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 2016
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 2016
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Net Asset Value ("NAV") Total Return per share of 0.6% for the year. |
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§ |
Share Price Total Return per share of 3.3% for the year. |
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§ |
Shareholders received an interim dividend of 2.00 pence per share in September 2016. A second interim dividend of 7.00 pence per share has been declared and was paid on 17 March 2017. This brought dividends paid per share in respect of the year to 9.00 pence and cumulative dividends paid per share to date to 80.20 pence. |
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£3.14 million was invested during the year into five growth capital investments. |
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A total of £2.10 million cash proceeds was received primarily from loan stock repayments. |
Cumulative total shareholder return per share (NAV basis)*
The longer term trend of performance on this measure is shown in the chart below:-
|
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 2016 |
52.76 |
107.57 |
73.20 |
180.77 |
|
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 |
*Cumulative total shareholder return (NAV basis) is net asset value plus cumulative dividends paid since 1999 to 31 December 2016. The cumulative dividend figure of 73.20 pence per share excludes the payment of the second interim dividend after the year end on 17 March 2017, of 7.00 pence per share. Payment of this dividend has the effect of reducing NAV per share by the equivalent amount.
The net asset value (NAV) per share as at 31 December 2016 was 107.57 pence.
The table 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 www.mig4vct.co.uk, where they can be downloaded by clicking on "table" under "Reviewing the performance of your investment" on the home page.
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 2016.
Overview
2016 represented a year of significant change for your Company. It was the first year of operating after the amendments introduced by the 2015 Finance Act "New VCT Rules".
Because of the magnitude of the changes, shareholders were asked to approve a new investment policy, which they did at last year's annual general meeting in May, 2016.
The Investment Adviser has expanded its investment team to address the new requirements, and has started making investments under the new rules.
Six new investments have already been completed under the New VCT Rules, which is encouraging.
The portfolio held up well despite the uncertainties of the Brexit campaign, which included some unduly pessimistic views advanced by the then government and its allies.
Performance
The NAV total return per share for the year was 0.6 per cent. (2015: 8.2 per cent.) (being the closing NAV plus dividends paid in the year divided by the opening NAV). The small rise in NAV return over the year was primarily due to a positive revenue return. The share price total return was 3.3 per cent. (2015: 11.7 per cent.). These figures are after adding back a total of 11.00 pence of dividends paid in the year. The NAV at 31 December 2016 was 107.57 pence. For details of these calculations, please refer to the Strategic Report in the Annual Report.
For more details on the longer-term performance of your investment in the Company, please consult the Investor Performance Appendix on the Company's website.
Dividends
Your Directors declared a second interim dividend in respect of 2016 of 7.00 pence (2015: final of 9.00 pence) per share, comprising 1.00 pence from income (2015: 1.50 pence) and 6.00 pence from capital (2015: 7.50 pence) of which 6.00 pence was paid from the Company's Special Distributable Reserve. This dividend was paid on 17 March 2017 to shareholders on the Register on 17 February 2017. This brought dividends paid in respect of the year ended 31 December 2016 to 9.00 pence (2015: 11.00 pence) per share and cumulative dividends paid since inception to 80.20 pence (2015: 71.20 pence) per share. In view of the second interim dividend paid in March, the Board is not proposing the payment of a final dividend in respect of 2016.
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 in the Annual Report.
Investment Portfolio
Partly as a consequence of the move to target younger and smaller companies seeking growth capital funding in order to comply with the New VCT Rules, the amount of new investment completed by the Company was lower in 2016 than 2015. These New VCT Rules contain more restrictive investment criteria which, as anticipated in my Statement last year, reduced new investment by the Company in the first half of the year (and across the whole VCT generalist sector), while the Board and the Investment Adviser adapted to the changes.
It was thus pleasing that the last quarter of the year saw a significant pick up in the pace of new investment such that a total of £3.14 million (2015: £8.48 million) was invested in five (2015: seven) companies during the year plus £0.58 million in another company just after the year-end. While this level of investment is lower than in previous years, it compares favourably to levels achieved elsewhere, as Mobeus advised VCTs invested around a sixth of the total invested by the VCT generalist sector in 2016. These investments were made into Redline, MPB, BookingTek, Biosite, Preservica, an existing portfolio company, and finally into Tapas Revolution just after the year-end. The average transaction size of these new investments is less than half that of last year, reflecting the change in focus to younger, smaller companies as required by the New VCT Rules. Further details of all of these transactions are included in the Investment Adviser's Review in the Annual Report.
In addition to these new investments, the Investment Adviser is reporting a growing pipeline of opportunities, from which we expect the rate of new investment to increase. The Board remains of the view that the changes in the VCT legislation clearly restrict the universe of companies that the Company can invest in, but has been encouraged by the numbers and quality of the opportunities identified by the Investment Adviser so far. The Board believes that such earlier stage investments will carry higher risk alongside potentially higher, but more variable, capital returns. It also believes that loan stock income will represent a lower proportion of total returns from such investments. Transactions to date have sought to mitigate these factors by use of the capital structure applied to that investment.
Shareholders should note that, at the year-end but adjusted for the inclusion of Tapas, 88.1% of the value of the investment portfolio (excluding companies preparing to trade) is still held in investments made under the previous MBO-focused strategy. Overall, performance of this principal portion of the portfolio remained solid, and should continue to yield annual income returns to shareholders, supplemented by capital returns as they are realised over time. Net proceeds totalling £2.10 million were received during the year under review. Of this total, £0.58 million was received in the form of realisation proceeds, of which £0.38 million was deferred consideration arising from the previous year's realisations of Focus and Westway. The balance of net proceeds of £1.52 million comprised loan repayments from companies held within the portfolio. Unless a compelling case for an exit opportunity is presented, the Board and the Investment Adviser would prefer to develop this portfolio to further maturity.
During the year the value of the opening portfolio increased by £0.38 million of realised gains (net of transaction costs) and fell by £0.38 million of net unrealised falls in valuations. On a like for like basis, the value of the portfolio was therefore maintained over the year. The portfolio under management at the year-end was valued at £38.93 million (2015: £38.72 million) representing 101.5 per cent. of cost.
Full details of all of these transactions and of the new investment following the year end are included in the Investment Review.
Industry and regulatory developments
HMRC published its guidance on the New VCT Rules in May 2016 which has provided further information on the new requirements at a detailed level. There remain several areas where further clarity is still required and the VCT, the Investment Adviser and the VCT industry as a whole, are continuing to work constructively with Government departments, through its industry bodies, to develop an improved practical approach. Notwithstanding the EU Referendum result, the Board is working on the assumption that there will be no further changes to the existing VCT legislation in the near future.
A summary of the current VCT regulations is included in the Annual Report.
Fundraising and liquidity
The Board continues to hold £7.51 million in a selection of money market funds with AAA credit ratings as at the year-end. The balance of the cash and current asset investments of £5.66 million is held in deposit accounts in a number of well-known financial institutions across a range of maturities. Alternative ways of prudently investing cash continue to be sought, although the risk of a loss of capital remains the overriding consideration. In addition, there is £8.33 million invested in companies preparing to trade at the year-end.
The Board will consider additional fundraising in the future in line with its liquidity and new investment requirements, together with an assessment of the effects of possible future legislative changes.
Audit tender
New legislation has been introduced in the UK on audit firm rotation, resulting from the new European Audit Regulation Directive, making it mandatory for listed companies to undergo a tender process for the audit of their company at least every ten years. An audit firm can, however, be appointed for up to twenty years provided a public tender process has been carried out after ten years. The Company therefore held an audit tender process over the summer. The Board, on the recommendation of the Audit Committee, has decided to recommend the reappointment of BDO LLP as the Company's external auditor. For further information on the audit tender, please see the Audit Committee section of the Corporate Governance Statement in the Annual Report.
Share buybacks
During the year ended 31 December 2016, the Company bought back 0.5 per cent. of the issued share capital of the Company which was subsequently cancelled. Further details of the purchases are included in the Directors' Report in the Annual Report.
Shareholder Communications
The annual shareholder event was held on Tuesday 24 January 2017 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 from investee companies. There were separate day-time and evening sessions, and feedback from those who attended indicated that they found it informative and worthwhile.
Annual General Meeting
The Annual General Meeting of the Company will be held at 12 noon on Monday, 8 May 2017 at a new venue, The Clubhouse, 8 St James's Square, London SW1Y 4JU. 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 also be found in the Directors' Report in the Annual Report.
Future prospects
In the context of a global economy that is facing increased uncertainty following the UK's Referendum vote and the US Presidential Election, the outlook for the UK economy in 2017 remains somewhat unclear, although not as doom laden as some forecasts have predicted. This will probably continue as the EU exit negotiations are unlikely to be completed rapidly. In this environment, we will continue our measured and cautious approach to investment appraisal and with our active engagement with existing portfolio companies.
The portfolio has a solid foundation of investments made under the previous MBO strategy, the majority of which are mature and profitable companies providing consistent income returns. Over the coming years, this portfolio mix will change towards younger growth capital companies. Your Board remains confident that, with the Investment Adviser's expanded management team, interesting investment opportunities will continue to be identified and developed. Notwithstanding the global political and economic uncertainties mentioned above, the Board and the Investment Adviser remain optimistic regarding the future prospects of the Company.
Finally, I would like to express my thanks to all shareholders for their continuing support of the Company.
Christopher Moore Chairman
22 March 2017
Investment Review
Portfolio Review
This has been a year of continued progress within the portfolio. The exceptional level of disposals in 2014 and 2015 has reduced the age of the remaining portfolio such that 57 % by value (44 % by number) of the current portfolio comprises investments made since the start of 2014. The latter half of the year has seen investment in five (plus one just after the year-end) new growth capital opportunities, which represent 12.0% of the portfolio. Many of the MBO portfolio companies are generating cash, have made repayments of their loan stock and are trading well.
Having experienced an unprecedented number of profitable realisations in 2014 and 2015, the Investment Adviser does not anticipate this level to be repeated in the near to medium term. Shareholders will note that the year-end valuation of the portfolio is only just above its cost. As the portfolio now has a younger profile, time is required for these more recent investments to grow in value. Unless a compelling offer is made for one of our investments, we plan to hold those that are performing, that are generating income, and that show potential to grow their value further.
Investments by market sector at valuation
Investments remain spread across a number of sectors, primarily in support services, software and computer services and general retailers.
Impact of Changes in VCT Rules
The amendments to VCT legislation were a significant change for the VCT industry and required all VCTs to reconsider the type of investments that VCTs can make in future. The Investment Adviser has responded to this by adding experienced growth capital investment resource to its existing team. Along with other investment advisers in the industry, Mobeus has focused on gaining familiarity with the practical implications of the rules on the types of investment opportunities it can now consider for VCT investment. That process is continuing, including discussions with HMRC in response to their draft Guidance to the legislation. The Investment Adviser is also gaining additional practical experience from assessing prospective opportunities at a detailed level and from continuing to seek HMRC Advance Assurance in respect of each new investment proposal.
There has been an inevitable initial slowdown in new deal activity, resulting from both the more restrictive criteria for VCT investment under the new VCT rules and delays at HMRC in processing applications for Advance Assurance. Independent research shows that as at 31 December 2016 the amount of completed new investment across the generalist VCT Industry for 2016 had fallen by 30% and 49% compared to the same periods in 2015 and 2014 respectively.
Impact of Brexit
It is too early to comment on the eventual impact of the UK leaving the EU upon the portfolio, whatever form that departure takes. Whilst the SME sector will not be immune to any general downturn in the UK economy, the portfolio has historically proved to be resilient and we believe will continue to be so. Portfolio companies with foreign currency exposure routinely cover this exposure and any negative effects of a longer term adjustment in exchange rate will not emerge for some months. Some portfolio companies will be beneficiaries of a weaker pound.
New Investment
Against this background, we are therefore pleased to have made six new investments under the New VCT Rules. A total of £3.14 million (including £0.84 million via a company preparing to trade) was invested during the year under review. This comprised new investments into Redline, MPB, BookingTek, Biosite and Preservica, an existing portfolio company. Just after the year-end, £0.58 million was invested into Tapas Revolution. Further details are set out below.
Principal new investments in the year
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Company |
Business |
Date of Investment |
Amount of new investment (£m) |
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Redline |
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February 2016 |
0.84* |
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Redline is a market leader in the provision of security consultancy and training services to airlines, governments, airports and global distribution companies. Redline currently operates predominantly in the aviation security market and is at the forefront of counter-terrorism training and services. The investment is being 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 2016 show turnover of £5.01 million and underlying profit before interest, tax and amortisation of goodwill of £1.04 million. |
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* £1.13 million previously 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. Pound FM Consultants Limited has subsequently changed its name to Redline Worldwide Limited. |
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MPB Group |
Online marketplace for used photo and video equipment |
June 2016 |
0.47 |
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MPB is Europe's leading online marketplace for used photo and video equipment. Based in Brighton, their custom-designed pricing technology enables MPB to offer both buy and sell services through the same platform and offers a one-stop shop for all its customers. The investment is to fund expansion of its platform globally, with launches into both the US and German markets. The company's latest audited accounts for the year ended 31 March 2016 show turnover of £8.37 million and profit before interest, tax and amortisation of goodwill of £0.001 million.
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BookingTek |
Direct booking software for hotels |
October 2016 |
0.51 |
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Based in London, BookingTek has developed software that enables hotels to reduce their reliance on third-party booking systems by means of a real-time booking platform for meeting rooms and restaurant reservations. The investment is to support further growth. The company's latest audited accounts for the year ended 31 July 2015 show turnover of £2.19 million and loss before interest, tax and amortisation of goodwill of £0.33 million.
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Biosite |
Workforce management |
November 2016 |
0.64 |
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Based in the Midlands, Pattern Analytics (Biosite) is a fast growing provider of biometric access control and software-based workforce management solutions for the construction sector. The investment will support the expansion of the team to facilitate the development of new site-management tools to enable managers to oversee all aspects of a construction project. The company's latest accounts for the year ended 31 July 2016 show turnover of £4.69 million and profit before interest, tax and amortisation of goodwill of £0.49 million.
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Further investment into existing portfolio companies in the year
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Company |
Business |
Date of investment |
Amount of new investment (£m) |
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Preservica |
Sellers of proprietary digital archiving software |
December 2016 |
0.68 |
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Based in Oxfordshire, Preservica has developed the world's leading software for the long-term preservation of digital records, ensuring that long-term digital content is accessible, irrespective of changes in future technology. Previously a subsidiary of Tessella it was demerged prior to the sale of Tessella in December 2015. The additional investment was made to provide development funding to the company. The company's latest accounts for the year ended 31 March 2016 show turnover of £1.78 million and profit before interest, tax and amortisation of goodwill of £0.16 million. |
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New investment post year-end
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Company |
Business |
Date of investment |
Amount of new investment (£m) |
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Tapa Revolution |
Restaurant |
January 2017 |
0.58 |
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Based in London, Ibericos Etc. Limited (which trades as Tapas Revolution) is a leading Spanish restaurant chain in the casual dining sector focusing on shopping centres sites with high footfall. Having opened its first restaurant in Shepherd's Bush Westfield, the business has since opened a further four restaurants. The investment provided growth capital to a high-calibre team with significant restaurant roll-out experience who have spent the past five years building and refining their offer and are now well placed to capitalise on a strong pipeline of new sites. The company's latest accounts for the year ended 25 October 2015 show a turnover of £2.37 million and loss before interest, tax and amortisation of goodwill of £0.16 million. |
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Realisations
There were no full realisations during the year ended 31 December 2016, although the Company received cash proceeds of £2.10 million, of which £1.52 million was in the form of loan stock repayments (detailed below), deferred consideration of £0.38 million and other receipts of £0.20 million.
Loan stock repayments
Loan stock repayments totalled £1.52 million for the year. These are summarised below:-
|
Company |
Business |
Month |
Amount (£000's) |
|
Ward Thomas |
Logistics, storage and removals business |
January |
837 |
|
Barham |
Company preparing to trade |
December |
454 |
|
Pound FM |
Company preparing to trade |
February |
111 |
|
Motorclean |
Vehicle cleaning and valeting services |
February |
64 |
|
Jablite |
Expanded polystyrene products |
April |
57 |
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Total |
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|
1,523 |
Investment Portfolio Summary
at 31 December 2016
|
|
Total Cost at 31 Dec 2016 £ |
Total Valuation at 31 Dec 2015 £ |
Total Valuation at 31 Dec 2016 £ |
% of equity held |
% of Portfolio by value |
|
Mobeus Equity Partners LLP |
|
|
|
|
|
|
Virgin Wines Holding Company Limited Online wine retailer |
1,930,813 |
2,784,729 |
2,685,675 |
9.7% |
6.9% |
|
Tovey Management Limited (trading as Access IS) Provider of data capture and scanning hardware |
2,469,013 |
2,469,013 |
2,601,197 |
10.1% |
6.7% |
|
Entanet Holdings Limited Wholesale communications provider |
2,167,662 |
3,338,043 |
2,254,135 |
13.1% |
5.8% |
|
Media Business Insight Holdings Limited A publishing and events business focused on the creative production industries |
2,722,760 |
2,282,607 |
2,218,152 |
15.7% |
5.7% |
|
ASL Technology Holdings Limited Printer and photocopier services |
1,933,591 |
2,234,937 |
2,082,980 |
9.5% |
5.4% |
|
Manufacturing Services Investment Limited Company seeking to carry on a business in the manufacturing sector |
2,016,900 |
2,016,900 |
2,016,900 |
11.4% |
5.2% |
|
Fullfield Limited (trading as Motorclean) Vehicle cleaning and valet services |
1,131,444 |
1,379,974 |
1,459,525 |
9.8% |
3.7% |
|
Gro-Group Holdings Limited Baby sleep products |
1,577,977 |
1,138,860 |
1,361,293 |
10.7% |
3.5% |
|
Turner Topco Limited (trading as ATG Media) Publisher and online auction platform operator |
1,529,075 |
828,610 |
1,330,326 |
3.7% |
3.4% |
|
CGI Creative Graphics International Limited Vinyl graphics to global automotive, recreation vehicle and aerospace markets |
1,449,746 |
1,179,872 |
1,311,572 |
6.3% |
3.4% |
|
Veritek Global Holdings Limited Maintenance of imaging equipment |
1,620,086 |
1,659,063 |
1,283,041 |
10.3% |
3.3% |
|
Tharstern Group Limited MIS & Commercial print software solutions |
1,091,886 |
1,518,767 |
1,217,396 |
12.2% |
3.1% |
|
EOTH Limited (trading as Equip Outdoor Technologies) Distributor of branded outdoor equipment and clothing |
951,471 |
1,008,235 |
1,197,945 |
1.7% |
3.1% |
|
Vian Marketing Limited (trading as Tushingham Sails) Design, manufacture and sale of stand-up paddleboards and windsurfing sails |
899,074 |
899,074 |
1,188,439 |
7.1% |
3.1% |
|
Backhouse Management Limited Company seeking to carry on a business in the motor sector |
1,134,000 |
1,134,000 |
1,134,000 |
11.3% |
2.9% |
|
Chatfield Services Limited Company seeking to carry on a business in the retail sector |
1,134,000 |
1,134,000 |
1,134,000 |
11.3% |
2.9% |
|
Creasy Marketing Services Limited Company seeking to carry on a business in the textile sector |
1,134,000 |
1,134,000 |
1,134,000 |
11.3% |
2.9% |
|
McGrigor Management Limited Company seeking to carry on a business in the pharmaceutical sector |
1,134,000 |
1,134,000 |
1,134,000 |
11.3% |
2.9% |
|
Hollydale Management Limited Company seeking to carry on a business in the food sector |
1,095,500 |
1,095,500 |
1,095,500 |
11.0% |
2.8% |
|
RDL Corporation Limited Recruitment consultants for the pharmaceutical, business intelligence and IT industries |
1,000,000 |
622,056 |
926,025 |
9.1% |
2.5% |
|
The Plastic Surgeon Holdings Limited Snagging and finishing of domestic and commercial properties |
458,935 |
840,837 |
902,329 |
11.4% |
2.3% |
|
Bourn Bioscience Limited Management of In-vitro fertilisation clinics |
1,132,521 |
895,428 |
864,082 |
7.7% |
2.2% |
|
Redline Worldwide Limited (formerly Pound FM Consultants Limited)1 Provider of security services to the aviation industry and other sectors |
838,377 |
1,134,000 |
838,377 |
6.7% |
2.2% |
|
Master Removers Group Limited (trading as Anthony Ward Thomas, Bishopsgate and Aussie Man & Van) A specialist logistics, storage and removals business |
511,855 |
1,485,897 |
734,387 |
4.3% |
1.9% |
|
Barham Consulting Limited Company seeking to carry on a business in the catering sector |
861,840 |
1,134,000 |
680,400 |
11.3% |
1.7% |
|
Preservica Limited2 Seller of proprietary digital archiving software |
679,617 |
- |
679,617 |
4.6% |
1.7% |
|
Pattern Analytics Limited (trading as Biosite) Workforce management and security services for the construction industry |
640,171 |
- |
640,171 |
4.8% |
1.6% |
|
Jablite Holdings Limited (formerly Duncary 16 Limited) Manufacturer of expanded polystyrene products |
376,083 |
1,097,406 |
606,998 |
9.1% |
1.6% |
|
BookingTek Limited Software for hotel groups |
512,137 |
- |
512,137 |
3.4% |
1.3% |
|
MPB Group Limited Online marketplace for used photographic equipment |
471,216 |
- |
471,216 |
5.3% |
1.2% |
|
Omega Diagnostics Group plc3 In-vitro diagnostics for food intolerance, auto-immune diseases and infectious diseases |
200,028 |
258,347 |
291,682 |
1.5% |
0.7% |
|
Blaze Signs Holdings Limited Manufacturer and installer of signs |
190,631 |
356,486 |
280,944 |
5.7% |
0.7% |
|
Vectair Holdings Limited Designer and distributor of washroom products |
24,732 |
123,079 |
183,729 |
2.1% |
0.5% |
|
Racoon International Holdings Limited Supplier of hair extensions, hair care products and training |
484,347 |
77,542 |
38,771 |
10.5% |
0.1% |
|
Lightworks Software Limited Provider of software for CAD and CAM vendors |
9,329 |
24,858 |
34,926 |
4.2% |
0.1% |
|
BG Training Limited City-based provider of specialist technical training |
14,167 |
14,167 |
14,167 |
0.0% |
0.0% |
|
Newquay Helicopters (2013) Limited (in creditors' voluntary liquidation) Helicopter service operator |
12,342 |
21,250 |
- |
2.5% |
0.0% |
|
CB Imports Group Limited (trading as Country Baskets) Importer and distributor of artificial flowers, floral sundries and home décor products |
175,000 |
- |
- |
5.8% |
0.0% |
|
Watchgate Limited Holding company |
1,000 |
- |
- |
33.3% |
0.0% |
|
Total |
37,717,326 |
38,455,537 |
38,540,034 |
- |
99.0% |
|
Former Elderstreet Private Equity Portfolio |
|
|
|
|
|
|
Cashfac Limited Provider of virtual banking application software solutions to corporate customers |
260,101 |
187,108 |
288,932 |
2.9% |
0.7% |
|
Sparesfinder Limited Supplier of industrial spare parts online |
250,854 |
46,977 |
64,067 |
2.0% |
0.2% |
|
Sift Group Limited Developer of business-to-business internet communities |
135,391 |
27,048 |
33,401 |
1.3% |
0.1% |
|
Total |
646,346 |
261,133 |
386,400 |
- |
1.0% |
|
Investment Adviser's Total |
38,363,672 |
38,716,670 |
38,926,434 |
- |
100.0% |
Notes
1 £1,134,000 invested in Pound FM Consultants Limited, a company preparing to trade, was used for the investment into Redline Assured Security Limited, which resulted in a net repayment of £295,623. Pound FM subsequently changed its name to Redline Worldwide Limited..
2 A further £679,617 was invested into Preservica Limited, adding to the Company's existing shareholding that was received as part of the disposal of Tessella Holdings Limited in December 2015.
3 Quoted on AIM.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year and the Directors have elected to prepare the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss 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, a Directors' Report and Directors' Remuneration Report which comply with the
requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial Statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the Financial Statements contained therein.
Directors' responsibilities pursuant to Disclosure and Transparency Rule 4 of the UK Listing Authority
The Directors confirm to the best of their knowledge that:
(a) The Financial Statements, which have been prepared in accordance with UK Generally Accepted Accounting Practice, gave a true and fair view of the assets, liabilities, financial position and the profit of the Company.
(b) The Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
Having taken advice from the Audit Committee, the Board considers the Annual Report and Financial Statements, taken as a whole, as fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
Neither the Company nor the Directors accept any liability to any person in relation to the Annual Report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A and schedule 10A of the Financial Services and Markets Act 2000.
The names and functions of the Directors are stated in the Annual Report.
For and on behalf of the Board:
Christopher Moore
Chairman
22 March 2017
FINANCIAL STATEMENTS
Income Statement
for the year ended 31 December 2016
|
Year ended 31 December 2016 Year ended 31 December 2015 |
|||||||
|
|
Notes |
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
£ |
£ |
£ |
£ |
£ |
£ |
|
Unrealised (losses)/gains on investments |
8 |
- |
(377,677) |
(377,677) |
- |
1,094,287 |
1,094,287 |
|
Realised gains on investments |
8 |
- |
381,087 |
381,087 |
- |
3,302,320 |
3,302,320 |
|
Income |
3 |
2,019,579 |
- |
2,019,579 |
2,202,056 |
- |
2,202,056 |
|
Investment Adviser's fees |
4a |
(304,628) |
(913,884) |
(1,218,512) |
(303,725) |
(911,176) |
(1,214,901) |
|
Other expenses |
4c |
(370,899) |
- |
(370,899) |
(402,156) |
- |
(402,156) |
|
Profit/(loss) on ordinary activities |
|
|
|
|
|
|
|
|
before taxation |
|
1,344,052 |
(910,474) |
433,578 |
1,496,175 |
3,485,431 |
4,981,606 |
|
Taxation on profit/(loss) on ordinary activities |
5 |
(212,864) |
182,776 |
(30,088) |
(184,209) |
184,209 |
- |
|
Profit/(loss) for the year and total |
|
|
|
|
|
|
|
|
comprehensive income |
|
1,131,188 |
(727,698) |
403,490 |
1,311,966 |
3,669,640 |
4,981,606 |
|
Basic and diluted earnings per ordinary share |
7 |
2.32p |
(1.49)p |
0.83p |
2.74p |
7.67p |
10.41p |
The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the unrealised (losses)/gains and realised gains on investments and the proportion of the Investment Adviser's fee charged to capital.
The total column is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS"). In order to better reflect the activities of a VCT and in accordance with the Statement of Recommended Practice ("SORP") issued in November 2014 (updated in January 2017) by the Association of Investment Companies ("AIC"), supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of profit attributable to equity shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 Income Tax Act 2007.
All the items in the above statement derive from continuing operations of the Company. No operations were acquired or discontinued in the year.
Balance Sheet
As at 31 December 2016
|
|
Notes |
31 December 2016 £ |
31 December 2015 £ |
|
Fixed assets |
|
|
|
|
Investments at fair value |
8 |
38,926,434 |
38,716,670 |
|
Current assets |
|
|
|
|
Debtors and prepayments |
|
860,011 |
561,950 |
|
Current asset investments |
|
9,511,810 |
14,619,207 |
|
Cash at bank |
|
3,662,074 |
3,386,635 |
|
|
|
14,033,895 |
18,567,792 |
|
Creditors: amounts falling due within one year |
|
(205,173) |
(276,680) |
|
Net current assets |
|
13,828,722 |
18,291,112 |
|
Net assets |
|
52,755,156 |
57,007,782 |
|
Capital and reserves |
|
|
|
|
Called up share capital |
|
490,430 |
483,562 |
|
Share premium reserve |
|
13,540,891 |
12,629,944 |
|
Capital redemption reserve |
|
9,342 |
6,827 |
|
Revaluation reserve |
|
1,152,007 |
1,545,364 |
|
Special distributable reserve |
|
31,646,338 |
32,622,021 |
|
Realised capital reserve |
|
4,702,557 |
8,422,420 |
|
Revenue reserve |
|
1,213,591 |
1,297,644 |
|
Equity shareholders' funds |
|
52,755,156 |
57,007,782 |
|
Basic and diluted net asset value per ordinary share |
|
107.57p |
117.89p |
Statement of changes in equity
for the year ended 31 December 2016
|
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 2016 |
|
483,562 |
12,629,944 |
6,827 |
1,545,364 |
32,622,021 |
8,422,420 |
1,297,644 |
57,007,782 |
|
Comprehensive income for the year |
|
|
|
|
|
|
|
|
|
|
(Loss)/profit for the year |
|
- |
- |
- |
(377,677) |
- |
(350,021) |
1,131,188 |
403,490 |
|
Total comprehensive income for the year |
|
- |
- |
- |
(377,677) |
- |
(350,021) |
1,131,188 |
403,490 |
|
Contributions by and distributions to owners |
|
|
|
|
|
|
|
|
|
|
Dividends re-invested into new shares |
|
9,383 |
910,947 |
- |
- |
- |
- |
- |
920,330 |
|
Shares bought back |
|
(2,515) |
- |
2,515 |
- |
(244,575) |
- |
- |
(244,575) |
|
Dividends paid |
6 |
- |
- |
- |
- |
- |
(4,116,630) |
(1,215,241) |
(5,331,871) |
|
Total contributions by and distributions to owners |
|
6,868 |
910,947 |
2,515 |
- |
(244,575) |
(4,116,630) |
(1,215,241) |
(4,656,116) |
|
Other movements |
|
|
|
|
|
|
|
|
|
|
Realised losses transferred to special reserve (note a below) |
|
- |
- |
- |
- |
(731,108) |
731,108 |
- |
- |
|
Realisation of previously unrealised appreciation |
|
- |
- |
- |
(15,680) |
- |
15,680 |
- |
- |
|
Total other movements |
|
- |
- |
- |
(15,680) |
(731,108) |
746,788 |
- |
- |
|
At 31 December 2016 |
|
490,430 |
13,540,891 |
9,342 |
1,152,007 |
31,646,338 |
4,702,557 |
1,213,591 |
52,755,156 |
|
Notes a) The Special distributable reserve also 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 £731,108 to the special reserve from the realised capital reserve above is the total of realised losses incurred by the Company in the year. b) The realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the Company. |
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|
|
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|
Statement of changes in equity for the year ended 31 December 2015
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. In accordance with stating all investments at fair value through profit and loss (as recorded in note 8), all such movements through both revaluation and realised capital reserves are shown within the Income Statement for the year. Special distributable reserve - The cost of share buybacks is charged to this reserve. In addition, any realised losses on the sale or impairment of investments, and 75% of the Investment Adviser's fee expense, and the related tax effect, are transferred from the Profit and Loss Account reserve to this reserve. Capital dividends may also be paid from this reserve. Realised capital reserve - The following are accounted for in this reserve: • Gains and losses on realisation of investments; • Permanent diminution in value of investments; • Transaction costs incurred in the acquisition of investments; and • 75% of the Investment Adviser's fee expense and 100% of any performance incentive fee payable, together with the related tax effect to this reserve in accordance with the policies; • 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 dividends paid that are classified as revenue in nature.
Statement of cash flows For the year ended 31 December 2016 |
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|
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NOTES TO THE ACCOUNTS
for the year ended 31 December 2016
1 Company Information
Mobeus Income and Growth 4 VCT plc is a public limited company incorporated in England, registration number 03707697. 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 (updated in January 2017). The company has a number of financial instruments which are disclosed under FRS102 s11/12 as shown in note 15 of the Annual Report.
Comparatives
The comparatives to these Financial Statements are those disclosed in last year's Financial Statements other than in relation to Monies held pending investment, Current asset investments and Cash at bank. These comparative figures have been reallocated to reflect more accurately the nature of the underlying instruments. This is just a presentational change and has no effect on net assets.
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, based on this assessment, the redemption premium recognised in the year ended 31 December 2016 has been classified as capital and has been included within gains on investments.
|
|
|
2016 £ |
2015 £ |
|
Income from bank deposits |
48,157 |
78,334 |
|
Income from investments - from equities |
106,043 |
61,752 |
|
- from overseas based OEICs |
47,986 |
30,470 |
|
- from loan stock |
1,817,393 |
2,031,331 |
|
- from interest on preference share dividend arrears |
- |
169 |
|
|
1,971,422 |
2,123,722 |
|
Total income |
2,019,579 |
2,202,056 |
|
Total income comprises Dividends |
154,029 |
92,222 |
|
Interest |
1,865,550 |
2,109,834 |
|
|
2,019,579 |
2,202,056 |
|
Total loan stock interest due but not recognised in the year was £446,862 (2015: £184,887). |
|
|
4 Investment Adviser's fees and other expenses
|
All fees and 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. |
|
|
Revenue 2016 |
Capital 2016 |
Total 2016 |
Revenue 2015 |
Capital 2015 |
Total 2015 |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
|
Mobeus Equity Partners LLP |
304,628 |
913,884 |
1,218,512 |
303,725 |
911,176 |
1,214,901 |
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 (2015: £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 Equity Partners 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 £219,348 (2015: £365,994) during the year ended 31 December 2016, being £62,480 (2015: £210,253) for arrangement fees, and £156,868 (2015: £155,741) 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.
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, while any excess is not carried forward, whether a fee is payable for that year or not. Payment of a fee is also conditional upon the average Net Asset Value ("NAV") per share for each such year equalling or exceeding the average Base NAV per share for the same year. The performance fee will be payable annually. No incentive fee is payable to date.
b) Offer for Subscription fees
No funds were raised by an offer by the VCT in the year (2015: £6.00 million). Accordingly, no subscription fees were payable to Mobeus in the year (2015: £0.19 million) where all costs associated with the offer were met out of these fees by Mobeus, excluding any payments to financial advisers facilitated under the terms of the offer).
c) 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. |
|
|
2016 £ |
2015 £ |
|
Directors' remuneration (including NIC of £8,327 (2015: £9,327) (note i) |
98,827 |
99,827 |
|
IFA trail commission |
73,779 |
77,227 |
|
Broker's fees |
12,000 |
12,000 |
|
Auditor's fees - Audit of Company (excluding VAT) |
21,525 |
23,600 |
|
- audit related assurance services (excluding VAT) - note ii) |
4,203 |
4,100 |
|
- tax compliance services (excluding VAT) note ii) |
3,752 |
5,288 |
|
Registrar's fees |
40,518 |
45,154 |
|
Printing |
38,171 |
34,196 |
|
Legal & professional fees |
10,686 |
6,117 |
|
VCT monitoring fees |
9,600 |
9,000 |
|
Directors' insurance |
8,350 |
9,248 |
|
Listing and regulatory fees |
40,680 |
39,132 |
|
Sundry |
8,808 |
8,511 |
|
Running costs |
370,899 |
373,400 |
|
Provision against loan interest receivable (note iii) |
- |
28,756 |
|
Other expenses |
370,899 |
402,156 |
Note i): See analysis in 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 other services disclosed above. The Audit Committee reviews the nature and extent of these services to ensure that auditor independence is maintained.
Note iii) In the current year, there is no provision against loan interest recognised in previous years (2015: £28,756).
5 Taxation on profit/(loss) 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. |
|
|
2016 Revenue £ |
2016 Capital £ |
2016 Total £ |
2015 Revenue £ |
2015 Capital £ |
2015 Total £ |
|
a) Analysis of tax charge: |
|
|
|
|
|
|
|
UK Corporation tax on profits/(losses) for the year |
212,864 |
(182,776) |
30,088 |
184,209 |
(184,209) |
- |
|
Total current tax charge/(credit) |
212,864 |
(182,776) |
30,088 |
184,209 |
(184,209) |
- |
|
Corporation tax is based on a rate of 20% (2015: 20%) |
|
|
|
|
|
|
|
b) Profit/(loss) on ordinary activities before tax |
1,344,052 |
(910,474) |
433,578 |
1,496,175 |
3,485,431 |
4,981,606 |
|
Profit/(loss) on ordinary activities multiplied by company rate of corporation tax in the UK of 20% (2015: 20%) |
268,810 |
(182,095) |
86,715 |
299,235 |
697,086 |
996,321 |
|
Effect of: |
|
|
|
|
|
|
|
UK dividends not taxable |
(21,209) |
- |
(21,209) |
(12,350) |
- |
(12,350) |
|
Unrealised losses/(gains) not taxable |
- |
75,535 |
75,535 |
- |
(218,857) |
(218,857) |
|
Realised gains not taxable |
- |
(76,216) |
(76,216) |
- |
(660,464) |
(660,464) |
|
Marginal relief |
- |
- |
- |
1,974 |
(1,974) |
- |
|
Losses brought forward |
(34,737) |
- |
(34,737) |
(104,650) |
- |
(104,650) |
|
Actual tax charge |
212,864 |
(182,776) |
30,088 |
184,209 |
(184,209) |
- |
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 (2015: £nil). There is no unrecognised deferred tax asset in 2016 (2015: £34,737).
|
6 Dividends paid and payable
Amounts recognised as distributions to equity shareholders in the year:
* - £5,331,871 (2015: £4,774,771) disclosed above differs to that shown in the Statement of Cash Flows of £4,411,541 (2015: £3,963,579) due to £920,330 (2015: £811,192) of new shares issued as part of the DIS scheme.
Distributions to equity holders after the year-end:
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.
Recognised income distributions in the financial statements for the year
7 Basic and diluted earnings per share
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
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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 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 IPEV guidelines:
All investments are held at the price of a recent investment for an appropriate period where there is considered to have been no change in fair value. Where such a basis is no longer considered appropriate, each investment is considered as a whole on a 'unit of account' basis, alongside consideration of:
(i) Where a value is indicated by a material arms-length transaction by an independent third party in the shares of a company, this value will be used.
(ii) In the absence of i), and depending upon both the subsequent trading performance and investment structure of an investee company, the valuation basis will usually move to either:-
a) 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, to the extent that they are considered capital in nature, 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. |
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Movements in investments during the year are summarised as follows:
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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 in the Annual Report.
The increase 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.
Reconciliation of investment transactions to Statement of Cash flows
Purchases above of £2,303,141 are less than that shown in the Statement of Cash flows of £2,883,610, by £580,469. This relates to the Tapas Revolution investment that completed on 4 January 2017, and these funds were shown as part of debtors at the year end.
The cash flow from investment proceeds shown above of £2,096,787 differs from the sale proceeds shown in the Statement of Cash flows of £2,402,008, by £305,221. This is due to £305,221 of deferred cash sale proceeds, which were received during the year relating to a prior year.
Major movements in investments
Disposals of investment portfolio companies during the year were:
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|
Type |
Investment cost
£ |
Disposal proceeds
£ |
Valuation at 31 December 2015 £ |
Realised gain in year £ |
|
Master Removers Group Limited (formerly Leap New Co Limited) |
Loan repayment |
836,825 |
836,825 |
836,825 |
- |
|
Barham Consulting Limited |
Loan repayment |
272,160 |
453,600 |
453,600 |
- |
|
Focus Pharma Holdings Limited |
Deferred consideration |
- |
371,652 |
- |
371,652 |
|
Pound FM Consultants Limited |
Loan repayment and share buyback |
295,623 |
295,623 |
295,623 |
- |
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Others |
Loan payments/deferred consideration |
113,972 |
139,087 |
129,652 |
9,435 |
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1,518,580 |
2,096,787 |
1,715,700 |
381,087 |
The major components of the decrease in unrealised valuations of £377,977 in the year were decreases of £1,083,908 in Entanet Holdings Limited, £433,708 in Jablite Holdings Limited, and £376,022 in Veritek Global Limited. This fall was partly offset by increases of £501,716 in Turner Topco Limited (trading as ATG Media), £303,969 in RDL Corporation Limited and £289,365 in Vian Marketing Limited (trading as Tushingham Sails).
During the year, permanent impairments of the cost of investments have decreased from £1,120,730 to £589,245. The net reduction is due to an investee company being dissolved in the year, which removes the cost and related impairment of this investment from these accounts, and an impairment of the equity of another investee company.
9 Annual Report
The Annual Report for the year ended 31 December 2016 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 11.30 am on Monday 8 May 2017 at
The Clubhouse, 8 St James's Square, London, SW1Y 4JU.
Contact details for further enquiries:
Robert Brittain of Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by e-mail to vcts@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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