
8.94% |
Turnover (£’000) |
13,400 |
Av. Purchase Price |
4.3p |
(Loss) before tax (£’000) |
(5,300) |
Cost (£’000) |
3,662 |
Net cash May 2023 (£’000) |
7,000 |
Valuation (£’000) |
7,631 |
Net assets May 2023 (£’000) |
13,803 |
Company description
Equipmake is a UK based technology company,
which has developed a range of electrification products for the
provision of electric vehicle (EV) drivetrains to meet the needs of
the automotive, aerospace and other sectors in support of the
transition from fossil-fuelled to zero emission powertrains.
Equipmake products can be applied in a variety of other vehicle
electrification contexts, including hybrid, fully electric and fuel
cell vehicles. Equipmake provides individual components to full
turnkey systems.
Eagle Eye Solutions Group plc |
Share Price: 525.0p |
Investment date |
April 2014 |
Forecasts for the year to |
June 2024 |
Equity held |
2.96% |
Turnover (£’000) |
50,800 |
Av. Purchase Price |
189.7p |
Profit before tax (£’000) |
4,400 |
Cost (£’000) |
1,642 |
Net cash June 2023 (£’000) |
9,300 |
Valuation (£’000) |
4,545 |
Net assets June 2023 (£’000) |
24,100 |
Company description
Eagle Eye is a Software-as-a-Service (SaaS)
technology company that creates digital connections enabling
personalised, real-time marketing solutions for large retailers.
Through Eagle Eye AIR, the company’s loyalty and promotions
omnichannel SaaS platform, companies connect all aspects of the
customer journey in real time, unlocking the capability to deliver
personalisation, streamline marketing execution and open up new
revenue streams through promotions, loyalty apps, subscriptions and
gift services.
PCI PAL plc |
Share Price: 56.0p |
Investment date |
January 2018 |
Forecasts for the year to |
June 2024 |
Equity held |
10.55% |
Turnover (£’000) |
19,100 |
Av. Purchase Price |
32.9p |
(Loss) before tax (£’000) |
1,000 |
Cost (£’000) |
2,280 |
Net cash June 2023 (£’000) |
1,169 |
Valuation (£’000) |
3,876 |
Net (liabilities) June 2023 (£’000) |
(4,109) |
Company description
PCI PAL plc is a provider of
Software-as-a-Service (SaaS) solutions that allows companies to
take payments from their customers securely. Its products secure
payments and data in any business communications environment
including voice, chat, social, email, and contact centre and is
integrated to, and resold by, business communications vendors and
payment service providers.
Abcam plc(1) |
Share Price: $22.63 USD |
Investment date |
October 2005 |
Forecast for the year to |
December 2023 |
Equity held |
0.07% |
Turnover (£’000) |
438,800 |
Av. Purchase Price |
33.4p |
Profit before tax (£’000) |
118,600 |
Cost (£’000) |
55 |
Net (debt) December 2022 (£’000) |
(30,600) |
Valuation (£’000) |
3,062 |
Net assets December 2022 (£’000) |
726,900 |
Company description
Abcam is a global life science company listed on
the Nasdaq stock exchange after delisting from AIM. Abcam produces
and distributes research-grade antibodies and biological tools to
the life sciences sector. The Company’s customers include
universities, research institutes and pharmaceutical and
biotechnology companies in countries around the world.
(1) Abcam was
acquired by Danaher Inc. post period-end for $24.00 a share
with £3.14m received by the Company on 6 December 2023.
Learning Technologies Group plc |
Share price: 64.15p |
Investment date |
July 2015 |
Forecast for the year to |
December 2023 |
Equity held |
0.57% |
Turnover (£’000) |
560,200 |
Av. Purchase Price |
49.7p |
Profit/(loss) before tax (£’000) |
83,000 |
Cost (£’000) |
2,238 |
Net (debt) June 2023 (£’000) |
(108,377) |
Valuation (£’000) |
2,887 |
Net assets June 2023 (£’000) |
419,647 |
|
|
|
|
Company description
Learning Technologies Group provides workplace
digital learning and talent management software and services to
corporate and government clients. The group offers end-to-end
learning and talent solutions ranging from strategic consultancy,
through a range of content and platform solutions to analytical
insights that enable corporate and government clients to meet their
performance objectives.
Infinity Reliance Ltd (My 1st Years) |
Unquoted |
Investment date |
May 2018 |
Results for the year to |
December 2022 |
Voting rights held |
8.97% |
Turnover (£’000) |
18,751 |
Av. Purchase Price |
4670.4p |
Profit before tax (£’000) |
1,091 |
Cost (£’000) |
2,500 |
Net cash December 2022 (£’000) |
2,818 |
Valuation (£’000) |
2,743 |
Net assets December 2022 (£’000) |
6,235 |
Income recognised in period (£) |
0 |
|
|
Company description
My 1st Years is a UK retail platform that
focusses on the sale of personalised baby and children’s gifts
through e-commerce channels. The product range includes bespoke
presents for new born babies to seven year olds, for christenings,
birthdays and Christmas.
Kidly Ltd(1) |
Unquoted |
Investment date |
March 2020 |
Results for the year to |
March 2022 |
Voting rights held |
9.45% |
Turnover (£’000)(2) |
— |
Av. Purchase Price |
165.6p |
Profit/(loss) before tax (£’000)(2) |
— |
Cost (£’000) |
4,060 |
Net cash March 2022 (£’000) |
358 |
Valuation (£’000) |
2,726 |
Net assets March 2022 (£’000) |
(1,490) |
Income recognised in period (£) |
223,562 |
|
|
Company description
Kidly is an online retail platform that curates
a range of the world’s best brands for children that sit alongside
its own Kidly Label brand catering to children between the ages of
0-5 years.
(1) Includes equity
investment of £0.3m and convertible loan note investments of
£2.4m.
(2) Not available,
data taken from abbreviated accounts.
Surface Transforms plc |
Share price: 27.0p |
Investment date |
March 2016 |
Forecast for the year to |
December 2023 |
Equity held |
4.85% |
Turnover (£’000) |
8,600 |
Av. Purchase Price |
17.6p |
(Loss) before tax (£’000) |
(8,500) |
Cost (£’000) |
1,744 |
Net cash June 2023 (£’000) |
3,512 |
Valuation (£’000) |
2,673 |
Net assets June 2023 (£’000) |
28,990 |
Company description
Surface Transforms develops and produces
carbon-ceramic brake discs serving customers that include major
OEMs in the global automotive markets. Surface Transforms
interweaves continuous carbon fibre to form a 3D multi-directional
matrix, producing a stronger, lighter and more durable product with
3x the heat conductivity compared to standard production
components.
Engage XR Holdings plc |
Share price: 2.80p |
Investment date |
March 2023 |
Forecast for the year to |
December 2023 |
Equity held |
29.72% |
Turnover (€’000) |
5,400 |
Av. Purchase Price |
4.0p |
(Loss) before tax (€’000) |
(4,500) |
Cost (£’000) |
3,453 |
Net cash December 2022 (€’000) |
9,447 |
Valuation (£’000) |
2,417 |
Net assets December 2022 (€’000) |
10,340 |
Company description
Engage XR is virtual reality (’VR’) technology
company with a proprietary cloud-based professional metaverse
platform used to deliver immersive corporate communications, remote
collaborations and events, training and education. The company has
a strong reputation for data security and reliability, with a
diverse customer base of 190 clients including several blue-chip
companies such as Meta, HP, HTC, KIA and BMW.
Cohort plc |
Share price: 492.0p |
Investment date |
February 2006 |
Forecast for the year to |
April 2024 |
Equity held |
1.15% |
Turnover (£’000) |
187,400 |
Av. Purchase Price |
130.2p |
Profit before tax (£’000) |
19,200 |
Cost (£’000) |
619 |
Net cash April 2023 (£’000) |
15,608 |
Valuation (£’000) |
2,337 |
Net assets April 2023 (£’000) |
99,778 |
Company description
Cohort is the parent company of six businesses
based in the UK, Germany and Portugal, providing a wide range of
services and products for domestic and export customers in defence
and related markets. The group is split into two
divisions: Communications and Intelligence, and Sensors and
Effectors.
For further information please contact:
Oliver BedfordLead Fund
Manager
Canaccord Genuity Asset Management Limited 88 Wood
Street London EC2V 7QR 0207 523 4837 aimvct@canaccord.com
Statement of directors’ responsibilities
in respect of the financial statements
The Directors are responsible for preparing the
annual report and the financial statements in accordance with
applicable law and regulations. They are also responsible for
ensuring that the annual report includes information required by
the Listing Rules of the Financial Conduct Authority.
Company law requires the Directors to prepare
financial statements for each financial year. Under that law the
Directors are required to prepare the financial statements and have
elected to prepare the company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice
(UK GAAP) (United Kingdom Accounting Standards and applicable
law). 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
the profit or loss for the Company for that period.
In preparing these financial statements, the
Directors are required to:
• select suitable
accounting policies and then apply them consistently;
• make judgements
and accounting estimates that are reasonable and prudent;
• state whether
they have been prepared in accordance with UK GAAP, subject to
any material departures disclosed and explained in the financial
statements;
• prepare the
financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in
business; and
• prepare a
directors’ report, a strategic report and directors’ remuneration
report which comply with the requirements of the Companies
Act 2006.
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 the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring that
the annual report and accounts, taken as a whole, are fair,
balanced and understandable, and provide the information necessary
for shareholders to assess the Company’s position and performance,
business model and strategy.
Website publication
The Directors are responsible for ensuring the
annual report and the financial statements are made available on a
website. The Company’s website address is
https://www.hargreaveaimvcts.co.uk. Financial statements are
published on the Company’s website in accordance with legislation
in the United Kingdom governing the preparation and dissemination
of financial statements, which may vary from legislation in other
jurisdictions. The maintenance and integrity of the Company’s
website is the responsibility of the Directors. The Directors’
responsibility also extends to the ongoing integrity of the
financial statements contained therein.
Directors’ responsibility statement
pursuant to DTR4
David Brock (Chair), Oliver Bedford, Angela
Henderson, Justin Ward, Megan McCracken and Busola Sodeinde, the
Directors confirm to the best of their knowledge that:
• the financial
statements have been prepared in accordance with UK GAAP and
give a true and fair view of the assets, liabilities, financial
position and profit and loss of the Company; and
• the annual report
includes a fair review of the development and performance of the
business and the financial position of the Company, together with a
description of the principal risks and uncertainties that it
faces.
Disclosure of information to the
Auditor
The Directors confirm that:
• so far as each
Director is aware, there is no relevant audit information of which
the Company’s auditor is unaware; and
• the Directors
have taken all the steps that they ought to have taken as Directors
in order to make themselves aware of any relevant audit information
and to establish that the Company’s auditor is aware of that
information.
For and on behalf of the Board
David Brock
Chair
18 December 2023
Income statement
|
|
Year to 30 September 2023 |
Year to 30 September 2022 |
|
Note |
Revenue £000 |
Capital £000 |
Total £000 |
Revenue £000 |
Capital £000 |
Total £000 |
Net loss on investments held at fair value through profit or
loss |
7 |
— |
(28,455) |
(28,455) |
— |
(85,203) |
(85,203) |
Income |
2 |
2,616 |
— |
2,616 |
975 |
13 |
988 |
|
|
2,616 |
(28,455) |
(25,839) |
975 |
(85,190) |
(84,215) |
Management fee |
3 |
(699) |
(2,098) |
(2,797) |
(835) |
(2,505) |
(3,340) |
Other expenses |
4 |
(1,052) |
(39) |
(1,091) |
(1,093) |
(22) |
(1,115) |
|
|
(1,751) |
(2,137) |
(3,888) |
(1,928) |
(2,527) |
(4,455) |
Profit/(loss) on ordinary activities before
taxation |
|
865 |
(30,592) |
(29,727) |
(953) |
(87,717) |
(88,670) |
Taxation |
5 |
— |
— |
— |
— |
— |
— |
Profit/(loss) after taxation |
|
865 |
(30,592) |
(29,727) |
(953) |
(87,717) |
(88,670) |
Basic and diluted earnings/(loss) per share |
6 |
0.27p |
(9.59)p |
(9.32)p |
(0.36)p |
(33.06)p |
(33.42)p |
The total column of these statements is the
income statement of the Company. All revenue and capital items in
the above statements derive from continuing operations. There was
no other comprehensive income other than the loss for the year.
The accompanying notes are an integral part
of these financial statements.
Balance sheet
As at 30 September 2023
Company Registration Number 5206425 (In England
and Wales)
|
Note |
2023£000 |
2022£000 |
Fixed assets |
|
|
|
Investments at fair value through profit or loss |
7 |
132,120 |
119,188 |
Current assets |
|
|
|
Debtors |
9 |
1,475 |
408 |
Cash and cash equivalents |
|
19,231 |
41,911 |
|
|
20,706 |
42,319 |
Creditors: amounts falling due within one
year |
10 |
(906) |
(1,000) |
Net current assets |
|
19,800 |
41,319 |
Total assets less current liabilities |
|
151,920 |
160,507 |
Capital and Reserves |
|
|
|
Called up share capital |
11 |
3,278 |
2,666 |
Share premium |
|
286 |
93,660 |
Capital redemption reserve |
|
272 |
201 |
Capital reserve – unrealised |
|
13,640 |
23,935 |
Special reserve |
|
177,762 |
63,931 |
Capital reserve – realised |
|
(41,071) |
(20,774) |
Revenue reserve |
|
(2,247) |
(3,112) |
Total shareholders’ funds |
|
151,920 |
160,507 |
Net asset value per share (basic and diluted) |
12 |
46.34p |
60.19p |
The accompanying notes are an integral part
of these financial statements.
These financial statements were approved and
authorised for issue by the Board of Directors on 18 December
2023 and signed on its behalf by
David BrockChair
18 December 2023
Statement of changes in
equity
For the year ending 30 September 2023
|
|
Non-distributable reserves |
Distributable reserves (1) |
|
|
Note |
Share Capital
£000 |
Share Premium
£000 |
Capital Redemption Reserve
£000 |
Capital Reserve Unrealised
£000 |
Special Reserve
£000 |
Capital Reserve Realised
£000 |
Revenue Reserve £000 |
Total £000 |
At 1 October 2022 |
|
2,666 |
93,660 |
201 |
23,935 |
63,931 |
(20,774) |
(3,112) |
160,507 |
Profit and total comprehensive income for the year |
|
|
|
|
|
|
|
|
|
Realised (losses) on investments |
7 |
— |
— |
— |
— |
— |
(8,245) |
— |
(8,245) |
Unrealised (losses) on investments |
7 |
— |
— |
— |
(20,210) |
— |
— |
— |
(20,210) |
Management fee charged to capital |
3 |
— |
— |
— |
— |
— |
(2,098) |
— |
(2,098) |
Income allocated to capital |
2 |
— |
— |
— |
— |
— |
— |
— |
— |
Due diligence investments costs |
4 |
— |
— |
— |
— |
— |
(39) |
— |
(39) |
Revenue profit after taxation for the year |
|
— |
— |
— |
— |
— |
— |
865 |
865 |
Total (loss) after taxation for the year |
|
— |
— |
— |
(20,210) |
— |
(10,382) |
865 |
(29,727) |
Contributions by and distributions to owners |
|
|
|
|
|
|
|
|
|
Subscription share issues |
11 |
659 |
39,277 |
— |
— |
— |
— |
— |
39,936 |
Issue costs |
11 |
— |
(742) |
— |
— |
— |
— |
— |
(742) |
Share buybacks |
11 |
(71) |
— |
71 |
— |
(3,637) |
— |
— |
(3,637) |
DRIS share issues |
11 |
24 |
1,276 |
— |
— |
— |
— |
— |
1,300 |
Equity dividends paid |
16 |
— |
— |
— |
— |
(15,717) |
— |
— |
(15,717) |
Total contributions by and distributions to
owners |
|
612 |
39,811 |
71 |
— |
(19,354) |
— |
— |
21,140 |
Other movements |
|
|
|
|
|
|
|
|
|
Capital reduction |
11 |
— |
(133,185) |
— |
— |
133,185 |
— |
— |
— |
Diminution in value |
|
— |
— |
— |
9,915 |
— |
(9,915) |
— |
— |
Total other movements |
|
|
|
|
|
|
|
|
|
At 30 September 2023 |
|
3,278 |
286 |
272 |
13,640 |
177,762 |
(41,071) |
(2,247) |
151,920 |
Reserves available for distribution are capital
reserve realised, special reserve and revenue reserve. Total
distributable reserves at 30 September 2023 were
£134.4 million, following the capital reduction of £133.2m
(2022: £40 million). The accompanying notes are an
integral part of these financial statements.
(1) The Income
Taxes Act 2007 restricts distribution of capital from reserves
created by the conversion of the share premium account into a
special (distributable) reserve until the third anniversary of the
share allotment that led to the creation of that part of the share
premium account. As at 30 September 2023, £108.9 million
of the special reserve is subject to this restriction.
Statement of changes in
equity
For the year ending 30 September 2022
|
|
Non-distributable reserves |
Distributable reserves (1) |
|
|
Note |
Share Capital
£000 |
Share Premium
£000 |
Capital Redemption Reserve
£000 |
Capital Reserve Unrealised
£000 |
Special Reserve
£000 |
Capital Reserve Realised
£000 |
Revenue Reserve £000 |
Total £000 |
At 1 October 2021 |
|
2,280 |
53,802 |
158 |
102,311 |
84,004 |
(11,433) |
(2,159) |
228,963 |
Profit and total comprehensive income for the year |
|
|
|
|
|
|
|
|
|
Realised gains on investments |
7 |
— |
— |
— |
— |
— |
2,056 |
— |
2,056 |
Unrealised (losses) on investments |
7 |
— |
— |
— |
(87,259) |
— |
— |
— |
(87,259) |
Management fee charged to capital |
3 |
— |
— |
— |
— |
— |
(2,505) |
— |
(2,505) |
Income allocated to capital |
2 |
— |
— |
— |
— |
— |
13 |
— |
13 |
Due diligence investments costs |
4 |
— |
— |
— |
— |
— |
(22) |
— |
(22) |
Revenue (loss) after taxation for the year |
|
— |
— |
— |
— |
— |
— |
(953) |
(953) |
Total (loss) after taxation for the year |
|
|
|
|
(87,259) |
|
(458) |
(953) |
(88,670) |
Contributions by and distributions to owners |
|
|
|
|
|
|
|
|
|
Subscription share issues |
11 |
416 |
39,579 |
— |
— |
— |
— |
— |
39,995 |
Issue costs |
11 |
— |
(746) |
— |
— |
— |
— |
— |
(746) |
Share buybacks |
11 |
(43) |
— |
43 |
— |
(3,243) |
— |
— |
(3,243) |
DRIS share issues |
11 |
13 |
1,025 |
— |
— |
— |
— |
— |
1,038 |
Equity dividends paid |
16 |
— |
— |
— |
— |
(16,830) |
— |
— |
(16,830) |
Total contributions by and distributions to
owners |
|
386 |
39,858 |
43 |
— |
(20,073) |
— |
— |
20,214 |
Other movements |
|
|
|
|
|
|
|
|
|
Diminution in value |
|
— |
— |
— |
8,883 |
— |
(8,883) |
— |
— |
Total other movements |
|
— |
— |
— |
8,883 |
— |
(8,883) |
— |
— |
At 30 September 2022 |
|
2,666 |
93,660 |
201 |
23,935 |
63,931 |
(20,774) |
(3,112) |
160,507 |
Reserves available for distribution are capital
reserve realised, special reserve and revenue reserve. Total
distributable reserves at 30 September 2022 were
£40 million (2021: £70.4 million). The accompanying
notes are an integral part of these financial statements.
(1) The Income
Taxes Act 2007 restricts distribution of capital from reserves
created by the conversion of the share premium account into a
special (distributable) reserve until the third anniversary of the
share allotment that led to the creation of that part of the share
premium account. As at 30 September 2023, none of the special
reserve is subject to this restriction.
Statement of cash flows
|
Note |
2023 £000 |
2022 £000 |
Total (loss) on ordinary activities before taxation |
|
(29,727) |
(88,670) |
Realised losses/(gains) on investments |
7 |
8,245 |
(2,056) |
Unrealised losses on investments |
7 |
20,210 |
87,259 |
(Increase) in debtors |
|
(1,067) |
(78) |
(Decrease) in creditors |
|
(94) |
(183) |
Amortisation for discount/premium on bonds |
|
(24) |
— |
Non-cash distributions |
2 |
— |
(126) |
Net cash (outflow) from operating
activities(1) |
|
(2,457) |
(3,854) |
Purchase of investments |
7 |
(57,699) |
(29,460) |
Sale of investments |
7 |
16,336 |
27,995 |
Net cash (used in) investing activities |
|
(41,363) |
(1,465) |
Share buybacks |
11 |
(3,637) |
(3,243) |
Issue of share capital |
11 |
39,936 |
39,995 |
Issue costs |
11 |
(742) |
(746) |
Dividends paid |
16 |
(14,417) |
(15,792) |
Net cash provided by financing activities |
|
21,140 |
20,214 |
Net (decrease)/increase in cash and cash
equivalents |
|
(22,680) |
14,895 |
Opening cash and cash equivalents |
|
41,911 |
27,016 |
Closing cash and cash equivalents |
|
19,231 |
41,911 |
(1) The Company
received dividends of £1,178,059 (2022: £715,253) and interest
of £599,735 (2022: £47,143).
The accompanying notes are an integral part
of these financial statements.
Notes to the financial
statements
Hargreave Hale AIM VCT plc is a company
incorporated in England and Wales under the Companies Act. The
address of the registered office is given in the company
information section and the nature and principal business
activities are set out in the Strategic Report.
Basis of preparation
The financial statements have been prepared in
accordance with UK Generally Accepted Accounting Practice
(UK GAAP), including Financial Reporting Standard 102 (FRS
102) and with the Companies Act 2006 and the Statement of
Recommended Practice for “Financial Statements of Investment Trust
Companies and Venture Capital Trusts” July 2022 (SORP).
Going Concern
The financial statements have been prepared on a
going concern basis and on the basis that the company maintains its
VCT status.
The Directors have assessed the Company’s
ability to continue as a going concern and are satisfied that the
Company has adequate resources to continue in operational existence
for a period of 12 months from the date these financial
statements were approved.
The Company has sufficient cash
(£19.2 million at 30 September 2023) and liquid assets
held across a diversified portfolio of investments in listed
companies to meet obligations as they fall due. The Company is a
close-ended fund, where assets are not required to be liquidated to
meet day-to-day redemptions. The major driver of cash outflows
(dividends, buybacks and investments) are managed in accordance
with the Company’s key policies at the discretion of the Board or,
in the case of the Company’s investments, the Investment
Manager.
The Board has reviewed forecasts and stress
tests to assist them with their going concern assessment. These
tests have included the modelling of a 15% reduction in NAV, whilst
also considering ongoing compliance with the VCT investment test.
It was concluded that in a plausible downside scenario the Company
would continue to meet its liabilities.
The Directors have carefully considered the
principal risk factors facing the Company and their potential
impact on income into the portfolio and the NAV. The Directors are
of the opinion that the Company has sufficient cash and other
liquid assets to continue to operate as a going concern, including
under a stress scenario.
The Investment Manager has a team of four
dedicated fund managers and analysts with multi-year experience
working for the VCT. Abbe Martineau joined the CGAM VCT fund
management team on 17 April 2023. The Investment Manager and
the Company’s other key service providers have contingency plans in
place to manage operational disruptions.
The Directors have not identified any material
uncertainties related to events or conditions that may cast
significant doubt about the ability of the Company to continue as a
going concern. Therefore, they are satisfied that the Company
should continue to operate as a going concern and report its
financial statements on that basis.
Key judgements and
estimates
The preparation of the financial statements
requires the Board to make judgements and estimates that affect the
application of policies and reported amounts of assets,
liabilities, income and expenses. The nature of estimation means
that the actual outcomes could differ from those estimates. Key
judgements and estimates mainly relate to determination of the fair
valuation of unquoted investments. The policies for these are set
out in the notes to the financial statements.
The assessment of fair value will reflect the
market conditions at the measurement date irrespective of which
valuation technique is used. The IPEV guidelines describe a range
of valuation techniques, as described in the “financial
instruments” section.
Further areas requiring judgement and estimation
are recognising and classifying unusual or special dividends as
either capital or revenue in nature. The estimates and underlying
assumptions are under continuous review with particular attention
paid to the carrying value of the investments.
1. Accounting
policies
A summary of the principal accounting policies,
all of which have been applied consistently throughout the year, is
set out below:
Financial instruments
All investments are classified as fair value
through profit or loss. Investments are measured initially and
subsequently at fair value which is deemed to be market bid prices
for listed investments and investments traded on AIM. Unquoted
investments are valued using the most appropriate methodology
recommended by the International Private Equity Venture Capital
(IPEV) guidelines published in December 2022.
Where no active market exists for the particular
asset, the Company holds the investment at fair value as determined
by the Investment Manager and approved by the Board. Valuations of
unquoted investments are reviewed on a quarterly basis and more
frequently if events occur that could have a material impact on the
investment.
In estimating fair value for an unquoted
investment, the Investment Manager will apply one or more valuation
techniques according to the nature, facts and circumstances of the
investment. The Investment Manager will use reasonable current
market data and inputs combined with market participant
assumptions. The assessment of fair value will reflect the market
conditions at the measurement date irrespective of which valuation
technique is used. The IPEV guidelines describe a range of
valuation techniques, including but not limited to relevant
observable market multiples, independent arms-length transactions,
income, discounted cash flows and net assets. The fair value of
convertible loan notes is estimated by aggregating the Net
Present Value of the bond component and the derivative value of the
option to convert into equity. The derivative value of the option
to convert a particular loan note is the probable weighted
average of the present value of each conversion scenario described
in the loan note instrument as calculated using the Black
Scholes option pricing model.
Investments are recognised and derecognised at
trade date where a purchase or sale is under a contract whose terms
require delivery within the time frame established by the market
concerned. Purchases and sales of unlisted investments are
recognised when the contract for acquisition or sale becomes
unconditional. Transaction costs are included in the initial cost
or deducted from the disposal proceeds as appropriate.
These investments will be managed and their
performance evaluated on a fair value basis in accordance with a
documented investment strategy and information about them is
provided internally on that basis to the Board.
Gains and losses arising from changes in fair
value (realised and unrealised) are included in the net profit or
loss for the period as a capital item in the income statement and
are taken to the unrealised capital reserve or realised capital
reserve as appropriate.
If an investment has been impaired such that
there is no realistic expectation that there will be a full return
from the investment, the loss is treated as a diminution in value
and transferred to the capital reserve realised. The Company
conducts impairments reviews on a quarterly basis. In the case of
equity investments, impairment reviews are triggered when
unrealised losses exceed 50% of book cost, or if the loss when
realised would lead to a material reduction in the Company’s
distributable reserves. Fixed income investments are reviewed for
impairment if the issuing company’s ability to repay is uncertain
unless there are reasonable grounds to believe that the loan could
be recovered through the sale of the company or its trading
assets.
Other financial assets and liabilities comprise
receivables, payables and cash and cash equivalents which are
measured at amortised cost. There are no financial liabilities
other than payables.
Cash and cash equivalents
For the purposes of the Balance Sheet, cash
comprises cash in hand and demand deposits. Cash equivalents are
short-term, highly liquid investments and money market funds that
are readily convertible to known amounts of cash and which are
subject to insignificant risk of changes in value. For the purposes
of the Statement of Cash Flows, cash and cash equivalents consist
of cash and cash equivalents as defined above, net of outstanding
bank overdrafts when applicable. Cash held at CGWL (see
note 15) meets the definition of cash and cash equivalents
as it is to meet short term liquidity requirements and is available
on demand with no restrictions or penalties on withdrawal.
Income
Equity dividends are analysed to consider if
they are revenue or capital in nature on a case by case basis and
are taken into account on the ex-dividend date, net of any
associated tax credit. Fixed returns on non-equity shares and debt
securities are recognised on a time apportionment basis so as to
reflect the effective yield, provided there is no reasonable doubt
that payment will be received in due course. All other income is
recognised on an accruals basis. Other income is treated as a
repayment of capital or revenue depending on the facts of each
particular case.
Expenditure
All expenditure is accounted for on an accruals
basis. Of investment management fees, 75% are allocated to the
capital reserve realised and 25% to the revenue account in line
with the Board’s expected long term split of investment returns in
the form of capital gains to the capital column of the income
statement. Due diligence costs incurred for prospective private
company purchases are charged to capital in addition to the cost of
investment. All other expenditure is charged to the revenue
account.
Capital reserves
Realised profits and losses on the disposal of
investments, due diligence costs, income that is capital in nature,
losses realised on investments considered to be diminished in value
and 75% of investment management fees are accounted for in the
capital reserve realised.
Increases and decreases in the valuation of
investments held at the year end are accounted for in the capital
reserve unrealised.
Operating segments
There is considered to be one operating segment
being investment in equity and debt securities.
Taxation
Deferred tax is recognised in respect of all
timing differences that have originated but not yet reversed at the
balance sheet date. 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.
Current tax is expected tax payable on the
taxable profit for the period using the current tax rate and laws
that have been enacted or substantially enacted at the reporting
date. The tax effect of different items of income and expenditure
is allocated between capital and revenue on the same basis as the
particular item to which it relates.
Approved VCTs are exempt from tax on capital
gains from the sale of fixed asset investments. The Directors
intend that the Company will continue to conduct its affairs to
maintain its VCT status, no deferred tax has been provided in
respect of any capital gains or losses arising from the revaluation
or disposal of investments.
Dividends
Only dividends recognised during the year are
deducted from revenue or capital reserves. Equity dividends are
recognised in the accounts when they become legally payable.
Interim dividends are approved by the Board of
Directors and may be varied or rescinded at any time before
payment, therefore the liability is only established when the
dividend is actually paid. Final dividends are subject to approval
at the AGM. When the dividend is declared it states that it is
payable on a future date, so liability is established on that
date.
Functional currency
The Company is required to nominate a functional
currency, being the currency in which the Company predominantly
operates. The Board has determined that sterling is the Company’s
functional currency. Sterling is also the currency in which these
accounts are presented.
Repurchase of shares to hold in
treasury
The cost of repurchasing shares into treasury,
including the related stamp duty and transaction costs is charged
to the special reserve and dealt with in the statement of changes
in equity. Share repurchase transactions are accounted for on a
trade date basis. Where shares held in treasury are subsequently
cancelled, the nominal value of those shares is transferred out of
share capital and into capital redemption reserve.
Should shares held in treasury be reissued, the
sale proceeds will be treated as a realised profit up to the amount
of the purchase price of those shares and will be transferred to
capital reserves. The excess of the sale proceeds over the purchase
price will be transferred to share premium.
Capital structure
Share Capital
Ordinary shares are classed as equity. The
ordinary shares in issue have a nominal value of one penny and
carry one vote each. Substantial holdings in the Company are
disclosed in the Directors’ Report.
Share Premium
This reserve represents the difference between
the issue price of shares and the nominal value of shares at the
date of issue, net of related issue costs.
Capital Redemption Reserve
This reserve is used for the cancellation of
shares bought back under the buyback facility.
Special Reserve
Distributable reserve used to pay dividends and
re-purchase shares under the buyback facility.
Capital Reserve Realised
Gains/losses on disposal of investments, due
diligence costs, income that is capital in nature, diminishment of
financial assets and 75% of the investment management fee are
accounted for in the capital reserve realised.
Capital Reserve Unrealised
Unrealised gains and losses on investments held
at the year end arising from movements in fair value are taken to
the capital reserve unrealised.
Revenue Reserve
Net revenue profits and losses of the
Company.
2. Income
|
2023 £000 |
2022 £000 |
Income from investments: |
|
|
Revenue: |
|
|
Dividend income |
1,247 |
744 |
Fixed income interest |
867 (1) |
184 |
Interest |
502 |
47 |
Total revenue income |
2,616 |
975 |
Capital: |
|
|
Return of capital |
— |
— |
In-specie dividend |
— |
13 |
Total capital income |
— |
13 |
Total Income |
2,616 |
988 |
(1) Additional
loan stock interest of £18k was recognised in the year following
reversal of the impairment being carried at 30 September 2022.
The loan note accrued interest to 30 June 2023 in line
with the terms of the redemption agreement with Sailpoint
Technologies UK Limited.
3. Management
fees
|
2023 Revenue
£000 |
2023 Capital
£000 |
2023 Total
£000 |
2022 Revenue
£000 |
2022 Capital
£000 |
2022 Total
£000 |
Management fees |
699 |
2,098 |
2,797 |
835 |
2,505 |
3,340 |
The investment management agreement terminates
on 12 months’ notice, subject to earlier termination in
certain circumstances. In the event of termination by the Company
on less than the agreed notice period, compensation may be payable
to the Investment Manager in lieu of the unexpired notice period.
No notice had been given by the Investment Manager or by the Board
to terminate the agreement as at the date of approval of these
accounts.
The Investment Manager receives an investment
management fee of 1.7% per annum of the NAV of the Company,
calculated and payable quarterly in arrears. At 30 September
2023, £645,397 (2022: £687,373) was owed in respect of
management fees. The Company receives a reduction to the annual
management fee for investments in other funds managed by the
Investment Manager, being any investment in the Marlborough Special
Situations Fund and/or the Marlborough UK Micro-Cap Growth Fund so
the Company is not charged twice for these services. This amounted
to £49,931 for the year to 30 September 2023
(2022: £23,407). The Investment Manager has agreed to
indemnify the Company against annual running costs exceeding 3.5%
of its net assets. No fees were waived between 1 October 2022
and 30 September 2023 and no fees were waived between
1 October 2021 and 30 September 2022 under the
indemnity.
4. Other
expenses
|
2023 £000 |
2022 £000 |
Other revenue expenses: |
|
|
Administration fee |
195 |
195 |
Directors’ fees |
205 |
157 |
Legal & professional |
39 |
34 |
London Stock Exchange fees |
84 |
131 |
Registrar’s fee |
47 |
50 |
Website and marketing |
60 |
14 |
Printing, postage and stationary |
40 |
43 |
Auditors’ remuneration – for audit services |
55 |
41 |
VCT monitoring fees |
15 |
12 |
Company secretarial fees |
57 |
72 |
Custody fee |
30 |
30 |
Directors’ and officers’ liability insurance |
36 |
39 |
Broker’s fee |
5 |
5 |
VAT |
115 |
128 |
Other expenses(1) |
104 |
98 |
Provision against loan stock interest receivable |
(35)(2) |
44(3) |
Total other revenue expenses |
1,052 |
1,093 |
Other capital expenses: |
|
|
Due diligence costs |
32 |
18 |
VAT on due diligence costs |
7 |
4 |
Total other capital expenses |
39 |
22 |
Total other expenses |
1,091 |
1,115 |
(1) Other expenses
include FCA fees, AIC membership fees, VCT Association fees,
recruitment costs, professional subscriptions, license costs,
shareholder event costs and other nominal expenses.
(2) Reversal of
provision against loan interest receivable in previous years of
£34,816 for Osirium plc.
(3) Provision
against loan interest receivable of £44,145 (2021: nil), for
loan stock interest regarded as collectable in previous years in
relation to Honest Brew Ltd and Osirium plc.
The Directors’ remuneration above includes
national insurance contributions. Directors’ remuneration excluding
employer’s national insurance contributions is detailed in the
directors’ remuneration report.
The maximum aggregate directors’ emoluments
authorised by the Articles of Association are detailed in the
directors’ remuneration report.
5. Tax
on ordinary activities
The tax charge for the year is based on the
standard rate of UK Corporation Tax of 22%(1)
(2022: 19%).
|
2023 Total
£000 |
2022 Total
£000 |
Loss on ordinary activities before taxation |
(29,727) |
(88,670) |
UK Corporation Tax: 22% (2022: 19%) |
(6,540) |
(16,847) |
Effect of non taxable losses on investments |
6,260 |
16,189 |
Effect of non taxable UK dividend income |
(274) |
(144) |
Deferred tax not recognised |
554 |
802 |
Current tax charge |
— |
— |
(1) Average rate of
corporation tax applicable for the period.
At the 30 September 2023 the Company had
tax losses carried forward of £24,379,001
(2022: £21,921,076). It is unlikely that the Company will
generate enough taxable income in the future to use these expenses
to reduce future tax charges and therefore no deferred tax asset
has been recognised.
There is no taxation charge in relation to
capital gains or losses. No asset or liability has been recognised
in relation to capital gains or losses on revaluing investments.
The Company is exempt from such tax as a result of its intention to
maintain its status as a Venture Capital Trust.
6. Basic
and diluted earnings/(loss) per share
|
2023 Revenue
£000 |
2023 Capital
£000 |
2023 Total
£000 |
2022 Revenue
£000 |
2022 Capital
£000 |
2022 Total
£000 |
Return (£) |
865 |
(30,592) |
(29,727) |
(953) |
(87,717) |
(88,670) |
Earnings/(loss) per ordinary share |
0.27p |
(9.59)p |
(9.32)p |
(0.36)p |
(33.06)p |
(33.42)p |
The earnings per share is based on 318,946,009
ordinary shares (2022: 265,292,558), being the weighted
average number of shares in issue during the year.
7. Investments
|
Quoted
investments(1)2023
£000 |
Unquoted Investments
2023 £000 |
Total investments
2023 £000 |
Total investments
2022 £000 |
Opening Valuation |
108,630 |
10,558 |
119,188 |
202,800 |
Purchases at cost |
56,199 |
1,500 |
57,699 |
29,460 |
Non-cash distribution |
— |
— |
— |
126 |
Sale proceeds |
(16,336) |
– |
(16,336) |
(27,995) |
Realised gains/(losses) |
(8,245) |
– |
(8,245)(2) |
2,056 |
Unrealised losses |
(17,705) |
(2,505) |
(20,210)(2) |
(87,259) |
Amortisation for discount/premium on bonds |
24 |
— |
24 |
— |
Closing valuation |
122,567 |
9,553 |
132,120 |
119,188(4) |
Cost at 30 September 2023 |
132,600 |
19,241 |
151,841 |
118,699 |
Unrealised gains |
14,981 |
(1,341) |
13,640 |
23,935 |
Diminution in value (3) |
(25,014) |
(8,347) |
(33,361) |
(23,446) |
Closing valuation |
122,567 |
9,553 |
132,120 |
119,188 |
(1) Includes the
Marlborough Special Situations Fund (valuation £8.3m as at
30 September 2023), included in unquoted investments
previously.
(2) The net loss
on investments held at fair value through profit or loss in the
income statement of -£28,455 is the sum of the realised gains and
unrealised losses for the year as detailed in the table above.
(3) Diminishments
of £14,762,893 were made in the year. Once adjusted for disposals
(£4,617,026) and diminishment reversals (£230,000) the net
movement for the year is £9,915,867. Diminishments carried forward
are £33,361,442.
(4) Correction to
prior year (casting error).
Transaction Costs
During the year the Company incurred transaction
costs of £97,493 (2022: £40,809) and £15,710
(2022: £15,989) on purchases and sales respectively. These
amounts are included in the gain on investments as disclosed in the
income statement.
Fair Value Measurement
Hierarchy
The table below sets out fair value measurements
using FRS102 (appendix to section 2 fair value measurement) fair
value hierarchy. The Company has one class of assets, being at fair
value through profit or loss.
• Level
1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities.
• Level
2: Inputs other than quoted prices included within level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from
prices).
• Level
3: Valued by reference to valuation techniques using inputs
that are not based on observable market data.
|
2023 Level 1
£’000 |
2023 Level 2
£’000 |
2023 Level 3
£’000 |
2023 Total
£’000 |
2022 Level 1
£’000 |
2022 Level 2
£’000 |
2022 Level 3
£’000 |
2022 Total
£’000 |
Investments |
82,565 |
40,002 |
9,553 |
132,120 |
105,069(1) |
3,561 |
10,558 |
119,188 |
(1) Correction to
prior year (casting error).
Transfers between level 3 and level 1 occur when
a previously unquoted investment undertakes an initial public
offering, resulting in its equity becoming quoted on an active
market. There have been no instances in the current period
(2022: £5.9m). Transfers between level 1 and 3 would occur
when a quoted investment’s market becomes inactive, or the
portfolio company elects to delist. There have been no instances in
the current year (2022: none).
There were transfers of £20.2m between level 1
and level 2 in the current period where the investments market is
not sufficiently active (2022: £3.6m). There were no transfers
between level 2 and level 1 (2022: none).
Level 3 financial assets
|
2023 Equity
shares £’000 |
2023 Preference
Shares
£’000(1) |
2023 Loan notes
£’000 |
2023 Total
£’000 |
2022 Equity
shares £’000 |
2022 Preference
Shares
£’000(1) |
2022 Loan notes
£’000 |
2022 Total
£’000 |
Opening balance |
4,740 |
3,861 |
1,957 |
10,558 |
19,956 |
9,380 |
5,835 |
35,171 |
Re-Classification Adjustment |
— |
— |
— |
— |
(457) |
(3,013) |
(2,431) |
(5,901)(2) |
Purchases at cost |
— |
— |
1,500 |
1,500 |
— |
— |
300 |
300 |
Non-cash distribution |
— |
— |
— |
— |
— |
59 |
— |
59(3) |
Sale proceeds |
— |
— |
— |
— |
(590) |
— |
— |
(590) |
Realised (losses)/gains |
— |
— |
— |
— |
(1,159) |
— |
— |
(1,159) |
Unrealised (losses)/gains |
(1,756) |
(792) |
43 |
(2,505) |
(13,010) |
(2,565) |
(1,747) |
(17,322) |
Closing valuation |
2,984 |
3,069 |
3,500 |
9,553 |
4,740 |
3,861 |
1,957 |
10,558 |
(1) The preference
shares held are in the nature of equity.
(2) Includes
Mexican Grill (£4.5m) listed on the London Stock Exchange on
8 October 2021 and conversion of the XP Factory loan
note (£1.4m) into listed equity shares on 2 February
2022.
(3) The Company
elected to convert accrued fixed income from a convertible loan
note in Kidly into shares (£59k).
The following table sets out the basis of
valuation for the material Level 3 investments and those where the
value has materially changed during the year, held within the
portfolio at 30 September 2023.
In assessing fair value, the Investment Manager
considered a range of valuation methodologies including EV/Sales,
and EV/EBITDA multiples for the current and next financial year.
Where appropriate, the Investment Manager also assessed value using
discounted cash flow analysis. Where observable market multiples
were available, these were used as part of peer group analysis.
Market based multiples were taken as reference points with
discounts applied (where appropriate) to reflect liquidity and
forecast risk.
The manager also undertook sensitivity analysis
to consider the impact of a 30% movement in the peer group
multiples, both higher and lower. The use of alternative investment
structures such as convertible loan stock by the Company or other
investors can lead to asymmetric movements in value in response to
different upside and downside scenarios. For further information on
sensitivities, please see note 15.
Level 3 Unquoted Investments |
Infinity Reliance Ltd (My 1st Years) |
Despite the difficult environment, trading remained resilient and
in line with expectations for the financial year to
December 2022. Although trading remains difficult, the company
expects to report further progress with revenues and EBITDA in the
current financial year. The fair value of the investment, which was
unchanged, was reviewed against EV/Sales multiples across a peer
group of listed companies. Peer group multiples recovered some of
the heavy declines seen in the prior year. |
Kidly Ltd |
Trading was difficult over the winter period with the company
closing the financial year to March 2023 with revenues lower
year on year. Although trading remains challenging within the
current year, changes to the operating model are expected to
increase margins and reduce losses. The company raised new equity
and debt funding (including from the Company) during the period
under review. The fair value of the equity investment, which was
reviewed against EV/Sales multiples across a peer group of listed
companies, was reduced. The fair value of the convertible loan
note investment was unchanged. The conversion option is valued
using the Black-Scholes option pricing model. Peer group multiples
recovered some of the heavy declines seen in the prior year. |
SCA Investments Ltd (Gousto) |
The company raised new equity (February 2023) and debt
(September 2023) to fund capital expenditure and working
capital. EBITDA and cash flow generation improved significantly
within the year. Although the assessment of value has resulted in
an increased enterprise value, the addition of a new class of share
and warrants resulted in a reduction to the value of the
investment. EV/Sales and EV/EBITDA peer group ratios and discounted
cash flow analysis were used to support the valuation. Peer group
multiples recovered some of the heavy declines seen in the prior
year. |
Zappar Ltd |
Trading for the financial year to March 2023 was in line with
(modestly) revised guidance. With end markets remaining difficult
and extended sales cycles, the company has made small reductions to
revenue and profit guidance for the financial year to
March 2024, although these, if achieved, would still represent
gains over the prior year. The valuation, which was unchanged, was
reviewed against the revised financial projections for the current
year and EV/Sales multiples across a peer group of listed
companies. Peer group multiples reduced in the year under
review. |
Osirium Technologies plc – convertible loan
note |
On 30 August 20203, Osirium announced a recommended cash offer
for the company by SailPoint Technologies through a scheme of
arrangement, effective from 30 October 2023. As part of the
transaction, the convertible loan notes and all outstanding
accrued interest was repaid in full in November 2023. |
Rosslyn Data Technologies plc – convertible loan
note |
On 19 September 2023, Rosslyn Data Technologies completed a
£3.3m fundraising through the issue of new shares and convertible
loan notes to fund its organic growth strategy. As part of the
funding round, the Company invested £0.3m through the new
convertible loan notes. The fair value of the convertible loan
notes was unchanged with the value of the conversion option
calculated using the Black-Scholes option pricing model. |
8. Significant
interests
At the year end the Company held 3% or more of
the issued share capital of the following investments:
Investment |
Holding % |
Investment |
Holding % |
Engage XR Holdings plc |
29.72% |
Crimson Tide plc |
6.39% |
Fadel Partners inc |
22.55% |
Eden Research plc |
5.59% |
Rosslyn Data Technologies plc |
20.27% |
Skillcast Group plc |
4.74% |
Bivictrix Therapeutics plc |
11.00% |
Zoo Digital Group plc |
4.50% |
PCI-PAL plc |
10.54% |
C4X Discovery Holdings plc |
4.26% |
Bidstack Group plc |
9.64% |
Intelligent Ultrasound Group plc |
4.21% |
Equipmake Holdings plc |
8.94% |
Verici DX plc |
4.18% |
Itaconix plc |
8.80% |
Surface Transforms plc |
4.10% |
Crossword Cybersecurity plc |
8.38% |
Strip Tinning Holdings plc |
3.69% |
XP Factory plc |
7.39% |
Polarean Imaging plc |
3.34% |
One Media IP Group |
7.33% |
Blackbird plc |
3.29% |
Tortilla Mexican Grill plc |
7.17% |
|
|
9. Debtors
|
2023 £000 |
2022 £000 |
Prepayments and accrued income |
1,475 |
408 |
The material increase in accrued income from the
prior year is due to increased investment in fixed interest bonds
and convertible loan notes.
10. Creditors: amounts
falling due within one year
|
2023 £000 |
2022 £000 |
Trade Creditors |
21 |
8 |
Accruals |
885 |
992 |
|
906 |
1,000 |
11. Called
up share capital
|
2023 £000 |
2022 £000 |
Allotted, called-up and fully paid: 327,813,939 |
|
|
(2022: 266,652,209) ordinary shares of 1p each. |
3,278 |
2,666 |
During the year 7,183,338
(2022: 4,307,731) ordinary shares were purchased through the
buyback facility at a cost of £3,636,841 (2022: £3,243,492).
The repurchased shares represent 2.7% (2022: 1.9%) of
ordinary shares in issue on 1 October 2022. The acquired
shares have been cancelled.
During the year, the Company issued 65,917,234
ordinary shares of 1 penny (nominal value £659,172.) in an offer
for subscription, representing 24.7% of the opening share capital
at prices ranging from 54.76p to 63.84p per share. Gross funds of
£39,935,333 were received. The 3.5% premium of £1,397,737 payable
to Canaccord Genuity Wealth Ltd (CGWL) under the terms of
the offer was reduced by £555,552 being the discount awarded to
investors in the form of additional shares. A further reduction of
£755 introductory commission was made resulting in fees payable to
CGWL of £841,430 which were used to pay other costs associated with
the prospectus and marketing. In accordance with the offer
agreement, the Company was entitled to a rebate of £100,000 from
CGWL reducing the net fees payable to CGWL to £741,430.
On 10 February 2023, 1,836,516 ordinary
shares were allotted at a price of 54.95 pence per share,
which was calculated in accordance with the terms and conditions of
the DRIS, on the basis of the last reported NAV per share as at
20 January 2023, to shareholders who elected to receive shares
under the DRIS as an alternative to the final and special dividend
for the year ended 30 September 2022.
On 28 July 2023, 591,318 ordinary shares
were allotted at a price of 49.29 pence per share, which was
calculated in accordance with the terms and conditions of the DRIS,
on the basis of the last reported NAV per share as at 7 July
2023, to shareholders who elected to receive shares under the DRIS
as an alternative to the interim dividend for the year ended
30 September 2023.
On 9 May 2023, the amount standing to the
credit of the share premium account (£133.2m) was cancelled.
Further details of the Company’s capital
structure can be seen in note 1.
Income entitlement
The revenue earnings of the Company are
available for distribution to holders of ordinary shares by way of
interim, final and special dividends (if any) as may from time to
time be declared by the Directors.
Capital entitlement
The capital reserve realised and special reserve
of the Company are available for distribution to holders of
ordinary shares by way of interim, final and special dividends (if
any) as may from time to time be declared by the Directors.
Voting entitlement
Each ordinary shareholder is entitled to one
vote on a show of hands and on a poll to one vote for each ordinary
share held. Notices of meetings and proxy forms set out the
deadlines for valid exercise of voting rights and other than with
regard to directors not being permitted to vote on matters upon
which they have an interest, there are no restrictions on the
voting rights of ordinary shareholders.
Transfers
There are no restrictions on transfers except
dealings by directors, persons discharging managerial
responsibilities and their persons closely associated which may
constitute insider dealing or is prohibited by the rules of the
FCA.
The Company is not aware of any agreements with
or between shareholders which restrict the transfer of ordinary
shares, or which would take effect or alter or terminate in the
event of a change of control of the Company.
12. Net
asset value per ordinary share
|
30 September 2023 |
30 September 2022 |
Net assets (£’000) |
151,920 |
160,507 |
Shares in issue |
327,813,939 |
266,652,209 |
NAV per share (p) |
46.34 |
60.19 |
There are no potentially dilutive capital
instruments in issue and as such, the basic and diluted NAV per
share are identical.
13. Contingencies,
guarantees and financial commitments
There were no contingencies, guarantees or
financial commitments of the Company at the year end
(2022: nil).
14. Related
party transactions and conflicts of interest
The remuneration of the directors, who are key
management personnel of the Company, is disclosed in the Directors’
remuneration report and in note 4.
Transactions with the Investment
Manager
As the Company’s Investment Manager, Canaccord
Genuity Asset Management Ltd is a related party to the Company
for the purposes of the Listing Rules. As the Investment Manager
and Canaccord Genuity Wealth Limited (CGWL) are part of the same
CGWL group, CGWL also falls into the definition of related
party.
On 7 September 2023, the Board and the
Investment Manager entered into an updated Investment Management
Agreement. The amended agreement included updates to reflect
changes in regulation. There were no changes to the commercial
terms of the agreement.
Oliver Bedford, a non-executive director of the
Company is also an employee of the Investment Manager which
received fees of £28,000 for the year ended 30 September 2023
in respect of his position on the Board (2022: £26,125). Of
these fees £7,000 was still owed at the year end. Oliver Bedford’s
non-executive directorship fees will increase to £29,500 per annum,
with effect from 1 October 2023.
CGWL act as administrator and custodian to the
Company. On 7 September 2023, the Company entered into an
amended administration agreement with CGWL. Under the terms of the
agreement the fees to be paid to CGWL were increased to £250,000
per annum (previously £195,000) with effect from 1 October
2023.
CGWL received fees for the support functions as
follows:
|
30 September 2023 |
30 September 2022 |
Custody |
30,000 |
30,000 |
Administration |
195,000 |
195,000 |
Total |
225,000 |
225,000 |
Still owed at the year end |
55,765 |
55,240 |
Under an offer agreement dated 5 September
2022, CGWL were appointed by the Company to administer an offer for
subscription and acted as receiving agent in relation to the offer.
Under the terms of the agreement CGWL received a fee of
3.5 per cent. of the gross proceeds of the offer for providing
these services. The Administrator agreed to discharge commissions
payable to financial advisers in respect of accepted applications
for offer shares submitted by them, including any trail
commission.
The Administrator also agreed to discharge
and/or reimburse all costs and expenses of and incidental to the
offer and the preparation of the prospectus, including without
limitation to the generality of the foregoing, FCA vetting fees in
relation to the prospectus, sponsor and legal fees, expenses of the
Company and CGWL, the Company’s tax adviser’s fees and expenses,
registrar’s fees, costs of printing, postage, advertising,
publishing and circulating the prospectus and marketing the offer,
including any introductory commission and discounts to Investors.
However, the Administrator was not responsible for the payment of
listing fees associated with the admission of the ordinary shares
to the premium segment of the Official List and to trading on the
main market of the London Stock Exchange.
During the year, the Company issued 65,917,234
ordinary shares of 1 penny (nominal value £659,172) in an offer
for subscription, representing 24.7% of the opening share capital
at prices ranging from 54.76p to 63.84p per share. Gross funds of
£39,935,333 were received. The 3.5% premium of £1,397,737 payable
to Canaccord Genuity Wealth Ltd (CGWL) under the terms of
the offer was reduced by £555,552, being the discount awarded to
investors in the form of additional shares. A further reduction of
£755 introductory commission was made resulting in fees payable to
CGWL of £841,430 which were then used to pay other costs associated
with the prospectus and marketing. In accordance with the offer
agreement, the Company was entitled to a rebate of £100,000 from
CGWL reducing the net fees payable to CGWL to £741,430.
Under an offer agreement dated 7 September
2023, CGWL were appointed by the Company to administer a new offer
for subscription and act as receiving agent in relation to the
offer. Under the terms of the agreement CGWL will receive a fee of
3.5 per cent. of the gross proceeds of the offer for providing
these services. The Administrator has agreed to discharge
commissions payable to financial advisers in respect of accepted
applications for Offer Shares submitted by them, including any
trail commission.
The Administrator has also agreed to discharge
and/or reimburse all costs and expenses of and incidental to the
offer and the preparation of the prospectus, including without
limitation to the generality of the foregoing, FCA vetting fees in
relation to the prospectus, sponsor and legal fees, expenses of the
Company and CGWL, the Company’s tax adviser’s fees and expenses,
registrar’s fees, costs of printing, postage, advertising,
publishing and circulating the prospectus and marketing the offer,
including any introductory commission and discounts to Investors.
However, the Administrator will not be responsible for the payment
of listing fees associated with the admission of the Ordinary
Shares to the premium segment of the Official List and to trading
on the main market of the London Stock Exchange.
If following the final admission under the
offer, the aggregate fee that has been paid to CGWL exceeds the
costs and expenses referred to above by more than £25,000, then
CGWL will rebate any surplus to the Company subject to a maximum
rebate of £100,000.
Canaccord Genuity Asset Management Ltd is
appointed as Investment Manager to the Company and receives an
investment management fee of 1.7% per annum.
Investment management fees for the year are
£2,797,377 (2022: £3,340,182) as detailed in note 3. Of
these fees £645,397 (2022: £687,373) were still owed at the
year end. As the Investment Manager to the Company and the
investment advisor to the Marlborough Special Situations Fund (in
which the Company may invest), the Investment Manager makes an
adjustment as necessary to its investment management fee to ensure
the Company is not charged twice for their services.
Upon completion of an investment, the Investment
Manager is permitted under the investment management agreement to
charge private investee companies a fee equal to 1.5 per cent.
of the investment amount. This fee is subject to a cap of £40,000
per investment and is payable directly from the investee company to
the Investment Manager. The Investment Manager may recover external
due diligence and transaction services costs directly from private
investee companies. No fees were charged to investee companies in
the year under this agreement (2022: nil).
Total commission of £63,318 was paid to CGWL in
the year for broker services (2022: £30,612).
The Investment Manager has agreed to indemnify
the Company and keep indemnified the Company in respect of the
amount by which the annual running costs of the Company exceed
3.5 per cent. of the net assets of the Company, such costs
shall exclude any VAT payable thereon and any payments to financial
intermediaries, the payment of which is the responsibility of the
Company. No fees were waived by the Investment Manager in the
financial year under the indemnity.
The Company also held £8,119,302 in the client
account held at CGWL at 30 September 2023
(2022: £16,786,442).
15. Financial
instruments
Risk management policies and
procedures
The investment objectives of the Company are to
generate capital gains and income from its portfolio and to make
distributions from capital or income to shareholders whilst
maintaining its status as a Venture Capital Trust.
The Company intends to achieve its investment
objectives by making Qualifying Investments in companies listed on
AIM, private companies and companies listed on the AQSE Growth
Market, as well as Non-Qualifying Investments as allowed by the VCT
Rules.
At least 80% of the Company’s funds have been
invested in qualifying holdings during the year under the HMRC
investment test definition. The balance of the Company’s funds were
invested in liquid assets (such as non-qualifying equities, fixed
income securities and bank deposits). The Company is managed as a
VCT in order that shareholders in the Company may benefit from the
tax relief available.
This strategy exposes the Company to certain
risks, which are summarised below.
The structure in place to manage these risks is
set out in the corporate governance report of the annual report and
accounts.
A detailed review of the investment portfolio is
contained in the chairman’s statement and Investment Manager’s
report.
Classification of financial
instruments
The investments at year end comprise two types
of financial instruments. The basis of valuation is set out
below:
• Equities – fair
value through the profit and loss account.
• Fixed income
securities – fair value through the profit and loss account
Other financial assets comprise cash and cash
equivalents of £19,231,167 (2022: £41,911,058), accrued
income and debtors of £1,434,688 (2022: £370,624), which is
classified as ‘loans and receivables measured at amortised cost’.
Financial liabilities consist of trade creditors and accruals of
£905,897 (2022: £1,000,255) which are classified as
‘financial liabilities measured at amortised cost’.
Market risk
Market price risk arises from any fluctuations
in the value of investments held by the Company. Adherence to
investment policies mitigates the risk of excessive exposure to any
particular type of security or issuer. In particular, other than
bank deposits, no individual investment shall exceed 10 per
cent. of the Company’s net assets at the time of investment.
However, many of the investments are in small companies traded on
the AIM market which by virtue of their size carry more risk than
investments in larger companies listed on the main market of the
London Stock Exchange.
Market risk is monitored by the Board on a
quarterly basis and on an ongoing basis, through the Investment
Manager.
The following table summarises exposure to price
risk by asset class at year end date:
|
Change in Fair Value of Investments |
Asset class |
30% market increase
2023 £’000 |
30% market decrease
2023 £’000 |
Aggregate value 2023
£’000 |
Aggregate value 2022
£’000 |
AIM Qualifying Investments(1) |
14,365 |
-14,232 |
80,673 |
93,680 |
Unquoted Qualifying Investments(2) |
2,004 |
-2,645 |
8,453 |
9,802 |
Quoted Non-Qualifying Investments |
4,496 |
-4,496 |
17,366 |
12,397 |
Unquoted Non-Qualifying Investments |
— |
— |
— |
— |
Authorised unit trust |
1,409 |
-1,409 |
8,268 |
3,309 |
Quoted Non-Qualifying fixed income securities |
-110 |
110 |
17,360 |
— |
|
22,164 |
22,672 |
132,120 |
119,188 |
(1) Includes
variances in the value of CLN issued by Osirium plc and
Rosslyn Data Technologies plc.
(2) Including
variances in the value of CLNs issued by Kidly Ltd.
If market prices had been 30% higher or lower
while all other variables remained unchanged the return
attributable to ordinary shareholders for the year ended
30 September 2023 would have increased by £22,164,436
(2022: £25,128,703) or decreased by £22,671,676
(2022: £25,965,809).
The assessment of market risk is based on the
Company’s equity and fixed income portfolio including private
company investments, as held at the year end. The assessment uses
the AIM All-Share Index and the FTSE 250 Index as proxies for
the AIM Qualifying Investments and quoted Non-Qualifying
Investments and illustrates, based on historical price movements,
their potential change in value in relation to change in value of a
reference index, in this case the FTSE 100.
The review has also examined the potential
impact of a 30% move in the market on the CLN investments held by
the Company, whose values will vary according to the price of the
underlying security into which the loan note instrument has
the option to convert.
Currency risk
The Company is not directly exposed to currency
risk and does not invest in currencies other than sterling. There
are indirect exposures through movements in the foreign exchange
market as a consequence of investments held in companies who report
in foreign currencies.
Interest rate risk
The Company is fully funded through equity and
has no debt; therefore, interest rate risk is not considered a
material risk.
The Company’s financial assets and liabilities
are denominated in sterling as follows:
|
30 September 2023 |
|
Fixed Rate
£000 |
Variable Rate
£000 |
Non-Interest Bearing
£000 |
Total £000 |
Investments |
20,860 |
— |
111,260 |
132,120 |
Cash and cash equivalents |
— |
19,231 |
— |
19,231 |
Other current assets (net) |
1,293 |
— |
182(2) |
1,475 |
Other current liabilities (net) |
— |
— |
(906) |
(906) |
Net assets |
22,153 |
19,231 |
110,536 |
151,920 |
|
30 September 2022 |
|
Fixed Rate
£000 |
Variable Rate
£000 |
Non-Interest Bearing
£000 |
Total £000 |
Investments |
1,956 |
— |
117,232 |
119,188 |
Cash and cash equivalents |
— |
41,911 |
— |
41,911 |
Other current assets (net)(1) |
262 |
— |
146 |
408 |
Other current liabilities (net)(1) |
— |
— |
(1,000) |
(1,000) |
Net assets |
2,218 |
41,911 |
116,378 |
160,507 |
(1) Prior year
updated to split out assets and liabilities and correct fixed
interest accrual allocation.
(2) Includes
prepayments of £40k which is not considered a financial asset.
Interest rate risk exposure relates to cash and
cash equivalents (bank deposits) where interest income is
primarily linked to bank base rates. Interest rate risk exposure on
debt instruments is reflected in the market risk and since these
securities are valued at fair value, no additional disclosure is
made in this respect. Movements in interest rates on cash and cash
equivalents are not considered a material risk.
Liquidity risk
Liquidity risk is the risk that the Company is
unable to meet obligations as they fall due. The Company has no
debt and maintains sufficient investments in cash or cash
equivalents, or readily realisable securities to pay trade
creditors and accrued expenses (£905,897 as at 30 September
2023). Liquidity risk is not considered material. As at
30 September 2023 the Company held £19,231,167 in cash or cash
equivalents.
Credit risk
Credit risk relates to the risk of default by a
counterparty. The Company may have credit risk through investments
made in unsecured loan stock issued by Qualifying Companies or
through Non-Qualifying Investments in fixed income securities and
exchange traded funds. No assets are past due date for payment.
On 30 August 2023, Osirium announced a
recommended cash offer for the company by SailPoint Technologies
through a scheme of arrangement, effective from 30 October
2023. As part of the transaction, the convertible loan
notes and all outstanding accrued interest was repaid in full
in November 2023. In anticipation of the completion of the
transaction, which was completed post period end, the impairments
to the carrying value of the loan note and accrued interest
were reversed.
An investment will be impaired if the investee
company is loss making and does not have sufficient funds available
to transition into profit and in the opinion of the Investment
Manager may fail to secure sufficient equity or debt funding to
transition into profit, or if the borrower defaults or is expected
to default on payment of accrued interest or repayment of the
principal sum.
The maximum credit risk exposure equates to the
carrying value of assets at the balance sheet date:
|
2023 £000 |
2022 £000 |
Fixed income securities; |
|
|
—Qualifying Investments (convertible loan notes) |
3,500 |
1,956 |
—Non-qualifying investments (investment grade corporate
bonds) |
17,361 |
— |
—Non-qualifying investments (UK gilt exchange traded fund) |
1,978 |
— |
Total fixed income securities |
22,839(1) |
1,956 |
Cash and cash equivalents |
19,231 |
41,911 |
Other assets |
1,475 |
408 |
|
43,545 |
44,275 |
(1) Includes UK
gilt exchange traded fund as underlying investments are fixed
income securities.
Cash and cash equivalents include bank deposits
held through Canaccord Genuity Wealth Limited of £8.1 million
(2022: £16.8 million) (CGWL, trading as CGWM), are
held with banks that are authorised and regulated to carry on
banking or deposit-taking business. All these meet the requirements
of UK’s FCA CASS rules. Through its treasury function, CGWM uses a
tiered level approach to counterparty selection to reflect
different maturities of cash held on deposit.
The Company’s cash reserves, when held through
CGWL, are pooled with cash deposits from other clients of CGWL and
diversified across a specified panel of banks. CGWM’s treasury
function reviews panel members ahead of selection and prioritises
the safety of client assets with the panel selection process
placing an emphasis on quality and security. Participating banks
must be rated as investment grade by at least two international
credit rating agencies. CGWM will also consider the expertise and
market reputation of the bank; review a bank’s financial statements
and consider its capital and deposit base; consider the
geographical location of the parent; monitor a bank’s credit
default swaps; and ask the bank to complete a due diligence
questionnaire. The CGWM treasury function maintains regular contact
with panel banks, typically meeting them every 6 months or so.
There are no withdrawal restrictions on the Company’s cash held
with CGWL.
Fair value of financial assets and
financial liabilities
Equity investments are held at fair value. No
investments are held for trading purposes only.
Capital management policies and
procedures
The current policy is to fund investments
through equity. No future change to this policy is envisaged. As a
public limited company, the Company is required to hold a minimum
£50,000 share capital.
The Company’s capital is summarised in
notes 1 and 11 to these accounts. The Company has no debt and
is fully funded by equity.
16. Dividends
|
2023 Ord
£000 |
2022 Ord
£000 |
Paid per share: |
|
|
Special capital dividend of 2.50 pence for the year ended
30 September 2021 |
— |
5,704 |
Paid per share: |
|
|
Final capital dividend of 3.15 pence for year ended
30 September 2021 |
— |
8,455 |
Paid per share: Interim capital dividend of 1.00 penny for
year ended 30 September 2022 |
— |
2,671 |
Paid per share: |
|
|
Special capital dividend of 2.00 pence for the year ended
30 September 2023 |
6,216 |
— |
Paid per share: |
|
|
Final capital dividend of 2.00 pence for year ended
30 September 2022 |
6,216 |
— |
Paid per share: |
|
|
Interim capital dividend of 1.00 penny for year ended
30 September 2023 |
3,298 |
— |
Dividends unclaimed |
(13) |
(1) |
|
15,717(2) |
16,830(3) |
Proposed per share: |
|
|
Final capital dividend of 1.50 pence for the year ended
30 September 2023 |
5,151 |
— |
Paid per share: |
|
|
Special capital dividend of 2.00 pence for the year ended
30 September 2023 |
— |
6,218 |
Paid per share: |
|
|
Final capital dividend of 2.00 pence for the year ended
30 September 2022 |
— |
6,218 |
(1) Unclaimed
dividends for a period of 12 years reverted to the
Company.
(2) The difference
between total dividends paid for the period ending
30 September 2023 and the cash flow statement is £1,300,000
which reflects the amount of dividends reinvested under the
DRIS.
(3) The difference
between total dividends paid for the period ending
30 September 2022 and the cash flow statement is £1,038,000
which reflects the amount of dividends reinvested under the
DRIS.
17. Post
balance sheet events
Share buybacks
As at 18 December 2023, 2,039,414 ordinary
shares have been purchased at an average price of 42.82 pence
per share and a total cost of £873,229.
Shares issued
As at 18 December 2023, 17,599,435 ordinary
shares have been issued through the offer for subscription raising
gross proceeds of £8,101,695.
New investments
The Company has made the following investments
since the period end:
|
Amount Invested £000 |
Investment into existing company |
Qualifying Investments |
|
|
Eden Research plc |
500 |
Yes |
Non-Qualifying Investments |
|
|
Next Group plc GRTD BDS 26/08/25 |
957 |
No |
Shell plc |
809 |
No |
XP Power plc |
126 |
Yes |
Marlborough UK Micro-Cap Fund |
4,365 |
No |
Marks & Spencer plc 3.75% SNR
EMTN 19/05/2026 |
2,058 |
No |
Unilever plc 1.375% GTD SNR NTS 15/09/24 |
3,028 |
No |
Disposals
The Company has made the following full
disposals since the period end:
|
Proceeds £000 |
Qualifying Investments |
|
Osiruim Technologies plc |
14 |
Osiruim Technologies plc (convertible loan note) |
800 |
Renalytix AI plc |
13 |
Velocys plc |
61 |
Instem plc |
1,416 |
Abcam plc |
3,143 |
Non-Qualifying Investments |
|
Diversified Energy Company plc |
659 |
Watches of Switzerland plc |
641 |
Energean plc |
679 |
Marks and Spencer 3% SNR EMTN |
3,000 |
IShares III plc UK Gilts 0-5 YR UCITS ETF |
2,005 |
Alternative performance
measures
Alternative performance
measures
An alternative performance measure (APM) is a
financial measure of the Company’s historic or future financial
performance, financial position or cash flows which is not defined
or specified in the applicable financial reporting framework.
The Directors assess the Company’s performance
against a range of criteria which are viewed as particularly
relevant for a VCT.
Where the calculation of the APM is not detailed
within the financial statements, an explanation of the methodology
employed is below:
NAV total return
|
|
30 September 2023 |
30 September 2022 |
Opening NAV per share |
A |
60.19p |
100.39p |
Special dividend paid |
B |
2.00p |
2.50p |
Final dividend paid |
C |
2.00p |
3.15p |
Interim dividend paid |
D |
1.00p |
1.00p |
Closing NAV per share |
E |
46.34p |
60.19p |
NAV total return |
((B+C+D+E-A)/A)*100 |
-14.70% |
-33.42% |
NAV total return (dividends
reinvested)
|
|
|
30 September 2023 |
% Return |
Opening NAV per share (30 September 2022) |
|
A |
60.19p |
|
Closing NAV per share (30 September 2023) |
|
46.34p |
|
|
|
Special dividend paid February 2023 |
2.00p |
|
|
|
Final dividend for year paid February 2023 |
2.00p |
|
|
|
Interim dividend July 2023 |
1.00p |
|
|
Total dividend payments |
|
5.00p |
|
|
Closing NAV per share plus dividends paid |
|
51.34p |
-14.70% (-33.42% 30 September 2022) |
|
In year performance of reinvested dividends |
|
-0.74p |
|
|
NAV total return (dividends reinvested) |
((B-A)/A)*100 |
B |
50.60p |
-15.93% (-35.47% 30 September 2022) |
Share price total return
|
|
30 September 2023 |
30 September 2022 |
Opening share price |
A |
62.75p |
93.00p(1) |
Special dividend paid |
B |
2.00p |
— |
Final dividend paid |
C |
2.00p |
3.15p |
Interim dividend paid |
D |
1.00p |
1.00p |
Closing share price |
E |
43.00p |
62.75p |
Share price total returns |
((B+C+D+E-A)/A)*100 |
-23.51% |
-28.06% |
(1) Ex-dividend
Share price total return (dividends
reinvested)
|
|
|
30 September 2023 |
% Return |
Opening share price (30 September 2022) |
|
A |
62.75p |
|
Closing share price (30 September 2023) |
|
43.00p |
|
|
|
Special dividend paid February 2023 |
2.00p |
|
|
|
Final dividend for year paid February 2023 |
2.00p |
|
|
|
Interim dividend paid July 2023 |
1.00p |
|
|
Total dividend payments |
|
5.00p |
|
|
Closing share price plus dividends paid |
|
48.00p |
% -23.51% (-28.06% 30 September 2022) |
|
In year performance of reinvested dividends |
|
-0.81p |
|
|
Share price total return (dividends reinvested) |
((B-A)/A)*100 |
B |
47.19p |
% -24.80% (-28.98% 30 September 2022) |
Ongoing charges ratio
The ongoing charges ratio has been calculated
using the AIC’s “Ongoing Charges” methodology.
|
|
30 September 2023 £000 |
30 September 2022 £000 |
Investment management fee |
|
2,797 |
3,340 |
Other expenses |
|
1,035(1) |
989 |
VCT proportion of MSSF expenses |
|
65 |
26 |
Ongoing charges |
A |
3,897 |
4,355 |
Average net assets |
B |
174,334 |
211,552 |
Ongoing charges ratio |
(A/B)*100 |
2.24% |
2.06% |
(1) Other expenses
exclude London Stock Exchange fees of £58,905 for admission of
shares under the offer for subscription, reversal of the provision
of loan stock interest previously recognised (£34,816), capital
reduction costs of £15,131 and witholding tax charges of £16,485 as
the Board do not consider these costs to be ongoing costs to the
fund.
Share price discount
|
|
30 September 2023 |
30 September 2022 |
Share price |
A |
43.00p |
62.75p |
Net asset value per share |
B |
46.34p |
60.19p |
(Discount) / premium |
((A/B)-1)*100 |
-7.21% |
4.25% |
The 1-year average discount of 6.06% is
calculated by taking the average of the share price discount at
each month end between 1 October 2022 and 30 September
2023.
The 5-year average discount of 5.64% is
calculated by taking the average of the share price discount at
each month end between 1 October 2018 and 30 September
2023.
END
For further information, please contact:
JTC (UK)
Limited HHV.CoSec@jtcgroup.comSusan
Fadil +44 20 3893
1005Uloma
Adighibe +44 207 409
0181
LEI: 213800LRYA19A69SIT31
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