Annual Financial Report
Mobeus Income & Growth 4 VCT plc ("MIG4" or the "Company" or the "VCT")
Annual Results Announcement for the year ended 31 December 2015
INVESTMENT OBJECTIVE
Mobeus Income & Growth 4 VCT plc, ("MIG4", the "Company" or the "Fund") is a Venture Capital Trust ("VCT") advised by Mobeus Equity Partners LLP ("Mobeus"), investing primarily in established, 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, while continuing at all times to qualify as a VCT.
DIVIDEND POLICY
The Company seeks to pay dividends at least 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 2015
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Net Asset Value ("NAV") Total Return per share of 8.2% for the year. |
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Share Price Total Return per share of 11.7% for the year. |
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§ |
Shareholders received an interim dividend of 2.00 pence per share in September 2015 and a final dividend of 9.00 pence per share is proposed to be paid on 25 May 2016. This will bring dividends paid per share in respect of the year to 11.00 pence and cumulative dividends paid per share to 71.20 pence. |
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§ |
£8.48 million was invested during the year into four new investments totalling £7.21 million with a further £1.27 million invested into three follow-on investments. |
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A total of £7.49 million was received as net cash proceeds from four realisations and loan repayments compared with a total cost of £3.42 million.
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Cumulative total shareholder return per share (NAV basis)
The longer term trend of performance on this measure is shown in the chart below:-
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As at |
Net assets
|
Net asset value (NAV) per share |
Cumulative dividends paid per share |
Cumulative total shareholder return per share (NAV basis)* |
|
|
(£ m) |
(p) |
(p) |
(p) |
|
31 December 2015 |
57.01 |
117.89 |
62.20 |
180.09 |
|
31 December 2014 |
50.29 |
118.21 |
52.20 |
170.41 |
|
31 December 2013 |
42.12 |
119.92 |
34.20 |
154.12 |
|
31 December 2012 |
33.54 |
117.31 |
26.70 |
144.01 |
|
31 January 2012 |
29.42 |
116.73 |
21.70 |
138.43 |
*Cumulative NAV total shareholder return is net asset value plus cumulative dividends paid since 1999 to date.
The net asset value (NAV) per share as at 31 December 2015 was 117.89 pence.
The chart above 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. Subscription prices from subsequent fundraisings and historic performance data from 2008 are shown in the Investor Performance Appendix on the Company's website.
On 31 July 2006, Mobeus became sole Investment Adviser to the Company. The cumulative NAV total return at this date was 122.51 pence.
CHAIRMAN'S STATEMENT
I am pleased to present the annual results of Mobeus Income & Growth 4 VCT plc for the year ended 31 December 2015.
Overview
It has been another good year for the Company, due to profitable realisations, positive portfolio performance and a high level of new investment. During the year the Company successfully completed two major realisations at substantial gains over cost. In addition, a number of existing investee companies have returned solid performances in the portfolio, contributing to increases in their valuations.
Shareholders will have noted that the Finance Act 2015, which became legislation last November, requires some changes in the type of investments that the VCT is now permitted to make. These changes will require the Company's current Investment Policy to be amended. For further information please see Industry developments (below) and Changes to the Investment Policy.
Performance
The NAV total return per share was 8.2 per cent. for the year ended 31 December 2015 (2014: 13.6 per cent.). The share price total return was 11.7 per cent. (2014: 15.0 per cent.). For details of these calculations, please refer to the Strategic Report in the Annual Report. There were two principal factors causing this result. Firstly, the value of the portfolio has risen due to strong performance from some of the portfolio companies, notably Virgin Wines, Jablite and Tharstern and, secondly, returns benefitted from realised gains from the sales of Tessella and Westway, which achieved 2.8 times and 6.7 times respectively over the original cost of these investments.
For more details on the performance of your investment in the Company, please consult the Investor Performance Appendix on the Company's website.
Dividends
Your Directors are pleased to propose a final dividend in respect of 2015 of 9.00 pence (2014: second interim 8.00 pence) per share. This dividend, if approved, will be paid on 25 May 2016 to shareholders on the Register on 8 April 2016. This will bring dividends paid in respect of the year ended 31 December 2015 to 11.00 pence (2014: 22.00 pence) per share and cumulative dividends paid since inception to 71.20 pence (2014: 60.20 pence) per share.
A chart showing the dividends paid in respect of each of the last five years and cumulative dividends on the same basis is included in the Strategic Report.
Investment Portfolio
The VCT has maintained a steady rate of new investment, investing a total of £8.48 million during the year under review in seven companies.
During the year the value of the opening portfolio increased by £3.30 million in realised gains (net of transaction costs) and £1.09 million in unrealised gains. These represent a total increase of 17.6 per cent. in the valuation of the portfolio over the year on a like for like basis Realised gains over the original cost of the investment were £4.07 million. The portfolio under management at the year-end was valued at £38.72 million representing 101.1 per cent. of cost.
Full details of all of these transactions and of a new investment following the year end are included in the Investment Review.
Net proceeds totalling £7.49 million were received during the year under review. Of this total, £4.81 million was received from two substantial disposals, Tessella and Westway Services. In addition the Company received realisation proceeds from several other companies, principally Higher Nature, Newquay Helicopters, and BG Training totalling £0.62 million. The balance of £2.06 million comprised loan repayments from companies held within the portfolio.
Industry developments
The UK Finance Act 2015 became law on 18 November 2015. This has introduced rules designed to ensure that VCTs comply with European Union ("EU") State Aid rules, while remaining able to provide finance to small and growing businesses.
The UK's VCT scheme must comply with the EU State Aid rules, as the tax relief given to investors is deemed to be State Aid to the companies in which the VCTs invest.
The new VCT rules have introduced new criteria regarding:
• the maximum age of companies that are eligible for investments (generally seven years under the UK Finance Act);
• besides an annual limit of £5 million, already in place, there is now also a lifetime cap on the total amount of state aided risk finance investment a company can receive (generally £12 million under the UK Finance Act); and
• a requirement that VCT investment is to be used for growth and development purposes only.
The practical consequences of the application of these EU State Aid rules by the UK Finance Act 2015 are that the range and size of potential investments open to generalist VCTs, such as Mobeus Income & Growth 4 VCT, will reduce. The Government has decided that VCT investments made to finance the purchase of existing business owners' shareholdings and the acquisition of businesses will no longer be permitted. Previous legislation had prevented such transactions if they used the VCT's funds raised after 5 April 2012. The 2015 Act has extended this restriction firstly, to apply to previously exempted monies raised prior to 5 April 2012 and secondly, to prevent such investment, even if it would be a non-qualifying holding. The new rules are therefore likely to restrict significantly all VCTs' future participation in management buyout ("MBO") transactions. However, such investments that have already been made remain qualifying investments as part of our investment portfolio.
The UK Finance Act now requires the VCT to re-adjust its focus for new investments to provide growth capital to younger companies, which is likely to alter the balance of the portfolio of the Company over a number of years. The UK Government has also announced an intention to permit VCTs to provide some replacement capital finance within investments, subject to agreement with the EU State Aid authorities. If this comes to pass, it would enlarge the pool of possible investment opportunities for VCTs compared to the more restricted regime that now applies under the new Act.
In theory, the change in focus to smaller investments in companies requiring growth (and possibly replacement) capital carries a higher risk, but also the prospect of higher, but more variable, returns. Generating the level of consistently high returns achieved over the last six years in particular is likely to be more challenging.
Your Board has questioned the Investment Adviser on its ability to comply with the new rules. The board is pleased to note that recruitment of a senior hire with extensive experience of growth capital has already taken place and further recruitment is planned. The Board has confidence in the Investment Adviser, justified by the past strong returns to shareholders, being able to adapt its investment approach to the new rules so as to generate attractive returns in the future.
Changes to the Investment Policy
The new VCT legislation above requires revisions to this VCT's current Investment Policy (the "Policy") which, in turn, will require the approval by shareholders of an ordinary resolution that will be proposed at the AGM. Although the changes are significant the investment methodology will continue. However, the Investment Policy makes particular reference to investing in management buyout (MBO) transactions and includes some of the key specific VCT legislative requirements. The principal change proposed to the Policy is to remove the reference to MBO transactions. In addition, references to the key specific VCT rules have been removed. The latter has been replaced by an intent that every investment will meet the requirements of prevailing VCT legislation. This should reduce the requirement to amend the Policy, which can be a costly and time-consuming process, each time VCT legislation changes. The proposed Policy also retains flexibility to enable the Board and the Investment Adviser to consider a wide range of opportunities amongst established businesses to provide growth capital under the new VCT legislative environment. The potential impact of the changes on the VCT's portfolio and investment risk is set out in Industry developments above.
Further details of the proposed changes to the Policy itself are contained in the Directors' Report, explaining the ordinary resolution to approve a revised Policy. The Board strongly recommends that shareholders approve the resolution. If the resolution is not approved, the Company is unlikely to continue to operate under current VCT regulations, and the Board will need to explore alternative strategies which may have a substantial impact on the Company and its shareholders.
Your Directors continue to work closely with Mobeus and our other professional advisers to understand the full implications of the new rules, so as to apply the revised Policy at a practical level. There remain many detailed points to be clarified in interpreting the new legislation.
Liquidity
The Board continues to investigate alternative investment options to secure greater returns on the Company's liquid assets, although the continuing security of capital remains a paramount consideration. Although the liquid assets are held in a range of credit worthy financial institutions it is recognised that the return on such assets is currently lower than wished due to the current government's low interest rate policies. Total liquidity is now £27.93 million (2014: £27.14 million), of which £9.92 million is held in companies preparing to trade and £18.01 million is held in deposit accounts at well-known banks and a selection of money market funds with AAA credit ratings.
VCT Fundraising
The Company participated with the three other Mobeus advised VCTs in a successful 2014/15 fundraising Offer which closed early, on 18 February 2015. The full amount of £6 million sought was raised which gave the Company £5.87 million net of costs.
The Company is not fundraising in 2015/16 and does not anticipate that there will be further fundraising until the Board has had the opportunity to consider in full the implications of the VCT tax legislation published in the Finance Act 2015 and until its review of projected liquidity indicates a need to raise further funds.
Dividend Investment Scheme
The Company's Dividend Investment Scheme ("the Scheme") is a convenient, easy and cost effective way for shareholders to build up their shareholding in the Company. Instead of receiving cash dividends they can elect to receive new shares in the Company.
Shareholders who already participate, or are considering whether to participate, in the Scheme should consider the preceding sections on Industry developments and Changes to the Investment Policy. There is an associated five year holding period required to secure income tax relief when new shares are allotted under the Scheme.
Shareholders may, therefore, wish to review their participation until the implications of these changes, outlined in the sections above, are clearer. If you are in any doubt whether to participate in the scheme or not, you should consult your financial adviser.
Following a commitment given to a shareholder who raised with me the question of whether shares issued under the Scheme should be issued at a discount of approximately 10 per cent. to the latest NAV, or at NAV, consultation took place with shareholders at the two investor meetings recently held. This process indicated that at present there are no strong views on the subject. There was a very limited response, and it was not unanimous. In view of this your Board decided to leave the position as is. The Board will, however, keep this issue under review.
Further information on the Scheme, including details of where to obtain an application form, can be found in Shareholder Information in the Annual Report.
Share buybacks
During the year ended 31 December 2015, the Company bought back 0.4 per cent. of the issued share capital of the Company which were subsequently cancelled. Further details of the purchases are included in the Directors' Report of the Annual Report.
Annual General Meeting
The Annual General Meeting of the Company will be held at 12 noon on Friday, 13 May 2016 at 33 St James's Square, London SW1Y 4JS. Both the Board and the Investment Adviser look forward to welcoming shareholders to the meeting which will include a presentation from the Investment Adviser on the investment portfolio and provide an opportunity to ask questions of the Board and the Investment Adviser. The Notice of the meeting is included in the Annual Report and an explanation of the resolutions to be proposed can be found in the Directors' Report of the Annual Report.
Shareholder Communications
The annual shareholder event was held on Tuesday 26 January 2016 at the Royal Institute of British Architects in central London. This annual event included presentations on the Mobeus advised VCTs' investment activity and performance including presentations by the Chief Executives of Jablite and Plastic Surgeon. There were separate day-time and evening sessions, and feedback from those who attended found it informative and worthwhile.
Industry awards for the Adviser
Your Board is pleased to see the Investment Adviser, once again, winning significant industry awards. The Investment Adviser was named VCT House of the Year for the fourth consecutive year at the unquote" British Private Equity Awards 2015 and also received the award for Exit of the year for Focus Pharmaceuticals. In addition, Mobeus was named VCT Manager of the Year by Investor Allstars. These three awards recognised again the continuing high level of performance achieved by the Investment Adviser in all areas of its activity including deals, exits, portfolio management and fundraising.
Future prospects
Most stock markets have been undergoing a corrective phase. There are a number of uncertainties including conflict in the Middle East, a slowdown in China, the migrant crisis in Europe, and an EU Referendum in June 2016. The recent correction in the UK market is not surprising after rises driven in part by cheap debt, which continues to drive up both public and private debt levels in the UK. On the other hand official figures still indicate UK growth, and private equity investment is a medium to longer term process. Remunerative investments can still be found and the Investment Adviser remains busy analysing new proposals. Profitable exits can still be achieved.
As mentioned earlier, we are proposing changes to the Company's current Investment Policy at the AGM to ensure full compliance with the provisions of the Finance Act 2015. There may be a pause in new investment while the Investment Adviser identifies opportunities that comply with the requirements of the new legislation.
The Company and its Investment Adviser are confident that they will be able to adjust to the changes in VCT regulation introduced by the Finance Act 2015, and still produce attractive returns in the future. The existing portfolio continues to perform well and to provide a good foundation for future performance.
Finally, I would like to express my thanks to all shareholders for their continuing support of the Company.
Christopher Moore
Chairman
23 March 2016
Proposed Changes to the Investment Policy
As referred to in the Chairman's Statement above, the Investment Policy requires changes and a resolution approving a revised Investment Policy is included in the Annual Report. Full details are contained within the Annual Report.
Investment Review
This has been another strong year for the investment portfolio. The market continued to provide a strong pipeline of good investment opportunities and conditions have been favourable for both new investment and realisations. The portfolio is performing well as a whole as is demonstrated by the fact that the valuation of the portfolio as a whole has increased by 17.6 per cent. during the year on a like-for-like basis. Many of the companies in the portfolio are strongly cash generative and have made partial repayments of their loan stock during the year.
Investments remain spread across a number of sectors, primarily in support services, general retailers, media and fixed line telecommunications.
The changes to VCT Rules, introduced by the Finance Act 2015, have required all VCTs to reconsider the type of investments that VCTs can make in future to ensure a VCT complies with the new Finance Act. This process is not yet complete, and we anticipate a phase of familiarisation with the practical application of the rules to prospective opportunities. The application of the new regulations in practice is still being defined. We have been able to make our first investment under the new rules earlier this month.
As another part of our response to the changes, we intend to recruit additional investment professionals, who will focus primarily upon growth capital transactions. We are pleased to have already recruited a senior experienced individual to head up this team, who has a good track record of profitable investments in the VCT growth capital sector.
Two excellent realisations were delivered at the end of the year. The sale of Tessella realised cash proceeds of £2.94 million, and a gain over current cost of £1.95 million, being 4.03 pence per share. Total proceeds over the life of the investment were £3.57 million, representing a return of 2.8 times the original cost of the investment of £1.27 million, over the three and a half years that this investment was held.
The realisation of Westway Services generated cash proceeds of £1.87 million, and a gain over current cost of £1.83 million, being 3.78 pence per share. Total proceeds to date over the life of the investment were £2.50 million, representing a return of 6.7 times the original cost of the investment of £0.37 million. In addition the Company received realisation proceeds from a number of other companies, such as, Higher Nature, Newquay Helicopters, and BG Training totalling £0.62 million. Finally, £2.06 million, comprising loan repayments from companies held within the portfolio, make up the balance of total net realisation proceeds of £7.49 million.
New investment
A total of £8.48 million was invested in new deals during the year under review. This included £7.21 million in new investments into Media Business Insight ("MBI"), Jablite, Tushingham and Access IS and £1.27 million in three follow-on investments in Entanet, CGI Creative Graphics International and Racoon International.
Principal new investments in the year
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Company |
Business |
Date of Investment |
Amount of new investment (£m) |
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Media Business Insight |
Events and publishing |
January 2015 |
2.72* |
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Media Business Insight is a publishing and events business focused on the creative production industries, specifically advertising, TV production and film. Based in Shoreditch, East London, the company comprises four distinct brands. The investment represented an attractive opportunity to invest in a sector-leading company underpinned by strong recurring revenues from subscriptions and events. The company's latest audited accounts for the year ended 31 December 2014 show annual sales of £8.38 million and profit before interest, tax and amortisation of goodwill of £1.14 million.
*A further £1.14 million was invested into South West Services Investment Limited ("SWSI") adding to its earlier investment of £0.91 million. This enabled SWSI to acquire Media Business Insight Limited ("MBI"). The Company has also advanced a non-qualifying loan of £0.67 million to MBI. SWSI subsequently changed its name to Media Business Insight Holdings Limited. |
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Jablite |
Expanded polystyrene products |
April 2015 |
1.12 *
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Jablite is the UK's largest domestic manufacturer of Expanded Polystyrene products operating under two divisions manufacturing packaging (Styropak) and construction (Jablite) products. The business was acquired from its Dutch parent and operates from five production sites in the UK. For the year ended 31 December 2014, Jablite Limited and Styropack (UK) Limited, generated annual sales of £32.83 million and £15.17 million respectively and profit before interest, tax and amortisation of goodwill of £2.01 million and £0.34 million respectively. * £1.12 million was invested into Duncary 16, a company preparing to trade on 2 April 2015. This enabled Duncary 16 to acquire Jablite on 23 April 2015. Duncary 16 has subsequently changed its name to Jablite Holdings Limited. |
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Tushingham Sails |
Supplier of watersports equipment |
July 2015 |
0.90* |
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Tushingham Sails is a supplier of sails to the UK windsurfing market. It has recently moved into the young and rapidly expanding watersport of stand-up paddleboarding, as the manufacturer of its own fast growing brand called Red Paddle. The Company's design ethos and historical market knowledge has enabled Tushingham to penetrate this world market and we are optimistic that its strong growth will continue. The Company had a turnover of £7.54 million and generated an adjusted profit before interest, tax and amortisation of goodwill of £1.08 million during the year ended 28 February 2015.
*£1.13 million held in Vian Marketing, a company preparing to trade, was used to acquire Tushingham Sails Limited. This resulted in a net repayment to the company of £0.23 million. |
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Access IS |
Data capture and scanning hardware |
October 2015 |
2.47* |
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Access IS is a leading provider of data capture and scanning hardware. The company has a significant share of the worldwide market for this technology in airports and strong positions in the fast growing markets of both ID & Security and Transport & Ticketing. This was an opportunity to acquire a longstanding and profitable business that is well positioned in its niche market. The company's latest audited accounts for the year ended 31 December 2014 show annual sales of £9.95 million and profit before interest, tax and amortisation of goodwill of £1.25 million. * Amounts held in existing companies preparing to trade, Knighton Management Limited (£1.10 million) and Tovey Management Limited (£1.13 million), along with a further £0.24 million from the Company, were used for this investment. |
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New investment post year-end
|
Company |
Business |
Date of investment |
Amount of new investment (£m) |
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Redline Assured Security |
Provision of security products and services |
February 2016 |
0.84 |
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Redline Assured Security Limited ("Redline") is a market leader in the provision of security products and training services to airlines and corporate entities. Redline currently operates predominantly in the aviation security market and is at the forefront of counter terrorism training and services. The investment will be applied to enable the Company to grow in its core aviation market and in other sectors. The company's latest accounts for the year ended 31 March 2015 show turnover of £4.81 million and profit before interest, tax and amortisation of goodwill of £0.82 million.
* £1.13 million held in Pound FM Consultants Limited, a company preparing to trade, was used for this investment. This resulted in a net repayment of £0.29 million. |
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Further investment into an existing portfolio companies in the year
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Company |
Business |
Date of investment |
Amount of new investment (£m) |
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Racoon International |
Hair extension, hair care products and training |
January and October 2015 |
0.08 |
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Racoon International is a premier supplier of ethically sourced hair for hair extensions. A small further investment of £0.06 was made in January 2015 with the expectation that this, together with the appointment of a successful sales-orientated Mobeus operating partner to the management team of the business, will add value to a previously unsuccessful investment. A further £0.02 million was advanced in October 2015 to provide working capital. Racoon has a £1.57 million turnover and has generated profit before interest, tax and amortisation of goodwill in the year ended 31 March 2015 of £0.01 million. |
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Entanet |
Wholesale provider of internet connectivity solutions |
February 2015 |
0.80 |
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Entanet is one of the UK's leading independent wholesale voice and data communications providers based in Telford. The VCT made a further loan stock investment in February 2015 as negotiated at the time of the original investment in February 2014. The operating subsidiary of Entanet had a turnover of £29.82 million and generated a profit before interest, tax and amortisation of goodwill of £2.31 million during the year to 31 December 2014. |
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CGI International |
Producer of adhesive decorative graphics for vehicles |
June 2015 |
0.39 |
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CGI Creative Graphics International is a leading specialist provider of adhesive decorative graphics to the automotive, recreational vehicle and airline markets. It operates from two centres, in Bedford, England and Cape Town, South Africa. The VCT made a further loan stock investment in June 2015 which had been negotiated at the time of the original investment in June 2014. The Company's latest audited accounts for the year ended 28 February 2015 show annual sales of £9.19 million and profits before interest, tax and amortisation of goodwill of £1.30 million. |
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The VCT also invested a further £7.90 million into new companies preparing to trade in March and April 2015 and a further investment of £1.10 million into an existing company preparing to trade in July 2015.
Realisations
Four investments were sold in the year for £5.19 million. Of these, two were sizeable, profitable realisations which both generated attractive returns for the Company. These were the sales of Tessella Holdings Limited and Westway Services Holdings (2014) Limited, which realised proceeds totalling £4.81 million. The two other realisations, Higher Nature and BG Training, generated proceeds of £0.38 million. Other capital receipts were £0.24 million including £0.04 million from Newquay Helicopters (2013) Limited, as an interim distribution resulting from the members' voluntary liquidation of the company and a further consideration of £0.20 million from investments realised in earlier periods, most notably Monsal Holdings and Focus Pharma. With the loan repayments of £2.06 million, total net cash proceeds for the year amounted to £7.49 million.
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Company |
Business |
Period of investment |
Total cash proceeds over the life of the investment/Multiple over cost |
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Higher Nature |
Distributor of vitamins and natural medicines |
November 1999 - June 2015 |
£1.26 million 1.1 times cost |
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Higher Nature is a mail order distributor of vitamins and natural medicines and was one of the VCT's oldest investments. The sale was to the existing management and its realisation delivered £0.30 million for shareholders. Cash proceeds from the investment totalled £1.26 million, compared to a total investment cost of £1.13 million providing a return of 1.1 times cost. |
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Tessella |
Science powered technology and consulting services |
July 2012 - December 2015 |
£3.57 million 2.8 times cost |
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The VCT sold its investment in Tessella to the French engineering consultancy, Altran Group plc for £2.94 million. Founded in 1980, Tesella is now a global business. In 2011 the company received the prestigious Queen's Award for Enterprise in innovation for its work on preserving the integrity of digital information over long periods of time, irrespective of numerous changes in technology. As part of the sale transaction, the Company has retained a small investment in this data archiving business, Preservica, which was previously held within Tessella. The sale returned an IRR of 42% and during the three and a half years of this investment, revenue has increased by 43% from £18.5 million in 2012 to £26.5 million forecast for the current financial year. |
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Westway |
Air conditioning systems |
June 2009 - December 2015 |
£2.50 million 6.7 times cost |
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The VCT sold its investment in Westway to ABM Industries Inc, one of the largest facility management services providers in the US for £1.87 million, the sale returning an IRR of 48%. During the period of the investment Westway, which is headquartered in Middlesex, and founded in 2001, has expanded its range of services from heating, ventilation and air conditioning and now offers other technical services including mechanical and electrical maintenance, energy services, communications, security systems and the servicing of electronic garment picking systems. |
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BG Training |
Specialist technical training |
September 2002 - August 2015 |
£0.17 million 0.9 times cost |
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The Company realised part of its loan stock and its entire equity investment in BG Training through a sale to the management team. BG is a City based provider of specialist technical training to investment banks. The Company holds a remaining loan stock investment in BG Training at a cost of £0.01 million. |
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Loan stock repayments
Loan stock repayments totalled £3.53 million for the year, including £1.47 million as part of the proceeds from the companies realised above. Positive cashflow at five other companies contributed to the balance of £2.06 million. These proceeds are summarised below:-
|
Company |
Business |
Month |
Amount (£000's) |
|
Jablite |
Expanded polystyrene products |
May-November |
975 |
|
Motorclean |
Vehicle cleaning and valeting services |
February-October |
342 |
|
Leap New Co (Ward Thomas) |
Logistics, storage and removals business |
May-December |
337 |
|
Vian Marketing |
Company preparing to trade |
July |
235 |
|
Tessella |
Consultancy services |
March-September |
89 |
|
Tharstern Group |
Software based management information systems |
March |
83 |
|
|
|
Total |
2,061 |
Investment Portfolio Summary
at 31 December 2015
|
|
Total |
Total |
Total |
% of |
% of |
|
|
Cost at |
Valuation at |
Valuation at |
equity |
portfolio |
|
|
31 Dec 2015 |
31 Dec 2014 |
31 Dec 2015 |
held |
by value |
|
|
£ |
£ |
£ |
|
|
|
Mobeus Equity Partners LLP |
|
|
|
|
|
|
Entanet Holdings Limited |
2,167,662 |
2,335,499 |
3,338,043 |
9.6 |
8.6 |
|
Wholesale communications provider |
|
|
|
|
|
|
Virgin Wines Holding Company Limited |
1,930,813 |
2,031,795 |
2,784,729 |
9.7 |
7.2 |
|
Online wine retailer |
|
|
|
|
|
|
Tovey Management Limited (trading as Access IS)1 |
2,469,013 |
- |
2,469,013 |
10.1 |
6.4 |
|
Providers of data capture and scanning hardware |
|
|
|
|
|
|
Media Business Insight Holdings Limited (formerly South West Services Investment Limited)2 |
2,722,760 |
908,000 |
2,282,607 |
15.7 |
5.9 |
|
A publishing and events business focused on the creative production industries |
|
|
|
|
|
|
ASL Technology Holdings Limited |
1,933,591 |
2,192,099 |
2,234,937 |
9.5 |
5.8 |
|
Printer and photocopier services |
|
|
|
|
|
|
Manufacturing Services Investment Limited |
2,016,900 |
912,800 |
2,016,900 |
11.4 |
5.2 |
|
Company seeking to carry on business in the manufacturing sector |
|
|
|
|
|
|
Veritek Global Holdings Limited |
1,620,086 |
1,628,647 |
1,659,063 |
10.3 |
4.3 |
|
Maintenance of imaging equipment |
|
|
|
|
|
|
Tharstern Group Limited |
1,091,886 |
1,149,811 |
1,518,767 |
12.2 |
3.9 |
|
MIS & Commercial print software solutions |
|
|
|
|
|
|
Leap New Co Limited (trading as Ward Thomas Removals, Bishopsgate and Aussie Man & Van)3 |
1,348,680 |
1,692,000 |
1,485,897 |
4.5 |
3.8 |
|
A specialist logistics, storage and removals business |
|
|
|
|
|
|
Fullfield Limited (trading as Motorclean Limited) |
1,195,488 |
1,630,299 |
1,379,974 |
9.8 |
3.6 |
|
Vehicle cleaning and valet services |
|
|
|
|
|
|
CGI Creative Graphics International Limited |
1,449,746 |
1,060,269 |
1,179,872 |
6.3 |
3.0 |
|
Vinyl graphics to global automotive, recreation vehicle and aerospace markets |
|
|
|
|
|
|
Gro-Group Holdings Limited |
1,577,977 |
1,428,543 |
1,138,860 |
8.4 |
2.9 |
|
Baby sleep products |
|
|
|
|
|
|
Backhouse Management Limited |
1,134,000 |
- |
1,134,000 |
11.3 |
2.9 |
|
Company seeking to carry on business in the motor sector |
|
|
|
|
|
|
Barham Consulting Limited |
1,134,000 |
- |
1,134,000 |
11.3 |
2.9 |
|
Company seeking to carry on business in the catering sector |
|
|
|
|
|
|
Chatfield Services Limited |
1,134,000 |
- |
1,134,000 |
11.3 |
2.9 |
|
Company seeking to carry on business in the retail sector |
|
|
|
|
|
|
Creasy Marketing Limited |
1,134,000 |
- |
1,134,000 |
11.3 |
2.9 |
|
Company seeking to carry on business in the textile sector |
|
|
|
|
|
|
McGrigor Management Limited |
1,134,000 |
- |
1,134,000 |
11.3 |
2.9 |
|
Company seeking to carry on business in the pharmaceutical sector |
|
|
|
|
|
|
Pound FM Consultants Limited |
1,134,000 |
- |
1,134,000 |
11.3 |
2.9 |
|
Company seeking to carry on business in the construction sector |
|
|
|
|
|
|
Jablite Holdings Limited (formerly Duncary 16 Limited)4 |
417,103 |
- |
1,097,406 |
9.1 |
2.8 |
|
Manufacturer of expanded polystyrene products |
|
|
|
|
|
|
Hollydale Management Limited |
1,095,500 |
- |
1,095,500 |
11.0 |
2.8 |
|
Company seeking to carry on a business in the food sector |
|
|
|
|
|
|
EOTH Limited (trading as Equip Outdoor Technologies) |
951,471 |
1,034,433 |
1,008,235 |
1.7 |
2.6 |
|
Distributor of branded outdoor equipment and clothing |
|
|
|
|
|
|
Vian Marketing Limited (trading as Tushingham Sails)5 |
899,074 |
- |
899,074 |
7.1 |
2.3 |
|
Design, manufacture and sale of stand-up paddleboards and windsurfing sails |
|
|
|
|
|
|
Bourn Bioscience Limited |
1,132,521 |
856,920 |
895,428 |
7.7 |
2.3 |
|
Bourn Hall In-vitro fertilisation clinics |
|
|
|
|
|
|
The Plastic Surgeon Holdings Limited |
458,935 |
570,655 |
840,837 |
8.6 |
2.2 |
|
Snagging and finishing of domestic and commercial properties |
|
|
|
|
|
|
Turner Topco Limited (trading as ATG Media) |
1,529,075 |
1,539,830 |
828,610 |
3.8 |
2.1 |
|
Publisher and online auction platform operator |
|
|
|
|
|
|
RDL Corporation Limited |
1,000,000 |
536,525 |
622,056 |
9.1 |
1.7 |
|
Recruitment consultants for the pharmaceutical, business intelligence and IT industries |
|
|
|
|
|
|
Blaze Signs Holdings Limited |
190,631 |
268,844 |
356,486 |
5.7 |
0.9 |
|
Manufacturer and installer of signs |
|
|
|
|
|
|
Omega Diagnostics plc6 |
200,028 |
300,015 |
258,347 |
1.5 |
0.8 |
|
In-vitro diagnostics for food intolerance, auto-immune diseases and infectious diseases |
|
|
|
|
|
|
Vectair Holdings Limited |
24,732 |
75,717 |
123,079 |
2.1 |
0.3 |
|
Designer and distributor of washroom products |
|
|
|
|
|
|
Racoon International Holdings Limited |
484,347 |
1,000 |
77,542 |
10.5 |
0.2 |
|
Supplier of hair extensions, hair care products and training |
|
|
|
|
|
|
Lightworks Software Limited |
9,329 |
13,530 |
24,858 |
4.2 |
0.1 |
|
Provider of software for CAD and CAM vendors |
|
|
|
|
|
|
Newquay Helicopters (2013) Limited (in liquidation) |
21,250 |
56,500 |
21,250 |
2.5 |
0.1 |
|
Helicopter service operator |
|
|
|
|
|
|
BG Training Limited |
14,167 |
87,671 |
14,167 |
0.0 |
0.0 |
|
City-based provider of specialist technical training |
|
|
|
|
|
|
Preservica Limited7 |
- |
- |
- |
4.6 |
0.0 |
|
Seller of proprietary digital archiving software |
|
|
|
|
|
|
PXP Holdings Limited (no longer trading) |
712,925 |
- |
- |
4.4 |
0.0 |
|
Formerly a designer, manufacturer and supplier of timber frames for buildings |
|
|
|
|
|
|
CB Imports Group Limited (trading as Country Baskets) |
175,000 |
- |
- |
5.8 |
0.0 |
|
Importer and distributor of artificial flowers, floral sundries and home décor products |
|
|
|
|
|
|
Watchgate Limited |
1,000 |
- |
- |
33.3 |
0.0 |
|
Holding company |
|
|
|
|
|
|
Disposals in year |
|
|
|
|
|
|
Tessella Holdings Limited |
- |
1,432,880 |
- |
0.0 |
0.0 |
|
Consultancy |
|
|
|
|
|
|
Westway Services Holdings (2014) Limited |
- |
836,941 |
- |
0.0 |
0.0 |
|
Installation, service and maintenance of air conditioning systems |
|
|
|
|
|
|
Higher Nature Limited |
- |
124,799 |
- |
0.0 |
0.0 |
|
Mail order distributor of vitamins and natural medicines |
|
|
|
|
|
|
Sub-total- Mobeus Equity Partners |
37,645,690 |
24,706,022 |
38,455,537 |
|
99.2 |
|
|
|
|
|
|
|
|
Former Elderstreet Private Equity Limited Portfolio |
|
|
|
|
|
|
Cashfac Limited |
260,101 |
145,933 |
187,108 |
2.9 |
0.5 |
|
Provider of virtual banking application software |
|
|
|
|
|
|
Sparesfinder Limited |
250,854 |
120,821 |
46,977 |
2.0 |
0.2 |
|
Supplier of industrial spare parts on-line |
|
|
|
|
|
|
Sift Limited |
135,391 |
26,514 |
27,048 |
1.3 |
0.1 |
|
Developer of business-to-business internet communities |
|
|
|
|
|
|
Sub-total - Elderstreet Private Equity |
646,346 |
293,268 |
261,133 |
|
0.8 |
|
Investment Adviser's totals |
38,292,036 |
24,999,290 |
38,716,670 |
|
100.0 |
1 £1,095,500 and £1,134,000 was invested into Knighton Management Limited on 31 March 2015 and Tovey Management Limited on 1 April 2015 respectively, both companies preparing to trade. Tovey Management Limited acquired Knighton Management Limited and Access IS on 2 October 2015. The Company also invested a further £239,513 in Access IS Limited which took the form of a non-qualifying loan and is included in the cost figure of £2,469,013 above.
2 A further £1,140,005 was invested into South West Services Investment ("SWSI"), adding to its earlier investment of £908,000. This enabled SWSI to acquire Media Business Insight ("MBI"). The Company has also advanced a non-qualifying loan of £674,755 to MBI, which is included in the cost figure of £2,722,760 above.
3 On 31 July 2015, Leap New co Limited (trading as Ward Thomas and Bishopsgate) acquired Aussie Man & Van Limited via a share for share exchange plus a small amount of cash. The figure represented the combined holding which was the position at 31 December 2015.
4 £1,122,661 was invested into Duncary 16 Limited on 2 April 2015, a company preparing to trade. This enabled Duncary 16 to acquire Jablite on 23 April 2015. Duncary 16 has subsequently changed its name to Jablite Holdings Limited.
5 £899,074 held in Vian Marketing, a company preparing to trade, was used to acquire Tushingham Sails Limited. This resulted in a net repayment to the Company of £234,926 from the original investment made in Vian Marketing.
6 Quoted on AIM.
7 The Company realised its investment in Tessella Holdings Limited in December 2015. In addition to the cash consideration received, the Company also received a small shareholding in Preservica Limited, a subsidiary of Tessella Holdings that was demerged as part of the transaction. The Fair value of the holding received was deemed to be zero at the date of the transaction and therefore, the investment cost is zero.
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 the financial statements have been prepared in accordance with the 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, 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
23 March 2016
NON STATUTORY ACCOUNTS
PRIMARY FINANCIAL STATEMENTS
Income Statement
for the year ended 31 December 2015
|
|
|
Year ended |
|
Year ended |
||||
|
|
|
31 December 2015 |
|
31 December 2014 |
||||
|
|
Note |
|
|
|
|
|
|
|
|
|
|
Revenue |
Capital |
Total |
|
Revenue |
Capital |
Total |
|
|
|
£ |
£ |
£ |
|
£ |
£ |
£ |
|
Unrealised gains on investments |
8 |
- |
1,094,287 |
1,094,287 |
|
- |
1,123,572 |
1,123,572 |
|
Realised gains on investments |
8 |
- |
3,302,320 |
3,302,320 |
|
- |
4,911,818 |
4,911,818 |
|
Income |
3 |
2,202,056 |
- |
2,202,056 |
|
2,415,923 |
- |
2,415,923 |
|
Investment Adviser's fees |
4a |
(303,725) |
(911,176) |
(1,214,901) |
|
(275,054) |
(825,163) |
(1,100,217) |
|
Other expenses |
4d |
(402,156) |
- |
(402,156) |
|
(380,120) |
- |
(380,120) |
|
Profit on ordinary activities before taxation |
|
1,496,175 |
3,485,431 |
4,981,606 |
|
1,760,749 |
5,210,227 |
6,970,976 |
|
|
|
|
|
|
|
|
|
|
|
Taxation on ordinary activities |
5 |
(184,209) |
184,209 |
- |
|
(169,152) |
169,152 |
- |
|
|
|
|
|
|
|
|
|
|
|
Profit for the year and total comprehensive income |
|
1,311,966 |
3,669,640 |
4,981,606 |
|
1,591,597 |
5,379,379 |
6,970,976 |
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per ordinary share |
7 |
2.74p |
7.67p |
10.41p |
|
3.91p |
13.21p |
17.12p |
The revenue column of the Income Statement includes all income and expenses. The Capital column accounts for the unrealised 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 better reflect the activities of a VCT and in accordance with the Statement of Recommended Practice ("SORP") issued in November 2014 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 31 December 2015
|
|
|
|
|
|
|
|
Note |
31 December 2015 £ |
|
31 December 2014 £ |
|
Fixed assets |
|
|
|
|
|
Investments at fair value |
8 |
38,716,670 |
|
24,999,290 |
|
Monies held pending investment |
|
2,085,130 |
|
2,538,251 |
|
|
|
40,801,800 |
|
27,537,541 |
|
Current assets |
|
|
|
|
|
Debtors and prepayments |
|
561,950 |
|
244,103 |
|
Current investments |
|
15,347,121 |
|
13,331,283 |
|
Cash at bank |
|
573,591 |
|
9,445,843 |
|
|
|
16,482,662 |
|
23,021,229 |
|
|
|
|
|
|
|
Creditors: amounts falling due within one year |
|
(276,680) |
|
(267,733) |
|
Net current assets |
|
16,205,982 |
|
22,753,496 |
|
|
|
|
|
|
|
Net assets |
|
57,007,782 |
|
50,291,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
Called up share capital |
|
483,562 |
|
425,434 |
|
Share premium reserve |
|
12,629,944 |
|
5,985,042 |
|
Capital redemption reserve |
|
6,827 |
|
5,143 |
|
Revaluation reserve |
|
1,545,364 |
|
1,214,933 |
|
Special distributable reserve |
|
32,622,021 |
|
33,748,039 |
|
Realised capital reserve |
|
8,422,420 |
|
7,968,451 |
|
Revenue reserve |
|
1,297,644 |
|
943,995 |
|
Equity shareholders' funds |
|
57,007,782 |
|
50,291,037 |
|
|
|
|
|
|
|
Basic and diluted net asset value per ordinary share |
|
117.89p |
|
118.21p |
|
Statement of Changes in Equity For the year ended 31 December 2015
|
|||||||||
|
|
|
Non-distributable reserves |
Distributable reserves |
|
|||||
|
|
|
Called up |
Share |
Capital |
|
Special |
Realised |
Revenue |
|
|
|
|
share |
premium |
redemption |
Revaluation |
distributable |
capital |
reserve |
|
|
|
Notes |
capital |
reserve |
reserve |
reserve |
reserve |
reserve |
|
Total |
|
|
|
|
|
|
|
(note a) |
(note b) |
(note b) |
|
|
|
|
£ |
£ |
£ |
£ |
£ |
£ |
£ |
£ |
|
At 1 January 2015 |
|
425,434 |
5,985,042 |
5,143 |
1,214,933 |
33,748,039 |
7,968,451 |
943,995 |
50,291,037 |
|
Comprehensive income for the year |
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
- |
- |
- |
1,094,287 |
- |
2,575,353 |
1,311,966 |
4,981,606 |
|
Total comprehensive income for the year |
|
- |
- |
- |
1,094,287 |
- |
2,575,353 |
1,311,966 |
4,981,606 |
|
|
|
|
|
|
|
|
|
|
|
|
Contributions by and distributions to owners |
|
|
|
|
|
|
|
|
|
|
Shares issued via Offer for Subscription |
|
51,679 |
5,841,843 |
- |
- |
(26,070) |
- |
- |
5,867,452 |
|
Dividends re-invested into new shares |
|
8,133 |
803,059 |
- |
- |
- |
- |
- |
811,192 |
|
Shares bought back |
(note c) |
(1,684) |
- |
1,684 |
- |
(168,734) |
- |
- |
(168,734) |
|
Dividends paid |
6 |
- |
- |
- |
- |
- |
(3,816,454) |
(958,317) |
(4,774,771) |
|
Total contributions by and distributions to owners |
|
58,128 |
6,644,902 |
1,684 |
- |
(194,804) |
(3,816,454) |
(958,317) |
1,735,139 |
|
|
|
|
|
|
|
|
|
|
|
|
Other movements |
|
|
|
|
|
|
|
|
|
|
Realised losses transferred to special reserve (note a below) |
- |
- |
- |
- |
(931,214) |
931,214 |
- |
- |
|
|
Realisation of previously unrealised appreciation |
|
- |
- |
- |
(763,856) |
- |
763,856 |
- |
- |
|
Total other movements |
|
- |
- |
- |
(763,856) |
(931,214) |
1,695,070 |
- |
- |
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2015 |
|
483,562 |
12,629,944 |
6,827 |
1,545,364 |
32,622,021 |
8,422,420 |
1,297,644 |
57,007,782 |
|
|
|
|
|
|
|
|
|
|
|
|
Note a: The Special distributable reserve provides the Company with a reserve to absorb any existing and future realised losses and, when considered by the Board to be in the interests of shareholders, to fund share buybacks and for other corporate purposes. All of this reserve originates from funds raised prior to 6 April 2014. The transfer of £931,214 to the special reserve from the realised capital reserve above is the total of realised losses incurred by the Company in the year. |
|||||||||
|
Note b: The realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the Company. |
|||||||||
|
Note c: During the year, the Company purchased 168,443 of its own shares at the prevailing market price for a total cost of £168,734, which were subsequently cancelled.
|
|||||||||
|
For the year ended 31 December 2014
|
|||||||||
|
|
|
Non-distributable reserves |
Distributable reserves |
|
|||||
|
|
|
Called up |
Share |
Capital |
|
Special |
Realised |
Revenue |
|
|
|
|
share |
premium |
redemption |
Revaluation |
distributable |
capital |
reserve |
|
|
|
|
capital |
reserve |
reserve |
reserve |
reserve |
reserve |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£ |
£ |
£ |
£ |
£ |
£ |
£ |
£ |
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2014 |
|
351,272 |
13,374,724 |
969,753 |
4,518,594 |
17,418,387 |
4,786,430 |
704,563 |
42,123,723 |
|
Comprehensive income for the year |
|
|
|
|
|
|
|
|
|
|
Profit for the year |
|
- |
- |
- |
1,123,572 |
- |
4,255,807 |
1,591,597 |
6,970,976 |
|
Total comprehensive income for the year |
|
- |
- |
- |
1,123,572 |
- |
4,255,807 |
1,591,597 |
6,970,976 |
|
|
|
|
|
|
|
|
|
|
|
|
Contributions by and distributions to owners |
|
|
|
|
|
|
|
|
|
|
Shares issued via Linked Offer for Subscription |
|
69,072 |
8,128,331 |
- |
- |
(3,488) |
- |
- |
8,193,915 |
|
Dividends re-invested into new shares |
|
10,233 |
1,039,770 |
- |
- |
- |
- |
- |
1,050,003 |
|
Shares bought back |
|
(5,143) |
- |
5,143 |
- |
(538,384) |
- |
- |
(538,384) |
|
Dividends paid |
|
- |
- |
- |
- |
- |
(6,157,031) |
(1,352,165) |
(7,509,196) |
|
Total contributions by and distributions to owners |
|
74,162 |
9,168,101 |
5,143 |
- |
(541,872) |
(6,157,031) |
(1,352,165) |
1,196,338 |
|
|
|
|
|
|
|
|
|
|
|
|
Other movements |
|
|
|
|
|
|
|
|
|
|
Cancellation of the share premium account |
|
- |
(16,557,783) |
(969,753) |
- |
17,527,536 |
- |
- |
- |
|
Realised losses transferred to special reserve |
|
- |
- |
- |
- |
(656,012) |
656,012 |
- |
- |
|
Realisation of previously unrealised appreciation |
|
- |
- |
- |
(4,427,233) |
- |
4,427,233 |
- |
- |
|
Total other movements |
|
- |
(16,557,783) |
(969,753) |
(4,427,233) |
16,871,524 |
5,083,245 |
- |
- |
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2014 |
|
425,434 |
5,985,042 |
5,143 |
1,214,933 |
33,748,039 |
7,968,451 |
943,995 |
50,291,037 |
|
|
|
|
|
|
|
|
|
|
|
|
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. |
|||||||||
|
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. |
|||||||||
|
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. |
|||||||||
|
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. |
|||||||||
|
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, and 75% of the Investment Adviser's fee, and the related tax effect, are transferred from the Profit and Loss Account reserve to this reserve. |
|||||||||
|
Realised capital reserve |
|||||||||
|
The following are accounted for in this reserve: • 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 dividend paid that are classified as revenue in nature. |
|||||||||
Statement of Cash Flows
for the year ended 31 December 2015
|
|
Year ended |
|
Year ended |
||
|
|
31 December 2015 |
|
31 December 2014 |
||
|
|
Note |
£ |
|
|
£ |
|
Cash flows from operating activities |
|
|
|
|
|
|
Profit for the financial year |
|
4,981,606 |
|
|
6,970,976 |
|
Adjusted for: |
|
|
|
|
|
|
Unrealised gains on investments |
|
(1,094,287) |
|
|
(1,123,572) |
|
Gains on realisations of investments |
|
(3,302,320) |
|
|
(4,911,818) |
|
(Increase)/decrease in debtors |
|
(68,758) |
|
|
117,165 |
|
Increase in creditors |
|
8,948 |
|
|
73,063 |
|
Net cash inflow from operating activities |
|
525,189 |
|
|
1,125,814 |
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
Sale of investments |
|
7,239,803 |
|
|
14,017,378 |
|
Purchase of investments |
|
(16,809,665) |
|
|
(8,467,543) |
|
Monies held pending investment |
|
453,120 |
|
|
(625,512) |
|
Net cash (outflow)/inflow from investing activities |
|
(9,116,742) |
|
|
4,924,323 |
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
Shares issued as part of Offer for Subscription |
|
5,867,452 |
|
|
8,193,915 |
|
Equity dividends paid |
6 |
(3,963,579) |
|
|
(6,459,193) |
|
Purchase of own shares |
|
(168,734) |
|
|
(538,384) |
|
Net cash inflow from financing activities |
|
1,735,139 |
|
|
1,196,338 |
|
|
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents |
|
(6,856,414) |
|
|
7,246,475 |
|
Cash and cash equivalents at start of year |
|
22,777,126 |
|
|
15,530,651 |
|
Cash and cash equivalents at end of year |
|
15,920,712 |
|
|
22,777,126 |
|
|
|
|
|
|
|
|
Cash and cash equivalents comprise: |
|
|
|
|
|
|
Cash at bank and in hand |
|
573,591 |
|
|
9,445,843 |
|
Cash equivalents |
|
15,347,121 |
|
|
13,331,283 |
NOTES TO THE ACCOUNTS
for the year ended 31 December 2015
1 Company Information
Mobeus Income and Growth 4 VCT plc is a public limited company incorporated in England, registration number 3707697. 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 next to 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') 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 15 in the Annual Report.
This is the first year in which the financial statements have been prepared under FRS102. There has been no material change in the accounting policies and so there has been no restatement of comparatives, other than in relation to monies held pending investment and current investments.
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 31 December 2015 has been classified as capital and has been included within gains on investments. |
|
|
2015 |
2014 |
|
|
£ |
£ |
|
Income from bank deposits |
78,334 |
118,350 |
|
|
|
|
|
Income from investments |
|
|
|
- from equities |
61,752 |
456,510 |
|
- from overseas based OEICs |
30,470 |
26,884 |
|
- from loan stock |
2,031,331 |
1,797,666 |
|
- from interest on preference share dividend arrears |
169 |
5,997 |
|
|
2,123,722 |
2,287,057 |
|
|
|
|
|
Other income |
- |
10,516 |
|
|
|
|
|
Total income |
2,202,056 |
2,415,923 |
|
|
|
|
|
Total income comprises |
|
|
|
Dividends |
92,222 |
483,394 |
|
Interest |
2,109,834 |
1,922,013 |
|
Other income |
- |
10,516 |
|
|
2,202,056 |
2,415,923 |
|
Income from investments comprises |
|
|
|
Listed overseas securities |
30,470 |
26,884 |
|
Unlisted UK securities |
61,921 |
462,507 |
|
Loan stock interest |
2,031,331 |
1,797,666 |
|
|
2,123,722 |
2,287,057 |
|
Total loan stock interest due but not recognised in the year was £184,887 (2014: £112,212). |
||
|
|
|
|
4 Investment Adviser's fees and other expenses
|
All expenses are accounted for on an accruals basis. |
a) Investment Adviser's 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. |
|
|
2015 |
2014 |
||||
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
|
Mobeus Equity Partners LLP |
303,725 |
911,176 |
1,214,901 |
275,054 |
825,163 |
1,100,217 |
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 £115,440 per annum, the latter being subject to indexation, if applicable. In 2013, Mobeus agreed to waive such further increases due to indexation, until otherwise agreed with the Board.
The Investment Adviser 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 Adviser. The excess expenses during the year amounted to £nil (2014: £nil).
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 to companies in which the Company invests. The Investment Adviser received fees totalling £361,416 (2014: £341,973) during the year ended 31 December 2015, being £210,253 (2014: £178,682) for arrangement fees, and £151,163 (2014: £163,291) for acting as non-executive directors on a number of investee company boards. These fees attributable to MIG 4 VCT are based upon the investment allocation to MIG 4 VCT which applied at the time of each investment. These figures are not part of these financial statements.
b) Incentive fee agreement
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 Adviser will be entitled to receive a performance related incentive fee of 20% of the dividends paid in excess of a "Target Rate" comprising firstly, an annual dividend target of 6% of the net asset value per share at 5 April 2007 (indexed each year for RPI) and secondly a requirement that any cumulative shortfalls below the 6 per cent hurdle must be made up in later years. Payment of a fee is also conditional upon the average Net Asset Value ("NAV") per share for each such year equalling or exceeding Base NAV per share for the same year. The performance fee will be payable annually. No incentive fee is payable to date.
c) Offer for Subscription fees
|
|
2015 £million |
2014 £million |
|
Funds raised across four Mobeus advised VCTs |
39.00 |
33.70 |
|
Of which funds raised by MIG 4 VCT |
6.00 |
8.43 |
|
|
|
|
|
Offer costs at 3.25% of amounts subscribed to MIG 4 VCT |
£0.19* |
£0.27* |
*All costs associated with the Offer were met out of these fees, excluding any payments to advisers facilitated under the terms of the Offer.
d) Other expenses
|
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. |
|
|
2015 |
2014 |
|
|
£ |
£ |
|
Directors' remuneration (including NIC of £9,327 (2014: £9,370)* |
99,827 |
99,870 |
|
IFA trail commission |
77,227 |
70,796 |
|
Broker's fees |
12,000 |
12,000 |
|
Auditor's fees - Audit of Company |
28,320 |
27,000 |
|
- audit related assurance services - note ii) |
4,920 |
4,320 |
|
- tax compliance services - note ii) |
6,345 |
3,000 |
|
Registrar's fees |
45,154 |
43,743 |
|
Printing |
34,196 |
37,247 |
|
Legal & professional fees |
6,117 |
20,049 |
|
VCT monitoring fees |
9,000 |
10,800 |
|
Directors' insurance |
9,248 |
8,056 |
|
Listing and regulatory fees |
39,132 |
40,832 |
|
Sundry |
1,914 |
2,407 |
|
Running costs |
373,400 |
380,120 |
|
Provision against loan interest receivable ( see note iii) |
28,756 |
- |
|
Other expenses |
402,156 |
380,120 |
Note i): See analysis in the Directors' Remuneration table in the Report and Accounts, which excludes the NIC above. The key management personnel are the three non-executive directors. The Company has no employees.
Note ii): The Directors consider the Auditor was best placed to provide the audit related services and tax compliance services disclosed above. The Audit Committee reviews the nature and extent of these services to ensure that audit independence is maintained.
Note iii): Provision against loan interest receivable above of £28,756 (2014:£nil), is a provision made against loan stock interest recognised in previous years.
5 Taxation on profit 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 Investment Adviser's 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. |
|
|
2015 |
2014 |
||||
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
|
a) Analysis of tax charge: |
|
|
|
|
|
|
|
UK Corporation tax on profits for the year |
184,209 |
(184,209) |
- |
169,152 |
(169,152) |
- |
|
Total current tax charge |
184,209 |
(184,209) |
- |
169,152 |
(169,152) |
- |
|
Corporation tax is based on a rate of 20% (2014: 20%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
b) Profit on ordinary activities before tax |
1,496,175 |
3,485,431 |
4,981,606 |
1,760,749 |
5,210,227 |
6,970,976 |
|
Profit on ordinary activities multiplied by company rate of corporation tax in the UK of 20% (2014: 20%) |
299,235 |
697,086 |
996,321 |
352,150 |
1,042,045 |
1,394,195 |
|
Effect of: |
|
|
|
|
|
|
|
UK dividends not taxable |
(12,350) |
- |
(12,350) |
(91,302) |
- |
(91,302) |
|
Unrealised gains not taxable |
- |
(218,857) |
(218,857) |
- |
(224,714) |
(224,714) |
|
Realised gains not taxable |
- |
(660,464) |
(660,464) |
- |
(982,364) |
(982,364) |
|
Marginal relief |
1,974 |
(1,974) |
- |
4,119 |
(4,119) |
- |
|
Losses brought forward |
(104,650) |
- |
(104,650) |
(97,761) |
- |
(97,761) |
|
Unrelieved expenditure |
- |
- |
- |
1,946 |
- |
1,946 |
|
Actual current tax charge |
184,209 |
(184,209) |
- |
169,152 |
(169,152) |
- |
Tax relief relating to Investment Adviser 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 (2014: £nil). There is an unrecognised deferred tax asset of £34,737 (2014: £159,755).
|
6 Dividends paid and payable
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.
7 Basic and diluted earnings per share
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.
8. Investment at fair value
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
The most critical estimates, assumptions and judgments 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 "fair value through profit and loss" ("FVTPL") and measured in accordance with the International Private Equity and Venture Capital Valuation ("IPEVCV") 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 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, 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) 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 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 that 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 multiple or cost less impairment basis is not appropriate and overriding factors apply, discounted cash flow or net asset valuation bases may be applied.
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. None were identified in the year. |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Details of investment transactions such as disposal proceeds, valuation movements cost and carrying value at the end of previous year are contained in the Investment Portfolio Summary.
Note a) The major components of the increase in unrealised valuations of £1,094,287 in the year were increases of £752,934 in Virgin Wines Holding Company Limited, £680,303 in Jablite Holdings Limited, and £426,881 in Tharstern Group Limited. These gains were partly offset by falls of £711,220 in Turner Topco Limited (trading as ATG Media), £440,153 in Media Business Insight Holdings Limited and £289,683 in Gro-Group Holdings Limited.
The decrease in unrealised valuations of the loan stock investments above reflects the changes in the entitlement to loan premiums, and/or in the underlying enterprise value of the investee company. The increase does not arise from assessments of credit risk or market risk upon these instruments.
Note b) During the year, permanent impairments of the cost of investments have reduced from £1,270,832 to £1,120,730. The reduction of £150,102 is due to an investee company being dissolved in the year, which removes the cost and related impairment of this investment from these accounts.
Reconciliation of investment transactions to Statement of Cash Flows
The cash flow from investment proceeds shown above of £7,488,990 differs from the sale proceeds shown in the Statement of Cash flows of £7,239,803, by £249,187. This is due to £303,221 of deferred cash sale proceeds not received until after the year-end, against which £56,034 of deferred cash sale proceeds were received during the year relating to a prior year.
Purchases above of £16,809,763 are greater than that shown in the Statement of Cash Flows of £16,809,665 by £98. This relates to the purchase of shares via the exercising of options in an investee company, which completed in the year.
9 Annual Report
The Annual Report for the year ended 31 December 2015 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.
10 Annual General Meeting
The Annual General Meeting of the Company will be held at 12 noon on Friday, 13 May 2016 at 33 St James's Square, London, SW1Y 4JS.
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 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
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