Final Results

The Income & Growth VCT plc 19 December 2012 Annual Financial Results of the Company for the Year ended 30 September 2012 Investment Objective The objective of The Income & Growth VCT plc is to provide investors with an attractive return, by maximising the stream of dividend distributions from the income and capital gains generated by a diverse and carefully selected portfolio of investments. The Company invests in companies at various stages of development. In some instances this may include investments in new and secondary issues of companies which may already be quoted on the Alternative Investment Market ("AiM") or the ICAP Securities and Derivatives Exchange (ISDX). Financial Highlights - This has been an exceptional year for disposals. A total of Â£26.64 million was realised, primarily through the sales of the VCT's investments in App-DNA, DiGiCo and Iglu. - Dividends totalling 24 pence per share were paid during the year. An interim dividend of 6 pence per share has also been declared. This payment will bring cumulative dividends paid to date to 34.5 pence per share (48.22 pence per original share invested for shareholders who invested in 2000/01). - Increase of 10.62% in net asset value (NAV) total return for the year to Shareholders. - Increase of 32.05% in share price total return for the year to Shareholders Performance Summary The net asset value (NAV) per share at 30 September 2012 was 109.62 pence The table below shows the recent past performance of funds raised in 2007/08 for the existing class of ordinary shares. Net NAV per Cumulative NAV total Share Share price assets Share dividends return to price total return (p) paid per Shareholders (p) 1 to (Â£m) Share (p) since launch Shareholders per Share (p) (p) Ordinary Shares As at 30 September 2012 50.55 109.62 28.50 138.12 97.00 125.50 As at 30 September 2011 49.15 120.794 4.50 125.29 91.63 96.13 As at 30 September 2010 36.60 99.01 0.50 99.51 87.00 87.50 1 Source: London Stock Exchange. Discount The Board's current intention is to continue with its existing buy-back policy with the objective of maintaining the discount to NAV at which the shares trade at 10% or less. The discount for the Company's Ordinary Shares at 30 September 2012 was 9.4% (2011: 10.9%) based on an NAV at 30 June 2012 of 107.11 pence. Dividends proposed An interim dividend of 6 pence per share comprising 3 pence from income and 3 pence from capital has been declared and will be paid on 8 February 2013 to Shareholders on the Register on 18 January 2013. Investments at valuation at 30 September 2012 Investments by market sector % of venture capital portfolio Market sector 30 September 2012 30 September 2011 Manufacturing 0.00% 0.63% Industrial engineering 2.17% 1.75% Pharmaceuticals and biotechnology 3.24% 2.66% Technology, hardware and equipment 2.86% 3.49% Software and computer services 10.42% 38.22% Personal goods 1.98% 1.87% Food producers 1.63% 1.55% Media 10.86% 6.46% General retailers 8.05% 5.15% Support services 39.56% 27.35% Acquisition vehicles 19.23% 10.77% Investments by stage of development % of venture capital portfolio Stage of development 30 September 2012 30 September 2011 Management buyout/buyin 65.67% 48.07% Development capital 5.94% 33.29% Early stage 0.00% 0.44% AIM-quoted 9.16% 7.44% Acquisition vehicles 19.23% 10.76% Chairman's Statement I am pleased to present to Shareholders the twelfth Annual Report of the Company for the year ended 30 September 2012. Overview As referred to in my statement at the half year stage, the UK and global economies are still struggling to come to terms with the persisting volatility caused in part by the continuing unresolved debt problems in several of the Eurozone countries. We expect the recovery to be slow and uncertain. However, despite the macro-economic situation, there is good progress in the portfolio and in the Manager's investment activity. The VCT has made three new investments during the year to support the MBOs of EMaC, EOTH (the holding company for the Rab and Lowe Alpine brands) and Tessella. These have all made promising starts. The Board and the Manager continue to adopt the cautious approach of waiting to identify the right opportunities in this challenging market. Even though the rate of investment may still be low compared to some previous periods, the Manager is currently considering a number of potentially strong opportunities. The year under review has been the most successful year to date in the history of the Company for realisations which have totalled Â£26.643 million. The most noteworthy of these was App-DNA, which was sold to Citrix Systems Inc in November 2011 resulting in the substantial return on investment of 32 times original investment cost. Other realisations included DiGiCo (where the Company retains a residual loan stock and equity investment), Camwood, Iglu and Letraset. With the exception of Letraset, which returned a disappointing 1.13 times cost on our original investment, all of these achieved returns of 2.5 - 4.4 times the cost of investment. Performance As at 30 September 2012 the Company's NAV per Ordinary Share was 109.62 pence (30 September 2011: 120.79 pence). Adjusted for dividends paid to Shareholders during the year, this represents an increase of 10.62% over the twelve month period. This compares with an increase of 14.61% in the FTSE SmallCap Index and an increase of 0.77% in the FTSE AiM All-Share Index, both on a capital return basis. Cumulative dividends paid and proposed to date amount to 48.22 pence per original share invested for shareholders who invested in 2000/01 (the 28.00 pence per share paid following the Merger has, therefore, been adjusted using the merger ratio of 0.7578) and 34.50 pence per Ordinary Share for shareholders who invested in 2007/08 (the existing share class following the Merger) . The portfolio Over the year, the portfolio as a whole achieved a net increase of Â£2.364 million in unrealised, and Â£5.243 million in realised, gains net of transaction costs. The portfolio under management was valued at Â£31.206 million at the year-end representing 86.73% of cost. During the year Â£5 million was placed into new investments (including the Â£1 million already invested into the acquisition vehicle Sawrey). I included details of the investments of Â£1.383 million into EOTH and of Â£1.878 million into EMaC in my Statement in last year's Annual Report, as both of these completed shortly after the beginning of the year under review in October 2011. More recently, in July 2012, the Company made a third new investment of Â£1.745 million (including Â£1 million from the acquisition vehicle Sawrey) into Tessella, an international provider of science-powered technology and consulting services. Founded in 1980, this company delivers innovative and cost-effective solutions to complex real-world commercial and technical challenges, such as developing smarter drug trials and minimising risk in oil and gas exploration. The VCT made a further loan of Â£1.450 million to Image Source, an existing investment, in December 2011 to fund the settlement of a legal dispute with a former employee and shareholder in that company. I am now pleased to report that shortly after the year-end in October 2012, Image Source merged with a similar company working in its sector, Cultura Creative, to create Europe's largest independent branded image business. The Board believes that the combined company will be better positioned to deal with the challenges it faces in a competitive marketplace for independent distributors. Change of name and control at the Manager With effect from 30 June 2012, the Manager, together with all its staff, became a fully independent firm owned by its partners and renamed itself, Mobeus Equity Partners LLP ("Mobeus"). The Company's investment strategy and its arrangements with Mobeus remain unchanged. The management team continues to be wholly dedicated to the management and administration of VCTs. The Board looks forward with confidence to this new phase of working with its Manager. Cash available for investment We have experienced a prolonged period of low interest rates on cash deposits which continues to inhibit the Company's ability to pay dividends out of interest income from cash held. The Board strongly believes, that at this time, the security and protection of the Company's capital is more important than striving for a small increase in deposit rates at the cost of much higher risk. However, in recent months we have started to place some funds in carefully selected bank deposit accounts offering improved returns. Cash and liquidity fund balances as at 30 September 2012 amounted to Â£22.385 million. Revenue Account The revenue account has again achieved a strong return this year, with a positive return of Â£990k compared to last year's positive return of Â£864k, a further improvement of Â£126k. A further increase in income over the year of Â£350k has been the principal reason for this improvement. This rise is due to an increase in loan stock interest of Â£328k. This year's figure was boosted by an exceptional Â£412k, as several investee companies paid interest that had been in arrears, although last year's income was itself boosted by an exceptional Â£427k earned from Amaldis. New investments in the year and during last year (primarily Motorclean, EOTH and EMaC) have contributed to substantial increases in loan stock, and there have also been lesser reductions from loan repayments and realisations made in this year and last. Dividend income fell by Â£60k, mainly as DiGiCo had contributed a dividend of Â£89k in 2011, but an increased dividend from Brookerpaks, as well as new dividends from Vectair and RDL, reduced some of this fall. Higher cash balances contributed to higher liquidity fund income and bank interest of Â£80k. Fund management fees charged to revenue return have increased by Â£53k, in line with the rise in net assets over the last twelve months. Other expenses have also risen by Â£123k in the year to Â£499k (2011: Â£376k). This increase was due firstly to higher directors' fees of Â£35k, due to a one-off payment of Â£10k (plus employers' National Insurance Contributions) made to each of the Directors in respect of additional work carried out on specific projects for the Company. In addition, registrars' fees, printing costs, listing fees and trail commission costs all rose, by an aggregate Â£56k, partly reflecting a larger number of shareholders and higher postage costs. Finally, the tax charge nominally borne by the revenue account rose by Â£48k, mainly due to the increase in loan stock interest which is taxable. However, as the Company has the ability to offset some capital costs against revenue profits, the Company has no overall charge to tax. Dividends On 5 December 2012, the Directors declared a further interim dividend in respect of the year ended 30 September 2012 of 6 pence per share, comprising 3 pence from capital and 3 pence from income. The dividend will be paid to Shareholders on the Register on 18 January 2013, on 8 February 2013. An interim capital dividend of 20 pence per share was also paid, in respect of the year ended 30 September 2012, on 27 January 2012. Thus total dividends paid and declared in respect of this year were 26 pence per share comprising 23 pence from capital and 3 pence from income (2011: 4 pence per share comprising 2 pence from capital and 2 pence from income). The Directors will not be recommending a final dividend to Shareholders in respect of the year ended 30 September 2012 at the Annual General Meeting of the Company to be held on 13 February 2013. The Company's Dividend Investment Scheme will apply to this dividend and elections under the Scheme should be received by the Scheme Administrator, Capita Registrars, by no later than 24 January 2013. Dividend Investment Scheme The Scheme is a convenient, easy and cost effective way to build up your shareholding in the Company. Instead of receiving cash dividends, you can elect to receive new shares in the Company. By opting to receive your dividend in this manner, there are three benefits to Shareholders: - The dividend is tax free to you; - - Shareholders are allotted new ordinary shares which will, subject to your particular circumstances, attract VCT tax reliefs applicable for the tax year in which the shares are allotted. The tax relief currently available to investors in new VCT shares is 30% for the 2012/13 tax year for investments up to Â£200,000 in any one tax year; and - The Scheme also has one other, particular advantage. Under its terms, a member is able to re-invest at an advantageous price, being the average market price of the shares for the five business days prior to the dividend being paid. This price is likely to be at a discount of 10% to the underlying net asset value (provided that this is greater than 70% of the latest published net asset value per share). Share buy-backs During the year ended 30 September 2012, the Company bought back 996k Ordinary Shares (year to 30 September 2011: 1.650 million) representing 2.45% of the Shares in issue at the beginning of the year at a total cost of Â£913k (year to 30 September 2011: Â£1.475 million) net of expenses. These shares were subsequently cancelled by the Company. The Board regularly reviews its buyback policy and has maintained the discount to NAV at which the Company's shares trade over the last year at around 10%. At 30 September 2012, the mid-market price for the Company's shares was 97.00 pence, representing a discount of 9.44% to the last published NAV, which at that time was the NAV at 30 June 2012 of 107.11 pence. When compared to the NAV at 30 September 2012 shown by these results, the discount has moved to 12.88% at 17 December 2012. The share price peaked towards the end of last year following the realisation of App-DNA and has since stabilised at a discount of approximately 10% to the latest published NAV per share. Selling your shares The Company's shares are listed on the London Stock Exchange and as such they can be sold in the same way as any other quoted company through a stockbroker. However, to ensure that you obtain the best price if you wish to sell your shares, you are strongly advised to contact the Company's stockbroker, Panmure Gordon, by telephoning 020 7886 2716/7 before agreeing a price with your stockbroker. Shareholders are also advised to discuss their individual tax position with their financial advisor before deciding to sell their shares. Changes to VCT legislation Further to changes set out in the note to the Investment Policy at the half year stage, the enactment of the Finance Act 2012 has ended a period of uncertainty in finalising the changes to the tax legislation that will apply to VCTs going forward. Funds raised after 6 April 2012 can no longer be used to support certain types of management buy-out transactions (MBOs). However, the Company has a significant amount of cash raised prior to this date that it will continue to use to pursue its successful strategy of investing in MBOs of profitable and cash generative companies. A number of the tests for VCT investment have been revised by this Act, enabling VCTs to invest in larger companies with up to 250 staff and gross assets of up to Â£15 million immediately before and Â£16 million immediately after the investment. Investee companies can now receive up to Â£5 million in any rolling 12 month period from state-aided sources, which includes VCTs. Fundraising The Company raised Â£5.168 million gross of issue costs in the Mobeus (formerly Matrix) Linked VCT Offer launched on 20 January 2012. A further Linked Offer to raise Â£21 million in aggregate for the Company, together with Mobeus Income & Growth VCT plc and Mobeus Income & Growth 4 VCT plc (both former Matrix Income & Growth named VCTs) was launched on 29 November 2012. The funds raised will spread our fixed running costs over a larger asset base and support the Company's existing investment strategy by providing new money to meet its year on year expenses, thus enabling it to preserve its funds raised prior to 6 April 2012 to invest in new MBO deals. Enhanced share buyback facility (EBF) Shareholders should note that the Company intends to offer an enhanced buyback facility to shareholders early in the New Year, which may be of interest to Shareholders who have held their shares for more than five years. An enhanced buyback facility is a loyalty scheme offered to a shareholder whereby the VCT buys back a proportion of the shareholder's existing shares at net asset value. The proceeds must then be used by the shareholder to purchase new shares in the same VCT at net asset value plus costs. Further up front tax reliefs are then available to qualifying shareholders. No new monies are required to participate in an enhanced buyback facility; rather, the shareholder's proceeds from the buyback are used to acquire new shares in the same VCT. Industry awards for the Manager The Manager received the award for VCT of the Year 2012 in respect of your Company at Investor AllStars 2012. It was also named VCT House of the Year 2012 at the unquote" British Private Equity Awards 2012. The citations for these awards recognised the Manager's outstanding performance in achieving record realisations during the year and promoting a successful fundraising. The Board is delighted that the work of the Manager has been acknowledged in this way. Outlook Whilst stockmarkets appear to be taking the view that US politicians will ultimately broker a deal to address the country's so called "fiscal cliff", both political parties seem to be positioning themselves for what could be a war of attrition, despite the positive noises emanating from Capitol Hill. While the politicians are still talking, it was been US businesses that have responded to the call for action and probably not in the way President Obama would like. Faced with uncertainty over future tax rates, a swathe of American companies have decided to take matters into their own hands by announcing special dividends in order to escape possible higher taxes on equity payments come next year. The current rate is 15% but this could spike to 40% unless a deal is agreed. So, against this backdrop, and with many companies being flush with cash, it is no real surprise that, in the fourth quarter, a record of some 103 businesses have announced that they will pay a special dividend before the year-end. Some companies, such as retail giant Wal-Mart, have even brought forward their scheduled dividend payment date to avoid the possibility of being taxed more heavily. The implications of an impasse have been highlighted by the US Federal Reserve in its latest Beige Book report, saying it had picked up "concern and uncertainty about the federal budget, especially the "fiscal cliff". The Report went on to note that a number of Federal districts had expressed concern about business conditions for the months ahead as firms and their customers waited for the outcome of the budget negotiations. Whilst the raft of special dividends will be welcomed by shareholders, there is a downside. For one thing, companies declaring special dividends will enter 2013 with less cash, reducing their ability to invest in their businesses or make acquisitions. Coupled with this, it is likely that there will be more share buy-backs as corporations try to find other ways to get cash back to shareholders without paying dividends that are likely to be taxed more severely. Given this scenario, it is no surprise that Wall Street has been jittery; but so far investors continue to take the view that a compromise will be reached, with confidence being boosted by signs that the economy continues to make progress. US growth for the third quarter was revised up from 2.0% to 2.7% and the latest S&P/Case-Schiller housing data showed prices rising for the sixth consecutive month. This coincided with news that consumer confidence rose to its highest level for four years and that US companies increased their orders for durable goods. In Europe in the last few weeks, the troika - the IMF, ECB and EU - finally agreed to release the latest â‚¬34.4 billion tranche of bailout funding for Greece, giving the country more time to reduce its mountain of debt: some â‚¬350 billion. It seems that desperate EU officials are also exploring other ways to help Greece hit its target, including access to EU development funds which would trim another 2.6% off the deficit. Nearer to home in the United Kingdom, the surprise appointment of Canadian Mark Carney as the new Governor of the Bank of England was one of the few moments of excitement in recent weeks as markets spent much of their time trading sideways. Mr Carney's appointment as Sir Mervyn King's successor was generally well received, with his experience at Canada's central bank likely to be invaluable given Mr Osborne's apparent desire to see the UK's central bank undergo reform. George Osborne's recent Autumn Statement delivered a neutral budget that endeavoured to give both growth and business a boost. The Chancellor, however, received no help from the Office for Budget Responsibility, whose forecasts for UK growth were cut, whilst also expecting the Government to borrow some Â£52.5 billion more than expected over the next five years. So with little room for manoeuvre, Mr Osborne made a judgement that the best course of action was to try and boost growth by bolstering business confidence and encouraging greater investment by companies and the public sector. Against this backdrop, the Board also continues to face many challenges in advancing its strategy in the face of developments in the legislative and regulatory environment in which the Company operates. We are continuing to monitor developments in the industry, including the recent consultation paper published by the FSA on the promotion of VCT shares to retail investors and the implementation of the Retail Distribution Review. The valuation of the portfolio as a whole has held up well, and a number of the investee companies continue to show good potential for growth. The Manager has reported that deal flow is improving and is considering a number of attractive investment opportunities. We are hopeful that a number of these will be completed over the coming months. Mobeus website The Manager has established a new website, which can be accessed by going to www.mobeusequity.co.uk. This is regularly updated with information on your investments including case studies of portfolio companies. The Company continues to have its own dedicated section of the website which Shareholders may prefer to access directly by going to www.incomeandgrowthvct.co.uk. This includes performance tables and details of dividends paid as well as copies of past reports to shareholders. Shareholder workshop We have received positive feedback from the shareholder workshop, held in January 2012, which was attended by nearly 100 Mobeus VCT shareholders. It is intended that this will be an annual event. Shareholders should have already received an invitation to attend the next workshop to be held on 29 January 2013. The workshop will include presentations from the Manager on the portfolio as a whole and from at least one successful entrepreneur from one of the VCT's investee companies. Once again, I would like to take this opportunity to thank Shareholders for their continued support. Colin Hook Chairman Going concern The Board has assessed the Company's operation as a going concern. The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the Management Report which is included within the Chairman's Statement, the Investment Portfolio Summary, the Investment Manager's Review and the Directors' Report. The Directors have satisfied themselves that the Company continues to maintain a significant cash position and is currently raising additional funds. The majority of companies in the portfolio continue to trade profitably and the portfolio taken as a whole remains resilient and well diversified. The major cash outflows of the Company (namely investments, buy-backs and dividends) are within the Company's control. The Board's assessment of liquidity risk and details of the Company's policies for managing its capital and financial risks are shown below. Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the annual financial statements. Principal risks, management and regulatory environment The Board believes that the principal risks faced by the Company are: Economic risk - events such as an economic recession and movement in interest rates could affect trading conditions for smaller companies and consequently the value of the Company's qualifying investments. Risk of loss of approval as a Venture Capital Trust - the Company must comply with the provisions of section 274 of the Income Tax Act 2007 ("ITA") to continue to be exempted from capital gains tax on investment gains and to ensure that its investors continue to qualify for VCT tax reliefs. Any breach of these rules may lead to the Company losing its approval as a Venture Capital Trust (VCT), qualifying shareholders who have not held their shares for the designated holding period having to repay the income tax relief they obtained and future dividends paid by the Company becoming subject to tax. The Company would also lose its exemption from corporation tax on capital gains. Investment and strategic risk - inappropriate strategy or consistently weak VCT qualifying investment recommendations might lead to underperformance and poor returns to shareholders. Investment in unquoted small companies by its nature involves a higher degree of risk than investment in companies traded on the London Stock Exchange main market. Smaller companies often have limited product lines, markets or financial resources and may be dependent for their management on a smaller number of key individuals. This may make them more risk-prone and volatile investments. Regulatory risk - the Company is required to comply with the Companies Act, the listing rules of the UKLA and United Kingdom Accounting Standards. Breach of any of these might lead to suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report. Financial and operating risk - inadequate controls that might lead to misappropriation of assets. Inappropriate accounting policies might lead to misreporting or beaches of regulations. Failure of the Investment Manager's and Administrator's accounting systems or disruption to its business might lead to an inability to provide accurate reporting and monitoring. Market risk - movements in the valuations of the VCT's investments will, inter alia, be connected to movements in UK Stock Market indices. Asset liquidity risk - The Company's investments may be difficult to realise. Market liquidity risk - Shareholders may find it difficult to sell their shares at a price which is close to the net asset value. Counterparty risk - A counterparty may fail to discharge an obligation or commitment that it has entered into with the Company. The Board seeks to mitigate the internal risks by setting policy and by undertaking a key risk management review at each quarterly Board meeting. Performance is regularly reviewed and assurances in respect of adequate internal controls and key risks are sought and received from the Investment Manager and Administrator on a six monthly basis. In mitigation and the management of these risks, the Board applies rigorously the principles detailed in the AIC Code of Corporate Governance. The Board also has a Share Buy-Back policy which seeks to mitigate the Market Liquidity risk. This policy is reviewed at each quarterly Board Meeting. Cautionary Statement This report may contain forward looking statements with regard to the financial condition and results of the Company, which are made in the light of current economic and business circumstances. Nothing in this report should be construed as a profit forecast. Investment Policy The Company's policy is to invest primarily in a diverse portfolio of UK unquoted companies. Investments are structured as part loan and part equity in order to receive regular income and to generate capital gains from trade sales and flotations of investee companies. Investments are made selectively across a number of sectors, primarily in management buyout transactions (MBOs) i.e. to support incumbent management teams in acquiring the business they manage but do not yet own. Investments are primarily made in companies that are established and profitable. The Company has a small legacy portfolio of investments in companies from the period prior to 30 September 2008, when it was a multi-manager VCT. This includes investments in early stage and technology companies and in companies quoted on the AiM or ISDX. The Company's cash and liquid resources are invested in a range of instruments of varying maturities, subject to the overriding criterion that the risk of loss of capital be minimised. VCT regulation The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue & Customs ("HMRC"). Amongst other conditions, the Company may not invest more than 15% of its investments in a single company and must have at least 70% by value of its investments throughout the period in shares or securities comprised in VCT qualifying holdings of which a minimum overall of 30% by value (70% for funds raised after 6 April 2011) must be in ordinary shares which carry no preferential rights (save as may be permitted under VCT rules). In addition, although the VCT can invest less than 30% (70% for funds raised after 6 April 2011) of an investment in a specific company in ordinary shares it must have at least 10% by value of its total investments in each VCT qualifying company in ordinary shares which carry no preferential rights (save as may be permitted under VCT rules). The companies in which investments are made must have no more than Â£15 million of gross assets at the time of investment and Â£16 million immediately following the investment to be classed as a VCT qualifying holding. Asset mix The Company initially holds its funds in a portfolio of readily realisable interest-bearing investments and deposits. The investment portfolio of qualifying investments is built up over a three year period with the aim of investing and maintaining at least 70% of net funds raised in qualifying investments. Risk diversification and maximum exposures Risk is spread by investing in a number of different businesses across different industry sectors. To reduce the risk of high exposure to equities, each qualifying investment is structured to maximise the amount which may be invested in loan stock. Co-investment The Company aims to invest in larger, more mature unquoted companies through investing alongside the three other VCTs advised by the Investment Manager with a similar investment policy. This enables the Company to participate in combined investments advised on by the Investment Manager of up to Â£5 million. Borrowing The Company's Articles permits borrowing up to 10% of the adjusted capital and reserves (as defined therein). However, it has never borrowed and the Board has no current plans to undertake any borrowing. Management The Board has overall responsibility for the Company's affairs including the determination of its investment policy. Investment and divestment proposals are originated, negotiated and recommended by the Manager and are then subject to approval by the Directors. Investment Manager's Review Overview This has been a busy year for the portfolio, which has achieved a record level of realisations totaling Â£26.643 million. In the early part of the year new investment activity was also strong, with the company supporting the MBO of EMaC and financing the acquisition of Lowe Alpine through an investment in Equip Outdoor Technologies (EOTH Limited). However, the environment for new investment became much more problematic in the latter months, for a number of reasons. First of these was the second dip into recession which revived uncertainty surrounding the extent and depth of the recovery. Lack of clarity regarding changes to VCT regulations further dampened the fragile market. Nonetheless, dealflow has improved in recent months, in terms of the number of deals coming forward, although concluding transactions has continued to be difficult. We have a number of interesting opportunities in the pipeline and are therefore hopeful that the pace of new investment will increase again. Uncertainty over the future persists, particularly amongst potential sellers of businesses, but our investment approach combining debt and equity continues to be compelling to companies seeking investment in a market where availability of bank finance remains patchy at best. This means that management buyout teams are increasingly turning to us as a reliable source of funding for their plans. The VCT has an exceptionally strong liquidity position at present, so is well placed to invest. In response, we are widening the scope of the deals which we target. We are also seeking to identify opportunities to invest more capital to support the expansion of successful businesses in the existing portfolio, including where appropriate, deploying loan funding to support portfolio companies' growth plans. We believe that the VCT's strategy of investing in well-structured MBO deals; supporting highly motivated management teams; focusing on acquiring established, profitable, positive cashflow businesses; and investing partly in income yielding loan stocks substantially increases the degree of downside protection to Shareholders' capital. We have noted the recent change in VCT legislation preventing certain types of MBOs, but also note that this restriction does not apply to the substantial level of funds held by the VCT from earlier fundraisings The strategy above is executed by retaining and developing a portfolio of successful companies until each has reached the optimal point for a profitable realisation. In the meantime, the portfolio routinely benefits from returns of loan stock interest, dividends and loan repayments, during the life of an investment. New investment Three new investments were completed during the year under review totalling Â£5.007 million, in addition to Â£6 million invested into six new acquisition vehicle investments. An additional investment of Â£1 million into a further acquisition vehicle, Sawrey, was also completed and used to support the MBO of Tessella as explained below. The first two of these new investments were completed shortly after the last year-end in October 2011. Firstly, the VCT made an investment of Â£1.383 million to provide mezzanine finance as part of a Â£4.45 million transaction by the Manager to support the acquisition of the international intellectual property and assets of Lowe Alpine Srl from administration in Italy by Equip Outdoor Technologies Limited, a company specialising in owning and distributing brands focused on the outdoor sector, including the world-renowned Rab range of mountaineering clothing. This investment continues to be valued at cost. It has two very strong brands and is making steady progress and gaining market share despite well-publicised volatility in the sector. Secondly, a new investment of Â£1.878 million was made, as part of Â£6 million deal, to support the MBO of EMaC Limited, the UK's leading provider of outsourced service plans to franchised dealers in the automotive sector. EMaC employs 55 people and currently manages over 350,000 plans for over 1,000 motor dealers in the UK. Despite a promising start, we are prudently valuing this investment at cost. The third new investment was made in July 2012, when the Company invested Â£1.745 million to support the MBO of Tessella, an international provider of science-powered technology and consulting services, using the Company's existing investment of Â£1 million in the acquisition vehicle Sawrey and an additional Â£745k from its cash reserves. Founded in 1980, the company delivers innovative and cost-effective solutions to complex real-world commercial and technical challenges such as developing smarter drug trials and minimising risk in oil and gas exploration. This company has made an encouraging start since investment. We are confident that our Operating Partner programme will continue to generate successful investments for the Company and accordingly, seven investments have been made during the year into new acquisition vehicles of Â£1 million each, totalling Â£7 million. One of these, Sawrey, was used to complete the Tessella investment, referred to above. The remaining six companies continue to pursue an active search for investment opportunities. Each of the acquisition vehicles is headed by an experienced Chairman, well-known to us, who is working closely with us in seeking to identify and complete investments in specific sectors relevant to their industry knowledge and experience. We have established these companies to provide time for us to identify and invest in suitable target companies at sufficiently attractive prices. Four of the acquisition vehicles in which the Company invested in September 2010, Backbarrow, Bladon Castle Management, Rusland Management and Torvar, did not find sufficiently attractive investment opportunities at the right price. These companies have therefore repaid their loan stock, and been sold to a new acquisition vehicle, Watchgate Limited, which has the intention of continuing to seek similar opportunities, building on the work of these companies to date. Follow-on investments Two investee companies received further funds in the year. Only Image Source has required a significant injection of further cash. This was made in the form of a loan of Â£1.450 million in December 2011 at the time of the resolution of a legal dispute with a former employee and shareholder in that company. This company has implemented changes to remain competitive in a challenging market where independent distributors have found it difficult to maintain revenue. The company merged with Cultura Creative in October 2012 to create Europe's largest independent image business. The combined business will benefit from significantly reduced overhead costs and routes to market. A smaller follow-on investment of Â£45k was made into PXP in June 2012 as part of a major re-structuring of the company to enable PXP to continue to trade following a period of poor trading in a challenging market. Trading in recent months has started to show improvement. Realisations The year under review has been notably strong for realisations. Taken as a whole, a total of Â£23.706 million was realised by the Company over the investment lives of App-DNA, DiGiCo, Camwood and Iglu. The VCT realised its investment in App-DNA in November 2011 by way of a trade sale to Citrix Systems Inc. The net cash consideration from the sale of Â£14.542 million contributed to net proceeds to the Company over the life of the investment of Â£16.854 million, which, including contingent consideration, represented an exceptional 32 times return on the Company's original investment of Â£514k. In December 2011, the VCT made a partial disposal of its investment in DiGiCo, a fast growing, technology-led business that designs market-leading digital sound-mixing consoles used by the live music market, theatres and many corporate users, to ISIS Equity Partners. The VCT received cash proceeds of Â£1.405 million, which contributed to total cash proceeds of Â£2.864 million over the life of the investment, representing a 4.36 times cash return on this investment to date. In addition, the VCT continues to hold a residual loan stock and equity (1.57%) investment valued at Â£876k, which represented another 1.4 times the original investment cost. Since the original investment by the VCT, the business has invested heavily in R&D and turnover has grown from Â£8 million in 2007 to an anticipated Â£25 million in 2012. The company, now called DiGiCo Global Limited, continues to trade strongly. In April 2012, the VCT sold its investment in Camwood Enterprises, a company which was spun out of App-DNA in 2010, to the company's management team for a net cash consideration of Â£943k compared to a prior year-end valuation of Â£499k. Total proceeds to the VCT over the life of the investment amounted to Â£1.458 million, representing a 2.8 times return on the VCT's investment cost of Â£514k. In May 2012, the Company realised its entire investment in Iglu.com Holidays, the specialist online ski and cruise holiday travel agent, for net cash proceeds and interest of Â£1.445 million through a sale to Growth Capital Partners. This realisation contributed to total cash proceeds of Â£2.530 million to the Company over the two and a half year life of the investment, representing a 2.5 times return on the Company's original investment of Â£1 million. We supported this established online ski agent through a period of rapid growth in its cruise holiday business since the MBO in December 2009. Iglu is now one of the leading distributors of cruise holidays, in the UK, in its sector, and the largest independent retailer of ski holidays. The company's revenues now exceed Â£90 million. In June 2012, the VCT sold its entire investment in Letraset for a cash consideration of Â£369k compared to a valuation of Â£234k at 30 September 2011. Total proceeds to I&G VCT over the life of the investment amounted to Â£1.133 million representing a 1.13 times return on the VCT's original investment cost of Â£1 million. The sale of Letraset represented an uplift in the year of 58% over the opening value. The Company sold a total of 2.750 million shares in IDOX plc during the year under review, realising total net proceeds of Â£1.018 million which represented a 3.53 times realised return on the VCT's original investment cost of Â£288k. The VCT continues to retain a residual holding in this company, which had a value of Â£2.058 million at the year-end. A further 1.250 million shares were sold following the year-end in November 2012 at an average price of 41 pence per share. The Company sold a total of 87k shares in Tikit Group plc during the year under review, realising total net proceeds of Â£276k which represented a 2.75 times realised return on the VCT's original investment cost of Â£101k. The VCT continues to retain a residual holding in this company, which had a value of Â£247k at the year-end. A further 12,500 shares were sold following the year-end in October 2012 at a price of 325 pence per share. A total of Â£1.278 million (including any premiums paid) has also been received in loan stock repayments from portfolio companies during the year to 30 September 2012. In January 2012, the company received partial loan stock pre-payments from Focus Pharma of Â£162k and Fullfield of Â£229k. Blaze Signs repaid a total of Â£323k in three separate payments received in May - August 2012, and in June 2012 the VCT received a payment of Â£564k from Aquasium. Also, in January 2012, the Company accepted a repayment of Â£250k from NexxtDrive in full repayment of this company's outstanding loan stock (held at a cost of Â£325k) and arrears of interest. Further loan repayments of Â£125k and 609k were received from Duncary 8 and Blaze Signs respectively following the year-end. Subsequent to the year-end, Tikit Group plc has received a recommended offer from BT plc at 4.16 pence per share valuing the VCT's investment at Â£321,556 compared to the valuation at 30 September 2012 of Â£247,350. Also subsequent to the year-end Espial Group Inc, a company listed on the Toronto Stock Exchange, announced a recommended offer for ANT plc at 20.5 pence per share, valuing the VCT's investment at Â£134,602 compared to the valuation at 30 September 2012 of Â£131,319. In November 2012, and subsequent to the year-end, the Company realised its entire holding in Brookerpaks, for proceeds of Â£600k. Portfolio review The portfolio at 30 September 2012 comprised 47 investments with a cost of Â£35.981 million and valued at Â£31.206 million. The portfolio's performance as a whole continues to be robust. ATG Media, DiGiCo and IDOX continue to be the strongest performers. Blaze has made a steady recovery from the difficulties it experienced during the economic downturn, enabling it to repay part of its loans as noted above. CB Imports continues to trade well overall and is improving its performance compared to last year. Focus is expected to exceed its budget, is performing well on product development and has a healthy pipeline of new products. Fullfield has maintained its solid start and cash generation at this company has been strong, as evidenced by its early partial repayments of its loan stock during the year. Aquasium is ahead of its budget after many years of disappointing performance with good prospects for 2013. The sale of its US subsidiary EBTEC to NASDAQ-listed EDAC Technologies Corporation was completed in June 2012; this enabled the company to repay some of its outstanding loan stock and interest to the VCT. Alaric is demonstrating sustained profit growth enabling it to repay your company's loan stock investment. ASL made a small acquisition during the year of Arkle Reprographic Consultants Limited, a Midlands based printer and photocopier dealer, funded from the company's cashflow. The company has successfully integrated its acquisition of Transcribe in 2011, which is trading well, but the group's overall performance is behind its investment plan. British International has had a difficult year, with the persistent and escalating reduction in passenger journeys on its scheduled route to the Isles of Scilly leading to a material reduction in profitability; this was compounded by the delays in completing the sale to Sainsbury of its heliport in Penzance, which was dependent on full planning permission being granted. Completion finally took place in October 2012 and this enabled the company to fully repay its bank borrowings. The continuing downturn in the construction and house building sectors continues to affect the performance of PXP and Plastic Surgeon, although management have worked well to reposition both of these businesses and make the necessary cuts in costs. The market environment for Youngman remains uncertain, although it has now fully repaid its bank debt and is well positioned to benefit from any upturn in its markets. Westway suffered from lower revenues last year but is now growing profits again and has strong customer relationships. RDL had a disappointing first year with a net reduction in contract staff placements in its core pharmaceuticals and IT markets but has taken measures to improve performance. Faversham has been streamlining its operations although progress is slower than anticipated. Investment outlook This has been an unprecedented year for realisations for the VCT, leaving us with ample liquidity to pursue our MBO strategy. We remain hopeful of completing a healthy period of new investment over the coming year. As part of our plans to increase the rate of investment, we will be seeking opportunities to provide further capital for expansion of successful existing investments. We continue to pursue a prudent approach to making new investments and ensuring that the portfolio remains well capitalised. We are confident that good returns can be earned for investors. Details of the Company's twelve largest investments by value as at 30 September 2012 (excluding the six acquisition vehicles in the portfolio, which have yet to complete an investment and have a current cost and valuation of Â£1 million each) are set out on the following below. Twelve Largest Investments (Excluding the six acquisition vehicles in the portfolio at 30 September 2012) ATG Media Holdings Limited IDOX plc Ingleby (1879) Limited - EMaC www.antiquestradegazette.com www.idoxplc.com www.emac.co.uk Cost Â£888,993 Cost Â£584,710 Cost Â£1,878,124 Valuation Â£2,270,884 Valuation Â£2,058,371 Valuation Â£1,878,124 Basis of valuation Basis of valuation Basis of valuation Earnings multiple Bid price (AiM quoted) Cost Equity % held Equity % held Equity % held 8.53% 1.55% 9.39% (fully diluted) Income receivable in year Income receivable in year Income receivable in year Â£71,889 Â£44,296 Â£144,181 Business Business Business Publisher and on-line auction Development and supply of knowledge Provider of service plans for platform operator management products the motor trade Location Location Location London London Crewe History History History Management buyout AiM flotation Management buyout Audited financial information Audited financial information Audited financial information Year ended 30 September Year ended 31 October 2011 Year ended 31 December 2011 2011 1 Turnover Â£8,927,000 Turnover Â£38,605,000 Turnover Â£4,990,000 Operating profit Â£1,831,000 Operating Â£9,506,000 Operating profit Â£867,000 profit Net assets Â£3,179,000 Net assets Â£34,371 ,000 Net assets Â£1,535,000 Year ended 30 September Year ended 31 October 2010 Year ended 31 December 2010 2010 1 Turnover Â£7,215,000 Turnover Â£31,268,000 Turnover Â£4,042,000 Operating profit Â£1,261,000 Operating Â£7,504,000 Operating profit Â£1,596,000 profit Net assets Â£2,506,000 Net assets Â£31,012 Net assets Â£2,712,000 1 The financial information quoted above relates to the operating subsidiary, EMaC Limited Tessella Holdings Limited Fullfield Limited - Blaze Signs Holdings Motorclean Limited www.tessella.com www.motorclean.net www.blaze-signs.com Cost Â£1,745,351 Cost Â£1,489,097 Cost Â£1,090,334 Valuation Â£1,745,351 Valuation Â£1,652,768 Valuation Â£1,448,159 Basis of valuation Basis of valuation Basis of valuation Cost Earnings multiple Earnings multiple Equity % held Equity % held Equity % held 7.48% 11.74% 12.54% Income receivable in year Income receivable in year Income receivable in year Â£25,214 Â£144,215 Â£147,784 Business Business Business Provider of science powered Provider of vehicle Manufacturer and installer technology and consulting cleaning and valet services of signs services Location Location Location Abingdon, Oxfordshire Laindon, Broadstairs, Essex Kent History History History Management buyout Management buyout Management buyout Audited financial Audited financial Audited financial information information information Year ended 31 March 2012 1 Year ended 31 March 2012 1 Year ended 31 March 2012 Turnover Â£18,533,000 Turnover Â£2300 Â£23,818,000 Turnover Â£20,878,000 Operating profit Â£278,000 Operating profit Â£1,752,000 Operating profit Â£1,761,000 Net assets Â£2,404,000 Net assets Â£9,044,000 Net assets Â£2,918,000 Year ended 31 March 2011 1 Year ended 31 March 2011 1 Year ended 31 March 2011 Turnover Â£16,941,000 Turnover Â£22,400,000 Turnover Â£20,127,000 Operating profit Â£346,000 Operating profit Â£1,631,000 Operating profit Â£1,889,000 Net assets Â£2,403,000 Net assets Â£2,344,000 Net assets Â£2,937,000 1 The financial information 1 The financial quoted above relates to the information quoted above operating subsidiary, relates to the operating Tessella Limited subsidiary, Motorclean (previously Tessella plc) Limited EOTH Limited RDL Corporation Limited CB Imports Group Limited - Equip Outdoor Technologies www.equipuk.com www.rdlcorp.com www.countrybaskets.co.uk Cost Â£1,383,313 Cost Â£1,441,667 Cost Â£1,000,000 Valuation Â£1,383,313 Valuation Â£1,271,194 Valuation Â£1,128,228 Basis of valuation Basis of valuation Basis of valuation Cost Earnings multiple Earnings multiple Equity % held Equity % held Equity % held 2.49% (fully diluted) 13.04% 5.79% Income receivable in year Income receivable in year Income receivable in year Â£124,080 Â£133,012 Â£76,355 Business Business Business Supplier of branded outdoor Recruitment consultants for the Importer and distributor of equipment and clothing including pharmaceutical, business artificial flowers, floral the Rab and Lowe Alpine brands intelligence and IT industries sundries and home dÃ©cor products. Location Location Location Alfreton, Derbyshire Woking, Surrey East Ardsley, West Yorkshire History History History Management buyout Management buyout Management buyout Audited financial information Audited financial information Audited financial information Year ended 31 January 2012 Year ended 31 December 2011 Year ended 31 December 2011 Turnover Â£15,504,000 Turnover Â£18,266,000 Turnover Â£23,130,000 Operating profit Â£1,830,000 Operating profit Â£1,214,000 Operating profit Â£969,000 Net assets Â£6,173,000 Net assets Â£1,501,000 Net assets Â£4,421,000 Year ended 28 February 2011 1 Year ended 31 December 2010 Year ended 31 December 2010 Turnover Â£13,457,000 Turnover Â£3,700,000 Turnover Â£21,197,000 Operating profit Â£2,354,000 Operating profit Â£279,000 Operating profit Â£2,139,000 Net assets Â£4,706,000 Net assets Â£1,846,000 Net assets Â£4,259,000 1 The financial information quoted above relates to the operating subsidiary, Equip Outdoor Technologies Limited Image Source Group Limited DiGiCo Global Limited Westway Services Holdings non-qualifying) (2010) Limited www.imagesource.com www.digico.org www.westwayservices.com Cost Â£1,754,558 Cost Â£876,497 Cost Â£353,589 Valuation Â£925,470 Valuation Â£876,497 Valuation Â£838,782 Basis of valuation Basis of valuation Basis of valuation Earnings multiple Cost supported by earnings Earnings multiple multiple calculation Equity % held Equity % held Equity % held 39.60% (diluted) 1.57% 4.72% Income receivable in year Income receivable in year Income receivable in year Â£58,569 Â£28,381 Â£31,708 Business Business Business Royalty-free picture Designer and manufacturer Installation, service and library of digital audio mixing desks maintenance of air conditioning systems Location Location Location London Chessington, Surrey Greenford, Middlesex History History History Management buyout Secondary buyout Management buyout Audited financial Audited financial Audited financial information information information Year ended 31 December 2011 Year ended 31 December 2011 Year ended 28 February 2011 Turnover Â£4,525,,000 Turnover Â£21,314,000 Turnover Â£27,521,000 Operating loss Â£2,120,000 Operating profit Â£6,466,000 Operating profit Â£3,942,000 Net assets Â£260,000 Net assets Â£7,932,000 Net assets Â£3,769,000 Year ended 31 December 2010 Year ended 31 December 2010 Year ended 28 February 2010 1 Turnover Â£6,053,000 Turnover Â£18,757,000 Turnover Â£13,352,000 Operating profit Â£165,000 Operating profit Â£5,501,000 Operating profit Â£1,638,000 Net assets Â£2,547,000 Net assets Â£8,909,000 Net assets Â£1,826,000 1 For the eight month period ended 28 February 2010 The remaining 35 investments in the portfolio (including the six acquisition vehicles in the portfolio at 30 September 2012) had a current cost of Â£21.495 million and were valued at 30 September 2012 at Â£13.729 million. Further details of the investments in the portfolio may be found on the Mobeus website: www.mobeusequity.co.uk. Operating profit is stated before charging amortisation of goodwill where appropriate for all investee companies. Investment Portfolio Summary for the year ended 30 September 2012 Total Total Additional Total % of % of cost valuation investments valuation at equity portfolio at at held by value 30-Sep-12 30-Sep-11 30-Sep-12 1 Â£ Â£ Â£ Â£ ATG Media Holdings Limited 888,993 1,675,368 - 2,270,884 8.5% 7.28% Publisher and online auction platform operator I-Dox plc 3 584,710 1,796,667 36 2,058,371 1.6% 6.60% Developer and supplier of knowledge management products Ingleby (1879) Limited 1,878,124 - 1,878,124 1,878,124 9.4% 6.02% trading as EMaC) Provider of service plans for the motor trade Tessella Holdings Limited 1,745,351 - 1,745,351 1,745,351 7.5% 5.59% (formerly Oval (2253) Limited) Provider of science powered technology and consulting services Fullfield Limited 1,489,097 1,718,189 - 1,652,768 11.7% 5.29% (trading as Motorclean) Vehicle cleaning andvalet services Blaze Signs Holdings Limited 1,090,334 1,354,238 - 1,448,159 12.5% 4.64% Manufacturer and installer of signs EOTH Limited (trading as Equip Outdoor Technologies) 1,383,313 - 1,383,313 1,383,313 2.5% 4.43% Distributor of branded outdoor equipment and clothing including the Rab and Lowe Alpine brands RDL Corporation Limited 1,441,667 1,383,792 - 1,271,194 13.0% 4.07% Recruitment provider within the pharmaceutical, business intelligence and IT sectors CB Imports Group Limited 1,000,000 1,025,448 - 1,128,228 5.8% 3.62% (trading as Country Baskets) Importer and distributor of artificial flowers, floral sundries and home decor products Ackling Management Limited 1,000,000 - 1,000,000 1,000,000 12.5% 3.20% Company seeking to acquire businesses in the food manufacturing, distributionand brand management sectors Fosse Management Limited 1,000,000 - 1,000,000 1,000,000 12.5% 3.20% Company seeking to acquire businesses in the brand management, consumer products and retail sectors Peddars Management Limited 1,000,000 - 1,000,000 1,000,000 12.5% 3.20% Company seeking to acquire businesses in the database management, mapping, data mapping and management services to legal and building industries Almsworthy Trading Limited 1,000,000 - 1,000,000 1,000,000 12.5% 3.20% Company seeking to acquire businesses in the specialist construction, building support building products and related services sectors Culbone Trading Limited 1,000,000 - 1,000,000 1,000,000 12.5% 3.20% Company seeking to acquire businesses in the outsourced services sector Madacombe Trading Limited 1,000,000 - 1,000,000 1,000,000 12.5% 3.20% Company seeking to acquire businesses in the engineering services sector Image Source Group Limited 1,754,558 238,977 1,449,558 925,470 20.0% 2.97% Royalty free picture library DiGiCo Global Limited 876,497 - 876,497 876,497 1.6% 2.81% (formerly Newincco 1124 Limited)2 Designer and manufacturer of digital audio mixing desks Westway Services Holdings (2010) Limited 353,589 928,577 - 838,782 4.7% 2.69% Installation, service and maintenance of air conditioning systems Duncary 8 Limited 634,923 535,699 - 814,025 25.5% 2.61% (trading as BG Consulting) Technical training business Youngman Group Limited 1,000,052 682,203 - 700,992 8.5% 2.25% Manufacturer of ladders and access towers Aquasium Technology Limited 4 500,000 486,319 - 677,971 16.7% 2.17% Manufacturing and marketing of bespoke electron beam welding and vacuum furnace equipment ASL Technology Holdings Limited 1,769,790 1,674,630 - 654,155 9.6% 2.10% Printer and photocopier services Focus Pharma Holdings Limited 405,407 628,706 - 636,574 2.1% 2.04% Licensor and distributor of generic pharmaceuticals British International Holdings Limited 590,909 646,718 - 590,909 5.0% 1.89% Helicopter service operator Original Additions Topco Limited 6 25,696 537,948 - 537,948 0.0% 1.72% Sale of false nails, nail accessories, false eyelashes, depilatory products, hair lightening and perming products Brookerpaks Limited 55,000 576,042 - 509,209 17.1% 1.63% Importer and distributor of garlic and vacuum-packed vegetables Machineworks Software Limited 20,471 407,310 - 479,459 9.2% 1.54% Provider of software for CAD and CAM vendors Alaric Systems Limited 4 565,156 167,114 - 468,495 6.9% 1.50% Software developer and provider of support services for retail credit card payment systems Omega Diagnostics Group plc 279,996 291,663 - 373,328 2.7% 1.20% In-vitro diagnostics for food intolerance, autoimmune diseases and infectious diseases The Plastic Surgeon Holdings Limited 406,082 101,521 - 248,878 6.1% 0.80% Supplier of snagging and finishing services to the property sector Tikit Group plc 3 88,892 458,094 - 247,350 0.5% 0.79% Supplier of IT solutions and support services to legal and accounting businesses Faversham House Holdings Limited 487,744 487,744 - 192,385 8.8% 0.62% Publisher, exhibition organiser and operator of websites for the environmental, visual communications and building services Vectair Holdings Limited 53,400 139,125 - 164,178 4.6% 0.53% Designer and distributor of washroom products ANT plc 4 462,816 144,451 - 131,319 2.7% 0.42% Provider of embedded browser/email software for consumer electronics and Internet appliances Lightworks Software Limited 20,471 54,138 - 84,060 9.2% 0.27% Provider of software for CAD and CAM vendors Racoon International Holdings Limited 550,852 157,755 - 79,026 7.7% 0.25% Supplier of hair extensions, hair care products and training PXP Holdings Limited 965,371 - 45,195 45,195 6.0% 0.15% (trading as Pinewood Structures) Designer, manufacturer and supplier of timber frames for buildings Monsal Holdings Limited 468,610 42,446 - 42,446 5.6% 0.14% Supplier of engineering services to the water and waste sectors Corero Network Security plc 4 600,000 35,363 - 31,434 0.2% 0.11% Provider of e-business technologies Sarantel Group plc 4 1,881,252 39,485 - 17,019 0.8% 0.05% Developer and manufacturer of antennae for mobile phones and other wireless devices Data Continuity Group Limited (formerly DCG Group Limited) 4 90,034 - 6,711 2,171 11.1% 0.01% Design, supply and integration of data storage solutions Oxonica Limited 2,524,527 69,624 - - 0.00% International nanomaterials group NexxtDrive Limited 5 487,014 162,500 - - 5.1% 0.00% Developer and exploiter of mechanical transmission technologies Aigis Blast Protection Limited 4 272,120 - - - 0.4% - Specialist blast containment materials company Legion Group plc (in administration) 150,000 - - - - Provider of manned guarding, mobile patrols and alarm response services Biomer Technology Limited 5 137,170 - - - 4.4% - Developer of biomaterials for medical devices Watchgate Limited 1,000 - - - 33.3% - Holding company Disposed of in year App-DNA Group Limited - 11,633,974 - - - - Provider of software repackaging services DiGiCo Europe Limited 2 - 1,258,330 - - - - Designer and manufacturer of digital audio mixing desks Iglu.com Holidays Limited - 888,657 - - - - Online ski and cruise travel agency Backbarrow Limited - 1,000,000 - - - - Company seeking to acquire businesses in the food manufacturing, distribution and brand management sectors Bladon Castle Management Limited - 1,000,000 - - - - Company seeking to acquire businesses in the brand management, consumer products and retail sectors Rusland Management Limited - 1,000,000 - - - - Company seeking to acquire businesses in the brand management, consumer products and retail sectors Torvar Limited - 1,000,000 - - - - Company seeking to acquire businesses in the database management, mapping, data mapping and management services sectors Camwood Enterprises Limited - 499,182 - - - - Provider of software repackaging services Letraset Limited - 234,385 - - - - Manufacturer and worldwide distributor of graphic art products Total 35,980,988 37,162,382 13,384,785 31,205,667 100.00% Notes 1 The percentage of equity held for these companies may be subject to further dilution of an additional 1% or more if, for example, management of the investee company exercises share options. 2 As well as the consideration on the disposal of DiGiCo Europe Limited, Â£874,926 of loan stock in DiGiCo Global Limited and 1.57% of its equity were also issued to the Company. 3 Investment formerly managed by Nova Capital Management Limited until 31 August 2007. 4 Investment formerly managed by Foresight Group LLP up to various dates ending on or before 10 March 2009. 5 Investment formerly managed by Nova Capital Management Limited until 31 August 2007 and by Foresight Group until various dates ending on or before 10 March 2009. 6 As part of the consideration on the disposal of Amaldis (2008) Limited, Â£537,948 of Original Additions Topco Limited loan stock was issued to the Company. Statement of Directors' Responsibilities The Directors are responsible for preparing the Directors' Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations. They are also responsible for ensuring that the Annual Report includes information required by the Listing Rules of the Financial Services Authority. 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 of the company for that year. In preparing these financial statements the Directors are required to: - select suitable accounting policies and then apply them consistently; - make judgements and accounting estimates that are reasonable and prudent; - state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions, to disclose with reasonable accuracy at any time the financial position of the Company and to 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. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements and other information included in annual reports may differ from legislation in other jurisdictions. The Directors confirm to the best of their knowledge that: the financial statements, which have been prepared in accordance with UK Generally Accepted Accounting Practice and the 2009 Statement of Recommended (a) Practice, `Financial Statements of Investment Trust Companies and Venture Capital Trusts' (SORP), give a true and fair view of the assets, liabilities, financial position and the profit of the Company. (b) the management report, included within the Chairman's Statement, Investment Manager's Review, Investment Portfolio Summary and Directors' Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. For and on behalf of the Board: Colin Hook Chairman Income Statement for the year ended 30 September 2012 Year ended 30 September 2012 Year ended 30 September 2011 Notes Revenue Capital Total Revenue Capital Total Â£ Â£ Â£ Â£ Â£ Â£ Net unrealised gains on investments - 2,364,362 2,364,362 - 10,870,219 10,870,219 Net gains on realisation of investments - 5,243,190 5,243,190 - 343,231 343,231 Income 2 2,004,297 - 2,004,297 1,654,663 - 1,654,663 Investment Manager `s fees 3a (290,664) (871,993) (1,162,657) (237,946) (713,837) (951,783) Investment Managers' performance fees 3b - (3,503,000) (3,503,000) - - - Other expenses (499,164) - (499,164) (375,837) - (375,837) Provision for litigation cost no longer required/ (charged) - 1,337,456 1,337,456 - (1,337,456) (1,337,456) --------- --------- --------- --------- --------- --------- Profit on ordinary activities before taxation 1,214,469 4,570,015 5,784,484 1,040,880 9,162,157 10,203,037 Tax on profit on ordinary activities (224,747) 224,747 - (176,808) 176,808 - --------- --------- --------- --------- --------- --------- Profit on ordinary activities after taxation for the financial year 989,722 4,794,762 5,784,484 864,072 9,338,965 10,203,037 --------- --------- --------- --------- --------- --------- Basic and diluted earnings per Ordinary Share: 7 2.26p 10.97p 13.23p 2.21p 23.83p 26.04p All the items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year. The total column is the Profit and Loss Account of the Company. There were no other recognised gains and losses in the year. Other than the revaluation movements arising in investments held at fair value through profit and loss, there were no differences between the profit as stated above and at historical cost. Balance Sheet as at 30 September 2012 as at 30 September 2012 as at 30 September 2011 Notes Â£ Â£ Â£ Â£ Â£ Â£ Fixed assets Investments at fair value 8 31,205,667 37,162,382 Current assets Debtors and prepayments 9 727,598 280,709 Current investments 10 17,523,440 11,682,461 Cash at bank 4,861,440 1,577,420 --------- --------- --------- 23,112,478 13,540,590 Creditors: amounts falling due within one year (3,766,160) (212,717) --------- --------- --------- --------- Net current assets 19,346,318 13,327,873 Provision for liabilities and charges - (1,337,456) ====== ====== Net assets 50,551,985 49,152,799 ====== ====== Capital and reserves Called up share capital 461,157 406,920 Share premium account 11 11,898,621 5,669,141 Capital redemption reserve 11 197,265 187,309 Capital reserve - unrealised 11 1,611,146 12,350,858 Special reserve 11 12,721,596 17,139,273 Profit and loss account 11 23,662,200 13,399,298 ====== ====== Equity Shareholders' funds 50,551,985 49,152,799 ====== ====== Basic and diluted net asset value per share Ordinary Shares 12 109.62p 120.79p Reconciliation of Movements in Shareholders' Funds For the year ended 30 September 2012 Year ended Year ended 30 September 2012 30 September 2011 Â£ Â£ Opening shareholders' funds 49,152,799 36,604,696 Net share capital bought back in the year (913,037) (1,475,019) Net share capital subscribed for in the year 6,293,673 5,353,709 Profit for the year 5,784,484 10,203,037 Dividends paid in the year 6 (9,765,934) (1,533,624) ====== ====== Closing shareholders' funds 50,551,985 49,152,799 ====== ====== Cash Flow Statement For the year ended 30 September 2012 Year ended Year ended 30 September 2012 30 September 2011 Operating activities Â£ Â£ Â£ Â£ Investment income received 1,955,985 1,571,454 VAT received and interest thereon - 34,370 Other income 4,861 3,647 Investment management fees paid (1,162,657) (1,160,893) Other cash payments (561,556) (480,615) -------- -------- -------- -------- Net cash inflow/(outflow) from operating activities 236,633 (32,037) Investing activities Acquisition of investments 8 (13,255,722) (2,739,946) Disposal of investments 8 26,468,137 4,907,493 -------- -------- -------- -------- Net cash inflow from investing activities 13,212,415 2,167,547 Equity Dividends Payment of equity dividends 6 (9,765,934) (1,533,624) -------- -------- -------- -------- Net cash inflow before liquid resource management and financing 3,683,114 601,886 Management of liquid resources Increase in monies held pending investment (5,840,979) (2,973,888) Financing Issue of Ordinary Shares 6,293,673 5,353,709 Purchase of own shares (851,788) (1,510,823) -------- -------- -------- -------- 5,441,885 3,842,886 -------- -------- -------- -------- Increase in cash for the year 3,284,020 1,470,884 -------- -------- -------- -------- Notes 1 Accounting policies The following accounting policies have been applied consistently throughout the year: a) Basis of accounting The accounts have been prepared under UK Generally Accepted Accounting Practice (UK GAAP) and the Statement of Recommended Practice, `Financial Statements of Investment Trust Companies and Venture Capital Trusts' ("the SORP") issued by the Association of Investment Companies in January 2009. The financial statements are prepared under the historical cost convention except for the revaluation of certain financial instruments. b) Presentation of the Income Statement In order to better reflect the activities of a VCT and in accordance with the SORP, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of the profit attributable to equity shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in section 274 Income Tax Act 2007. c) Investments All investments held by the Company are classified as "fair value through profit and loss", and are valued in accordance with the International Private Equity and Venture Capital Valuation ("IPEVCV") guidelines, as updated in September 2009, which have not materially changed the results reported last year. This classification is followed as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income. For investments actively traded on organised financial markets, fair value is generally determined by reference to Stock Exchange market quoted bid prices at the close of business on the balance sheet date. Purchases and sales of quoted investments are recognised on the trade date where a contract of sale exists whose terms require delivery within a time frame determined by the relevant market. Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional. Unquoted investments are stated at fair value by the Directors in accordance with the following rules, which are consistent with the IPEVCV guidelines: All investments are held at the price of a recent investment for an appropriate period where there is considered to have been no change in fair value. Where such a basis is no longer considered appropriate, the following factors will be considered: (i) Where a value is indicated by a material arms-length transaction by an independent third party in the shares of a company, this value will be used. (ii) In the absence of (i), and depending upon both the subsequent trading performance and investment structure of an investee company, the valuation basis will usually move to either:- (a) an earnings multiple basis. The shares may be valued by applying a suitable price-earnings ratio to that company's historic, current or forecast post-tax earnings before interest and amortisation (the ratio used being based on a comparable sector but the resulting value being adjusted to reflect points of difference identified by the Investment Manager compared to the sector including, inter alia, a lack of marketability). or:- a) (b) where a company's underperformance against plan indicates a diminution in the value of the investment, provision against cost is made, as appropriate. Where the value of an investment has fallen permanently below cost, the loss is treated as a permanent impairment and as a realised loss, even though the investment is still held. The Board assesses the portfolio for such investments and, after agreement with the Investment Manager, will agree the values that represent the extent to which an investment loss has become realised. This is based upon an assessment of objective evidence of that investment's future prospects, to determine whether there is potential for the investment to recover in value. (iii) Premiums on loan stock investments are accrued at fair value when the Company receives the right to the premium and when considered recoverable. (iv) Where an earnings multiple or cost less impairment basis is not appropriate and overriding factors apply, discounted cash flow or net asset valuation bases may be applied. 2 Income 2012 2011 Â£ Â£ Income from investments - from equities 305,650 365,331 - from OEIC funds 96,138 56,580 - from loan stock 1,540,777 1,212,795 - from bank deposits 56,871 16,309 -------- -------- 1,999,436 1,651,015 Other income 4,861 3,648 -------- -------- Total income 2,004,297 1,654,663 -------- -------- Total income comprises Revenue dividends received 401,788 421,911 Interest 1,597,648 1,229,104 Other income 4,861 3,648 -------- -------- Total Income 2,004,297 1,654,663 -------- -------- Income from investments comprises Listed UK securities 38,549 61,539 Listed overseas securities 96,138 56,580 Unlisted UK securities 1,807,878 1,516,587 -------- -------- Total Income 1,942,565 1,634,706 -------- -------- Total loan stock interest due but not recognised in the year was Â£352,133 (2011: Â£428,557). 3a Investment Manager's fees Revenue Capital Total Revenue Capital Total 2012 2012 2012 2011 2011 2011 Â£ Â£ Â£ Â£ Â£ Â£ Mobeus Equity Partners LLP 290,664 871,993 1,162,657 237,946 713,837 951,783 Under the terms of a revised investment management agreement dated 29 March 2010, Mobeus Equity Partners LLP ("Mobeus") (formerly Matrix Private Equity Partners LLP ("MPEP")) provides investment advisory, administrative and company secretarial services to the Company, for a fee of 2.4% per annum of closing net assets, calculated on a quarterly basis by reference to the net assets at the end of the preceding quarter. One sixth of this fee is subject to minimum and maximum limits of Â£150,000 (2011: Â£150,000) and Â£170,000 (2011: Â£170,000) per annum respectively. The investment management expense disclosed above is stated after applying a cap on expenses excluding IFA trail commission and exceptional items set at 3.25% of closing net assets at the year-end. In accordance with the investment management agreement any excess expenses are wholly borne by the Investment manager. The excess expenses during the year attributable to the Investment Manager amounted to Â£nil (2011: Â£nil). 3b Investment Managers' performance fees Revenue Capital Total Revenue Capital Total 2012 2012 2012 2011 2011 2011 Â£ Â£ Â£ Â£ Â£ Â£ Portfolio Mobeus Equity Partners LLP - 453,000 453,000 - - - Mobeus Equity Partners LLP/ Foresight Group LLP - 3,050,000 3,050,000 - - - -------- -------- -------- -------- -------- -------- - 3,503,000 3,503,000 - - - Under a Deed of Termination and Variation relating to Performance Incentive Agreements dated 29 March 2010, the Investment Manager's Incentive Agreement for the former 'O' Share Fund has been continued while the former 'S' Share Fund's Incentive Agreement has been terminated. Under the terms of the pre-merger 'O' Share Fund Incentive Agreement, each of the ongoing Investment Manager, Mobeus Equity Partners LLP and a former Investment Manager, Foresight Group LLP ("Foresight") are entitled to a performance fee equal to 20% of the excess of the value of any realisation of an investment made after 30 June 2007, over the value of that investment in an Investment Manager's portfolio at that date ("the Embedded Value"), which value is itself uplifted at the rate of 6% per annum subject to a High Watermark test. However, two amendments were made to this agreement for Mobeus for its portfolio. Firstly, the High Watermark was increased by Â£811,430, being the 'S' Share Fund's shortfall in total net assets from net asset value of Â£1 per 'S' Share, at 31 December 2009. Secondly, only 70% of any new investment made by Mobeus after the Merger will be added to the calculation of the Embedded Value, the value of the Investment Manager's portfolio and the value of any realisations, for the purposes of assessing any excess. Under the above agreements, the Investment Manager (Mobeus) and former investment manager (Foresight) may be entitled to an Incentive fee for the year ended 30 September 2012 of Â£453,000 (that may be payable on the Mobeus portfolio) (2011: Â£nil) and Â£3,050,000 (that may be payable on the ex-Foresight portfolio, to be shared between Mobeus and Foresight) (2011: Â£nil). At the date of approval of these accounts, the amounts accrued above have not yet been agreed between the Board, and Mobeus and Foresight. The amounts above are regarded by the Board as a prudent estimate of the amounts that may be ultimately be agreed between the parties as payable. 4 Provision for litigation costs no longer required/(charged) 2012 2011 Â£ Â£ Writeback/(charge) for the year 1,337,456 (1,337,456) As explained in the previous year-end accounts, at 30 September 2011 the Company had a prima facie obligation to meet the costs of an action brought by a former director and shareholder in Image Source Group Limited ("IMSG"). Under an agreement between the Company and IMSG dated 6 December 2011, IMSG met the cost of the settlement including the Company's pro rata share of the legal fees incurred in defending the action up to 30 September 2011 and all the legal costs incurred since. To facilitate the settlement, the Company has lent approximately Â£1.45 million to IMSG on commercial terms and repayable in 5 years. The plaintiff to the action will also be entitled to a small percentage share of the net proceeds over and above Â£5 million attributable to the ordinary shareholders from any sale of IMSG up to 31 December 2016, after all loans and any outstanding interest costs and prior charges have been repaid. This loan therefore forms part of the Company's investments and has a value of Â£925,470 as shown in the Investment Portfolio Summary above. Accordingly, the obligation has been discharged due to IMSG agreeing to meet the costs of the settlement, funded by the loan to IMSG in the period. Thus the provision at 30 September 2011 is no longer required at 30 September 2012 and has been credited to the Income Statement. 5 Tax on ordinary activities 2012 2012 2012 2011 2011 2011 Revenue Capital Total Revenue Capital Total Â£ Â£ Â£ Â£ Â£ Â£ a) Analysis of tax charge: UK Corporation tax on profits/(losses) for the year 224,747 (224,747) - 176,808 (176,808) - -------- -------- -------- -------- -------- -------- Total current tax charge/(credit) 224,747 (224,747) - 176,808 (176,808) - -------- -------- -------- -------- -------- -------- Corporation tax is based on a rate of 20% (2011: 20.5%) b) Profit on ordinary activities before tax 1,214,469 4,178,404 5,392,873 1,040,880 9,162,157 10,203,037 Profit on ordinary activities multiplied by small company rate of corporation tax in the UK of 20% (2011: 20.5%) 242,894 835,681 1,078,575 213,380 1,878,242 2,091,622 Effect of: UK dividends (61,130) - (61,130) (74,893) - (74,893) Unrealised gains not taxable - (394,550) (394,550) - (2,228,395) (2,228,395) Realised gains not taxable - (1,048,638) (1,048,638) - (70,362) (70,362) Litigation costs - (267,491) (267,491) - 274,178 274,178 Income not yet taxable 165 - 165 (552) - (552) Unrelieved expenditure - 693,069 693,069 - 8,402 8,402 Impact of marginal rate 42,818 (42,818) - 38,873 (38,873) - -------- -------- -------- -------- -------- -------- Actual current tax charge 224,747 (224,747) - 176,808 (176,808) - 6 Dividends paid and payable 2012 2012 2012 2011 2011 2011 Revenue Capital Total Revenue Capital Total Â£ Â£ Â£ Â£ Â£ Â£ Dividends on equity shares Ordinary Shares (formerly 'S' Shares) - Special interim - year ended 30 September 2012 - 20p capital paid in January 2012 (2011: Â£nil) - 8,138,244 8,138,244 - - - Ordinary Shares (formerly 'S' Shares) - Interim - year ended 30 September 2010 - nil p (2010: 2p - capital) - - - - 765,916 765,916 Ordinary Shares (formerly 'S' Shares) - Final - year ended 30 September 2011 - 2p revenue and 2p capital paid in February 2012 (2011 - 2p capital). 813,845 813,845 1,627,690 - 767,708 767,708 -------- -------- -------- -------- -------- -------- Total paid in year 813,845 8,952,089 9,765,934* - 1,533,624 1,533,624* *- Of these amounts Â£1,256,231 (30 September 2011: Â£117,369) was re-invested in new shares, issued as part of the DRIS scheme. 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 259 of the Income Tax Act 2007 are considered. 2012 2011 Â£ Â£ Revenue available by way of dividends for the year 989,722 864,072 Proposed interim income dividend for the year - 3p (2011: 2p) 1,383,470 813,841 7 Basic and diluted earnings per share 2012 2011 Â£ Â£ Total earnings after taxation: 5,784,484 10,203,037 Basic and diluted earnings per share (note a) 13.23p 26.04p Revenue profit from ordinary activities after taxation 989,722 864,072 Basic and diluted revenue earnings per share (note b) 2.26p 2.21p Net unrealised capital gains on investments 2,364,362 10,870,219 Net realised capital gains on investments 5,243,190 343,231 Provision for litigation cost no longer required/(charged) 1,337,456 (1,337,456) Capitalised management fees less taxation (647,246) (537,029) Investment Managers' performance fees (3,503,000) - -------- -------- Total capital return 4,794,762 9,338,965 Basic and diluted capital earnings per share (note c) 10.97p 23.83p Weighted average number of shares in issue in the year 43,710,889 39,182,112 Notes a) Basic earnings per share is total earnings after taxation divided by the weighted average number of shares in issue. b) Revenue earnings per share is the revenue profit after taxation divided by the weighted average number of shares in issue. c) Capital earnings per share is the total capital gain after taxation divided by the weighted average number of shares in issue.d) Diluted earnings per share in each case are the same as basic earnings per share due to the potential extra shares that may be issued to settle the investment managers incentive fee having no effect on the weighted average number of shares in issue at the year end. 8 Summary of movement on investments during the year Traded Unquoted Preference Qualifying Total on AiM Ordinary shares loans or OFEX shares Â£ Â£ Â£ Â£ Â£ Cost at 30 September 2011 4,286,189 11,104,773 86,767 14,139,876 29,617,605 Impairment (940,626) (3,865,454) - - (4,806,080) Unrealised (losses)/gains (579,840) 12,926,699 (16,722) 20,720 12,350,857 -------- -------- -------- -------- -------- Valuation at 30 September 2011 2,765,723 20,166,018 70,045 14,160,596 37,162,382 - Purchases at cost 36 3,555,244 3,119 9,826,386 13,384,785 Sales - proceeds (1,296,944) (19,428,785) (30,792) (5,886,175) (26,642,696) Reclassification - (108,277) - 108,277 - Realised gains 460,905 2,746,842 - 2,120,698 5,328,445 Unrealised gains/(losses) 929,101 2,068,197 (6,942) (1,017,605) 1,972,751 -------- -------- -------- -------- -------- Valuation at 30 September 2012 2,858,821 8,999,239 35,430 19,312,177 31,205,667 -------- -------- -------- -------- -------- Cost at 30 September 2012 3,897,666 12,457,883 57,647 19,567,792 35,980,988 Impairment (940,626) (4,179,304) - - (5,119,930) Unrealised (losses)/gains at 30 September 2012 (98,219) 720,660 (22,217) (255,615) 344,609 -------- -------- -------- -------- -------- Valuation at 30 September 2012 2,858,821 8,999,239 35,430 19,312,177 31,205,667 Transaction costs on the purchase and disposal of investments of Â£85,255 were incurred in the year. These are excluded from realised gains shown above of Â£5,328,445, but were included in arriving at gains on realisation of investments in the Income Statement of Â£5,243,190. Reconciliation of cash movements in investment transactions The difference between additions in the investments note above of Â£13,384,785 and the additions figure per the Cash Flow Statement of Â£13,255,722 is Â£129,063. This relates to costs funded by the Company in a previous period subsequently treated as a loan. The difference between disposals in the investments note above of Â£26,642,696 and the disposals figure per the Cash Flow Statement of Â£26,468,137 is Â£174,559. This relates to transaction costs of Â£85,255 and an unsettled trade of Â£89,304 received shortly after the year end. 9 Debtors and prepayments 2012 2011 Â£ Â£ Amounts due within one year: Accrued income 226,319 191,592 Prepayments 14,327 15,044 Other debtors 486,952 74,073 -------- -------- 727,598 280,709 Included within Other debtors is an amount receivable from Mobeus Equity Partners LLP of Â£6,037 for the reimbursement of listing fees incurred by the VCT in relation to the Joint Linked Offer for Subscription launched on 20 January 2012. 10 Current Investments 2012 2011 Â£ Â£ Monies held pending investment 17,523,440 11,682,461 This comprises cash of Â£15,523,440 invested in four Dublin based and one UK based OEIC money market funds, subject to immediate access, and Â£2,000,000 in a bank deposit, repayable within one year. These sums are regarded as monies held pending investment. 11 Movement in share capital and reserves Called up Share Capital Capital reserve Special Profit and share premium redemption (unrealised) reserve* loss capital account reserve (non- (note a) account* distributable) (note b) Â£ Â£ Â£ Â£ Â£ Â£ At 30 September 2011 406,920 5,669,141 187,309 12,350,858 17,139,273 13,399,298 Shares bought back (9,956) - 9,956 - (913,037) - Shares issued 49,844 4,987,598 - - - - Dividends re-invested into new shares 14,349 1,241,882 - - - - Dividends paid - - - - - (9,765,934) Transfer between reserves (note a) - - - - (3,504,640) 3,504,640 Other expenses net of taxation - - - - - (4,150,246) Net unrealised gains on investments - - - 2,364,362 - - Write-back of provision for settlement of litigation costs (note 5) - - - - - 1,337,456 Gains on disposal of investments (net of transaction costs) - - - - - 5,243,190 Realisation of previously unrealised gains - - - (13,104,074) - 13,104,074 Profit for the year - - - - - 989,722 -------- -------- -------- -------- -------- -------- At 30 September 2012 461,157 11,898,621 197,265 1,611,146 12,721,596 23,662,200 * - Distributable reserves total Â£36,383,796 (2011: Â£30,538,571). The Special reserve has been treated as distributable in determining the amounts available for distribution. 12 Net asset value per share 2012 2011 Â£ Â£ Net assets 50,551,985 49,152,799 Number of shares in issue 46,115,656 40,692,048 Basic and diluted net asset value per share 109.62p 120.79p 13 Post balance sheet events The Company sold 12,500 of its shares in Tikit Group on 1 October 2012 at a price of 325 pence per share, realising proceeds of Â£40,625. Duncary 8 Limited made two separate partial repayments of its loan stock totaling Â£125,000 in October and December 2012. The Company sold 1,250,000 of its shares in IDOX plc in November 2012 at an average price of 41 pence per share, realising proceeds of Â£513,500. On 23 November 2012, Blaze Signs Holdings Limited partially repaid loan stock, realising proceeds of Â£609,471 including a premium of Â£140,647. On 30 November 2012, the entire equity holding of Brookerpaks Limited was realised for proceeds of Â£600,000. 14 Statutory information The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 30 September 2012 but is derived from those accounts. Statutory accounts will be delivered to the Registrar of Companies after the Annual General Meeting. The auditors have reported on these accounts and their report was unqualified and did not contain a statement under section 498(2) of the Companies Act 2006. 15 Annual Report The Annual Report will be published on the Company's website at www.incomeandgrowthvct.co.uk shortly and, following the adoption of electronic communications by the Company, Shareholders will shortly receive notification from the Company on how to download a pdf of the Report from the website if they have not requested to receive a hard copy. Shareholders and members of the public, who wish to receive a hard copy of the Annual Report, may request a copy by writing to the Company Secretary, Mobeus Equity Partners LLP, 30 Haymarket (4th floor), London SW1Y 4EX or by email: iandg@mobeusequity.co.uk. 16 Annual General Meeting The Annual General Meeting of the Company will be held at 11.00 am on Wednesday, 13 February 2013 at the offices of Mobeus Equity Partners, 30 Haymarket (4th floor), London SW1Y 4EX.

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