Annual Financial Report

RNS Number : 1138Z

Income & Growth VCT (The) PLC

12 December 2017

The Income & Growth VCT plc

Annual Financial Results of the Company for the Year ended 30 September 2017

The Income & Growth VCT plc (the "Company") today announces the final results for the year ended 30 September 2017. These results were approved by the Board of Directors on 12 December 2017.

You may, in due course, view the Annual Report & Financial Statements, comprising the statutory accounts of the Company by visiting www.incomeandgrowthvct.co.uk.

Financial Highlights

-	Net asset value total return per share was 4.8% for the year.
-	Share price total return per share was 7.0% for the year.
-	Dividends paid and proposed in respect of the year total 21.00 pence per share. The proposed final dividend of 3.00 pence per share, if approved, will bring cumulative dividends paid to shareholders in respect of the past five years to 71.00 pence per share.
-	The Company realised investments totalling £14.73 million of cash proceeds and generated realised gains over original investment cost of £3.81 million.
-	£8.07 million¹ was invested into six new companies and two follow-on investments during the year.
¹ This figure includes £2.76 million previously held in companies preparing to trade.

PERFORMANCE SUMMARY

As at 30 September 2017 the Company had net assets of £64.35 million and the net asset value ("NAV") per share was 81.24 pence.

The table below shows the recent past performance of the Company's existing class of shares for each of the last five years.

Reporting date		Net assets	NAV per share	Share price¹	Cumulative dividends paid per share	Cumulative total return per share to shareholders²		Dividends paid and proposed per share in respect of each year
As at 30 September						(NAV basis)	(Share price basis)
		(£m)	(p)	(p)	(p)	(p)	(p)	(p)
2017		64.35	81.24	73.00	102.50	183.74	175.50	21.00	⁴
2016		70.84	98.51	88.80	80.50	179.01	169.30	10.00
2015		75.20	106.38	93.50	68.50	174.88	162.00	12.00
2014		69.31	114.60	103.50³	50.50	165.10	154.00	18.00
2013		60.47	113.90	99.50	40.50	154.40	140.00	10.00

¹	Source: Panmure Gordon & Co. (mid-market price)
²	Cumulative total return per share comprises the NAV per share (NAV basis) or the mid-market price per share (share price basis) plus cumulative dividends paid since the launch of the current share class.
³	The share price at 30 September 2014 has been adjusted to add back the dividend of 8.00 pence per share paid on 30 October 2014, as the listed share price was quoted ex this dividend at the year-end.
⁴	Dividends paid and proposed per share in respect of 2017 include the final dividend of 3.00 pence referred to above, which is subject to shareholder approval at the Annual General Meeting ("AGM").

Chairman's Statement

I am pleased to present to shareholders the Annual Report of the Company for the year ended 30 September 2017.

Overview

This has been another year of solid performance by the Company. Returns to shareholders have again been positive, due to a profitable portfolio company exit as well as a good income return. Further comment can be found under the 'Performance' section of my Statement below and in the Investment's Adviser's Review.

The Company and the Investment Adviser have responded well to the VCT Rules introduced by the Finance (No 2) Act 2015, having completed nine growth capital investments since the change in the Company's investment policy in February 2016. The Investment Adviser has continued to recruit experienced growth capital investors into its team and a healthy pipeline of investment opportunities is being evaluated.

Most recently, additional changes to VCT legislation have been proposed in the Autumn Budget. Your Board's opinion of the likely impact of these changes can be found under the 'Industry and Regulatory Changes' section of my statement below.

Fundraising

Shareholders should be aware that, on 6 September 2017, the Company launched an Offer for Subscription to raise up to £15 million, with an over-allotment facility to raise up to an additional £10 million. I am pleased to report that demand for the Offer has been strong from both new and existing shareholders. To accommodate investor demand, the Board took the decision to utilize its over-allotment facility on 23 October 2017. To date, applications amount to £16.3 million have been received. 19,072,153 shares have been allotted to date at offer prices ranging from 81.21 to 87.36 pence per share, dependent upon the prevailing net asset value at the date of each allotment and the method by which each investor subscribed for the Offer. The Offer will close when fully subscribed, or on 4 April 2018, whichever is the sooner.

Performance

The Company's NAV total return per share was 4.8% for the year ended 30 September 2017 (2016: 3.9%), after taking into account the dividends paid during the year. This NAV return for the year was primarily attributable to the sale of the Company's investment in Entanet Holdings Limited and another year of good revenue returns, arising principally from income from loan stock investments.

As a result of this year's performance, the cumulative NAV total return per share (being the closing net asset value plus total dividends paid to date since launch) increased during the year by 2.6% (2016: 2.4%) from 179.01 pence to 183.74 pence.

Using the benchmark of NAV cumulative total return, it is pleasing to report strong relative performance over the long-term as well as in recent years, as compared with the Company's peers. The VCT was ranked in the second quartile over five years and in the top quartile over ten years amongst generalist (including planned exit) VCTs used by the Association of Investment Companies ('AIC') to measure performance at 31 October 2017. Further details are included in the Strategic Report contained in the Annual Report.

Final dividend

Your Board is proposing a final dividend in respect of the year ending 30 September 2017 of 3.00 (2016: 4.00) pence per share. The dividend, comprising 2.50 pence from capital and 0.50 pence from income, will be proposed to shareholders at the Annual General Meeting of the Company to be held on 7 February 2018, to shareholders on the register on 12 January 2018, for payment on 15 February 2018. This final dividend is in addition to the special dividend of 15.00 pence paid on 31 August 2017 and the interim dividend of 3.00 pence paid on 20 June 2017.

If approved by shareholders, this forthcoming final dividend will bring dividends paid per share in respect of the year ended 30 September 2017 to 21.00 pence (2016: 10.00 pence) and the Company will have paid dividends totalling 71.00 pence per share in respect of the last five years.

Shareholders should note, however, as a result of the changes in the VCT Rules and the Company's Investment Policy, that the Company may find it a challenge to generate a similar level of dividends over the next five years. Your Board will continue to monitor whether the current annual dividend target of 6.00 pence per share remains sustainable in the current investment environment.

The Company's Dividend Investment Scheme ("the Scheme") will apply to this dividend and new elections under the Scheme should be received by the Scheme administrator, Link Asset Services, by no later than Wednesday, 31 January 2018. For further details of the Scheme, please see the Shareholder Information section of the Annual Report.

Investment portfolio

For the year under review, the portfolio as a whole achieved a net increase of £3.88 million on investment realised, but a decrease of £0.79 million on investments still held. Investment realisations produced £3.81 million in capital gains in excess of original investment cost. The portfolio still under management was valued at £48.03 million (2016: £54.36 million) at the year-end, representing 94.8% of cost. This position is mainly due to a former Investment Adviser's investments which have been written down below cost. Despite the apparent fall in value, on a like for like basis (adding back realisations and excluding new investments) the portfolio produced a positive return of 5.7% over the year.

During the year £8.07 million (including £2.76 million previously held in companies preparing to trade) was invested in six new companies and two existing portfolio companies.

Six new growth capital investments totalling £6.98 million were made during the financial year. These investments were in: BookingTek, a provider of enterprise software to major hotel groups (plus a small follow on investment); Biosite, a biometric security access control developer; Tapas Revolution, a leading Spanish restaurant chain; Buster & Punch, a London based interiors retailer; MyTutorweb, an online tutoring business; and Wetsuit Outlet, a leading online retailer in the water sports market. In addition, two follow-on investments were made: £0.94 million into Preservica, a developer of digital archiving software; and £0.15 million into Mpb, an online marketplace for used camera and video equipment.

Cash proceeds totalling £14.73 million were received from 14 companies that were either sold or which repaid loans. Of this total, £7.17 million was received cash proceeds from the substantial disposal of Entanet Holdings Limited (realising a gain of 5.48 pence per share) with a further £6.73 million being received as loan repayments and finally, £0.83 million as other receipts.

Full details of the investment activity during the year and a summary of the performance highlights can be found in the Investment Adviser's Review in the Annual Report.

Industry and regulatory developments

As mentioned in my overview, the UK Government has undertaken a Patient Capital Review to identify and tackle factors considered to be adversely affecting the supply of longer term capital to small and developing firms. The consultation period closed on 22 September 2017 and strong representations were made on behalf of the VCT industry by Mobeus as Investment Adviser, the Venture Capital Trust Association and the Association of Investment Companies.

The recent Chancellor's Autumn Budget Statement outlined the key findings from the review including a number of legislative changes to the VCT scheme, the earliest of which are due to come into effect from 6 April 2018. We understand that these changes are designed to exclude tax-motivated investments where capital is not at risk (that is, principally seeking to preserve investors' capital).

Your Board notes the initiatives behind these changes. While some of these changes place further restrictions on the way investments may be structured, the Board currently has no reason to believe they will materially affect the Company's existing strategic objectives.

A summary of the current VCT regulations and those proposed in the Autumn Budget is included in the Annual Report.

Shareholder Event

The Investment Adviser holds an annual VCT event for shareholders in Central London. The event will include presentations on the Mobeus advised VCTs' investment activity and performance. We have been pleased to receive positive comments from those attending in previous years. The next event will again be held at the Royal Institute of British Architects in Central London on Tuesday, 30 January 2018. There will be day-time and separate evening sessions. Shareholders have already been sent an invitation to this event with further details. If you have not replied to the invitation, but would like to attend, please apply to Mobeus (vcts@mobeusequity.co.uk) by email to register. The Board looks forward to meeting all shareholders able to join them at the event.

Outlook

Your Board remains of the opinion that your Company is well positioned to take advantage of the strong demand for growth capital investment, despite the uncertainties faced by the UK economy. The fundraising is currently anticipated to be fully subscribed and this will provide the Company with sufficient funds to continue the current investment rate in the medium term.

Your Board will shortly be issuing further guidance (in a joint announcement with the boards of the other Mobeus-advised VCTs) on the impact of the Budget changes, in a supplementary prospectus to the Offer. This will be available on the Company's website and the National Storage Mechanism.

Finally, I would like to take this opportunity once again to thank all shareholders for their continued support.

Colin Hook
Chairman

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 to generate capital gains upon sale and to reduce the risk of high exposure to equities. To further spread risk, investments are made in a number of businesses across different industry sectors.

The Company's cash and liquid resources are held in a range of instruments which can be of varying maturities, subject to the overriding criterion that the risk of loss of capital be minimised.

The Investment Policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HMRC. For further information, please see the Strategic Report section of the Annual Report.

Investment ADVISER'S Review

Portfolio Review

This has been a year of continued progress within the portfolio with the addition of six new growth capital investments totalling £6.98 million, two existing investments receiving follow-on funding totalling £1.09 million, and one significant profitable disposal generating net cash proceeds of £7.17 million resulting in a 2.5 times multiple over cost over the three and a half year life of the investment. The past year's investment and divestment activity has increased the proportion of the portfolio at value comprised of growth capital investments to 21.8%, excluding companies preparing to trade. The Company has now invested £9.85 million in growth capital investments since the introduction of the VCT regulations in 2015.

The value of the existing portfolio decreased by £0.79 million during the year under review. This net fall in value is due to reductions in the valuations of Jablite, Veritek Global and Media Business Insight outweighing gains elsewhere in the portfolio, such as Gro-Group, Master Removers Group and Access IS. The majority of the investment portfolio companies are generating cash and trading well in uncertain economic circumstances.

Demand for growth capital investment remains strong and there is a large pipeline of investment opportunities. It is expected that the pace and quantum of new investment will continue over the coming months.

Patient Capital Review

As the Chairman's Statement noted, the UK Government has conducted a review to identify and tackle factors considered to be adversely affecting the supply of longer term capital to small and developing firms. As anticipated, the Chancellor's recent Autumn Budget outlined the key findings from the review including a number of changes to the VCT scheme, the earliest of which are due to come into effect from 6 April 2018.

Mobeus, as Investment Adviser, believe these changes should not overall affect the ability of the Company to continue to make successful growth capital investments.

New investment in the year

A total of £8.07 million was invested in new and existing investments during the year under review. New investments of £6.98 million were made into BookingTek, Biosite, Tapas Revolution, Buster & Punch, MyTutorweb and Wetsuit Outlet; all new growth capital investments. In addition, the Company made £1.09 million of follow-on investments into Preservica (originally arising from a spin out from a former portfolio company, Tessella) and Mpb to support further growth and development.

Further details of these investments are set out below:

Company	Business	Date of investment	Amount of new investment (£m)
BookingTek	A provider of direct-booking systems to major hotel groups	October 2016 / March 2017	0.78
London-based BookingTek provides software that enables hotels to reduce their reliance on third-party booking systems through an enterprise-grade, real-time booking platform for meeting rooms and restaurant reservations. BookingTek's existing clients include two of the world's top 10 hotel groups and the UK's largest hotel group. On 27 March, the VCT advanced a further £0.09 million as loan as envisaged in the original investment plan. The company's latest accounts for the year ended 31 July 2016 show turnover of £2.03 million and a loss before interest, tax and amortisation of goodwill of £0.29 million.
Biosite	Workforce management	November 2016	0.86
Based in the Midlands, Biosite is a fast-growing provider of biometric access control and software-based workforce management solutions for the construction sector. The investment was to support the expansion of the Biosite team to facilitate the development of new site-management tools to enable managers to oversee all aspects of a construction project. The company's latest accounts for the year ended 31 July 2016 show turnover of £4.69 million and profit before interest, tax and amortisation of goodwill of £0.49 million.
Tapas Revolution	Restaurant chain	January 2017	0.78
Based in London, Ibericos Etc. Limited (which trades as Tapas Revolution) is a leading Spanish restaurant chain in the casual dining sector, focussing on shopping centre sites with high footfall. Having opened its first restaurant in Shepherd's Bush Westfield, the business has since opened a further six restaurants. The investment provided growth capital to a high-calibre team with significant restaurant rollout experience which has spent the past five years building and refining its offer and is now well placed to capitalise on a strong pipeline of new sites. The company's latest accounts for the period ended 25 October 2016 show a turnover of £4.25 million and loss before interest, tax and amortisation of goodwill of £0.25 million.
Buster + Punch	Retailer	March 2017	0.72
Buster and Punch Holdings Limited (formerly Chatfield Services Limited) is a London-based interiors brand founded in 2012 by architect and industrial designer Massimo Buster Minale. Buster + Punch (www.busterandpunch.com) started in a small garage in East London, where it built the "world's first designer LED light bulb" (the Buster Bulb) and made its name with its industrial inspired lighting. Its products are now sold in over 50 countries, both directly and to end-consumers, designers and architects, and through well-known retailers including John Lewis, Harvey Nichols and Harrods. The investment will support the business's international expansion plans and the broadening of its product range. The company's latest accounts for the year ended 31 March 2016 show turnover of £1.98 million and profit before interest, tax and amortisation of goodwill of £0.47 million.
MyTutorweb	Online tutoring	May 2017	0.63
MyTutorweb is a digital marketplace that connects school pupils seeking private one-to-one tuition with university students. The business is satisfying growing demand from both students and parents to improve pupil's exam results and enhance their academic and career prospects. This investment supports and opportunity to consolidate the sizable £2 billion UK tutoring market, grow MyTutorweb's market presence and drive technological development within the company. The company's latest accounts for the year ended 31 December 2016 show turnover of £0.21 million and a loss before interest, tax and amortisation of goodwill of £0.79 million.
Wetsuit Outlet	Retailer	July 2017	3.21*
B2C Holdings Limited (trading as Wetsuit Outlet) has established itself as a leading online retailer in the water sports market, stocking an impressive brand portfolio including Musto, Billabong, Rip Curl, O'Neill, Red Paddle (an existing Mobeus investment) and Gul. The investment is to fund working capital and growth in existing activities and enter two new markets. Established in 2005, the company has developed into a successful and profitable business achieving turnover of £11.51 million and a profit before interest, tax and amortisation of goodwill of £1.77 million in the financial year ended 31 March 2017. * £2,708,100 previously held in Manufacturing Services Investment Limited, a company preparing to trade, was used for the investment in Wetsuit Outlet. This resulted in a net repayment to the Company of £668,400. A further £1,165,482 was also invested by the Company.

Further investments in existing portfolio companies

The Company made further investments of £0.94 million into Preservica, a leading provider of digital preservation solutions, and £0.15 million into Mpb, a leading online marketplace for used camera and video equipment, during the year under review.

Company	Business	Date of investment	Amount of new investment (£m)
Preservica	Provider of digital preservation solutions	December 2016	0.94
Preservica is a leading provider of digital preservation solutions and its access software is used around the globe by leading businesses, archives, libraries, museums and government organisations to safeguard and share valuable digital content. The company's latest audited accounts for the year ended 31 March 2017 show turnover of £2.03 million and a loss before interest, tax and amortisation of goodwill of £1.16 million.
MPB Group	Online Marketplace for used camera and video equipment	September 2017	0.15
Mpb is Europe's leading online marketplace for used camera and video equipment. Based in Brighton, its custom-designed pricing technology enables Mpb to offer both buy and sell services through the same platform and offers a one-stop shop for all its customers. The investment is to fund expansion of its platform globally, with launches into both the US and German markets. The company's latest audited accounts for the year ended 31 March 2016 show turnover of £8.37 million and a loss before interest, tax and amortisation of goodwill of £0.001 million.

Realisations in the year

The Company realised one investment during the year under review for cash proceeds totalling £7.17 million. This was the very successful sale of the Company's investment in Entanet Holdings Limited, detailed below.

Company

Business

Period of investment

Total cash proceeds over the life of the investment/
Multiple over cost

Entanet

Wholesale voice and data communications provider

February 2014 to August 2017

£8.10 million

2.5 times cost

The Company sold its investment in Entanet to AIM quoted CityFibre Infrastructure Holdings Limited for £7.17 million in August 2017. Deferred contingent consideration of up to £0.74 million is potentially payable over the next two years. Excluding this deferred consideration, the Company has so far realised a gain over the life of the investment of £4.93 million, a multiple of 2.5 times cost and has returned an IRR of 39% to date - an excellent outcome.

Mobeus Equity Partners LLP

Investment Adviser

Investment Portfolio Summary
for the year ended 30 September 2017
	Total cost at	Total Valuation at	Additional investments	Total valuation at	% of equity Held	% of portfolio by value
	30-Sep-17	30-Sep-16		30-Sep-17
	£	£	£	£
Tovey Management Limited (trading as Access IS)	3,313,932	3,532,917	-	3,880,197	13.1%	8.1%
Provider of data capture and scanning hardware
Virgin Wines Holding Company Limited	2,745,503	3,706,526	-	3,483,880	13.7%	7.3%
Online wine retailer
Manufacturing Services Investment Limited (trading as Wetsuit Outlet)	3,205,182	2,708,100	1,165,482	3,205,182	8.8%	6.7%
Online retailer in the water sports market
ASL Technology Holdings Limited	2,722,106	2,870,789	-	2,845,619	13.3%	5.9%
Printer and photocopier services
I-Dox plc	453,881	2,833,470	-	2,687,629	1.0%	5.6%
Developer and supplier of knowledge management products
Gro-Group Holdings Limited	2,398,928	1,651,824	-	2,606,640	16.3%	5.4%
Baby sleep products
Media Business Insight Holdings Limited	3,666,556	2,980,641	-	2,443,888	21.2%	5.1%
A publishing and events business focussed on the creative production industries
Vian Marketing Limited (trading as Red Paddle Co)	1,207,437	1,593,103	-	1,906,790	9.5%	4.0%
Design, manufacture and sale of stand-up paddleboards and windsurfing sails
EOTH Limited (trading as Equip Outdoor Technologies)	1,383,313	1,495,307	-	1,809,879	2.5%	3.8%
Distributor of branded outdoor equipment and clothing including the Rab and Lowe Alpine brands
Tharstern Group Limited	1,454,278	1,777,923	-	1,770,484	16.2%	3.7%
Software based management Information systems for the printing industry
Veritek Global Holdings Limited	2,289,859	2,297,607	-	1,752,129	14.6%	3.6%
Maintenance of imaging equipment
Fullfield Limited (trading as Motorclean)	1,517,734	2,020,433	-	1,606,346	13.2%	3.3%
Vehicle cleaning and valet services
Master Removers Group Limited (formerly Leap New Co Limited (trading as Anthony Ward Thomas, Bishopsgate and Aussie Man & Van))	682,183	878,989	-	1,379,326	5.8%	3.0%
A specialist logistics, storage and removals business
CGI Creative Graphics International Limited	1,943,948	1,768,414	-	1,301,638	8.8%	2.7%
Vinyl graphics to global automotive, recreation vehicle and aerospace markets
Turner Topco Limited (trading as ATG Media)	1,529,075	1,114,321	-	1,209,162	3.7%	2.5%
Publisher and online auction platform operator
Redline Worldwide Limited	1,129,121	1,129,121	-	1,145,887	9.1%	2.4%
Provider of security services to the aviation industry and other sectors
RDL Corporation Limited	1,441,667	1,409,809	-	1,072,527	13.0%	2.3%
Recruitment consultants within the pharmaceutical, business intelligence and IT industries
MPB Group Limited	804,855	650,075	154,780	1,023,613	7.3%	2.1%
Online marketplace for used photographic equipment
Preservica Limited	935,000	-	935,000	935,000	6.3%	1.9%
Seller of proprietary digital archiving software
Bourn Bioscience Limited	1,610,379	1,206,547	-	925,420	10.9%	1.9%
Management of In-vitro fertilisation clinics
Pattern Analytics Limited (trading as Biosite)	857,014	-	857,014	857,014	6.4%	1.8%
Workforce management and security services for the construction industry
BookingTek Limited	779,095	-	779,095	779,095	4.6%	1.6%
Software for hotel groups
Ibericos Etc. Limited (trading as Tapas Revolution)	776,386	-	776,386	776,386	7.8%	1.6%
Spanish restaurant chain
TPSFF Limited (formerly The Plastic Surgeon Holdings Limited)	239,688	836,215	-	765,694	7.7%	1.6%
Supplier of snagging and finishing services to the property sector
Buster and Punch Holdings Limited (formerly Chatfield Services Limited)	725,226	1,504,000	-	725,226	6.2%	1.5%
Industrial inspired lighting and interiors retailer
Aquasium Technology Limited	166,667	681,377	-	706,592	16.7%	1.5%
Manufacturing and marketing of bespoke electron beam welding and vacuum furnace equipment
My Tutorweb Limited	636,477	-	636,477	636,477	6.2%	1.3%
Digital marketplace connecting school pupils seeking one-to-one online tutoring
Hollydale Management Limited	994,560	1,554,000	-	621,600	15.5%	1.3%
Company seeking to carry on a business in the food sector
Vectair Holdings Limited	53,400	302,340	-	601,006	4.6%	1.3%
Designer and distributor of washroom products
Omega Diagnostics Group plc	280,026	367,511	-	501,682	1.8%	1.0%
In-vitro diagnostics for food intolerance, autoimmune diseases and infectious diseases
Blaze Signs Holdings Limited	418,281	608,241	-	438,320	12.5%	0.9%
Manufacturer and installer of signs
Jablite Holdings Limited	498,790	1,271,052	-	304,755	12.1%	0.6%
Manufacturer of expanded polystyrene products
Backhouse Management Limited	782,080	1,504,000	-	300,800	15.0%	0.6%
Company seeking to carry on a business in the motor sector
Barham Consulting Limited	782,080	1,504,000	-	300,800	15.0%	0.6%
Company seeking to carry on a business in the catering sector
Creasy Marketing Services Limited	782,080	1,504,000	-	300,800	15.0%	0.6%
Company seeking to carry on a business in the textile sector
McGrigor Management Limited	782,080	1,504,000	-	300,800	15.0%	0.6%
Company seeking to carry on a business in the pharmaceutical sector
LightWorks Software Limited	20,471	61,212	-	87,596	9.2%	0.2%
Provider of software for CAD and CAM vendors
BG Training Limited	53,125	70,833	-	26,563	0.0%	0.1%
Technical training business
Corero Network Security plc	600,000	9,577	-	7,866	0.1%	0.0%
Provider of e-business technologies
Racoon International Group Limited (formerly Racoon International Holdings)	655,851	104,999	-	-	10.8%	0.0%
Supplier of hair extensions, hair care products and training
Newquay Helicopters (2013) Limited (in liquidation)	15,234	-	-	-	5.0%	0.0%
Helicopter service operator
CB Imports Group Limited (trading as Country Baskets)	175,000	-	-	-	5.8%	0.0%
Importer and distributor of artificial flowers, floral sundries and home decor products
Oxonica Limited	2,524,527	-	-	-	10.6%	0.0%
International nanomaterials group
NexxtDrive Limited/Nexxt E-drive Limited	487,014	-	-	-	3.9%	0.0%
Developer and exploiter of mechanical transmission technologies
Biomer Technology Limited	137,170	-	-	-	3.0%	0.0%
Developer of biomaterials for medical devices
Watchgate Limited	1,000	-	-	-	33.3%	0.0%
Holding company

Disposed in year
Entanet Holdings Limited	-	3,351,685	-	-	0.0%	0.0%
Wholesale communications provider
Focus Pharma Holdings Limited	-	-	-	-	0.0%	0.0%
Licensor and distributor of generic pharmaceuticals
MachineWorks Software Limited	-	-	-	-	0.0%	0.0%
Provider of software for CAD and CAM vendors

Total	50,658,259	54,364,958	5,304,234	48,030,308		100.0%

For further information on the Investment Portfolio, please see the Annual Report and Financial Statements

PRINCIPAL RISKS

The Directors acknowledge the Board's responsibilities for the Company's internal control systems and have instigated systems and procedures for identifying, evaluating and managing the principal 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, a description of the possible consequences of each risk and how the Board manages each risk are set out below.

The risk profile of the Company changed as a consequence of the VCT regulations introduced in 2015. As the Company is required to focus its investment on growth capital investments in younger companies it is anticipated that investment returns will be more volatile and will have a higher risk profile. The Board remains confident that the Company and the Investment Adviser has adapted to these new requirements and put in place appropriate resource to identify and make suitable investments.

The Board regularly sets and reviews policies for financial risk management and full details of these can be found in Note 16 to the Financial Statements.

Risk	Possible consequence	How the Board manages risk

Investment and strategic	Investment in unquoted small companies involves a higher degree of risk than investment in fully listed 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.	● The Board regularly reviews the Company's Strategy including its Investment Policy. ● Careful selection and review of the Investment portfolio on a regular basis.
Loss of approval as a Venture Capital Trust	A breach of the VCT Tax Rules may lead to the Company losing its approval as a VCT, which would result in qualifying shareholders who have not held their shares for the designated period having to repay the income tax relief they obtained and future dividends paid by the Company being subject to tax. The Company would also lose its exemption from corporation tax on capital gains.	● The Company's VCT qualifying status is regularly reviewed by the Board and the Investment Adviser. ● The Board receives regular reports from its VCT Status Adviser who has been retained by the Board to monitor the VCT's compliance with the VCT Rules.
Regulatory	The Company is required to meet its legal and regulatory obligations as a VCT, a listed company and its own Alternative Investment Fund Manager (AIFM). Failure to comply might result in suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report or a loss of the Company's status as a VCT.	● Regulatory and legislative developments are kept under review by the Board.
Counterparty	A counterparty may fail to discharge an obligation or commitment that it has entered into with the Company.	● The Board regularly reviews and agrees policies for managing these risks. Further details can be found in the discussion on 'credit risk' in Note 16 to the Financial Statements.
Economic	Events such as the impact of Brexit, an economic recession and movements in interest rates could affect trading conditions for smaller companies and consequently the value of the Company's qualifying investments.	● The Board monitors (1) the portfolio as a whole to ensure that the Company invests in a diversified portfolio of companies and (2) developments in the macro-economic environment such as movements in interest rates.
Financial and operating	Failure of the systems (including breaches of cyber security) at any of the third party service providers that the Company has contracted with could lead to inaccurate reporting or monitoring. Inadequate controls could lead to the misappropriation or insecurity of assets.	● The Board carries out an annual review of the internal controls in place, reviews the risks facing the Company at each quarterly Board meeting and receives reports by exception. ● It reviews the performance of the service providers annually and has obtained assurance that such providers have controls in place to reduce the risk of breaches of their cyber security.
Market	Movements in the UK Stock Market indices will inevitably impact the valuation of the VCT's investments.	● The Board receives and reviews quarterly valuation reports from the Investment Adviser. ● The Investment Adviser alerts the Board about any adverse movements.
Asset liquidity	The Company's investments may be difficult to realise.	● The Board receives reports from the Investment Adviser 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 difficult to sell their shares at a price which is close to the net asset value.	● The Board has a share buyback policy which seeks to mitigate market liquidity risk for shareholders. This policy is reviewed at each quarterly Board meeting.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual 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 and 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 of 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 the Financial Statements have been prepared in accordance with United Kingdom accounting standards, 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;
-	prepare a Strategic Report, a Director's 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.

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 United Kingdom Generally Accepted Accounting Practice give a true and fair view of the assets, liabilities, financial position and the profit of the Company.

(b)	The Annual 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 Annual Report and Financial Statements, taken as a whole, is 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.

For and on behalf of the Board

Colin Hook

Chairman

FINANCIAL STATEMENTS


Income Statement
for the year ended 30 September 2017		Year ended 30 September 2017			Year ended 30 September 2016

Notes		Revenue	Capital	Total	Revenue	Capital	Total
		£	£	£	£	£	£

Net unrealised (losses)/gains on investments	8	-	(794,007)	(794,007)	-	549,889	549,889
Net gains on realisation of investments	8	-	3,883,829	3,883,829	-	2,506,146	2,506,146
Income	3	3,266,634	-	3,266,634	3,201,629	-	3,201,629
Investment Adviser's fees	4a	(394,012)	(1,182,037)	(1,576,049)	(419,260)	(1,257,781)	(1,677,041)
Investment Advisers' performance fees	4b	-	(571,879)	(571,879)	-	(1,140,221)	(1,140,221)
Other expenses		(423,354)	-	(423,354)	(392,228)	-	(392,228)
Profit on ordinary activities before taxation		2,449,268	1,335,906	3,785,174	2,390,141	658,033	3,048,174

Tax on profit on ordinary activities	5	(421,283)	421,283	-	(479,600)	479,600	-
Profit for the year and total comprehensive income		2,027,985	1,757,189	3,785,174	1,910,541	1,137,633	3,048,174

Basic and diluted earnings per ordinary share:	6	2.79p	2.42p	5.21p	2.68p	1.60p	4.28p

The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the unrealised (losses)/gains and realised gains on investments and the proportion of the Investment Adviser's fee charged to capital.

The total column is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS"). In order to reflect better the activities of a VCT and in accordance with the 2014 Statement of Recommended Practice ("SORP") (updated in January 2017) by the Association of Investment Companies ("AIC"), supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of profit attributable to equity shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 Income Tax Act 2007.

All the items in the above statement derive from continuing operations of the Company. No operations were acquired or discontinued in the year.

Balance sheet
as at 30 September 2017

	Notes	as at 30 September 2017	as at 30 September 2016
		£	£
Fixed assets
Investments at fair value	8	48,030,308	54,364,958

Current assets
Debtors and prepayments		3,372,032	304,935
Current asset investments	9	12,412,671	15,338,067
Cash at bank and in hand	9	1,375,065	2,189,856
		17,159,768	17,832,858

Creditors: amounts falling due within one year		(841,325)	(1,357,178)
Net current assets		16,318,443	16,475,680
Net assets		64,348,751	70,840,638

Capital and reserves
Called up share capital	10	792,047	719,140
Capital redemption reserve		14,014	11,985
Share premium reserve		24,099,311	18,308,887
Revaluation reserve		4,020,689	4,744,396
Special reserve		23,215,643	24,980,045
Profit and loss account		12,207,047	22,076,185
Equity shareholders' funds		64,348,751	70,840,638
Basic and diluted net asset value per share
Ordinary shares	11	81.24p	98.51p

Statement of Changes in Equity for the year ended 30 September 2017

			Non-distributable reserves				Distributable reserves			Total

	Notes		Called up share capital	Capital redemption reserve	Share premium reserve	Revaluation reserve	Special distributable reserve	Realised capital reserve	Revenue reserve
							(Note a)	(Note b)	(Note b)
			£	£	£	£	£	£	£	£

At 1 October 2016			719,140	11,985	18,308,887	4,744,396	24,980,045	20,225,980	1,850,205	70,840,638
Comprehensive income for the year
(Loss)/profit for the year		-		-	-	(794,007)	-	2,551,196	2,027,985	3,785,174
Total comprehensive income for the year		-		-	-	(794,007)	-	2,551,196	2,027,985	3,785,174

Contributions by and distributions to owners
Shares issued via Offer for Subscription (note c)		10	36,277	-	2,910,719	-	(786)	-	-	2,946,210
Dividends re-invested into new shares		10	38,659	-	2,879,705	-	-	-	-	2,918,364
Shares bought back (note d, note e)		10	(2,029)	2,029	-	-	(160,323)	-	-	(160,323)
Dividends paid		7	-	-	-	-	-	(14,175,466)	(1,805,846)	(15,981,312)
Total contributions by and distributions to owners			72,907	2,029	5,790,424	-	(161,109)	(14,175,466)	(1,805,846)	(10,277,061)

Other movements
Realised losses transferred to special reserve (note f)			-	-	-	-	(1,603,293)	1,603,293	-	-
Realisation of previously unrealised depreciation			-	-	-	70,300	-	(70,300)	-	-
Total other movements			-	-	-	70,300	(1,603,293)	1,532,993	-	-

At 30 September 2017			792,047	14,014	24,099,311	4,020,689	23,215,643	10,134,703	2,072,344	64,348,751

Notes
a) The Company's special reserve is available to fund buy-backs of shares as and when it is considered by the Board to be in the interests of the shareholders, and to absorb any existing and future realised losses and for other corporate purposes. As at 30 September 2017, the Company has a special reserve of £23,215,643, all of which relates to reserves from shares issued on or before 5 April 2014.

b) The realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the Company shown in the Balance Sheet.

c) On 28 September 2017, 3,627,706 shares were issued under the Offer for Subscription and net funds receivable of £2,946,210 is held within debtors at 30 September 2017. This figure is net of issue costs of £45,529.

d) The shareholders authorised the Company to purchase its own shares for cancellation pursuant to section 701 of the Companies Act 2006 at the Annual General Meeting held on 8 February 2017. The authority was limited to a maximum number of 10,779,912 shares (this being approximately 14.99% of the issued share capital at the date of the Notice of the meeting). The minimum price which may be paid for a share is 1 penny per share, the nominal value thereof. The maximum price that may be paid for a share is an amount that is not more than 5% above the average of the middle market quotations of the shares as derived from the Daily Official List of the London Stock Exchange for the five business days preceding such purchase. The authorities provide that the Company may make a contract or contracts to purchase its own shares prior to the expiry of the authority which may be executed in whole or part after the expiry of such authority, and may purchase its shares in pursuance of any such contract.

e) During the year, the Company repurchased 202,886 of its own shares at the prevailing market price for a total cost of £160,323, which were subsequently cancelled. The difference between the figure shown above of £160,323, and that per the Statement of Cash Flows of £115,024 is due to an opening share buyback creditor of £37,339, offset by a share buyback creditor at 30 September 2017 of £82,638.

f) The transfer of £1,603,293 to the special reserve from the realised capital reserve above is the total of realised losses incurred by the Company this year.

Statement of Changes in Equity for the year ended 30 September 2016
	Non-distributable reserves				Distributable reserves			Total

	Called up share capital	Capital redemption reserve	Share premium reserve	Revaluation reserve	Special distributable reserve	Realised capital reserve	Revenue reserve
	£	£	£	£	£	£	£	£

At 1 October 2015	706,930	9,288	16,977,902	8,997,633	27,147,965	19,653,747	1,708,831	75,202,296
Comprehensive income for the year
Profit for the year	-	-	-	549,889	-	587,744	1,910,541	3,048,174
Total comprehensive income for the year	-	-	-	549,889	-	587,744	1,910,541	3,048,174
Contributions by and distributions to owners
Dividends re-invested into new shares	14,907	-	1,330,985	-	-	-	-	1,345,892
Shares bought back	(2,697)	2,697	-	-	(249,518)	-	-	(249,518)
Dividends paid	-	-	-	-	-	(6,737,039)	(1,769,167)	(8,506,206)
Total contributions by and distributions to owners	12,210	2,697	1,330,985	-	(249,518)	(6,737,039)	(1,769,167)	(7,409,832)
Other movements
Realised losses transferred to special reserve	-	-	-	-	(1,918,402)	1,918,402	-	-
Realisation of previously unrealised depreciation	-	-	-	(4,803,126)	-	4,803,126	-	-
Total other movements	-	-	-	(4,803,126)	(1,918,402)	6,721,528	-	-
At 30 September 2016	719,140	11,985	18,308,887	4,744,396	24,980,045	20,225,980	1,850,205	70,840,638

The composition of each of these reserves is explained below:
Called up share capital
The nominal value of shares originally issued, increased for subsequent share issues either via an Offer for Subscription or Dividend Investment Scheme or reduced due to shares bought back by the Company.
Capital redemption reserve
The nominal value of shares bought back and cancelled is held in this reserve, so that the company's capital is maintained.
Share premium reserve
This reserve contains the excess of gross proceeds less issue costs over the nominal value of shares allotted under recent Offers for Subscription and the Company's Dividend Investment Scheme.
Revaluation reserve
Increases and decreases in the valuation of investments held at the year-end are accounted for in this reserve, except to the extent that the diminution is deemed permanent. In accordance with stating all investments at fair value through profit and loss (as recorded in note 8 to the Financial Statements), all such movements through both revaluation and realised capital reserves are shown within the Income Statement for the year.
Special distributable reserve
The cost of share buybacks is charged to this reserve. In addition, any realised losses on the sale or impairment of investments (excluding transaction costs), and 75% of the Investment Adviser fee expense, and the related tax effect, are transferred from the realised capital reserve to this reserve.
Realised capital reserve
The following are accounted for in this reserve: • Gains and losses on realisation of investments; • Permanent diminution in value of investments; • Transaction costs incurred in the acquisition of investments; • 75% of the Investment Adviser fee expense and 100% of any performance fee payable, together with the related tax effect to this reserve in accordance with the policies, and • Capital dividends paid.
Revenue reserve
Income and expenses that are revenue in nature are accounted for in this reserve together with the related tax effect, as well as income dividends paid that are classified as revenue in nature.

STATEMENT OF CASH FLOWS

for the year ended 30 September 2017

		Year ended	Year ended
		30 September 2017	30 September 2016
	Notes	£	£
Cash flows from operating activities
Profit for the financial year		3,785,174	3,048,174
Adjustments for:
Net unrealised losses/(gains) on investments		794,007	(549,889)
Net gains on realisations on investments		(3,883,829)	(2,506,146)
(Increase)/decrease in debtors		(120,887)	77,630
(Decrease)/increase in creditors and accruals		(561,152)	190,471
Net cash inflow from operating activities		13,313	260,240

Cash flows from investing activities
Purchase of investments	8	(5,304,234)	(936,007)
Disposal of investments	8	14,728,706	10,742,834
Decrease in bank deposits with a maturity over three months		2,028,243	1,960,755
Net cash inflow from investing activities		11,452,715	11,767,582

Cash flows from financing activities
Shares issued as part of Offer for Subscription		-	-
Equity dividends paid	7	(13,062,948)	(7,160,312)
Purchase of own shares		(115,024)	(212,644)

Net cash outflow from financing activities		(13,177,972)	(7,372,956)

Net (decrease)/increase in cash and cash equivalents		(1,711,944)	4,654,866
Cash and cash equivalents at start of year		12,347,911	7,693,045

Cash and cash equivalents at end of year		10,635,967	12,347,911

Cash and cash equivalents comprise:
Cash at bank and in hand	9	1,375,065	2,189,856
Cash equivalents	9	9,260,902	10,158,055

Notes to the Financial Statements

for the year ended 30 September 2017

1 Company Information

The Income and Growth VCT plc is a public limited company incorporated in England, registration number 4069483. The registered office is 30 Haymarket, London, SW1Y 4EX.

2 Basis of preparation

A summary of the principal accounting policies, all of which have been applied consistently throughout the year are set out at the start of the related disclosure throughout the Notes to the Financial Statements. All accounting policies are included within an outlined box at the top of each relevant note.

These Financial Statements have been prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 ("FRS102"), with the Companies Act 2006 and the 2014 Statement of Recommended practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('the SORP') (updated in January 2017) issued by the Association of Investment Companies. The Company has a number of financial instruments which are disclosed under FRS102 s11/12 as shown in Note 16 to the Financial Statements.

The Company has elected to apply early the revised disclosure requirements as set out in Amendments to FRS 102 - Fair Value hierarchy disclosures issued in March 2016.

3 Income

Dividends receivable on quoted equity shares are brought into account on the ex-dividend date. Dividends receivable on unquoted equity shares are brought into account when the Company's right to receive payment is established and there is no reasonable doubt that payment will be received.

Interest income on loan stock is accrued on a daily basis. Provision is made against this income where recovery is doubtful or where it will not be received in the foreseeable future. Where the loan stocks only require interest or a redemption premium to be paid on redemption, the interest and redemption premium is recognised as income or capital as appropriate once redemption is reasonably certain. When a redemption premium is designed to protect the value of the instrument holder's investment rather than reflect a commercial rate of revenue return the redemption premium is recognised as capital. The treatment of redemption premiums is analysed to consider if they are revenue or capital in nature on a company by company basis. Accordingly, the redemption premium recognised in the year ended 30 September 2017 has been classified as capital and has been included within unrealised gains on investments

	2017	2016
	£	£
Income from bank deposits	55,893	101,393
Income from investments
- from equities	288,843	114,915
- from OEIC funds	21,960	38,412
- from loan stock	2,899,869	2,946,909
	3,210,672	3,100,236
Other income	69	-
Total income	3,266,634	3,201,629
Total income comprises
Revenue dividends received	310,803	153,327
Interest	2,955,762	3,048,302
Other income	69	-
Total Income	3,266,634	3,201,629
Income from investments comprises
Listed UK securities	36,086	36,086
Listed overseas securities	21,960	38,412
Unlisted UK securities	3,152,626	3,025,738
Total investment income	3,210,672	3,100,236
Total loan stock interest due but not recognised in the year was £223,159 (2016: £525,395) due to uncertainty over its recoverability.

4 Investment Adviser's fees and performance fees

25% of the Investment Adviser's fees are charged to the revenue column of the Income Statement, while 75% is charged against the capital column of the Income Statement. This is in line with the Board's expected long-term split of returns from the investment portfolio of the Company.

100% of any performance incentive fee payable for the year is charged against the capital column of the Income Statement, as it is based upon the achievement of capital growth

a) Investment Adviser's fees

	Revenue	Capital	Total	Revenue	Capital	Total
	2017	2017	2017	2016	2016	2016
	£	£	£	£	£	£
Mobeus Equity Partners LLP	394,012	1,182,037	1,576,049	419,260	1,257,781	1,677,041

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 (2016: £150,000) and £170,000 (2016: £170,000) per annum respectively.

The Investment Adviser fees disclosed above are 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 Adviser. The excess expenses during the year attributable to the Investment Adviser amounted to £nil (2016: £nil)

b) Investment Advisers' performance fees

		Revenue	Capital	Total	Revenue	Capital	Total
		2017	2017	2017	2016	2016	2016
Portfolio		£	£	£	£	£	£
Mobeus Equity Partners LLP		-	571,879	571,879	-	1,096,391	1,096,391
Foresight Group LLP		-	-	-	-	43,830	43,830
	-		571,879	571,879	-	1,140,221	1,140,221

Under a Deed of Termination and Variation relating to Performance Incentive Agreements dated 29 March 2010, the Investment Adviser's Incentive Agreement for the former 'O' Share Fund was continued, while the former 'S' Share Fund's Incentive Agreement was terminated. Under the terms of the pre-merger 'O' Share Fund Incentive Agreement, each of the ongoing Investment Adviser, Mobeus Equity Partners LLP and a former Investment Adviser, 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 Adviser'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.

On 30 September 2014, a new incentive fee agreement was signed between the Board and Mobeus, with effect from 1 October 2013, to amend and replace the previous agreement. The previous agreement remains in force, but only with the former adviser, Foresight Group LLP, to whom, for the year ended 30 September 2017, £nil (2016: £43,830) is payable. The agreement is due to expire on 10 March 2019. Mobeus waived their right to their portion of the fee, under the previous agreement.

Any payment under the new incentive agreement is now 15% of net realised gains for each year, payable in cash. It is payable only if Cumulative Net Asset Value (NAV) total return per share (being the closing NAV at a year-end plus cumulative dividends paid to that year-end, since 1 October 2013) equals or exceeds a Target Return. The Target Return is the greater of two targets, being:

i) compound growth of 6% per annum (but 5% per annum for the year ended 30 September 2014 only), before deducting any incentive fee payable (for the year of calculation only) under both this amended agreement and the existing incentive agreement with Foresight Group LLP in Cumulative NAV total return per share; or

ii) the cumulative percentage change in the Consumer Prices Index since 1 October 2013 to the relevant financial year end, the resultant figure then being multiplied by (100+A)/100, where A is the number of full 12 month periods (or part thereof) that have passed between 1 October 2013 and the relevant financial year end.

Both measures of Target Return are applied to the same opening base, being NAV per share as at 30 September 2013 of 113.90 pence. The objective of this Target Return is to enable shareholders to benefit from a cumulative NAV return of at least 6% per annum (5% in the financial year ended 30 September 2014), before any incentive fee is payable. Once a payment has been made, cumulative NAV total return is calculated after deducting past years' incentive fees paid and payable.

Under this amended agreement, any fee payments to Mobeus are subject to an annual cap of an amount equal to 2% of the net assets of the Company as at the immediately preceding year-end. This cap will include any fee payable to Foresight Group LLP under the old agreement, although any such payment to Foresight Group LLP is not capped. Any excess over the 2% remains payable to Mobeus in the following year(s), subject to the 2% annual cap in such subsequent year(s) and after any payment in respect of such subsequent year(s).

The Target Return for the year ended 30 September 2017 was a 6% uplift on the previous year's Target Return of 134.38 pence, being 142.44 pence. As Cumulative Total NAV return is 144.00 pence per share, the Target Return has been met and a fee is payable. This fee amounts to £571,879 and has been accrued in these accounts. This is payable following the approval of this Annual Report by shareholders at the AGM.

c) Offer for Subscription fees

	2017	2016
	£m	£m
Funds raised by I&G VCT	2.99	-
Offer costs payable to Mobeus at 3.25% of funds raised by I&G VCT	0.10	-

Under the terms of an Offer for Subscription, with the other Mobeus advised VCTs, launched on 6 September 2017, Mobeus is entitled to fees of 3.25% of the investment amount received from investors. This amount totalled £341,500 for the first allotment on 28 September 2017 across all four VCTs, out of which all the costs associated with the allotment were met, excluding any payments to advisers facilitated under the terms of the Offer.

5 Taxation on ordinary activities

The tax expense for the year comprises current tax and is recognised in profit or loss. The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date. Any tax relief obtained in respect of adviser fees allocated to capital is reflected in the capital reserve - realised and a corresponding amount is charged against revenue. The tax relief is the amount by which corporation tax payable is reduced as a result of these capital expenses. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the Company's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in the tax assessments in periods different from those in which they are recognised in the Financial Statements. Deferred tax is measured at the average tax rates that are expected to apply in the years in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted at the balance sheet date. Deferred tax is measured on a non-discounted basis. A deferred tax asset would be recognised only to the extent that it is more likely than not that future taxable profits will be available against which the asset can be utilised. No deferred tax asset has been recognised due to the uncertainty of available future taxable profits.
	2017	2017	2017	2016	2016	2016
	Revenue	Capital	Total	Revenue	Capital	Total
	£	£	£	£	£	£
a) Analysis of tax charge:
UK Corporation tax on profits/(losses) for the year	421,283	(421,283)	-	479,600	(479,600)	-
Total current tax charge/(credit)	421,283	(421,283)	-	479,600	(479,600)	-
Corporation tax is based on a rate of 19.5% (2016: 20.0%)

b) Profit on ordinary activities before tax	2,449,268	1,335,906	3,785,174	2,390,141	658,033	3,048,174
Profit on ordinary activities multiplied by main company rate of corporation tax in the UK of 19.5% (2016: 20.0%)	477,607	260,502	738,109	478,028	131,607	609,635
Effect of:
UK dividends	(56,324)	-	(56,324)	(22,983)	-	(22,983)
Unrealised losses not allowable/(gains not taxable)	-	154,831	154,831	-	(109,978)	(109,978)
Realised gains not taxable	-	(757,347)	(757,347)	-	(501,229)	(501,229)
Losses (utilised)/carried forward	-	(79,269)	(79,269)	24,555	-	24,555
Actual current tax charge	421,283	(421,283)	-	479,600	(479,600)	-

Tax relief relating to Investment Adviser fees is allocated between revenue and capital where such relief can be utilised. The rate of corporation tax applied to the company has reduced due to a reduction in HMRC's main company rate of corporation tax to 19% on 1 April 2017, from the previous rate of 20%.

No asset or liability has been recognised for deferred tax in relation to capital gains or losses on revaluing investments as the Company is exempt from corporation tax in relation to capital gains or losses as a result of qualifying as a Venture Capital Trust.

There is no potential liability to deferred tax (2016: £nil). There is an unrecognised deferred tax asset of £965,000 (2016: £1,034,000).

6 Basic and diluted earnings and return per share

	2017	2016
	£	£
Total earnings after taxation:	3,785,174	3,048,174
Basic and diluted earnings per share (note a)	5.21p	4.28p
Revenue profit from ordinary activities after taxation	2,027,985	1,910,541
Basic and diluted revenue earnings per share (note b)	2.79p	2.68p

Net unrealised capital (losses)/gains on investments	(794,007)	549,889
Net realised capital gains on investments	3,883,829	2,506,146
Capitalised Investment Adviser fees and performance fees less taxation	(1,332,633)	(1,918,402)
Total capital return	1,757,189	1,137,633
Basic and diluted capital earnings per share (note c)	2.42p	1.60p
Weighted average number of shares in issue in the year	72,621,839	71,198,046

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 return after taxation divided by the weighted average number of shares in issue.

c) Capital earnings per share is the total capital return after taxation divided by the weighted average number of shares in issue.

7 Dividends paid and payable

Dividends payable are recognised as distributions in the financial statements when the Company's liability to pay them has been established. This liability is established for interim dividends when they are paid, and for final dividends when they are approved by the shareholders, usually at the Company's Annual General Meeting.

The Company's status as a VCT means it has to comply with Section 259 of the Income Tax Act 2007, which requires that no more than 15% of the income from shares and securities in a year can be retained from the revenue available for distribution for the year. Accordingly, the Board is required to determine the amount of minimum income dividend.

Amounts recognised as distributions to equity shareholders in the year:
		For the year ended 30 September	Pence per share	Date Paid	2017 £	2016 £
Final	Income	2015	1.00p	15 February 2016	-	706,921
Final	Capital	2015	5.00p	15 February 2016	-	3,534,606
Interim	Income	2016	1.00p	07 July 2016	-	1,067,478
Interim	Capital	2016	5.00p	07 July 2016	-	3,202,433
Final	Income	2016	1.00p	15 February 2017	718,814	-
Final	Capital	2016	3.00p	15 February 2017	2,156,442	-
Interim	Income	2017	1.50p	20 June 2017	1,087,032	-
Interim	Capital	2017	1.50p	20 June 2017	1,087,032	-
Special	Capital	2017	15.00p	31 August 2017	10,931,992	-
Previous dividends not claimed within the statutory period						(5,232)
					15,981,312¹	8,506,206

¹- £15,981,312 (30 September 2016: £8,506,206) disclosed above differs to that shown in the Statement of Cash Flows of £13,062,948; (30 September 2016: £7,160,312) due to £2,918,364 (30 September 2016: £1,345,894) of new shares issued as part of the Company's Dividend Investment Scheme.

	2017	2017	2017	2016	2016	2016
	Revenue	Capital	Total	Revenue	Capital	Total
	£	£	£	£	£	£
Proposed distribution to equity holders at the year-end
Final dividend for the year ended 30 September 2017 of 0.50p (income) (2016: 1.00p), 2.50p (capital) (2016: 3.00p) per ordinary share	473,245	2,366,229	2,839,474	719,140	2,157,421	2,876,561

Any proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.

Set out below are the total income dividends payable in respect of the financial year, which is the basis on which the requirements of section 274 of the Income Tax Act 2007 are considered.

	2017	2016
	£	£
Revenue available by way of dividends for the year	2,027,985	1,910,541
Interim income dividend for the year - 1.50p (2016: 1.00p)	1,087,032	1,067,478
Proposed final income dividend for the year - 0.50p (2016: 1.00 p)	473,425	719,140
Total income dividends for the year	1,560,457	1,786,618

8 Investments at fair value

The most critical estimates, assumptions and judgements relate to the determination of the carrying value of investments at "fair value through profit and loss" (FVTPL). All investments held by the Company are classified as FVTPL and measured in accordance with the International Private Equity and Venture Capital Valuation ("IPEV") guidelines, as updated in December 2015. This classification is followed as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income.

For investments actively traded on organised financial markets, fair value is generally determined by reference to Stock Exchange market quoted bid prices at the close of business on the balance sheet date. Purchases and sales of quoted investments are recognised on the trade date where a contract of sale exists whose terms require delivery within a time frame determined by the relevant market. Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional.

Unquoted investments are stated at fair value by the Directors in accordance with the following rules, which are consistent with the IPEV guidelines:

All investments are held at the price of a recent investment for an appropriate period where there is considered to have been no change in fair value. Where such a basis is no longer considered appropriate, each investment is considered as a whole on a 'unit of account' basis, alongside consideration of:

(i) Where a value is indicated by a material arms-length transaction by an independent third party in the shares of a company, this value will be used.

(ii) In the absence of i) and depending upon both the subsequent trading performance and investment structure of an investee company, the valuation basis will usually move to either:-

a) a multiple basis. The shares may be valued by applying a suitable price-earnings ratio or revenue multiple to that company's historic, current or forecast post-tax earnings before interest and amortisation, or revenue, (the ratio used being based on a comparable sector but the resulting value being adjusted to reflect points of difference identified by the Investment Adviser compared to the sector including, inter alia, a lack of marketability).

or:-

b) where a company's underperformance against plan indicates a diminution in the value of the investment, provision against cost is made, as appropriate.

(iii) Premiums, to the extent that they are considered capital in nature, and that they will be received upon repayment of loan stock investments are accrued at fair value when the Company receives the right to the premium and when considered recoverable.

(iv) Where an earnings or revenue multiple or cost less impairment basis is not appropriate and overriding factors apply, a discounted cash flow, net asset valuation or realisation proceeds basis may be applied.

Capital gains and losses on investments, whether realised or unrealised, are dealt with in the profit and loss and revaluation reserves and movements in the period are shown in the Income Statement.

All investments are initially recognised and subsequently measured at fair value. Changes in fair value are recognised in the Income Statement.

A key judgement made in applying the above accounting policy relates to investments that are permanently impaired. Where the value of an investment has fallen permanently below cost, the loss is treated as a permanent impairment and as a realised loss, even though the investment is still held. The Board assesses the portfolio for such investments and, after agreement with the Investment Adviser, will agree the values that represent the extent to which an investment loss has become realised. This is based upon an assessment of objective evidence of that investment's future prospects, to determine whether there is potential for the investment to recover in value.

The methods of fair value measurement are classified into hierarchy based on the reliability of the information used to determine the valuation.

- Level 1 - Fair value is measured based on quoted prices in an active market.

- Level 2 - Fair value is measured based on directly observable current market prices or indirectly being derived from market prices.

- Level 3 - Fair value is measured using valuation techniques using inputs that are not based on observable market data.

Movements in investments during the year are summarised as follows:

		Unquoted	Unquoted
	Traded	equity	preference	Unquoted
	on AIM	shares	shares	Loan Stock	Total
	£	£	£	£	£
Cost at 30 September 2016	1,333,907	18,112,271	27,341	34,392,604	53,866,123
Permanent impairment at 30 September 2016	(500,000)	(3,467,312)	(787)	(227,462)	(4,195,561)
Unrealised gains/(losses) at 30 September 2016	2,376,651	(2,507,427)	(3,908)	4,829,080	4,694,396
Valuation at 30 September 2016	3,210,558	12,137,532	22,646	38,994,222	54,364,958

Purchases at cost	-	4,745,463	-	558,771	5,304,234
Sale proceeds (note a)	-	(4,552,845)	(1,671)	(10,174,190)	(14,728,706)
Reclassification at value (note b)	-	437,022	87	(437,109)	-
Realised gains on investments	-	1,494,881	1,671	2,387,277	3,883,829
Unrealised (losses)/gains on investments (note c)	(13,381)	91,438	391,453	(1,263,517)	(794,007)
Valuation at 30 September 2017	3,197,177	14,353,491	414,186	30,065,454	48,030,308
Cost at 30 September 2017	1,333,907	21,758,149	25,757	27,540,446	50,658,259
Permanent impairment at 30 September 2017 (note c)	(500,000)	(6,011,453)	-	(87,187)	(6,598,640)
Unrealised gains/(losses) at 30 September 2017 (note e)	2,363,270	(1,393,205)	388,429	2,612,195	3,970,689
Valuation at 30 September 2017	3,197,177	14,353,491	414,186	30,065,454	48,030,308

A full breakdown of the increases and decreases in unrealised valuations of the portfolio is seen in the Investment Portfolio Summary in the Annual Report.

Major movements in investments

Note a) Disposals of investment portfolio companies during the year were:

Company	Type	Investment Cost	Disposal Proceeds	Valuation at 30 September 2016	Realised gain in year
		£	£	£	£
Entanet Holdings Limited¹	Realisation	3,175,171	7,166,414	3,351,685	3,814,729
Manufacturing Services Investment Limited	Share buyback	668,400	668,400	668,400	-
Chatfield Services Limited	Share buyback and loan repayment	778,774	778,774	778,774	-
Backhouse Management Limited	Loan repayment	721,920	1,203,200	721,920	-	¹
Barham Consulting Limited	Loan repayment	721,920	1,203,200	721,920	-	¹
Creasy Marketing Services Limited	Loan repayment	721,920	1,203,200	721,920	-	¹
McGrigor Management Limited	Loan repayment	721,920	1,203,200	721,920	-	¹
Hollydale Management Limited	Loan repayment	559,440	932,400	559,440	-	¹
Others		442,633	369,918	300,818	69,100
		8,512,098	14,728,706	8,546,797	3,883,829

¹ - Deferred contingent consideration of £0.74 million is potentially payable over the next two years. There are conditions attached to this deferred consideration such that the amount receivable is uncertain and so has not been recognised in the current year's financial statements.

² - The gain on the loan repayments above of £2,298,080 has been set off against an equivalent permanent impairment in the equity instrument of the investments in these companies (see note c). Thus, no gain or loss resulted.

Note b) During the year, two investee companies were reorganised whereby loan stocks held at a value of £437,109 were reclassified as ordinary shares, and ordinary shares of value £87 were reclassified as preference shares.

Note c) Within net unrealised losses of £794,007 for the year, the significant falls in value compared to last year were as follows: £966,297 in Jablite Holdings Limited, £466,776 in CGI Creative Graphics International Limited, £414,087 in Fullfield Limited (trading as Motorclean), £545,478 in Veritek Global Limited and £536,753 in Media Business Insight Holdings Limited. These losses were partially offset by unrealised gains in valuation compared to last year, including: £954,816 in Gro Group Holdings Limited, £500,337 in Master Removers Group Limited (formerly Leap New Co), £347,280 in Tovey Management Limited (trading as Access IS), £314,572 in EOTH Limited and £298,666 in Vectair Holdings.

The decrease in unrealised valuations of the loan stock investments above reflect the changes in the entitlements to loan premiums, and/or in the underlying enterprise value of the investee company. The decrease does not arise from assessments of credit risk or market risk upon these investments.

Note d) During the year, permanent impairments of the cost of investments have increased from £4,195,561 to £6,598,640. The increase of £2,403,079 is due to the impairments of equity of five investee companies referred to in note 2 to note a) above, and the impairment of £104,999 of another company's remaining investment cost.

Note e) The figure of unrealised gains as at 30 September 2017 of £3,970,689 is lower than shown on the Statement of Changes in Equity of £4,020,689 by £50,000. This is caused by £50,000 of contingent consideration at the Balance Sheet date, shown as other debtors in Note 11 to the Financial Statements in the Annual Report.

Provisions and write-offs against unlisted investments

The amounts provided below cost at the end of the year or written-off against unlisted investments were as follows:

	Total Provisions at end of year	Net write-offs in year¹
Financial Year	£	£
2017	13,528,607	2,403,079
2016	11,500,860	(1,115,371)
2015	9,793,793	65,779
2014	7,709,509	(1,876,253)
2013	10,475,290	2,001,476
2012	11,991,733	313,850
2011	11,206,678	1,881,554
2010	11,575,422	2,524,527

¹ - £2,403,079 of the cost of six investments were permanently impaired in the year.

9 Current asset investments and Cash at bank

Cash equivalents, for the purposes of the Statement of Cash Flows, comprise bank deposits repayable on up to three months' notice and funds held in OEIC money-market funds. Current asset investments are the same but also include bank deposits that mature after three months. Current asset investments are disposable without curtailing or disrupting the business and are readily convertible into known amounts of cash at their carrying values at immediate or up to one year's notice. Cash, for the purposes of the Statement of Cash Flows is cash held with banks in accounts subject to immediate access. Cash at bank in the Balance Sheet is the same.
Current asset investments and Cash at bank
	2017	2016
	£	£
OEIC Money market funds	9,260,902	10,158,055
Cash equivalents per Statement of Cash Flows	9,260,902	10,158,055
Bank deposits that mature after three months	3,151,769	5,180,012
Current asset investments	12,412,671	15,338,067
Cash at bank	1,375,065	2,189,856

10 Called up share capital

	2017	2016
	£	£

Allotted, called-up and fully paid:
Ordinary Shares of 1p each: 79,204,702 (2016: 71,914,023)	792,047	719,140
Total	792,047	719,140

Under the Offer for Subscription launched on 6 September 2017, a total of 3,627,706 ordinary shares were allotted at an average effective offer price of 82.49 pence per share, raising net funds of £2,946,210, after £45,529 offer costs have been deducted.

Under the terms of the Dividend Investment Scheme, a total of 3,865,859 (2016: 1,490,729) ordinary shares were allotted during the year for a total consideration of £2,918,364 (2016: £1,345,892).

During the year, the Company purchased 202,886 (2016: 269,713) of its own ordinary shares for cash (representing 0.3% (2016: 0.4%) of the ordinary shares in issue at the start of the year) at the prevailing market price for a total cost of £160,323 (2016: £249,518). The shares bought back were subsequently cancelled.

11 Basic and diluted net asset value per share

	2017	2016
	£	£

Net assets	64,348,757	70,840,638
Number of shares in issue	79,204,702	71,914,023
Basic and diluted net asset value per share	81.24p	98.51p

12 Post balance sheet events

On 20 October 2017, 7,167,226 ordinary shares were allotted under the Company's Offer for Subscription, raising net funds of £5.82 million for the Company.

On 23 October 2017, the Company announced its intention to utilise its overallotment facility and is now seeking to raise up to £25.00 million.

On 1 November 2017 and 2 November 2017, TPSFF Holdings Limited made loan repayments of £0.04 million and £0.05 million.

On 9 November 2017, 5,214,308 ordinary shares were allotted under the Company's Offer for Subscription, raising net funds of £4.23 million.

On 20 November 2017, 1,978,451 ordinary shares were allotted under the Company's Offer for Subscription, raising net funds of £1.61 million.

On 21 November 2017, 1,084,462 ordinary shares were allotted under the Company's Offer for Subscription, raising net funds of £0.88 million.

On 21 November 2017, a further £0.09 million was invested in BookingTek Limited.

On 5 December 2017, a further £0.15 million was invested in Mpb Group Limited.

On 5 December 2017, an amount of £0.12 million was received from Alaric Systems Limited, an investment realised in a previous year.

Statutory information

The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 30 September 2017 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.

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: vcts@mobeusequity.co.uk.

Annual General Meeting

The Annual General Meeting of the Company will be held at 11.00 am on Wednesday, 7 February 2018 at The Clubhouse, 8 St James's Square, London, SW1Y 4JU.

Contact details for further enquiries:

Robert King or Robert Brittain of Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by e-mail to vcts@mobeusequity.co.uk.

Mark Wignall or Mike Walker at Mobeus Equity Partners LLP (the Investment Adviser) 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.

This information is provided by RNS

The company news service from the London Stock Exchange

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