Final Results
The Income & Growth VCT plc
Annual Financial Results of the Company for the Year ended 30 September 2013
Investment Objective
The objective of the Company is to provide investors with an attractive
return, by maximising the stream of dividend distributions from the income and
capital gains generated by a diverse and carefully selected portfolio of
investments.
The Company invests in companies at various stages of development. In some
instances this may include investments in new and secondary issues of
companies which may already be quoted on the Alternative Investment Market
("AiM") or PLUS.
Investment policy
The Company's policy is to invest primarily in a diverse portfolio of UK
unquoted companies. Investments are structured as part loan and part equity in
order to receive regular income and to generate capital gains from trade sales
and flotations of investee companies.
FINANCIAL HIGHLIGHTS
- Share price total return of 15.0% for the year.
- Net asset value (NAV) total return of 14.9% for the year.
- The Directors are recommending a final dividend of 4.0 pence per Share, which
will bring total dividends in respect of the year to 10 pence per Share. This
payment will bring cumulative dividends paid since 1 January 2008 to 44.5 pence
per Share.
Five Year Performance Summary
The net asset value (NAV) per ordinary share of 1 penny ("Share") at 30
September 2013 was 113.9 pence
The table below shows the recent past performance of the Company's existing
class of Shares for each of the last five years.
Net NAV per Cumulative NAV total Share Share price
assets Share dividends return per price 1 total return
paid per Share to per Share to
Share Shareholders Shareholders
As at (£m) (p) (p) (p) (p) (p)
30 September 2013 60.5 113.9 40.5 * 154.4 99.5 140.0
30 September 2012 50.6 109.6 28.5 138.1 97.0 125.5
30 September 2011 49.2 120.8 4.5 125.3 91.6 96.1
30 September 2010 36.6 99.0 0.5 99.5 87.0 87.5
30 September 2009 11.0 93.2 0.0 93.2 94.5 94.5
1 Source: London Stock Exchange
* Dividends proposed (not included in the above table)
A final dividend of 4.0 pence per Share, comprising 1.25 pence from income and
2.75 pence from capital will be recommended to Shareholders at the Annual
General Meeting of the Company to be held on 12 February 2014. If approved,
the dividend will be paid on 12 March 2014 to Shareholders on the Register on
21 February 2014 and bring cumulative dividends paid per Share since 1 January
2008 to 44.5 pence.
Discount
The Board's current intention is to continue with its
existing buy-back policy with the objective of maintaining the discount to NAV
at which the Shares trade at 10% or less. The discount for the Company's
Shares at 30 September 2013 was 10.0% (2012: 9.4%) based on a NAV at 30 June
2013 of 110.5 pence.
Investments at valuation at 30 September 2013
Investments by market sector
% of venture capital portfolio
Market sector 30 September 2013 30 September 2012
Support services 48.2% 39.6%
General retailers 14.5% 8.0%
Software and computer services 13.3% 10.4%
Media 11.6% 10.9%
Acquisition vehicles 3.0% 19.2%
Pharmaceuticals and biotechnology 2.8% 3.2%
Industrial engineering 2.5% 2.2%
Technology, hardware and equipment 2.4% 2.9%
Personal goods 1.7% 2.0%
Food producers Nil 1.6%
Investments by stage of development
% of venture capital portfolio
Stage of development 30 September 2013 30 September 2012
Management buyout/buyin 84.6% 65.7%
Development capital 6.4% 5.9%
AiM-quoted 6.0% 9.2%
Acquisition vehicles 3.0% 19.2%
CHAIRMAN'S STATEMENT
I am pleased to present to Shareholders the Annual Report of the Company for
the year ended 30 September 2013.
Overview
In my statement at the Half-Year stage, I reported on a period of strong
performance from many companies in the portfolio in spite of continuing
uncertainty in the UK and global economies. I am pleased to report that this
trend has largely continued in the second half of the year. At the year-end,
the underlying net asset value ("NAV") had increased in the second half of the
year by a further 6.1%, reflecting primarily further increases in the value of
the investment portfolio, as a number of individual investee companies have
continued to make good progress. The positive trend in deal flow noted by the
Manager at the half-year has also been sustained and a number of promising
opportunities are being reviewed from a healthy pipeline, the first of which
has completed after the year-end.
Performance
The Company's NAV total return per Share rose by 14.9% during the year to 30
September 2013.
I am pleased to report that, using the benchmark of NAV total return, the VCT
is ranked first over three years, second over five years and fourth over ten
years amongst generalist VCTs by the Association of Investment Companies (AIC)
(based on statistics prepared by Morningstar) at 31 October 2013. This is an
encouraging indication of the consistency of the VCT's performance in the
long-term as well as the strong performance in recent years, where the
increase in the NAV has arisen from several excellent realisations.
The rise in NAV total return compares with an increase of 34.2% in the FTSE
SmallCap Index and an increase of 13.3% in the FTSE AiM All-Share Index, both
on a total return basis.
The NAV per Share at 30 September 2013 was 113.9 pence (30 September 2012:
109.6 pence).
Cumulative dividends paid and proposed since 1 January 2008 amount to 44.5
pence per Share.
The portfolio
Over the year, the portfolio as a whole achieved a net increase of £5.9
million in unrealised gains and £1.1 million in realised gains, net of
transaction costs. The portfolio under management was valued at £34.0 million
at the year-end representing 101% of cost and an increase of 20.9% in
valuation over the year on a like for like basis.
During the year £6.7 million was placed into new and existing investments
(including a total of £3.9 million held in four acquisition vehicles). Two of
these were to support new MBOs of Gro-Group and Veritek Global using existing
investments in the acquisition vehicles Fosse Management and Madacombe Trading
respectively. Two additional investments were made to support strategic
acquisitions by existing portfolio companies, namely, ATG Media, of Bidspotter
Inc in the US using Peddars Management, and Motorclean, of Forward Valeting
Services using Almsworthy Trading.
Following the year-end in November 2013, the VCT completed a
further investment of £1.8 million into the acquisition vehicle Culbone
Trading to support the MBO of Virgin Wines, one of the UK's leading online
retailers of wine. The Company's investment in this company now totals £2.8
million.
Realisations proceeds totalling £6.5 million were received from seventeen
companies. Of this total £2.8 million were loan repayments and £1.7 million
was received as total proceeds from the disposal of Image Source.
Full details of the investment activity during the year and a summary of the
performance highlights can be found in the Investment Manager's Review on
pages 8 - 14 of this Annual Report.
Cash available for investment
The Board continues to consider and monitor credit risk in respect of its cash
balances extremely carefully.
The Company has diversified its holdings of cash available for investment
during the year as it is no longer adding to its investment in money market
funds in response to a change in VCT regulations. It continues to hold £12.8
million in a selection of money market funds with AAA credit ratings at 30
September 2013. The balance of cash and current asset investments of £13.1
million is held in deposit accounts with a number of well-known financial
institutions across a range of maturities. However, whilst several of the
larger UK banks remain in a recovery stage, systemic risk remains. In
addition, the £2 million invested in acquisition vehicles is also held in
money market funds (reduced to £1 million following the use of Culbone Trading
to support the MBO of Virgin Wines after the year-end). The Company is
currently well-positioned both to take advantage of favourable investment
opportunities as they arise and, if required, to make investments to support
the existing portfolio. Cash and liquidity fund balances as at 30 September
2013 amounted to £25.9 million.
Revenue Account
The revenue return has shown a large increase in the year, with a figure of
£1.5 million compared with last year's return of £1.0 million, an improvement
of £0.5 million.
An increase in income for the year and a reduction in running costs are the
two primary reasons for this improvement. Loan interest income has risen by
£0.4 million due to a number of new investments, such as Gro-Group and Veritek
Global, in addition to follow on loans to ATG Media and Motorclean. The VCT
has also received a number of interest arrears payments from investee
companies that have improved their financial positions e.g. Aquasium, Blaze
Signs and Newquay Helicopters (formerly British International).
Dividend income has fallen by a nominal amount in the year, although the
majority of investee companies have increased their dividend (e.g. ATG, Focus,
Tessella). This comparative fall has arisen as a result of significant
dividend receipts in 2012 from Brookerpaks and Image Source which investments
have both since been realised. However, in 2013, bank deposit interest has
increased significantly in comparison to previous years as the VCT has spread
cash on deposit amongst several well-known financial institutions.
Investment management fees charged to the revenue return have increased by
less than £0.1 million, in line with the growth in the Company's net assets.
Running costs have fallen by £0.1 million to £0.4 million. This fall in
running costs is mainly due to a large reduction in trail commission payable
to intermediaries, as the trail commission cap for many older holdings was
reached last year. Commission is still payable, where appropriate, on the more
recent linked fundraisings.
Dividends
A final dividend of 4.0 pence per Share, comprising 1.25 pence from income and
2.75 pence from capital, will be recommended to Shareholders at the Annual
General Meeting of the Company to be held on 12 February 2014, for payment to
Shareholders on the register on 21 February 2014, on 12 March 2014.
Enhanced buyback facility (EBF)
The VCT offered an EBF to Shareholders in January 2013 and this took place in
April 2013. A total of 8.1 million Shares were bought-back by the Company in
respect of the two tax years 2012/13 and 2013/14 (representing 17.0% of the
Shares in issue at the date of launch of the EBF). 7.9 million new Shares were
allotted by the VCT under the EBF as a result of this buy-back. The costs of
the EBF were solely borne by the Shareholders who participated in it.
Share buy-backs
During the year ended 30 September 2013, the Company bought back a further 0.9
million of the Company's own Shares (year to 30 September 2012: 1.0 million)
representing 2.0% (2012: 2.5%) of the Shares in issue at the beginning of the
year at a total cost of £0.9 million (year to 30 September 2012: £0.9 million)
net of expenses. All Shares bought-back by the Company were subsequently
cancelled by the Company.
The Board regularly reviews its buyback policy and has maintained the discount
to NAV at which the Company's Shares trade over the last year at around 10%.
At 30 September 2013, the mid-market price for the Company's shares was 99.5
pence, representing a discount of 10.0% to the NAV at 30 June 2013 of 110.5
pence.
Fundraising
The Company raised £8.3 million gross of issue costs in the Mobeus Linked VCT
Offer launched on 29 November 2012. A further Linked Offer to raise £24
million in aggregate for the Company, together with the other Mobeus VCTs was
launched on 28 November 2013. This fundraising by the Company anticipates a
higher rate of new investment in the year ahead and the increased assets will
spread the Company's fixed running costs over a larger asset base.
Industry awards for the Manager
Your Board is pleased to report to Shareholders that the Manager was named VCT
House of the Year 2013 for the second consecutive year at the unquote" British
Private Equity Awards 2013. The award recognised the high level of consistency
achieved by the Manager during the year under consideration in maintaining
high standards in all areas of its activity including deals, exits, portfolio
management and fundraising.
Annual Report
Shareholders may be aware that a number of significant changes have
been introduced by legislation which affect the way in which companies are now
required to present information in the narrative sections of their annual
reports. In particular, you will see that this year's report contains a
Strategic Report (pages 19 - 27) for the first time. This includes the
Company's investment objective and policy and describes how these have been
met in the year under review as well as giving information about the risks
face by the Company and regulatory environment in which it operates. We are
considering improvements to the way in which the information is presented and
will seek, in future, to make the report more concise by, in particular,
reducing the amount of duplication. We are aware that with a September
year-end, the Company is in the vanguard of implementing these new
requirements but may I assure you that the review process is proceeding
actively, as you will see in next year's report.
Outlook
Since the half-year, the outlook for the UK economy appears to have improved;
recent data suggests the economy is growing and will continue to grow. The UK
Government appears to be trying to create a more optimistic mood ahead of the
election in 2015, with its measures aimed at the housing market designed to
boost growth. Some business surveys reveal a cautious optimism in the
corporate sector. The Financial Times and The Daily Telegraph have both
featured articles on mid-sized companies which they describe as a resurgent
sector of the economy. This is an area in which we are seeking to increase our
participation as some of our more successful investee companies look to
increase their size and profitability by making significant acquisitions.
Other commentators are more pessimistic about how solid such a recovery may
be. The Board and the Manager remain wary of potential shocks to this
recovering trend from, for example, Western governments' levels of debt, a
Eurozone or banking crisis.
Our cautious approach of wishing to identify the right opportunities in the
recent uncertain markets has meant that we have only invested in well-run
profitable companies operating in niche markets that we believe have the
potential to grow and to deliver attractive returns to Shareholders. Downside
risk to Shareholders is minimised by specifically structuring the terms of
deals to include loan stock as well as equity. We believe that this strategy
underpins the quality of the investment portfolio currently held within the
VCT. The Company also holds a significant level of liquidity that is available
to use for future deals that we anticipate the Manager will bring to the
Company. We perceive that the banking sector largely remains reluctant to lend
to the small business sector, which is creating opportunities for your
Company, evident in the number of quality investment opportunities the Manager
is evaluating.
If growth in the UK economy is sustained, the economic prospects should
improve further for our existing and future portfolio companies. A number of
portfolio companies have performed well in the recent challenging environment.
If these companies continue to produce good performance, the Company should be
able to deliver good returns for Shareholders.
Once again, I would like to take this opportunity to thank Shareholders for
their continued support.
Colin Hook
Chairman
INVESTMENT MANAGER'S REVIEW
The portfolio has continued to perform strongly during the year resulting from
the strong trading performance of a number of companies in the portfolio. This
year has seen a high level of investment activity both in terms of new
investment and disposals. We have supported two new MBOs and two significant
acquisitions by successful existing portfolio companies. A number of investee
companies have made partial repayments of their loan stock during the year,
reflecting their improving confidence and cashflow.
We are benefitting from a positive dealflow which we believe is a symptom both
of improved business confidence and the continued perception that the UK
banking industry is reluctant to lend to smaller businesses. Both the number
and quality of the deals that we have considered in recent months have
increased . We are confident that a number of new deals will complete over the
coming months.
New investment
A total of £6.5 million was invested into new deals during the year under
review.
In March 2013, the Company completed a new investment of £2.3 million, to
support the MBO of Gro-Group Holdings Limited. The amount invested included £1
million from the Company's existing investment in the acquisition vehicle
Fosse Management. Devon based Gro-Group created the original, and now
internationally renowned, Gro-bag which has become the number one baby sleep
bag brand in the UK and Australia. Market penetration of the product has
increased from zero to around 90% since the company was founded in 2000 and
turnover has grown to £12 million.
In July 2013, the VCT completed a further new investment of £2.3 million
(including the VCT's existing investment of £1 million in the seed company,
Madacombe Trading) to support the MBO of Veritek Global Limited, a Europe-wide
provider of installation, maintenance and support services for blue-chip
owners of a wide range of complex imaging and printing equipment. The company
has revenues in excess of £25 million and around 300 staff across ten
countries.
The investment management team has focussed on opportunities for expansion by
acquisition within the existing portfolio and as a result of this the VCT has
funded two substantial strategic acquisitions by Fullfield (trading as
Motorclean) and ATG Media. Both of these transactions have significantly
increased the size and market share of the companies involved and improved the
trading position and potential for further growth of these companies.
In the first of these, in February 2013, the VCT provided an additional £0.9
million, via the acquisition vehicle Almsworthy Trading, to finance
Motorclean's acquisition of Forward Valeting Services. The transaction created
the UK's largest provider of car cleaning and valeting services to the motor
industry with a turnover in excess of £35 million and around 450 dealership
sites across the country. It brought the VCT's total investment in this
company to £2.4 million.
In April 2013, a further £1 million was invested into ATG Media, using the
VCT's existing investment of £1 million in the acquisition vehicle Peddars
Management (the remainder of which was returned to the Company), to enable it
to acquire Bidspotter Inc, a US based business engaged in providing live
bidding and auction software to industrial and commercial liquidation
auctioneers. This new investment brought the VCT's total investment in this
company to £1.9 million.
These transactions were specifically structured to enhance the value of
existing successful investments. We will continue to pursue similar
opportunities as they arise as we are conscious that a materially lower
investment risk is likely to be involved when we back what we know are
successful management teams within the portfolio, compared to a first
investment into a new portfolio company.
Following the year-end in November 2013, the VCT completed a further
investment of £1.8 million into the acquisition vehicle Culbone Trading to
support the MBO of Virgin Wines, one of the UK's leading online retailers of
wine. The Company's investment in this company now totals £2.8 million.
Follow-on investment
A further loan of less than £0.1 million was advanced to support the working
capital requirements of Newquay Helicopters (formerly British International).
This was used to provide working capital pending the disposal of the company's
major trading subsidiary, which has now occurred. The company has now repaid
the principal and premium of the first two loan stocks, together with all
interest arrears, for total cash proceeds of £0.9 million over the life of
this investment. The capital proceeds of £0.6 million compare with an
investment cost of £0.5 million. This is a pleasing outcome and there is the
prospect of further returns of capital as the company realises its remaining
assets and activities.
Realisations
The year has seen a continuation of realisation activity. Most significant of
these was the disposal of the Company's remaining loan and equity investment
in Image Source Group for total proceeds of £1.7 million during February and
March 2013. Over the life of the investment, total proceeds were £3.5 million
compared to cost of £2.5 million, being 143% of cost. A few months prior to
this realisation, Image Source merged with Cultura Creative in October 2012 to
create Europe's largest independent image business.
The Company also realised its remaining investment in Brookerpaks, an importer
and distributor of garlic and vacuum-packed vegetables, in November 2012, for
proceeds of £0.6 million compared to the equity investment cost of less than
£0.1 million; the overall cash return from this investment was £1.9 million,
or a 3.8 times multiple of original investment cost.
Also in November 2012, the VCT sold a total of 1.3 million of its shares in
IDOX plc, representing 23.1% of the VCT's holding at the previous year-end,
for total proceeds of £0.5 million.
Two AiM listed companies received recommended offers in the first few months
of the Company's financial year which both successfully completed in the early
months of 2013. The Company's remaining investment in Tikit was acquired by
British Telecommunications plc in January 2013 at a price of 416 pence per
share, realising approximately £0.3 million. This, in addition to a series of
further disposals of Tikit shares earlier in the financial year and in
previous years, brought total proceeds over the life of this investment to
£1.3 million or almost 2.7 times cost of £0.5 million. ANT was acquired in
February 2013 by Espial Group Inc, a company listed on the Toronto Stock
Exchange, at a price of 20.5 pence per share. The transaction recovered the 30
September 2012 valuation of £0.1 million compared with cost of £0.5 million.
In March 2013, the VCT sold part of its loan stock, and its entire equity
investment, in Faversham House for net proceeds of £0.2 million. Faversham's
progress had fallen short of expectations and we took the opportunity to agree
with management a phased realisation of our holding. The Company's residual
loan stock investment in this company, valued at 30 September 2013 at £0.1
million, was realised following the year-end. On a total return basis
(including interest received) we have recovered 93% of original cost of £0.5
million.
Two payments totalling £0.4 million were received during the year in respect
of the deferred consideration due from the sale of App-DNA to Citrix Systems
Inc in November 2011. A further payment of £0.5 million has been received
following the year-end in November 2013.
The Company has continued to benefit from the profitability and strong cash
generation of a number of investee companies. It has received partial loan
stock repayments totalling £1.9 million in the twelve months covered by this
report from Blaze Signs (£0.6 million), EMaC (£0.4 million), DiGiCo (£0.3
million), Focus (£0.2 million), Westway (£0.2 million), Duncary 8 (£0.1
million), and Tessella (£0.1 million), in addition to the significant partial
realisation of Newquay Helicopters mentioned above.
Following the year-end in December 2013, the Company realised its investment
in Alaric Systems, which develops software for payment processing and fraud
prevention, through a sale to a subsidiary of NCR Corporation for cash
proceeds of £2.5 million. The realisation contributed to total receipts of
£2.7 million by the Company over the life of the investment, representing a
return of over 4.4 times original cost of £0.6 million. The Company may become
entitled to receive additional sale proceeds of up to £0.5 million over the
period to December 2017, which is currently held in escrow.
Investment outlook
The increase in the number and quality of investment opportunities that we
have seen in recent months is encouraging. We see this as a result of the
upturn in business confidence in the UK. We are being approached by sellers
with much more realistic expectations of the value of their businesses and the
commitment to see deals through to completion. As a result of our cautious
approach to new investment during the downturn, the Company still retains a
strong level of liquidity which will enable it to take advantage of this more
positive environment. We believe that the current encouraging performance of
the portfolio, and the improved outlook for new investment will create value
for Shareholders in the medium term.
LARGEST INVESTMENTS IN THE PORTFOLIO
ATG Media Holdings Limited Fullfield Limited - Motorclean Ingleby (1879) Limited - EMaC
www.antiquestradegazette.com www.motorclean.net www.emac.co.uk
Cost £1.9 million Cost £2.4 million Cost £1.5 million
Valuation £3.7 million Valuation £2.9 million Valuation £2.5 million
Basis of valuation Basis of valuation Basis of valuation
Earnings multiple Earnings multiple Earnings multiple
Equity % held Equity % held Equity % held
8.5% 13.2% 9.4% (fully diluted)
Income receivable in year Income receivable in year Income receivable in year
£128,672 £190,899 £160,890
Business Business Business
Publisher and on-line auction Provider of vehicle cleaning and Provider of service plans for the
platform operator valet services motor trade
Location Location Location
London Laindon, Essex Crewe
History History History
Management buyout Management buyout Management buyout
Audited financial information Audited financial information Audited financial information
£ million £ million £ million
Year ended 30 September 2012 Year ended 31 March 2013 Year ended 31 December 2012 1
Turnover £10.9 Turnover £25.2 Turnover £6.1
Operating profit £2.7 Operating profit £1.2 Operating profit £2.3
Net assets £4.6 Net assets £2.6 Net assets £2.5
Year ended 30 September 2011 Period ended 31 March 2012 Year ended 31 December 2011 1
Turnover £8.9 Turnover £17.3 Turnover £5.0
Operating profit £1.8 Operating profit £1.2 Operating profit £0.9
Net assets £3.2 Net assets £2.4 Net assets £1.5
1 The financial information quoted
above relates to the operating
subsidiary, EMaC Limited and
includes figures relating the
performance of this company prior
to the MBO which completed in
October 2011.
Gro-Group Holdings Limited Madacombe Trading - Tessella Holdings Limited
Veritek Global
www.gro.co.uk www.veritekglobal.com www.tessella.com
Cost £2.3 million Cost £2.3 million Cost £1.6 million
Valuation £2.3 million Valuation £2.3 million Valuation £2.2 million
Basis of valuation Basis of valuation Basis of valuation
Cost Cost Earnings multiple
Equity % held Equity % held Equity % held
12.8% 14.6% 7.5%
Income receivable in year Income receivable in year Income receivable in year
£94,195 £46,303 £170,256
Business Business Business
Manufacturer and Maintenance of imaging Provider of science powered
distributor of baby sleep equipment technology and consulting
products services
Location Location Location
Ashburton, Devon Eastbourne, East Sussex Abingdon, Oxfordshire
History History History
Management buyout Management buyout Management buyout
Audited financial Audited financial Audited financial
information information information
£ million £ million £ million
Year ended 30 June 2012 1 Year ended 31 March 2013 1 Year ended 31 March 2013 1
Turnover £10.9 Turnover £24.7 Turnover £20.9
Operating profit £0.9 Operating profit £1.5 Operating profit £3.0
Net assets £1.1 Net assets £6.2 Net assets £5.6
Year ended 30 June 2011 1 Year ended 31 March 2012 Year ended 31 March 2012 1
Turnover £11.0 Turnover £25.4 Turnover £18.5
Operating profit £0.9 Operating profit £1.6 Operating profit £0.3
Net assets £0.9 Net assets £7.0 Net assets £2.4
1 The financial information 1 The financial information 1 The financial
quoted above is for Gro-Group quoted above is for Veritek information quoted above relates
Holding Limited prior to the Global Limited prior to the MBO to the operating subsidiary, Tessella
MBO which completed in March which completed in July 2013. Limited and includes figures relating the
2013). to the performance of this company prior
to the MBO which completed in July 2012.
Alaric Systems Limited * I-Dox plc EOTH Limited
- Equip Outdoor Technologies
www.alaric.com www.idoxplc.com www.equipuk.com
Cost £0.6 million Cost £0.5 million Cost £1.4 million
Valuation £2.1 million Valuation £1.6 million Valuation £1.4 million
Basis of valuation Basis of valuation Basis of valuation
Discounted realisation proceeds Bid price (AiM quoted) Earnings multiple
multiple
Equity % held Equity % held Equity % held
6.9% 1.2% 2.5%
Income receivable in year Income receivable in year Income receivable in year
£Nil £29,168 £132,425
Business Business Business
Provider of software for retail Development and supply of Supplier of branded outdoor
credit card payment systems knowledge management equipment and clothing including
products the Rab and Lowe Alpine brands
Location Location Location
London London Alfreton, Derbyshire
History History History
Development capital AiM flotation Acquisition capital
Audited financial information Audited financial information Audited financial information
£ million £ million £ million
Year ended 31 March 2013 Year ended 31 October 2012 Year ended 31 January 2013
Turnover £9.8 Turnover £57.9 Turnover £27.3
Operating profit £1.7 Operating profit £13.8 Operating profit £2.5
Net assets £3.9 Net assets £38.9 Net assets £7.7
Year ended 31 March 2012 Year ended 31 October 2011 Year ended 31 January 2012
Turnover £8.7 Turnover £38.6 Turnover £15.5
Operating profit £1.8 Operating profit £9.5 Operating profit £1.8
Net assets £3.3 Net assets £34.4 Net assets £6.2
* This investment was sold after the year-end for cash proceeds of £2.5 million.
Blaze Signs Holdings Limited ASL Technology Holdings Limited CB Imports Group Limited -
Country Baskets
www.blaze-signs.com www.asl-group.co.uk www.countrybaskets.co.uk
Cost £0.6 million Cost £1.8 million Cost £1.0 million
Valuation £1.2 million Valuation £1.1 million Valuation £1.1 million
Basis of valuation Basis of valuation Basis of valuation
Earnings multiple Earnings multiple Earnings multiple
Equity % held Equity % held Equity % held
12.5% 9.6% 5.8%
Income receivable in year Income receivable in year Income receivable in year
£192,199 £Nil £76,355
Business Business Business
Manufacturer and installer of Provider of printer and photocopier Importer and distributor of
signs services artificial flowers, floral
sundries and home décor products
Location Location Location
Broadstairs, Kent Cambridge East Ardsley, West Yorkshire
History History History
Management buyout Management buyout Management buyout
Audited financial information Audited financial information Audited financial information
£ million £ million £ million
Year ended 31 March 2013 Year ended 30 September 2012 Year ended 31 December 2012
Turnover £22.7 Turnover £13.4 Turnover £24.4
Operating profit £2.3 Operating profit £0.7 Operating profit £1.4
Net assets £3.3 Net assets £0.2 Net assets £4.5
Year ended 31 March 2012 Year ended 30 September 2011 Year ended 31 December 2011
Turnover £20.9 Turnover £9.6 Turnover £23.1
Operating profit £1.8 Operating profit £0.7 Operating profit £1.0
Net assets £2.9 Net assets £1.5 Net assets £4.4
The remaining 29 investments in the portfolio (including the two acquisition
vehicles in the portfolio at 30 September 2013) had a current cost of £15.8
million and were valued at 30 September 2013 at £9.7 million.
Further details of the investments in the portfolio may be found on the Mobeus
website: www.mobeusequity.co.uk.
Operating profit is stated before charging amortisation of goodwill where
appropriate for all investee companies.
INVESTMENT PORTFOLIO SUMMARY
for the year ended 30 September 2013
Total Total Additional Total % of 1 2 % of
cost at valuation investments valuation equity portfolio
at at held by value
30-Sep-13 30-Sep-12 30-Sep-13
£ £ £ £
ATG Media Holdings 1,889,006 2,270,884 1,000,013 3,686,911 8.5% 10.8%
Limited 9
Publisher and online
auction platform operator
Fullfield Limited 2,405,465 1,652,768 916,368 2,887,812 13.2% 8.5%
(trading as
Motorclean) 8
Vehicle cleaning and
valet services
Ingleby (1879) Limited 1,486,848 1,878,124 - 2,452,407 9.4% 7.2%
trading as EMaC)
Provider of service
plans for the
motor trade
Gro-Group Holdings 2,341,286 - 2,341,286 2,341,286 12.8% 6.9%
Limited
(formerly Michco 1209
Limited) 7
Baby sleep products
Madacombe Trading 2,289,859 - 2,289,859 2,289,859 14.6% 6.7%
Limited
(trading as Veritek
Global) 10
Maintenance of imaging
equipment
Tessella Holdings 1,645,118 1,745,351 - 2,213,488 7.5% 6.5%
Limited
Provider of science
powered
technology and
consulting
services
Alaric Systems Limited 565,156 468,495 - 2,064,071 0.4% 6.1%
4
Software developer and
provider
of support services
for retail credit
card payment systems
I-Dox plc 3 453,881 2,058,371 46 1,625,078 1.2% 4.8%
Developer and supplier
of
knowledge management
products
EOTH Limited (trading 1,383,313 1,383,313 - 1,397,444 2.5% 4.1%
as Equip
Outdoor Technologies)
Distributor of branded
outdoor
equipment and clothing
including
the Rab and Lowe
Alpine brands
Blaze Signs Holdings 621,510 1,448,159 - 1,249,579 12.5% 3.7%
Limited
Manufacturer and
installer of
signs
ASL Technology 1,769,790 654,155 - 1,088,213 9.6% 3.2%
Holdings Limited
Printer and
photocopier services
CB Imports Group 1,000,000 1,128,228 - 1,050,541 5.8% 3.1%
Limited (trading as
Country Baskets)
Importer and
distributor of
artificial
flowers, floral
sundries and home
decor products
Westway Services 195,141 838,782 - 1,025,054 4.7% 3.0%
Holdings
(2010) Limited
Installation, service
and
maintenance of air
conditioning
systems
Ackling Management 1,000,000 1,000,000 - 1,000,000 12.5% 2.9%
Limited
Company seeking to
acquire
businesses in the food
manufacturing,
distribution and
brand management
sectors
Culbone Trading 1,000,000 1,000,000 1,000,000 12.5% 2.9%
Limited
Acquistion vehicle
used to support
the MBO of Virgin
Wines following
the year-end
Aquasium Technology 500,000 677,971 - 840,760 16.7% 2.5%
Limited 4
Manufacturing and
marketing of
bespoke electron beam
welding
and vacuum furnace
equipment
DiGiCo Global Limited 572,694 876,497 - 776,204 1.6% 2.3%
Designer and
manufacturer of
digital audio mixing
desks
Youngman Group Limited 1,000,052 700,992 - 700,992 8.5% 2.1%
Manufacturer of
ladders and
access towers
RDL Corporation 1,441,667 1,271,194 - 667,316 13.0% 2.0%
Limited
Recruitment provider
within the
pharmaceutical,
business
intelligence and IT
sectors
Focus Pharma Holdings 293,913 636,574 - 583,331 2.1% 1.7%
Limited
Licensor and
distributor of generic
pharmaceuticals
Machineworks Software 20,471 479,459 - 574,339 9.2% 1.7%
Limited
Provider of software
for CAD and
CAM vendors
Original Additions 25,696 537,948 - 537,948 0.0% 1.6%
Topco Limited 6
Sale of false nails,
nail
accessories, false
eyelashes,
depilatory products,
hair
lightening and perming
products
Duncary 8 Limited 509,923 814,025 - 516,702 25.5% 1.5%
(trading as BG
Consulting)
Technical training
business
Omega Diagnostics 279,996 373,328 - 338,329 2.2% 1.0%
Group plc
In-vitro diagnostics
for food
intolerance,
autoimmune diseases
and infectious
diseases
The Plastic Surgeon 406,082 248,878 - 315,644 6.1% 0.9%
Holdings
Limited
Supplier of snagging
and finishing
services to the
property sector
Vectair Holdings 53,400 164,178 - 198,098 4.6% 0.6%
Limited
Designer and
distributor of
washroom products
Newquay Helicopters 196,824 590,909 83,824 196,824 5.0% 0.6%
(2013)
Limited (formerly
British
International Holdings
Limited)
Helicopter service
operator
Faversham House 144,859 192,385 - 144,859 0.0% 0.4%
Holdings
Limited
Publisher, exhibition
organiser
and operator of
websites for the
environmental, visual
communications and
building
services
Lightworks Software 20,471 84,060 - 106,937 9.2% 0.3%
Limited
Provider of software
for CAD and
CAM vendors
PXP Holdings Limited 965,371 45,195 - 45,195 6.0% 0.1%
(trading as Pinewood
Structures)
Designer, manufacturer
and
supplier of timber
frames for
buildings
Racoon International 550,852 79,026 - 31,370 7.7% 0.01%
Holdings
Limited
Supplier of hair
extensions, hair
care products and
training
Data Continuity Group 163,345 2,171 73,311 29,632 15.0% 0.1%
Limited 4
Design, supply and
integration of
data storage solutions
Monsal Holdings 454,461 42,446 - 28,297 5.7% 0.1%
Limited
Supplier of
engineering services
to the water and waste
sectors
Corero Network 600,000 31,434 - 15,717 0.1% 0.0%
Security plc 4
Sarantel Group plc 4 1,881,252 17,019 - - 0.8% 0.0%
Developer and
manufacturer of
antennae for mobile
phones and
other wireless devices
Oxonica Limited 4 2,524,527 - - - 0.0% -
International
nanomaterials
group
NexxtDrive Limited 5 487,014 - - - 4.5% -
Developer and
exploiter of
mechanical
transmission
technologies
Aigis Blast Protection 272,120 - - - 6.9% -
Limited 4
Specialist blast
containment
materials company
Legion Group plc 150,000 - - - 0.0% -
(in administration)
Provider of manned
guarding,
mobile patrols and
alarm
response services
Biomer Technology 137,170 - - - 3.5% -
Limited 5
Developer of
biomaterials for
medical devices
Watchgate Limited 1,000 - - - 33.3% -
Holding company
Disposed in year
Image Source Group - 925,470 - - - -
Limited
Royalty free picture
library
Brookerpaks Limited - 509,209 - - - -
Importer and
distributor of garlic
and vacuum-packed
vegetables
Tikit Group plc 3 - 247,350 103 - - -
Supplier of IT
solutions and
support services to
legal and
accounting businesses
ANT plc 4 - 131,319 - - - -
Provider of embedded
browser/email software
for
consumer electronics
and Internet
appliances
Almsworthy Trading - 1,000,000 - - - -
Limited 8
Acquisition vehicle
used to
provide acquisition
finance to
Fullfield Limited
Fosse Management - 1,000,000 - - - -
Limited 7
Acquisition vehicle
used to
provide acquisition
finance to
support the MBO of
Gro-Group
Limited
Madacombe Trading - 1,000,000 - - - -
Limited 10
Acquisition vehicle
used to
provide acquisition
finance to
support the MBO of
Veritek
Global Limited
Peddars Management - 1,000,000 - - - -
Limited 9
Acquisition vehicle
used to
provide acquisition
finance to
ATG Media Limited
--------- --------- --------- --------- ---------
Total 33,699,533 31,205,667 6,704,810 34,020,237 100.0%
--------- --------- --------- --------- ---------
Notes
1 The percentage of equity held, and the amounts co-invested, in these companies
by funds managed by Mobeus Equity Partners LLP are disclosed in Note 13 to the
financial statements.
2 The percentage of equity held for these companies may be subject to further
dilution of an additional 1% or more if, for example, management of the investee
company exercises share options.
3 Investment formerly managed by Nova Capital Management Limited until 31 August
2007.
4 Investment formerly managed by Foresight Group LLP up to various dates ending on
or before 10 March 2009.
5 Investment formerly managed by Nova Capital Management Limited until 31 August
2007 and by Foresight Group until various dates ending on or before 10 March
2009.
6 As part of the consideration on the disposal of Amaldis (2008) Limited, £537,948
of Original Additions Topco Limited loan stock was issued to the Company.
7 £1,000,000 of this investment into Gro-Group Limited was provided by Fosse
Management Limited, one of the Company's acquisition vehicles.
8 £916,368 was further invested into Fullfield Limited (trading as Motorclean).
This finance was provided by the acquisition vehicle Almsworthy Trading Limited
and resulted in a net repayment to the Company of £83,632.
9 £1,000,000 of this investment into ATG Media Holdings Limited was provided by
Peddars Management, one of the Company's acquisition vehicles.
10 £1,000,000 of this investment into Madacombe Trading (trading as Veritek Global
Limited) was provided by Madacombe Trading Limited, one of the Company's
acquisition vehicles.
STRATEGIC REPORT
(Extracted information)
INVESTMENT POLICY
The Company's policy is to invest primarily in a diverse portfolio of UK
unquoted companies. Investments are generally structured as part loan and part
equity in order to receive regular income and to generate capital gains from
trade sales and flotations of investee companies.
Investments are made selectively across a number of sectors, primarily in
management buy-out transactions (MBOs) i.e. to support incumbent management
teams in acquiring the business they manage but do not yet own. Investments
are primarily made in companies that are established and profitable.
The Company has a small legacy portfolio of investments in companies from the
period prior to 30 September 2008, when it was a multi-manager VCT. This
includes investments in early stage and technology companies and in companies
quoted on the AiM market.
The Company's cash and liquid resources are held in a range of instruments of
varying maturities, subject to the overriding criterion that the risk of loss
of capital be minimised.
VCT regulation
The investment policy is designed to ensure that the Company continues to
qualify and is approved as a VCT by HM Revenue & Customs ("HMRC").
Amongst other conditions, the Company may not invest more than 15% of its
investments in a single company and must have at least 70% by value of its
investments throughout the period in shares or securities comprised in VCT
qualifying holdings of which a minimum overall of 30% by value (70% for funds
raised after 6 April 2011) must be in ordinary shares which carry no
preferential rights (save as may be permitted under VCT rules). In addition,
although the VCT can invest less than 30% (70% for funds raised after 6 April
2011) of an investment in a specific company in ordinary shares it must have
at least 10% by value of its total investments in each VCT qualifying company
in ordinary shares which carry no preferential rights (save as may be
permitted under VCT rules).
The companies in which investments are made must have no more than £15 million
of gross assets at the time of investment and £16 million immediately
following the investment to be classed as a VCT qualifying holding.
Asset mix
The Company initially holds its funds in a portfolio of interest bearing
investments and deposits. The investment portfolio of qualifying investments
is built up over a three year period with the aim of investing and maintaining
at least 70% of net funds raised in qualifying investments.
Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses
across different industry sectors. To reduce the risk of high exposure to
equities, each qualifying investment is structured to reduce the risk of high
exposure to equities, each qualifying investment is structured to achieve the
optimum balance between loan stock and equity to provide protection against
downside risk alongside the best potential overall returns.
Co-investment
The Company aims to invest in larger, more mature unquoted companies through
investing alongside other VCTs advised by the Investment Manager with a
similar investment policy.
Borrowing
The Company's Articles permit borrowing of up to 10% of the adjusted capital
and reserves (as defined therein). However, it has never borrowed and the
Board has no current plans to undertake any borrowing.
Management
The Board has overall responsibility for the Company's affairs including the
determination of its investment policy. Investment and divestment proposals
are originated, negotiated and recommended by the Manager and are then subject
to comment and approval by the Directors.
Key Indicators used to measure performance
The Board believes that the following indicators, used in its own assessment
of the Company, will provide Shareholders with sufficient information to
assess how the Company is performing against its objective.
The Board places significant emphasis on the Company's performance against
benchmarks and is satisfied that the VCT's performance remained ahead of the
benchmarks used on a consistent basis. The Company's performance compared to
VCTs in the generalist sector is referred to in the Chairman's Statement .
For a full review of the Company's development and performance during the year
and future prospects, please see the Chairman's Statement and the Investment
Manager's Review and Investment Portfolio Summary. The Financial Highlights
provides data on the Company's key performance indicators.
Net asset value (NAV) per share increased by 3.9% to 113.9 pence
for the year ended 30 September 2013.
Cumulative NAV total return to shareholders increased by 11.8% to 154.4 pence
for the year ended 30 September 2013.
Dividends paid
Dividends paid in respect of the year ended 30 September 2013 will be 10 pence
per Share, subject to Shareholder approval of the proposed final dividend.
Cumulative dividends paid since 1 January 2008 are 40.5p per Share.
Subject to approval of the payment of the final dividend of 4 pence per Share
at the AGM, this figure will increase to 44.5 pence per Share.
Ongoing charges
The Ongoing Charges Ratio of the Company is as follows:
Ongoing charges * 2.81%
*The Ongoing Charges Ratio has been calculated, using the Association of
Investment Companies' (AIC) recommended methodology. This figure shows
Shareholders the annual percentage reduction in shareholder returns as a
result of recurring operational expenses, assuming markets remain static and
the portfolio is not traded. Although the Ongoing Charges figure is based upon
historic information, it provides Shareholders with an indication of the
likely level of costs that will be incurred in managing the fund in the
future.
The Ongong Charges Ratio replaces the Total Expense Ratio previously reported,
although the latter will still form the basis of any expense cap that may be
borne by the Manager. There was no breach of the expense cap for the year
ended 30 September 2013 (2012: £nil).
The AIC also recommends that the impact of performance fees should also be
disclosed, and this is shown below:
Performance fee 0.2%
Ongoing Charges plus accrued performance fee 3.0%
OTHER KEY POLICIES
Cash available for investment and liquidity
The Company's cash and liquid resources are held in a range of instruments of
varying maturities including liquid, low risk Money Market Funds and bank
deposits, subject to the overriding criterion that the risk of loss of capital
be minimised.
The Company has participated in the Mobeus VCTs' annual linked fundraising
since 2010 in order to maintain a sufficient level of funds that can be
deployed in meeting the day-to-day expenses of the Company and dividends
distributions and purchases of the Company's own Shares. This enables money
raised prior to 6 April 2012 to be allocated for future MBO investment.
Dividend policy
The Company has an annual target dividend of not less than 4p per Share which
it has met or exceeded in respect of its last three financial years.
However, the ability of the Company to pay dividends in the future cannot be
guaranteed and will be subject to performance and available cash and reserves.
Subject to certain conditions, VCT dividends are generally tax free to
investors and attract VCT tax reliefs applicable for the tax year in which the
shares are allotted.
The Company has instigated a dividend investment scheme in which Shareholders
may participate. Dividends are reinvested into Shares at the average market
price of the Shares for the five business days prior to the dividend being
paid which is likely to be at a discount of 10% to the underlying net asset
value (provided that this is greater than 70% of the latest published net
asset value per Share).
Share buy-backs and discount policy
Subject to the Company having sufficient available funds and distributable
reserves, it is the Board's current intention is to pursue a buyback policy
with the objective of maintaining the discount to NAV at which the Shares
trade at approximately 10% or less.
Future prospects
The Company's performance record reflects the success of the strategy outlined
above and has enabled the Company to maximise the stream of dividend payments
to Shareholders. The Board believes that this model will continue to meet the
Investment Objective and has the potential to continue to deliver attractive
returns to Shareholders. For further details on the Company's future
prospects, please see the Outlook paragraph in the Chairman's Statement above.
Principal risks, management and regulatory environment
The Directors acknowledge the Board's responsibilities for the Company's
internal control systems and have established systems and procedures for
identifying, evaluating and managing the significant risks faced by the
Company. This includes a key risk management review which takes place at each
quarterly Board meeting. The Principal risks identified by the Board are set
out below.
Risk Possible consequence How the Board manages
risk
Economic risk Events such as an economic The Board monitors the
recession and movements in portfolio as a whole to
interest rates could affect ensure that the Company
trading conditions for invests in a
smaller companies and diversified portfolio
consequently the value of the of companies.
Company's qualifying
investments.
It continually monitors
developments in the
macro-economic
environment and in
interest rates with the
aim of minimising this
risk.
Risk of loss of The Company must comply with The Company's VCT
approval as a the provisions of section 274 qualifying status is
Venture Capital of the ITA to ensure that its continually reviewed by
Trust investors continue to qualify the Manager.
for VCT tax reliefs. Any
breach of these rules may
lead to the Company losing
its approval as a VCT, which The Board receives
would mean that qualifying regular reports from
shareholders who have not Pricewaterhouse Coopers
held their shares for the LLP who have been
designated period would have retained by the Board
to repay the income tax to undertake an
relief they obtained and that independent VCT status
future dividends paid by the monitoring role.
Company would be subject to
tax. The Company would also
lose its exemption from
corporation tax on capital
gains.
Investment and Inappropriate strategy or The Board regularly
strategic risk consistently weak VCT reviews the Company's
qualifying investment investment strategy.
recommendations might lead to
underperformance and poor
returns to shareholders.
Investment in unquoted small Careful selection and
companies involves a higher review of the
degree of risk than investment portfolio on
investment in fully listed a regular basis.
companies. Smaller companies
often have limited product
lines, markets or financial
resources and may be
dependent for their
management on a smaller
number of key individuals.
Valuation risk Investments may be valued Review and approval of
inappropriately which may valuation
result in an inaccurate recommendations from
representation of the the Manager.
Company's net assets and net
asset value per share.
The Board challenges
assumptions used in the
valuations and
considers sensitivity
analyses where
appropriate.
Monitoring of audited
valuations published by
co-investees.
Regulatory risk The Company is required to Regulatory and
comply with the Companies legislative
Act, the Listing Rules of the developments are kept
UKLA and United Kingdom under review by the
Accounting Standards. Breach Board.
of any of these might lead to
suspension of the Company's
Stock Exchange listing,
financial penalties or a
qualified audit report.
Financial and The Company has no employees The Board carries out
operating risk and is therefore reliant on an annual review of the
third party service Internal controls in
providers. Failure of the place and reviews the
systems at third party risks facing the
service providers could lead Company at each
to inaccurate reporting or quarterly Board
monitoring. Inadequate meeting.
controls could lead to the
misappropriation or
insecurity of assets.
The Board considers the
performance of the
service providers
annually.
Market risk Movements in the valuations The Board receives
of the VCT's investments quarterly valuation
will, inter alia, be reports from the
connected to movements in UK Manager.
Stock Market indices.
The Manager alerts the
Board about any adverse
movements.
Asset liquidity The Company's investments may The Board receives
risk be difficult to realise. reports from the
Manager and reviews the
portfolio at each
quarterly board
meeting. It carefully
monitors investments
where a particular risk
has been identified.
Market liquidity Shareholders may find it The Board has a share
risk difficult to sell their buyback policy which
shares at a price which is seeks to mitigate
close to the net asset value. market liquidity risk.
This policy is reviewed
at each quarterly board
Meeting.
Counterparty risk A counterparty may fail to The Board regularly
discharge an obligation or reviews and agrees
commitment that it has policies for managing
entered into with the these risks. Full
Company. details can be found in
the Chairman's
Statement under `Cash
available for
investment' and in the
discussion on `credit
risk' in Note 19 to the
accounts in the full
statutory accounts.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Strategic Report, the
Directors' Report, the Directors' Remuneration Report and the Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have elected to prepare the
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (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 applicable UK accounting standards have
been followed,, 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;
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.
Website publication
The Directors are responsible for ensuring the annual report and the financial
statements are made available on a website. 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' responsibilities pursuant to Disclosure and Transparency Rule 4 of
the UK Listing Authority
The Directors confirm to the best of their knowledge that:
(a) the financial statements, which have been prepared in accordance with UK
Generally Accepted Accounting Practice and the 2009 Statement of Recommended
Practice, `Financial Statements of Investment Trust Companies and Venture
Capital Trusts', give a true and fair view of the assets, liabilities,
financial position and the profit of the Company.
(b) the management report, included within the Chairman's Statement, Investment
Manager's Review, Investment Portfolio Summary, Strategic Report and
Directors' Report includes a fair review of the development and performance of
the business and the position of the Company, together with a description of
the principal risks and uncertainties that it faces.
Having taken advice from the Audit Committee, the Board considers
the report and accounts, taken as a whole, as fair, balanced and
understandable and that it provides the information necessary for shareholders
to assess the Company's performance, business model and strategy.
Neither the Company nor the Directors accept any liability to any person in
relation to the annual report except to the extent that such liability could
arise under English law. Accordingly, any liability to a person who has
demonstrated reliance on any untrue or misleading statement or omission shall
be determined in accordance with section 90A and schedule 10A of the Financial
Services and Markets Act 2000.
Colin Hook
Chairman
INCOME STATEMENT
for the year ended 30 September 2013
Year ended 30 September 2013 Year ended 30 September 2012
Notes Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Net unrealised gains
on investments - 5,900,080 5,900,080 - 2,364,362 2,364,362
Net gains on
realisation of
investments - 1,093,304 1,093,304 - 5,243,190 5,243,190
Income 2 2,488,388 533,750 3,022,138 2,004,297 - 2,004,297
Investment Manager's
fees 3a (321,777) (965,335) (1,287,112) (290,664) (871,993) (1,162,657)
Investment Managers'
performance fees 3b - (106,778) (106,778) - (3,503,000) (3,503,000)
Other expenses (412,241) - (412,241) (499,164) - (499,164)
Provision for litigation
cost no longer required - - - - 1,337,456 1,337,456
-------- -------- -------- -------- -------- -------- -------- --------
Profit on ordinary
activities before
taxation 1,754,370 6,455,021 8,209,391 1,214,469 4,570,015 5,784,484
-------- -------- -------- -------- -------- -------- -------- --------
Tax on profit on
ordinary activities (267,890) 267,890 - (224,747) 224,747 -
-------- -------- -------- -------- -------- -------- -------- --------
Profit on ordinary
activities after
taxation for the
financial year 1,486,480 6,722,911 8,209,391 989,722 4,794,762 5,784,484
-------- -------- -------- -------- -------- -------- -------- --------
Basic and diluted
earnings per Ordinary
Share: 4 2.98p 13.45p 16.43p 2.26p 10.97p 13.23p
All the items in the above statement derive from continuing operations. No
operations were acquired or discontinued in the year. The total column is the
Profit and Loss Account of the Company. There were no other recognised gains
and losses in the year.
Other than the revaluation movements arising in investments held at fair value
through profit and loss, there were no differences between the profit as
stated above and at historical cost.
BALANCE SHEET
as at 30 September 2013
Company number: 4069483
as at 30 September 2013 as at 30 September 2012
Notes
£ £ £ £ £ £
Fixed assets
Investments at fair value 34,020,237 31,205,667
Current assets
Debtors 1,384,798 727,598
Current investments 22,799,201 17,523,440
Cash at bank 3,095,005 4,861,440
--------- --------- --------- ---------
Total current assets 27,279,004 23,112,478
Creditors: amounts falling
due within one year (830,369) (3,766,160)
--------- --------- --------- ---------
Net current assets 26,448,635 19,346,318
--------- --------- --------- --------- --------- ---------
Net assets 60,468,872 50,551,985
--------- --------- --------- --------- --------- ---------
Capital and reserves
Called up share capital 530,882 461,157
Share premium account 15,634,572 11,898,621
Capital redemption reserve 287,932 197,265
Capital reserve - unrealised 8,902,232 1,611,146
Special reserve 13,193,594 12,721,596
Profit and loss account 21,919,660 23,662,200
--------- --------- --------- --------- --------- ---------
Equity Shareholders'
funds 60,468,872 50,551,985
--------- --------- --------- --------- --------- ---------
Basic and diluted net
asset value per share
Ordinary Shares 5 113.90p 109.62p
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the year ended 30 September 2013
Year ended Year ended
30 September 2013 30 September 2012
£ £
Opening Shareholders' funds 50,551,985 49,152,799
Share capital bought back in the year - including expenses (9,898,671) (913,037)
Share capital subscribed for in the year - net of expenses 17,647,874 6,293,673
Profit for the year 8,209,391 5,784,484
Dividends paid in the year (6,041,707) (9,765,934)
--------- ---------
Closing Shareholders' funds 60,468,872 50,551,985
--------- ---------
CASH FLOW STATEMENT
For the year ended 30 September 2013
Year ended Year ended
30 September 2013 30 September 2012
£ £ £ £
Operating activities
Investment income received 2,747,369 1,955,985
Other income 469 4,861
Investment management fees paid (1,287,112) (1,162,657)
Investment Managers' performance fees paid (3,050,234) -
Other cash payments (310,007) (561,556)
--------- --------- --------- ---------
Net cash (outflow)/inflow from operating activities (1,899,515) 236,633
Investing activities
Acquisition of investments (2,788,442) (13,255,722)
Disposal of investments 6,559,171 26,468,137
--------- --------- --------- ---------
Net cash inflow from investing activities 3,770,729 13,212,415
Equity Dividends
Payment of equity dividends (6,049,507) (9,765,934)
--------- --------- --------- ---------
Net cash (outflow)/inflow before liquid
resource management and financing (4,178,293) 3,683,114
Management of liquid resources
Increase in monies held pending investment (5,275,761) (5,840,979)
Financing
Shares issued as part of joint fundraising offer
for subscription and dividend investment
scheme 8,802,776 6,293,673
Shares issued as part of the enhanced
buyback facility 250,000 -
Shares bought back as part of enhanced
buyback facility (including expenses) (394,360) -
Purchase of own shares (970,797) (851,788)
--------- --------- --------- ---------
7,687,619 5,441,885
--------- --------- --------- ---------
(Decrease)/Increase in cash for the year (1,766,435) 3,284,020
--------- --------- --------- ---------
NOTES
1 Basis of accounting
The accounts have been prepared under UK Generally Accepted Accounting Practice
(UK GAAP) and the Statement of Recommended Practice, `Financial Statements of
Investment Trust Companies and Venture Capital Trusts' ("the SORP") issued by
the Association of Investment Companies in January 2009. The financial
statements are prepared under the historical cost convention except for certain
financial instruments, accounted for at fair value.
2 Income
2013 2012
£ £
Income
- from equities 813,927 305,650
- from OEIC funds 48,954 96,138
- from loan stock 1,929,482 1,540,777
- from bank deposits 229,306 56,871
--------- ---------
3,021,669 1,999,436
Other income 469 4,861
--------- ---------
Total income 3,022,138 2,004,297
--------- ---------
Total income comprises
Revenue dividends received 329,131 401,788
Capital dividends received 533,750 -
Interest 2,158,788 1,597,648
Other income 469 4,861
--------- ---------
Total Income 3,022,138 2,004,297
--------- ---------
Income from investments comprises
Listed UK securities 29,168 38,549
Listed overseas securities 48,954 96,138
Unlisted UK securities 2,714,241 1,807,878
--------- ---------
Total Income 2,792,363 1,942,565
--------- ---------
Total loan stock interest due but not recognised in
the year was £294,421 (2012: £352,133).
3 Investment management and performance fees
a) Investment Manager's fees
Revenue Capital Total Revenue Capital Total
2013 2013 2013 2012 2012 2012
£ £ £ £ £ £
Mobeus Equity Partners LLP 321,777 965,335 1,287,112 290,664 871,993 1,162,657
Under the terms of a revised investment management agreement dated 29 March
2010, Mobeus Equity Partners LLP ("Mobeus") (formerly Matrix Private Equity
Partners LLP ("MPEP")) provides investment advisory, administrative and company
secretarial services to the Company, for a fee of 2.4% per annum of closing net
assets, calculated on a quarterly basis by reference to the net assets at the
end of the preceding quarter. One sixth of this fee is subject to minimum and
maximum limits of £150,000 (2012: £150,000) and £170,000 (2012: £170,000) per
annum respectively.
The investment management expense disclosed above is stated after applying a
cap on expenses excluding IFA trail commission and exceptional items set at
3.25% of closing net assets at the year-end. In accordance with the investment
management agreement any excess expenses are wholly borne by the Investment
manager. The excess expenses during the year attributable to the Investment
Manager amounted to £nil (2012: £nil).
(b) Investment Managers' performance fees
Revenue Capital Total Revenue Capital Total
2013 2013 2013 2012 2012 2012
Portfolio £ £ £ £ £ £
Mobeus Equity Partners LLP - 38,811 38,811 - 453,000 453,000
Mobeus Equity Partners LLP/ Foresight
Group LLP - 67,967 67,967 - 3,050,000 3,050,000
--------- --------- --------- --------- --------- ---------
- 106,778 106,778 - 3,503,000 3,503,000
--------- --------- --------- --------- --------- ---------
Under a Deed of Termination and Variation relating to Performance Incentive
Agreements dated 29 March 2010, the Investment Manager's Incentive Agreement
for the former 'O' Share Fund has been continued while the former 'S' Share
Fund's Incentive Agreement has been terminated. Under the terms of the
pre-merger 'O' Share Fund Incentive Agreement, each of the ongoing Investment
Manager, Mobeus Equity Partners LLP and a former Investment Manager, Foresight
Group LLP ("Foresight") are entitled to a performance fee equal to 20% of the
excess of the value of any realisation of an investment made after 30 June
2007, over the value of that investment in an Investment Manager's portfolio at
that date ("the Embedded Value"), which value is itself uplifted at the rate of
6% per annum subject to a High Watermark test.
However, two amendments were made to this agreement for Mobeus, the ongoing
Investment Manager. Firstly, the High Watermark was increased by £811,430,
being the 'S' Share Fund's shortfall in total net assets from net asset value
of £1 per 'S' Share, at 31 December 2009. Secondly, only 70% of any new
investment made by Mobeus after the Merger will be added to the calculation of
the Embedded Value, the value of the Investment Manager's portfolio and the
value of any realisations, for the purposes of assessing any excess.
Under the above agreements, the Investment Manager (Mobeus) is entitled to a
further Incentive fee for the year ended 30 September 2012 of £38,811 (on the
Mobeus portfolio to be paid to Mobeus) (2012: £453,000). This further sum has
arisen from a revision of the calculation of the fee due for the previous year.
No fee is payable upon the Mobeus portfolio for the year ended 30 September
2013. £67,967 is payable on the ex-Foresight portfolio for the year ended 30
September 2013, to be shared between Mobeus and Foresight (2012: £3,050,000).
Under the terms of the Linked Offer for Subscription launched on 29 November
2012 and which closed on 30 April 2013 ("the Offer"), Mobeus were entitled to
fees of 5.5% of gross investment subscriptions up to 30 December 2012 and 3.25%
of gross investment subscriptions after 30 December 2012. This amount totalled
£942,656 across all three VCTs involved in the Offer, out of which all costs
associated with the Offer were met.
Under the terms of a Linked Offer for Subscription launched 28 November 2013,
Mobeus are entitled to fees of 3.25% of the investment amount received from
investors. Based upon a fully subscribed offer of £24million this would equal
£780,000 across all four VCTs involved in the Offer, out of which all the costs
associated with the Offer will be met.
4 Basic and diluted* earnings per share
2013 2012
£ £
Total earnings after taxation: 8,209,391 5,784,484
Basic and diluted earnings per share (Note a) 16.43p 13.23p
Revenue profit from ordinary activities after taxation 1,486,480 989,722
Basic and diluted revenue earnings per share (Note b) 2.98p 2.26p
Net unrealised capital gains on investments 5,900,080 2,364,362
Net realised capital gains on investments 1,093,304 5,243,190
Capital dividend 533,750 -
Provision for litigation cost no longer required - 1,337,456
Capitalised management less taxation (697,445) (647,246)
Investment Managers' performance fees (106,778) (3,503,000)
--------- ---------
Total capital return 6,722,911 4,794,762
Basic and diluted capital earnings per share (Note c) 13.45p 10.97p
Weighted average number of shares in issue in the year 49,959,629 43,710,889
* Diluted earnings per share in each case are the same as basic earnings per share due to the potential
extra shares that may be issued to settle the Investment Manager's incentive fee having no effect on the
weighted average number of shares in issue at the year end.
Notes
a) Basic earnings per share is total earnings after taxation divided by the weighted average number of
shares in issue.
b) Revenue earnings per share is the revenue profit after taxation divided by the weighted average number
of shares in issue.
c) Capital earnings per share is the total capital gain after taxation divided by the weighted average
number of shares in issue.
5 Net asset value per share
2013 2012
Net assets £60,468,872 £50,551,985
Number of shares in issue 53,088,219 46,115,656
Basic and diluted net asset value per share 113.90p 109.62p
6 Dividends
The Directors will be recommending to Shareholders at the forthcoming Annual
General Meeting a final dividend in respect of the year ended 30 September 2013
of 4 pence per share comprising 1.25 pence from income and 2.75 pence from
capital. The dividend will be paid on 12 March 2014 to shareholders on the
Register on 21 February 2014. The Company's Dividend Investment Scheme ("the
Scheme") will apply to this dividend and elections under the Scheme should be
received by the Scheme Administrator, Capita Asset Services, by no later than
25 February 2014.
7 Post balance sheet events
On 4 October 2013, Blaze Signs Holdings Limited repaid its loan stock,
realising proceeds of £264,198 including premium of £60,969.
On 10 October 2013, DiGiCo Global Limited repaid £27,219 of its loan stock.
In November and December 2013, Faversham House Holdings Limited fully repaid
its outstanding loan stock generating net proceeds of £165,442 including
£21,005 premium.
On 8 November 2013, £2,843,557 was invested into Virgin Wines Online Limited,
including £1,000,000 from acquisition vehicle Culbone Trading Limited.
On 14 November 2013, £492,579 of deferred consideration as part of the sale of
App-DNA Limited in December 2011, was received.
On 29 November 2013, Focus Pharma Holdings Limited repaid all its remaining
loan stock realising £162,543 including £50,351 premium.
On 3 December 2013, the Company realised its investment in Alaric Systems
Limited through a sale to a subsidiary of NCR Corporation for cash proceeds of
£2,542,018. The Company may become entitled to receive additional sale proceeds
of up to £0.5 million over the period to December 2017, which is currently held
in escrow.
8 Statutory information
The financial information set out in these statements does not constitute the
Company's statutory accounts for the year ended 30 September 2013 but is
derived from those accounts. Statutory accounts will be delivered to the
Registrar of Companies after the Annual General Meeting. The auditors have
reported on these accounts and their report was unqualified and did not contain
a statement under section 498(2) of the Companies Act 2006.
9 Annual Report
The Annual Report will be published on the Company's website at
www.incomeandgrowthvct.co.uk shortly and following the adoption of electronic
communications by the Company, Shareholders will shortly receive notification
from the Company on how to download a pdf of the Report from the website.
Shareholders and members of the public, who wish to receive a hard copy of the
Annual Report, may request a copy by writing to the Company Secretary, Mobeus
Equity Partners LLP, 30 Haymarket (4th floor), London SW1Y 4EX or by email:
iandg@mobeusequity.co.uk.
10 Annual General Meeting
The Annual General Meeting of the Company will be held at 11.00 am on
Wednesday, 12 February 2014 at the offices of SGH Martineau LLP, One America
Square, Crosswall, London EC3N 2SG.
Contact details for further enquiries:
Robert Brittain of Mobeus Equity Partners LLP (the Company Secretary) on
0207024 7600 or by e-mail to i&g@mobeusequity.co.uk.
Mark Wignall or Mike Walker at Mobeus Equity Partners LLP (the Investment
Manager) on 020 7024 7600 or by e-mail to info@mobeusequity.co.uk.
DISCLAIMER
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
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