Annual Financial Report

RNS Number : 9342C

Mobeus Income & Growth 4 VCT PLC

21 March 2014

Mobeus Income & Growth 4 VCT plc ("MIG4" or the "Company" or the "VCT")

Annual Results Announcement for the year ended 31 December 2013

INVESTMENT OBJECTIVE

Mobeus Income & Growth 4 VCT plc, ("MIG4", the "Company" or the "Fund") is a Venture Capital Trust ("VCT") managed by Mobeus Equity Partners LLP, investing primarily in established, profitable, unquoted companies.

The objective of the Company is to provide investors with a regular income stream by way of tax free dividends and to generate capital growth through portfolio realisations which can be distributed by way of additional tax free dividends.

DIVIDEND POLICY

The Company seeks to pay dividends of at least 4 pence per share annually out of income and capital as appropriate, and subject to fulfilling certain regulatory requirements.

FINANCIAL HIGHLIGHTS

Annual results for the year ended 31 December 2013

§ -	Net Asset Value ("NAV") Total Return per share of 8.6% for the year.
§ -	Share Price Total Return per share of 9.6% for the year.
§ -	An interim dividend in respect of 2013 of 2p has been paid. A final dividend of 4 pence per share is proposed, to be paid on 16 May 2014. This will bring cumulative dividends paid in respect of 2013, to 6 pence per share, a 9% increase over 2012.
§ -	Strong liquidity has been further enhanced by two successful fundraisings. The first in 2013 raised £8.1 million, while the current fundraising has so far raised £5.0 million. This brings the current total of portfolio and liquid assets to £47.0 million.
§ -	Investment of £6.9 million during the year, plus a further £4.3 million invested after the year-end.

Note: The above data does not reflect the benefit of income tax relief.

The NAV per share as at 31 December 2013 was 119.92 pence

The table below shows the recent past performance of the original funds raised in 1999. The original subscription price was 200p per share before the benefit of income tax relief. Historic performance data from 2008 for this fundraising is shown in the Annual Report and Accounts (the "Annual Report" or "Report").

Performance data for all fundraising rounds are shown in tables within the Annual Report and Accounts.

As at	Net assets (£ m)	Net asset value (NAV) per share (p)	Share price (mid-market price)³ (p)	Cumulative dividends paid per share (p)	Cumulative total return per Share to Shareholders since launch² (NAV basis) (p)	Cumulative total return per Share to Shareholders since launch³ (Share price basis) (p)
31 December 2013	42.1	119.9	104.8	34.2	154.1	139.0
31 December 2012	33.5	117.3	102.5	26.7	144.0	129.2
31 January 2012	29.4	116.7	102.0	21.7	138.4	123.7
31 January 2011	25.3	112.9	103.5	18.7	131.6	122.2

¹ Source: London Stock Exchange

² NAV as at 31 December 2013 plus cumulative dividends paid since fund launch

³Mid-market share price as at 31 December 2013 plus cumulative dividends paid since fund launch.

The data in the table above excludes the benefit of any income tax relief.

CHAIRMAN'S STATEMENT

I am pleased to present the annual results of Mobeus Income & Growth 4 VCT plc for the year ended 31 December 2013.

Overview

This has been another satisfactory year for the VCT. Many of the companies in the portfolio have continued to achieve strong growth in their niche markets in spite of continuing uncertainty in the UK and global economies. Our portfolio supports the view that well-managed and prudently financed businesses can

succeed under testing market conditions. Several businesses are now well placed to take advantage of the more promising near term outlook for the UK economy.

Performance

The NAV total return per share for the year was 8.6% and the share price total return was 9.6%. Portfolio activity increased, as new investments totalled £6.9 million and investment realisations totalled £2.5 million.

Strategic Report

Shareholders may be aware that a number of significant changes have been introduced by recent legislation which affects 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 for the first time which complies with the new 2006 Companies Act requirements.

This Report sets out the Company's Objective, Business Model and Investment Policy. It provides information on how, and to what extent, by applying the Company's Investment and other key policies, the Company has met the Objective during the year. A section on performance includes key performance indicators used to measure this assessment. The Report also includes an Investment Review, containing key data on the top ten investments, and an analysis of the full investment portfolio. The Report goes on to provide context to this performance, giving information on what the Board regards as the key risks faced by the Company, how those risks are dealt with, and the Company's other key policies. In summary, this report is intended to give you an overview of your Company's progress in the year, supported by further detail that you can review as you wish, in other sections of the Annual Report.

Whilst every effort has been made to avoid duplication the introduction of the Strategic Report means that there will inevitably be an element of repetition within the Report.

Dividends

Your Directors are pleased to recommend a final dividend in respect of 2013 of 4 pence per share comprising 2.75 pence per share from capital and 1.25 pence per share from income. Subject to shareholder approval, this dividend will be paid on 16 May 2014 to shareholders on the Register on 22 April 2014. This will bring dividends paid in respect of the year ended 31 December 2013 to 6.0 pence (2012: 5.5 pence) per share and cumulative dividends paid since inception to 38.2 pence (2012: 32.2 pence) per share.

The Company's target set in the second half of 2010 of paying a dividend of at least 4 pence per share in respect of each financial year has been met or exceeded in each of the last four years. A table showing the dividends paid in respect of each of the last five years and cumulative dividends paid is included in the Strategic Report.

Changes to VCT legislation

There are two main developments that I wish to bring to your attention. The recent draft Finance Bill 2014 has proposed measures which, if enacted, will restrict the tax relief received if a shareholder sells their existing shares in a VCT within six months before or after the date of making a new investment in the same VCT.

These changes will apply to investments in VCTs made with effect from the 2014/15 tax year when investors will only be able to claim income tax relief to the extent that the value of the new shares they subscribe for in respect of that VCT exceeds the proceeds from the shares which were sold. However, subscriptions in this Linked Offer for the 2013/14 tax year are NOT affected by this new regulation.

Secondly, the Budget Statement proposed measures to prevent dividends being paid out of capital, as opposed to realised profits and income. The detail is awaited. At the date of this Report, it is not anticipated that any such measure will significantly affect the Company's dividend policy. We will update Shareholders, if necessary, when full details are known.

Share buybacks

During the year ended 31 December 2013, the Company bought back 2.0% (2012: 4.4%) (excluding enhanced buybacks) of its share capital in issue at the beginning of the year. Further details of the purchases are included in the Strategic Report.

Fundraising/Liquidity

The Company raised £8.3 million (£8.1 million after costs) in the Mobeus Linked VCT Offer launched on 29 November 2012, which closed on 30 June 2013.

The Company launched a further linked fundraising with the other three Mobeus VCTs on 28 November 2013 to raise up to £24 million across the four VCTs. The funds raised for the VCT will further improve the Company's liquidity, ensuring it can take part in the increased prospective deal flow and spread its fixed running costs over a larger asset base. They will provide a fund of new money which may be used to pay ongoing expenses, including dividends and share buybacks, thus preserving money raised prior to 6 April 2012 to support the Company's strategy of investing in MBO deals. Details of the Offer were posted to Shareholders in December 2013. This Offer has been well received and a total of £20.0 million of applications in total has been subscribed to date.

The Offer will remain open until 30 April 2014 (4 April 2014 in respect of the current tax year) although the Directors of the four VCTs reserve the right to extend the closing date at their discretion. It will close earlier if fully subscribed.

The Board is currently of the view that regular fundraisings are beneficial, providing adequate levels of capital to enable the Company to pursue its objective. Investment opportunities are increasing. The ability to provide mezzanine as well as equity finance is an advantage. Fundraising in the future might become more complex and expensive. Regular fundraising has moved the Company from being subscale to a size sufficient to achieve operating economies.

However, your Board is well aware that recent performance has been affected by the high cash levels as the fund size has increased. This has not been helped by the very low returns currently available for the investment of cash. The Board, together with Mobeus, is actively searching for alternative cash deployment opportunities but these will only be implemented if the risk exposure is considered acceptable.

Future prospects

The UK economy is in unchartered territory. Quantitative easing cannot continue for ever; at some point a normal interest rate situation must return. Government debt is still too high. However, after several years of marked recession, confidence is returning and a recovery is taking place. This is reflected in rising UK stock indices, the return of mergers and acquisitions activity, and a re-opening of the IPO market. All of this should be helpful to the Company's activities.

The Manager is of the view that there are many promising new opportunities to invest in established, profitable businesses on attractive terms. In addition there continue to be several opportunities to provide further finance to certain businesses in the portfolio in order to make acquisitions.

The Board continues to believe that its relatively low-risk investment strategy of investing only in profitable companies with strong cash flows mitigates some of the risks inherent when investing in smaller businesses and should continue to deliver attractive returns to Shareholders over the medium to long term.

Finally, I would like to express my thanks to all Shareholders for their continuing support of the Company.

Christopher Moore

Chairman

21 March 2014

STRATEGIC REPORT

Introduction

The Directors present the Strategic Report of the Company for the year ended 31 December 2013. The Report has been prepared by the Directors in accordance with section 414 of the Companies Act 2006 (the "Act"). The purpose of the report is to provide Shareholders with sufficient information at a summary level to enable them to assess the extent to which the Company has met its Objective for the year and that the Directors have performed their duty to promote the success of the Company. Measurement of this is achieved by disclosing a number of key performance indicators. As an investment company, this is followed by an overview of the progress of the investment portfolio. Finally, the major risks it faced in its business and how the Board countered those risks, are both highlighted to shareholders.

Objective

The Objective of the Company is to provide investors with a regular income stream by way of tax free dividends and to generate capital growth through portfolio realisations which can be distributed by way of additional tax free dividends.

Summary of investment policy

The VCT's policy is to invest primarily in a diverse portfolio of UK unquoted companies in order to generate regular income from existing investments and capital gains from realisations. Investments are usually structured as part loan and part equity to reduce the risk of investing in smaller companies.

Risk is further spread by investing in a number of different businesses across different industry sectors. Investments are made selectively, primarily in management buyout transactions (MBOs) in companies that are established and profitable. The VCT aims to invest in larger, more mature, unquoted companies through investing alongside three other VCTs advised by Mobeus with similar investment policies. This enables the VCT to participate in combined investments by the Manager of up to £5 million in each business per year.

The Company aims to maintain around 80% of net funds raised in qualifying investments. Uninvested funds are held in a portfolio of readily realisable interest-bearing investments and deposits.

The full text of the Company's investment policy is available in the Annual Report.

Business Model

The Company is a Venture Capital Trust (VCT ). Its Objective and its full investment policy above, are designed to ensure that the VCT continues to qualify and is approved as a VCT by HM Revenue & Customs (HMRC) whilst maximising returns to shareholders from both income and capital returns. One of the rules to remain a VCT is that it must remain a fully listed company on the London Stock Exchange, and thus must also comply

with the listing rules governing such companies.

The Company is an externally managed fund with a Board comprising non- executive Directors. 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 review and approval by the Directors. Investment management and operational support are outsourced to external service providers (including registrars and brokers), with the key strategic and operational framework and key policies set and monitored by the Board.

Private individuals invest in the Company to benefit from both income and capital returns on good investment performance. By investing in a VCT they also receive immediate income tax relief (currently 30% of the amount subscribed by an investor), as well as tax-free dividends received from the Company, and no capital gains tax upon the eventual sale of the shares.

The Company's Investee Companies are primarily unquoted businesses and operate in the UK. These businesses fulfil the criteria and characteristics as set out in the Investment policy.

Performance

Key Performance Indicators used to measure performance*

The Board believes that the following indicators (Return per share; Benchmarking; Dividends; Buybacks; Compliance with VCT regulation and Costs), used in its own assessment of the Company, provide Shareholders with sufficient information to assess how the Company has performed in 2013 against its Objective and the application of its investment, dividend and Share buyback policies.

*Throughout the Strategic Report each financial year is for 12 months, except for the 11 months ended 31 December 2012, reflecting the change in the Company's year end in 2012.

Return per share

Total returns per share

Net Asset Value (NAV) total return per share was 8.6% and share price total return was 9.6%, both for the year ended 31 December 2013, as shown below:

NAV basis (p)		Share price basis (p)
Closing NAV per share	119.9	Closing share price	104.8
Plus: dividends paid in year	7.5	Plus: dividends paid in year	7.5
Total for year	127.4	Total for year	112.3
Less: opening NAV per share	(117.3)	Less: opening share price	(102.5)
Return for year	10.1	Return for year	9.8
Return for year	8.6%	Return for year	9.6%

Cumulative returns per share

NAV basis (p)		Share price basis (p)
Closing NAV per share	119.9	Closing share price	104.8
Plus: cumulative dividends paid to date	34.2	Plus: cumulative dividends paid to date	34.2
Cumulative total return	154.1	Cumulative total return	139.0
Less: opening cumulative total return	(144.0)	Less: opening cumulative total return	(129.2)
Increase in cumulative return for year	10.1	Increase in cumulative return for year	9.8

Taking into account initial income tax relief, founder shareholders who invested in 1999 have seen an overall loss on net investment cost of 3.7% (2012: 10.0%) since the launch of the Company, on a NAV return basis and on a net investment cost of 160 pence per share after initial income tax relief of 40 pence per share. For original shareholders, that performance is clearly disappointing. It was caused by very poor performance from two former managers who the Board replaced in 2006. It was at this point that the current investment strategy was applied to the whole portfolio. Performance since then has stabilised and improved. Shareholders who invested in the 2006/07 offer have seen an overall return on a NAV basis, on net investment cost of 83.0 pence per share, of 72.8% (2012: 60.6%) taking into account initial income tax relief. This improved performance has benefitted founder shareholders too. Cumulative NAV total return was 122.5 pence per share at

31 July 2006, which has increased by 25.8% since.

The figures quoted in the table shown above are for the shares subscribed in the original offer for subscription in 1999/00. Both NAV and share price returns for the year are considered to be satisfactory by the Board, while the cumulative returns are now on an improving trend.

For performance data for each allotment in each fundraising since the inception of the Company please see the Performance Data Appendix of the Annual Report.

Review of financial results for the year

For the year	2013 £(m)	2012 £(m)
Capital return	2.5	1.1
Revenue return	1.0	0.4
Total profit	3.5	1.5

The positive capital return of £2.5 million for the year is due to a healthy uplift in portfolio valuations of a net £2.8 million on investments held at the year-end, and gains realised in the year from disposals of £0.3 million. Management fees charged to capital returns were a net £0.6 million.

The increase in revenue return of £0.6 million is mainly due to a rise in income of £0.7 million from £1 million to £1.7 million, explained in the table below:

	2013 £'000	2012 £'000	% Change	Reason
Loan interest from investee companies	1,344	783	+71.6	Due to new loan stock investments, and an exceptional receipt from Newquay Helicopters, settling historic arrears.
Dividend income from investee companies	220	93	+136.6	Higher and maiden dividends received, including preference dividend arrears from Newquay Helicopters.
Returns on cash	174	90	+93.3	Higher amounts placed on bank deposit.
Other income	-	7	-
Totals	1,738	973	+78.6

Benchmarking

VCT Peer Group

The Board places emphasis on the Company's performance against a peer group of VCTs. Using the benchmark of NAV total return on an investment of £100, the VCT is ranked 29 out of 54 over three years, and 23 out of 42 over five years amongst generalist VCTs by the Association of Investment Companies (AIC) (based on statistics prepared by Morningstar) at 28 February 2014. The Board considers this performance to be satisfactory after taking account of the adverse short term consequences of increasing funds and liquidity.

Industry award for the Manager

Your Board is pleased to report to shareholders that the performance of the Manager was recognised in the unquote" British Private Equity Awards 2013. Mobeus was named VCT House of the Year 2013 for the second consecutive year. 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.

Dividend policy

The Company has an annual target dividend of paying not less than 4 pence per share in respect of each financial year. It has met or exceeded this target in respect of its last four 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.

Share buybacks and discount policy

Subject to the Company having sufficient available funds and distributable reserves, it is the Board's current intention to pursue a buyback policy based on the objective of maintaining the discount to NAV at which the shares trade at approximately 10% or less. It has succeeded in carrying out this objective in the year.

The Board considers that a 10% discount represents a fair balance between assisting investors who wish to sell shares and the majority of investors who wish to continue to invest in a portfolio of investments in unquoted shares.

The Board intends to continue with the above buyback policy. Any future repurchases will be subject to the Company having appropriate authorities from shareholders and sufficient funds available for this purpose. Share buybacks will also be subject to the Listing Rules and any applicable law at the relevant time. Shares bought back in the market are generally cancelled.

During the year ended 31 December 2013, shareholders holding 567,165 shares expressed their desire to sell their investments. The Company instructed its brokers, Panmure Gordon, to purchase these shares at prices representing discounts of approximately 10% to the previously announced NAV per share.

The Company subsequently purchased these shares at prices ranging between 101.5 and 104.2 pence per share and cancelled them.

In total, the Company bought back 2.0% of the issued share capital of the Company, which excluded enhanced buyback shares, at the beginning of the year.

Continuing shareholders benefit from the difference between the net asset value and the price at which the shares are bought back and cancelled.

Management fees and other expenses

In line with the rise in net assets, Investment Manager fees charged to both revenue and capital have increased from £703,000 to £916,000, whilst other expenses have risen from £363,000 to £374,000. The rise in other expenses is mainly due to a rise in Directors' fees and registrar's fees.

Costs

The Board monitors costs using the Ongoing Charges Ratio* which is as follows:

The Ongoing 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 31 December 2013 (11 months ended 31 December 2012: £nil).

	2013	2012
Ongoing charges	2.87%	2.87%
Performance fee	0.00%	0.00%
Ongoing charges plus accrued performance fee	2.87%	2.87%

Shareholders should note that the 2012 figure reflected only 11 months of expenditure. If that expenditure had been annualised, last year's figure would have been over 3%.

* 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.

Further details of these are contained in the Financial Statements.

Compliance with VCT regulation

In order to comply with VCT tax legislation, the Company must meet a number of tests set by HMRC as detailed in the Annual Report under VCT regulation within the investment policy. At 31 December 2013, the Company continued to meet these tests.

Investment Review

The strong deal flow reported at the half-yearly stage has continued in the second half of the year and the Manager is increasingly confident that the higher rate of new investments completing in 2014 will be sustained. The Manager believes that the positive deal flow reflects both improved business confidence and the continued perception that the UK banking industry remains unable to fund the needs of smaller businesses.

The valuation of the portfolio has increased by 14.0 % during the year on a like for like basis. This is due to the strong trading performance of a number of companies in the portfolio.

Investments remain diversified across a number of sectors primarily in support services, general retailers, media and engineering services.

New investment

A total of £ 6.9 million was invested into new deals during the year under review, utilising cash of £4.7 million from five acquisition vehicles. This included significant new investments to support the MBOs of Gro-Group, Veritek and Virgin Wines.

The Manager has also focussed on opportunities for expansion by acquisition within the existing portfolio. As a result of this the VCT has funded two substantial strategic acquisitions by Motorclean and ATG Media, included in the figure above. The additional investment in Motorclean was provided to support its ambitions as a consolidator in its market, increasing its depth and range of geographical coverage. For ATG Media, the acquisition finance enabled it to acquire an established position in a major market and broaden its sector coverage.

Post year-end

In January 2014, the VCT invested £1.1 million in Bourn Bioscience Limited. In February 2014, the VCT also made a new investment to support the MBO of Entanet International Limited of £1.4 million including £1 million from Ackling Management Limited, an acquisition vehicle. It also invested a further £1.8 million into two new acquisition vehicle investments. The VCT also received £67k as a partial loan stock repayment from Westway.

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 as the UK consolidates its emergence from recession. Our Manager is 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 prudent 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 should create value for Shareholders in the medium term.

Key policies

The Board has put in place the following policies to be applied to meet the Company's overall objective and to cover specific areas of the Company's business.

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.

Investments are made selectively across a number of sectors, primarily in management buyout 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 1 August 2006, when it was a multi-manager VCT. This includes investments in early stage and technology companies.

Uninvested funds are held in cash and lower risk money market funds.

VCT regulation

The investment policy is designed to ensure that the VCT 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 or group of companies and must have at least 70% by value of its investments throughout the year in shares or securities comprised in VCT qualifying holdings, of which a minimum overall of 30% by value (70% for funds raised from 6 April 2011) must be in ordinary shares which carry no preferential rights. In addition, although the Company can invest less than 30% (70% for funds raised from 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).

UK Companies

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 readily realisable 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 around 80% 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 maximise the amount which may be invested in loan stock.

Co-investment

The Company aims to invest in larger, more mature unquoted companies through investing alongside three other VCTs advised by Mobeus with a similar investment policy. This enables the Company to participate in combined investments advised on by Mobeus of up to £5 million.

Borrowing

The Company's articles permit borrowings of amounts up to 10% of the adjusted capital and reserves (as defined therein). The Company has never borrowed and the Board has no current plans to undertake any borrowing.

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.

Diversity

The Directors have considered diversity in relation to the composition of the Board and have concluded that its membership is diverse in relation to gender and breadth of experience. The Board comprises two men and one woman. The Company does not have any senior managers or employees. The Board has made a commitment to consider diversity in making future appointments.

Further policies

In addition to the investment policy above and the policies on payment of dividends and share buybacks which were discussed earlier in this section, the Company has adopted a number of further policies relating to:

● Human rights

● Anti-bribery policy

● Environmental and social responsibility

● Global greenhouse gas emissions

These are set out in the Directors' Report in the Annual Report.

Principal risks, management and regulatory environment

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 significant risks faced by the Company. This includes a key risk management review which takes place at each quarterly Board meeting. Further details of these are contained in the section of the corporate governance section of the Director's Report in the Annual Report. The principal risks identified by the Board are set out below:

Risk	Possible consequences	How the Board manages risk
Economic risk	Events such as an economic recession and movement in interest rates could affect trading conditions for smaller companies and consequently the value of the Company's qualifying investments.	The Board monitors the portfolio as a whole to (1) ensure that the Company invests in a diversified portfolio of companies and (2) ensure that developments in the macro-economic environment such as movements in interest rates are monitored.
Risk of loss of approval as a Venture Capital Trust	The Company must comply with section 274 of the Income Tax Act 2007 ("ITA") which allows it to be exempted from capital gains tax on investment gains. Any breach of these rules may lead to the Company losing its approval as a Venture Capital Trust (VCT), qualifying shareholders who have not held their shares for the designated holding period having to repay the income tax relief they obtained and future dividends paid by the Company becoming subject to tax. The Company would also lose its exemption from corporation tax on capital gains.	The Company's VCT qualifying status is continually reviewed by the Investment Manager. The Board receives regular reports from PricewaterhouseCoopers LLP who has been retained to undertake an independent VCT status monitoring role.
Investment risk	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 investment strategy. Careful selection and review of the investment portfolio on a regular basis.
Regulatory risk	The Company is required to comply with the Companies Act, the listing rules of the UK Listing Authority and United Kingdom Accounting Standards. Changes to and breach of any of these might lead to suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report.	Regulatory and legislative developments are kept under review by the Board.
Financial and operating risk	Failure of the systems 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 and reviews the risks facing the Company at each quarterly Board meeting. It reviews the performance of the service providers annually.
Market risk	Movements in the valuations of the VCT's investments will, inter alia, be connected to movements in UK Stock Market indices.	The Board receives quarterly valuation reports from the Manager. The Manager alerts the Board about any adverse movements.
Asset liquidity risk	The Company's investments may be difficult to realise.	The Board receives 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 risk	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. This policy is reviewed at each quarterly Board meeting.
Counterparty risk	Counterparty risk	The Board regularly reviews and agrees policies for managing these risks. Further details can be found under 'credit risk' in Note 19 to the Accounts.

TEN LARGEST INVESTMENTS IN THE PORTFOLIO *

ATG Media Holdings Limited		Fullfield Limited (non-qualifying)		Culbone Trading Limited
www.antiquestradegazette.com		www.motorclean.net		www.virginwines.co.uk
Cost	£1,889,000	Cost	£1,793,000	Cost	£2,000,000

Valuation	£4,094,000	Valuation	£2,063,000	Valuation	£2,000,000

Basis of valuation		Basis of valuation		Basis of valuation
Earnings multiple		Earnings multiple		Cost

Equity % held		Equity % held		Equity % held
8.5%		9.8%		9.7%

Income receivable in year		Income receivable in year		Income receivable in year
£149,861		£161,359		£25,819

Business		Business		Business
Publisher and on-line auction platform operator		Provider of vehicle cleaning and valet services		Online wine retailer

Location		Location		Location
London		Laindon, Essex		Norwich

History		History		History
Management buyout		Management buyout		Management buyout

Audited financial information		Audited financial information		Audited financial information

Year ended	30 September 2012	Year ended	31 March 2013	Year ended	28 June 2013 ¹
Turnover	£10,900,000	Turnover	£25,156,000	Turnover	£34,475,000
Operating profit	£2,704,000	Operating profit	£1,234,000	Operating profit	£2,010,000
Net assets	£4,612,000	Net assets	£2,576,000	Net assets	£4,952,000

Year ended	30 September 2011	Year ended	31 March 2012	Year ended	28 June 2012 ¹
Turnover	£8,927,000	Turnover	£17,320,000	Turnover	£37,390,000
Operating profit	£1,831,000	Operating profit	£1,210,000	Operating profit	£2,404,000
Net assets	£3,179,000	Net assets	£2,408,000	Net assets	£7,210,000
				¹ The financial information quoted above relates to the operating subsidiary, Virgin Wine Online Limited and includes figures relating to the performance of this company prior to the MBO which completed in November 2013.
Movements during the year
An additional investment of £1 million was made into ATG Media in April 2013.		An additional investment of £683,000 was made into Motorclean in February 2013.		New investment made in November 2013

Ingleby (1879) Limited			Madacombe Trading Limited		Tessella Holdings Limited
www.emac.co.uk			www.veritekglobal.com		www.tessella.com
Cost		£1,001,000	Cost	£1,620,000	Cost	£1,178,000

Valuation		£1,701,000	Valuation	£1,620,000	Valuation	£1,578,000

Basis of valuation			Basis of valuation		Basis of valuation
Earnings multiple			Cost		Earnings multiple

Equity % held			Equity % held		Equity % held
6.3%			10.3%		5.4%

Income receivable in year			Income receivable in year		Income receivable in year
£108,004			£79,417		£122,561

Business			Business		Business
Provider of service plans to the motor trade			Manufacturer of imaging equipment		Provider of science powered technology and consulting services

Location			Location		Location
Crewe			Eastbourne, East Sussex		Abingdon, Oxfordshire

History			History		History
Management buyout			Management buyout		Management buyout

Audited financial information			Audited financial information		Audited financial information

Year ended	31 December 2012¹		Year ended	31 March 2013¹	Year ended	31 March 2013¹
Turnover	£6,047,000		Turnover	£24,684,000	Turnover	£20,870,000
Operating profit	£2,347,000		Operating profit	£223,000	Operating profit	£30,21,000
Net assets	£3,510,000		Net assets	£7,683,000	Net assets	£5,560,000

Year ended	31 December 2011 ¹		Year ended	31 March 2012¹	Year ended	31 March 2012¹
Turnover	£4,990,000		Turnover	£25,412,000	Turnover	£18,533,000
Operating profit	£867,000		Operating profit	£581,000	Operating profit	£278,000
Net assets	£1,535,000		Net assets	£7,043,000	Net assets	£2,404,000
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			¹The financial information quoted above is for Veritek Global Limited prior to the MBO which completed in July 2013		¹ The financial information quoted above relates to the operating subsidiary, Tessella Limited and includes figures relating the performance of this company prior to the MBO which completed in July 2012.
Movements during the year
EMaC made a loan stock repayments totalling £0.3 million in the year.			New investment made in July 2013.		Tessella made quarterly loan stock repayments totalling £0.1 million in the year

Gro-Group Holdings Limited		DiGiCo Global Limited		EOTH Limited (trading as Equip)
www.gro.co.uk		www.digico.biz		www.equipuk.com
Cost	£1,540,000	Cost	£830,000	Cost	£951,000

Valuation	£1,540,000	Valuation	£1,470,000	Valuation	£957,000

Basis of valuation		Basis of valuation		Basis of valuation
Cost		Earnings multiple		Earnings multiple

Equity % held		Equity % held		Equity % held
8.4%		2.4%		1.7%

Income receivable in year		Income receivable in year		Income receivable in year
£91,360		£118,593		£91,083

Business		Business		Business
Manufacturer and distributor of baby sleep products		Designer and manufacturer of audio mixing desks		Manufacturer and installer of signs

Location		Location		Location
Ashburton, Devon		Chessington, Surrey		Broadstairs, Kent

History		History		History
Management buyout		Secondary buyout		Management buyout

Audited financial information		Audited financial information		Audited financial information

Year ended	30 June 2013¹	Period ended	31 December 2012	Year ended	31 January 2013
Turnover	£11,444,000	Turnover	£23,858,000	Turnover	£27,266,000
Operating profit	£775,000	Operating profit	£7,594,000	Operating profit	£2,464,000
Net assets	£1,178 ,000	Net assets	£2,945,000	Net assets	£7,657,000

Year ended	30 June 2012¹	Year ended	31 December 2011¹	Year ended	31 January 2012
Turnover	£10,945,000	Turnover	£21,314,000	Turnover	£15,504,000
Operating profit	£663,000	Operating profit	£6,466,000	Operating profit	£1,830,000
Net assets	£1,080,000	Net assets	£7,932,000	Net assets	£6,173,000
¹ The financial information quoted above is for Gro-Group Holdings Limited prior to the MBO which completed in March 2013		¹Relates to Digico Europe Limited prior to secondary buyout in 2011
Movements during the year
New investment made in March 2013.		DiGiCo made loan stock repayments totalling £0.5 million in the year.

ASL Technology Holdings Limited
www.asl-group.co.uk
Cost	£1,257,000

Valuation	£892,000

Basis of valuation
Earnings multiple

Equity % held
6.8%

Income receivable in year
£nil

Business
Provider of printer and photocopier services

Location
Cambridge

History
Management buyout

Audited financial information

Year ended	30 September 2012
Turnover	£13,394,000
Operating profit	£665,000
Net assets	£204,000

Year ended	30 September 2011
Turnover	£9,613,000
Operating profit	£662,000
Net assets	£1,497,000

The remaining 23 investments in the portfolio had a current cost of £8.1 million and were valued at 31 December 2013 at £6.7 million.

Further details of the investments in the portfolio may be found on the Mobeus website: www.mobeusequity.co.uk.

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. 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 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;

· prepare a Strategic Report, Director's Report, Director's 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 UK 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 Accounts, 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. 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.

The names and functions of the Directors are stated in the Annual Report.

For and on behalf of the Board:

Christopher Moore

Chairman

21 March 2014

NON STATUTORY ACCOUNTS

PRIMARY FINANCIAL STATEMENTS

Income Statement

for the year ended 31 December 2013

		Year ended			11 months ended
		31 December 2013			31 December 2012
	Note
		Revenue	Capital	Total	Revenue	Capital	Total
		£	£	£	£	£	£
Unrealised gains on investments	7	-	2,785,539	2,785,539	-	1,300,844	1,300,844
Gains on investments realised	7	-	258,724	258,724	-	278,802	278,802
Income	2	1,737,504	-	1,737,504	973,259	-	973,259
Investment management fees	3	(228,977)	(686,932)	(915,909)	(175,825)	(527,475)	(703,300)
Other expenses		(373,788)	-	(373,788)	(362,512)	-	(362,512)
Profit on ordinary activities before taxation		1,134,739	2,357,331	3,492,070	434,922	1,052,171	1,487,093

Taxation on ordinary activities	4	(133,343)	133,343	-	(75,182)	75,182	-

Profit for the year/period		1,001,396	2,490,674	3,492,070	359,740	1,127,353	1,487,093

Basic and diluted earnings per ordinary share	6	2.96p	7.35p	10.31p	1.27p	3.99p	5.26p

All the items in the above statement derive from continuing operations of the Company. No operations were acquired or discontinued in the year/period. The total column is the Profit and Loss Account of the Company. There were no other recognised gains and losses in the year/period.

Other than revaluation movements arising on investments held at fair value through the profit and loss account, there were no differences between the return as stated above and at historical cost.

Balance Sheet

As at 31 December 2013

	Note
		31 December 2013 £	31 December 2012 £
Fixed assets
Investments at fair value	7	24,569,769	21,838,167

Current assets
Debtors and prepayments		305,234	214,166
Current investments		14,318,103	9,020,144
Cash at bank		3,125,287	2,645,938
		17,748,624	11,880,248

Creditors: amounts falling due within one year		(194,670)	(181,144)
Net current assets		17,553,954	11,699,104

Net assets		42,123,723	33,537,271


Capital and reserves
Called up share capital	8	351,272	285,895
Share premium reserve	8	13,374,724	12,004,600
Capital redemption reserve	8	969,753	905,059
Revaluation reserve	8	4,518,594	1,529,402
Special distributable reserve	8	17,418,387	12,501,764
Profit and loss account	8	5,490,993	6,310,551
Equity shareholders' funds	8	42,123,723	33,537,271

Basic and diluted net asset value per Ordinary Share	9	119.92p	117.31p

Reconciliation of Movements in Shareholders' Funds

for the year ended 31 December 2013

	Note	Year ended 31 December 2013	11 months ended 31 December 2012
		£	£
Opening shareholders' funds		33,537,271	29,418,665
Share capital subscribed for in the year/period - net of expenses	8	15,358,285	5,201,860
Share capital bought back in the year/period - including expenses	8	(7,634,821)	(1,117,828)
Profit for the year/period		3,492,070	1,487,093
Dividends paid in year/period	5	(2,629,082)	(1,452,519)
Closing shareholders' funds		42,123,723	33,537,271

The notes below form part of these financial statements.

Cash Flow Statement

for the year ended 31 December 2013

	Year ended		11 months ended
	31 December 2013		31 December 2012
	Note	£		£
Interest income received		1,419,008		865,212
Dividend income		166,382		136,504
Other income		-		7,264
Investment management fees paid		(850,830)		(768,379)
Cash payments for other expenses		(364,197)		(321,248)
Net cash inflow/(outflow) from operating activities		370,363		(80,647)


Investing activities
Sale of investments	7	2,514,504		2,028,239
Purchase of investments	7	(2,201,941)		(4,307,298)
Net cash inflow/(outflow)from investing activities		312,563		(2,279,059)


Dividends
Equity dividends paid	5	(2,629,082)		(1,452,519)

Cash outflow before liquid resource management and financing		(1,946,156)		(3,812,225)

Management of liquid resources
Increase in monies held in current investments		(5,297,959)		(136,879)

Financing
Shares issued as part of joint fundraising offer for subscription and dividend investment scheme	8	8,434,913		5,201,860
Shares issued as part of the Enhanced Buyback Facility	8	250,000		-
Shares bought back as part of Enhanced Buyback Facility (including expenses)	8	(375,149)		-
Purchase of own shares	8	(586,300)		(1,117,828)
Net cash inflow from financing		7,723,464		4,084,032
Increase in cash for the year		479,349		134,928

NOTES TO THE ACCOUNTS

1. Accounting policies

A summary of the principal accounting policies, all of which have been applied consistently throughout the year, is set out below.

a) 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 Trust Companies in January 2009. The financial statements are prepared under the historical cost convention except for the measurement of certain financial instruments at fair value.

b) Presentation of the Income Statement

In order to better reflect the activities of a VCT and in accordance with the SORP, 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.

c) Comparatives

In the previous period, the Company changed its financial year end to 31 December and, therefore the comparative to these financial statements and notes to the accounts relate to the eleven month period to 31 December 2012.

d) Investments

All investments held by the Company are classified as "fair value through profit and loss", and measured in accordance with the International Private Equity and Venture Capital Valuation ("IPEVCV") guidelines, as updated in September 2009. 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 in 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 IPEVCV 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, the following factors will be considered:

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

(iii) Premiums on 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 multiple or cost less impairment basis is not appropriate and overriding factors apply, discounted cash flow or net asset valuation bases may be applied.

e) Current investments

Monies held pending investment are invested in financial instruments with same day or two-day access and as such are treated as current investments, and have been valued at fair value.

f ) 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 where recovery is doubtful or where it will not be received in the foreseeable future. Where the loan stocks require interest or a redemption premium to be paid on redemption, the interest and redemption premium is recognised as income once redemption is reasonably certain. Until such date interest is accrued daily and included within the valuation of the investment, where appropriate.

g) Capital reserves

(i) Realised (included within the Profit and Loss Account 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; and

• 75% of management fee expense, together with the related tax effect to this reserve in accordance with the policies.

(ii) Revaluation reserve (Unrealised capital reserve)

Increases and decreases in the valuation of investments held at the year/period-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, all such movements through both revaluation and realised capital reserves are shown within the Income Statement for the year/period.

(iii) Special distributable reserve

The cost of share buybacks is charged to this reserve. In addition, any realised losses on the sale of investments, and 75% of the management fee expense, and the related tax effect, are transferred from the Profit and Loss Account reserve to this reserve.

(iv) 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 re-investment scheme.

(v) 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.

h) Expenses

All expenses are accounted for on an accruals basis.

25% of the Investment Managers' 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.

Expenses are charged wholly to revenue, with the exception of expenses incidental to the acquisition or disposal of an investment, which are written off to the capital column of the Income Statement or deducted from the disposal proceeds as appropriate.

i) Taxation

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 substantially enacted at the balance sheet date. Deferred tax is measured on a non-discounted basis.

A deferred tax asset is 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.

Any tax relief obtained in respect of management 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.

2 Income

	Year ended 31 December 2013	11 months ended 31 December 2012
	£	£
Income from bank deposits	147,949	52,568

Income from investments
- from equities	220,304	93,274
- from overseas based OEICs	25,216	37,099
- from loan stock	1,344,035	783,053
	1,589,555	913,426

Other income	-	7,265

Total income	1,737,504	973,259

Total income comprises
Dividends	245,520	130,373
Interest	1,491,984	835,621
Other income	-	7,265
	1,737,504	973,259
Income from investments comprises
Listed overseas securities	25,216	37,099
Unlisted UK securities	220,304	93,274
Loan stock interest	1,344,035	783,053
	1,589,555	913,426

Total loan stock interest due but not recognised in the year was £177,912 (11 month ended 31 December 2012: £197,941).

3 Investment Manager's fees

	Year ended 31 December 2013			11 month ended 31 December 2012
	Revenue	Capital	Total	Revenue	Capital	Total
	£	£	£	£	£	£
Mobeus Equity Partners LLP	228,977	686,932	915,909	175,825	527,475	703,300

Under the terms of a revised investment management agreement dated 12 November 2010, Mobeus Equity Partners LLP ("Mobeus LLP") (formerly Matrix Private Equity Partners LLP ("MPEP") provides investment advisory, administrative and company secretarial services to the Company, for a fee of 2% per annum of closing net assets, calculated on a quarterly basis by reference to the net assets at the end of the preceding quarter, plus a fixed fee of £112,518 per annum, the latter being subject to indexation, if applicable. In 2013, Mobeus has agreed to waive such further increases due to indexation, until otherwise agreed with the Board.

The investment management fee includes provision for a cap on expenses excluding irrecoverable VAT and exceptional items set at 3.4% of closing net assets at the year-end. In accordance with the investment management agreement, any excess expenses are borne by the Investment Manager. The excess expenses during the year amounted to £nil (period to 31 December 2012: £nil).

Under the terms of a separate agreement dated 1 November 2006, from the end of the accounting period ending on 31 January 2009 and in each subsequent accounting period throughout the life of the company, the Investment Manager will be entitled to receive a performance related incentive fee of 20% of the excess above 6 per cent of the net asset value per share of the annual dividends paid to Shareholders. The performance fee will be payable annually, with any cumulative shortfalls below the 6 per cent hurdle having to be made up in later years. The incentive payment will be shared between the Investment Manager 75% and the Promoter 25%. No incentive fee is payable to date.

The Company is responsible for external costs such as legal and accounting fees, incurred on transactions that do not proceed to completion ("abort expenses") subject to the cap on total annual expenses referred to above. In line with common practice, Mobeus LLP retain the right to charge arrangement and syndication fees and Directors' or monitoring fees ("deal fees") to companies in which the Company invests.

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 are met.

Under the terms of a Linked Offer for Subscription launched 28 November 2013, Mobeus will be entitled to fees of 3.25% of the investment amount received from investors. Based upon a fully subscribed offer of £24 million this would equal £780,000, across all four VCTs involved in the Offer, out of which all the costs associated with the Offer are met.

4 Taxation on profit on ordinary activities

	Year ended 31 December 2013			11 months ended 31 December 2012
	Revenue	Capital	Total	Revenue	Capital	Total
	£	£	£	£	£	£
a) Analysis of tax charge:
UK Corporation tax on profits for the year	133,343	(133,343)	-	75,182	(75,182)	-
Total current tax charge (credit)	133,343	(133,343)	-	75,182	(75,182)	-
Corporation tax is based on a rate of 20% (2012: 20%)

b) Profit on ordinary activities before tax	1,134,739	2,357,331	3,492,070	434,922	1,052,171	1,487,093
Profit on ordinary activities multiplied by small company rate of corporation tax in the UK of 20% (2012: 20%)	226,948	471,466	698,414	86,984	210,434	297,418
Effect of:
UK dividends	(44,061)	-	(44,061)	(18,655)	-	(18,655)
Unrealised gains not taxable	-	(557,108)	(557,108)	-	(260,169)	(260,169)
Realised gains not taxable	-	(51,745)	(51,745)	-	(55,760)	(55,760)
Marginal relief	(4,044)	4,044		6,853	(6,853)	-
Losses brought forward	(45,500)	-	(45,500)	-	-	-
Unrelieved expenditure	-	-	-	-	37,166	37,166
Actual current tax charge	133,343	(133,343)	-	75,182	(75,182)	-

Tax relief relating to investment management fees is allocated between revenue and capital where such relief can be utilised.

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 (year to 31 January 2012: £nil). There is an unrecognised deferred tax asset of £272,720 (31 December 2012: £325,046).

5 Dividends paid and payable

	Year ended 31 December 2013	11 months ended 31 December 2012
	£	£
Amounts recognised as distributions to equity holders in the year/period:
Interim income dividend for the year ended 31 January 2012 of 1.5 pence per Ordinary Share paid 6 June 2012	-	435,756
Interim capital dividend for the year ended 31 January 2012 of 3.5 pence per Ordinary Share paid 6 June 2012	-	1,016,763
Interim income dividend for the 11 months ended 31 December 2012 of 1 pence per Ordinary Share paid 10 May 2013	349,878	-
Interim capital dividend for the 11 months ended 31 December 2012 of 4.5 pence per Ordinary Share paid 10 May 2013	1,574,452	-
Interim income dividend for the 11 months ended 31 December 2012 of 1.25 pence per Ordinary Share paid 20 September 2013	440,471	-
Interim capital dividend for the year ended 31 December 2013 of 0.75 pence per Ordinary Share paid 20 September 2013	264,281	-
	2,629,082	1,452,519*

* Of this amount £342,378 (31 December 2012: £164,418) of new shares were issued as part of the DRIS scheme.

6 Basic and diluted earnings per share

	Year ended 31 December 2013	11 months ended 31 December 2012
	£	£
Total earnings after taxation:	3,492,070	1,487,093
Basic and diluted earnings per share (note a)	10.31p	5.26p
Net revenue from ordinary activities after taxation	1,001,396	359,740
Basic and diluted revenue return per share (note b)	2.96p	1.27p

Net unrealised capital gains	2,785,539	1,300,844
Net realised capital gains	258,724	278,802
Capital expenses (net of taxation)	(553,589)	(452,293)
Total capital return	2,490,674	1,127,353
Basic and diluted capital return per share (note c)	7.35p	3.99p

Weighted average number of shares in issue in the period	33,875,228	28,266,790

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

d) There are no instruments that will increase the number of shares in issue in future. Accordingly, the above figures currently represent both basic and diluted returns.

7 Investments at fair value

Movements in investments during the period are summarised as follows:

	Traded on AiM	Unquoted equity Shares	Unquoted preference Shares	Loan stock	Total
	£	£	£	£	£
Cost at 31 December 2012	199,998	7,689,195	23,113	14,332,053	22,244,359
Unrealised gains/(losses) at 31 December 2012	66,666	(74,277)	(7,883)	212,994	197,500
Permanent impairment in value of investments as at 31 December 2012	-	(319,319)	(1,068)	(283,305)	(603,692)
Valuation at 31 December 2012	266,664	7,295,599	14,162	14,261,742	21,838,167

Purchases at cost	-	-	-	2,201,843	2,201,843
Sale proceeds	-	(14,837)	-	(2,506,577)	(2,521,414)
Reclassification at value	-	(1,704,054)	1,957	1,702,097	-
Realised gains in the year	-	14,837	-	250,797	265,634
Unrealised gains in the year	25,000	2,548,737	-	211,802	2,785,539
Closing valuation at 31 December 2013	291,664	8,140,282	16,119	16,121,704	24,569,769

Cost at 31 December 2013	199,998	5,853,676	25,070	16,070,641	22,149,385
Unrealised gains/(losses) at 31 December 2013	91,666	2,988,303	(7,302)	618,549	3,691,216
Permanent impairment in value of investments	-	(701,697)	(1,649)	(567,486)	(1270,832)
Valuation at 31 December 2013	291,664	8,140,282	16,119	16,121,704	24,569,769

The major components of the increase in unrealised valuations of £2,785,539 in the year were increases of £771,801 in ATG Media Limited, £400,232 in Tessella Holdings Limited and £396,306 in ASL Technology Holdings Limited. These gains were partly offset by falls of £342,014 in CB Imports Group Limited, £261,721 in RDL Corporation Limited and £93,890 in Racoon International Holdings Limited.

Details of investment transactions such as disposal proceeds, valuation movements, cost and carrying value at the end of previous period are contained in the Investment Portfolio Summary in the Acounts..

Reconciliation of investment transactions to cash and income statement movements

The difference between purchases of investments above of £2,201,843 and the outflow of £2,201,941 shown by the Cash Flow Statement is £98. This related to purchasing of share options in an investee company that had not completed by the year end.

The difference between sales of investments above of £2,521,414, and the inflow of £2,514,504 shown by the Cash Flow Statement is £6,910 relating to transaction costs. These transaction costs also account for the difference in realised gains between £265,634 shown above and £258,724 disclosed in the Income Statement.

Unrealised gains/(losses) at 31 December 2013 of £3,691,216 differ to that shown on the Revaluation Reserve of £4,518,594. The difference of £827,378 is the remaining loan stock balance received as part of the disposal of DiGiCo Europe Limited in December 2011 which was not recognised as a realised gain in that year.

8 Movement in share capital and reserves

	Called up Share capital	Share Premium reserve	Capital redemption reserve	Revaluation reserve	Special distributable reserve *	Profit and loss account (note a) *	Total
	£	£	£	£	£	£	£

At 1 January 2013	285,895	12,004,600	905,059	1,529,402	12,501,764	6,310,551	33,537,271

Share buybacks	(5,671)	-	5,671	-	(586,300)	-	(586,300)
Shares issued via Dividend re-investment Scheme	3,342	339,036	-	-	-	-	342,378
Shares issued via Offer for Subscriptions	69,513	8,023,022	-	-	-	-	8,092,535
Shares issued under Enhanced Buyback Facility (note b)	57,216	6,866,156	-	-	-	-	6,923,372
Shares bought back under Enhances Buyback Facility (note b)	(59,023)	-	59,023	-	(6,923,372)	-	(6,923,372)
Expenses of share issued and bought back via Enhanced Buyback Facility (note c)	-	-	-	-	(125,149)	-	(125,149)
Transfer of realised losses to Special distributable reserve (note d)	-	-	-	-	(1,306,646)	1,306,646	-
Cancellation of Share premium account (note d)	-	(13,858,090)	-	-	13,858,090	-	-
Realisation of previously unrealised losses	-	-	-	203,653	-	(203,653)	-
Dividends paid	-	-	-	-	-	(2,629,082)	(2,629,082)
Profit for the year	-	-	-	2,785,539	-	706,531	3,492,070

As at 31 December 2013	351,272	13,374,724	969,753	4,518,594	17,418,387	5,490,993	42,123,723

* These reserves total £22,909,380 (31 December 2012: £18,812,315) and are regarded as distributable reserves for the purpose of assessing the Company's ability to pay dividends to shareholders.

Note a: The realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the Company shown in the Balance Sheet.

Note b: Reconciliation of the Cash Flow Statement to Reserves above

The Cash Flow Statement discloses an inflow of funds of £250,000, and an outflow of funds of £375,149 from shares bought back under the Enhanced Buyback Facility ("EBF") including expenses. The amount of £375,149 is comprised of an initial £250,000 remitted to the Company's broker to finance the EBF and £125,149 of expenses related to the EBF (see note d). With the initial receipt of £250,000 from the Company, the Company's broker and registrars then processed £6,923,372 of shares bought back under the EBF, and £6,923,372 of shares issued under the EBF. As these cash movements did not pass through the Company's bank accounts, the Cash Flow Statement does not reflect the full figures disclosed in the reserve movements above.

Note c: These are the expenses of the Enhanced Buyback Facility ("EBF") of £125,149. These costs are borne by those Shareholders who participated in the EBF. No fees were charged by the Investment Manager. The EBF transaction was completed in two tranches, on 4 April and 8 April 2013. Across both dates, a total of 5,902,280 Ordinary shares were bought back at a price of 117.3 pence per share, and immediately following this 5,721,589 Ordinary shares were allotted at a price of 121 pence per share.

Note d: The cancellation of £13,858,090 from the share premium account (as approved at the general meeting held on 22 February 2013 and by order of the Court dated 13 March 2013) has increased the Company's special distributable reserve out of which it can fund share buybacks 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. As a result, the Company has a special reserve of £17,418,387. The transfer of £1,306,646 to the special reserve from the realised capital reserve above is the total of realised losses incurred by the Company, within total net realised gains for the year.

9 Basic and diluted net asset value per share

Net asset value per Ordinary Share is based on net assets at the end of the year/period, and on 35,127,218 (31 December 2012:28,589,452) Ordinary Shares, being the number of Ordinary Shares in issue on that date.

There are no instruments that will increase the number of shares in issue in future. Accordingly, the figures currently represent both basic and diluted net asset value per share.

10 Management of capital

The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern, so that it can continue to provide returns for shareholders and to provide an adequate return to shareholders by allocating its capital to assets commensurate with the level of risk.

By its nature, the Company has an amount of capital, at least 70% (as measured under the tax legislation) of which is and must remain, invested in the relatively high risk asset class of small UK companies within three years of that capital being subscribed. The Company accordingly has limited scope to manage its capital structure in the light of changes in economic conditions and the risk characteristics of the underlying assets. Subject to this overall constraint upon changing the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets if so required to maintain a level of liquidity to remain a going concern.

Although, as the Investment Policy implies, the Board would consider levels of gearing, there are no current plans to do so. It regards the net assets of the Company as the Company's capital, as the levels of liabilities are small and the management of them is not directly related to managing the return to Shareholders. There has been no change in this approach from the previous year.

11 Segmental analysis

The operations of the Company are wholly in the United Kingdom, from one class of business.

12 Post balance sheet events

Under the Linked Offer for Subscription launched on 28 November 2013, 2,755,916 new Ordinary shares have so far been allotted at an average price of 120.57 pence per share raising net funds of £3,210,618.

On 16 January 2014, £908,000 was invested into South West Services Investments Limited. On 29 January 2014, the Company invested £1,132,521 in Bourn Bioscience Limited.

On 20 February 2014, the Company invested £1,369,050 (including £1,000,000 from Ackling Management Limited, one of the Company's acquisition vehicles) to support the MBO of Entanet International Limited.

On 26 February 2014, £913,000 was invested into Manufacturing Services Investments Limited.

On 12 March 2014, by order of the High Court, the Company cancelled the amount of £17,527,536 in the Company's Share Premium account and Capital Redemption reserve on that date. This balance has been added to the Company's special distributable reserve.

13 Dividends

The Directors have recommended a final dividend of 4.0 pence per share. The dividend will be paid on 16 May 2014 to Shareholders on the Register on 22 April 2014. Shareholders who wish to have dividends paid directly into their bank account rather than sent by cheque to their registered address can complete a mandate for this purpose. Mandates can be obtained by telephoning the Company's Registrars, Capita Registrars on 0871 664 0300, (lines are open 8.30 am - 5.30 pm Mon - Fri, calls cost 10p per minute plus network extras - if calling from overseas please ring +44 208 639 2157) or by writing to them at Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU. Alternatively you may visit their website, www.capitaregistrars.com/shareholders.

14 Statutory information

The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 31 December 2013 in terms of section 434 of the Companies Act 2006 but is derived from those accounts. Statutory accounts for the year ended 31 December 2013 will be delivered to Companies House following the Company's Annual General Meeting. The auditors have reported on those accounts: their report was unqualified and did not contain a statement under Section 498 of the Companies Act 2006.

15 Annual Report

The Annual Report for the year ended 31 December 2013 will shortly be made available on the Company's website: www.mig4vct.co.uk. and Shareholders will be notified of this by email or post or sent a hard copy in the post in accordance with their instructions. Copies will be available thereafter to members of the public from the Company's registered office.

16 Annual General Meeting

The Annual General Meeting of the Company will be held at 11.00 am on Friday, 9 May 2014 at the offices of Mobeus Equity Partners LLP, 4^th Floor, 30 Haymarket, London, SW1Y 4EX.

Contact details for further enquiries:

Robert Brittain of Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by e-mail to mig4@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.

This information is provided by RNS

The company news service from the London Stock Exchange

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