Annual Financial Report
Mobeus Income & Growth 2 VCT plc
(formerly Matrix Income & Growth 2 VCT plc ("MIG2", "the Company" or "the
Fund"))
Annual Results announcement for the year ended 30 April 2013
INVESTMENT OBJECTIVE
Mobeus Income & Growth 2 VCT plc , formerly Matrix Income & Growth 2 VCT plc
("Mobeus Income & Growth 2 VCT" or "the Company" or "the VCT") is a Venture
Capital Trust managed by Mobeus Equity Partners LLP (previously Matrix Private
Equity Partners LLP ("Mobeus")) investing primarily in established, profitable,
unquoted companies.
Investment Objective - The Company's objective is to provide investors with a
regular income stream, arising both from the income generated by the companies
selected for the portfolio and from realising any growth in capital.
Venture Capital Trust Status - Mobeus Income & Growth 2 VCT has satisfied the
requirements as a Venture Capital Trust under section 274 of the Income Tax Act
2007 ("ITA") and the Directors intend to conduct the business of the Company so
as to continue to comply with that section.
FINANCIAL HIGHLIGHTS
The highlights during the year have been:-
• Net Asset Value (NAV basis) Total Return for the year was 12.3%.
• Net Asset Value (share price basis) Total Return for the year was 10.9%.
• 4p dividend declared and paid in the year.
Performance Summary
Annual results for the year ended 30 April 2013
Ordinary Shares of 1 penny (formerly C Shares until 10 September 2010)
To help Shareholders understand the recent past performance of their
investment, comparative data is shown below. Total return (NAV basis) comprises
NAV per share plus cumulative dividends paid per share:
Net Net asset Cumulative dividends Share Cumulative Total Return per
assets value per paid per Share (p) price Share to Shareholders since
(£ m) Share (p) 1 launch²³
(NAV) (p)
(NAV basis) (share price
(p) basis) (p)
Ordinary Share Fund (formerly C Share Fund until 10 September 2010)²
As at 30 April 2013 25.7 106.8 18.0 70.3 124.8 88.3
As at 30 April 2012 24.5 98.7 14.0 67.0 112.7 81.0
As at 30 April 2011 24.9 96.2 10.0 62.0 106.2 72.0
At close of Offer
for Subscription
in 2005 8.7 94.5 - - - -
Former Ordinary Share Fund (raised in 2000/2001)³
As at 30 April 2013 - 88.3 36.7 - 125.0 -
As at 30 April 2012 - 81.6 33.4 - 115.0 -
As at 30 April 2011 - 79.5 30.1 - 109.6 -
At close of Offer
for Subscription
in 2001 12.4 94.0 - - - -
¹Source: London Stock Exchange
²Launch date 30 September 2005
³ Launch date 10 May 2000
CHAIRMAN'S STATEMENT
I am pleased to present the thirteenth Annual Report of the Company, for the
year ended 30 April 2013. The Company changed its name from Matrix Income &
Growth 2 VCT plc to Mobeus Income & Growth 2 VCT plc on 29 June 2012.
Although the UK Government's continuing deficit and consequential high level of
debt are a concern, there are some signs of a return to economic growth. If
this continues, it will provide better trading conditions for the companies in
the portfolio, the majority of which are already trading profitably.
During the year, there has been an 11.5% increase in the unrealised gain in the
value of the portfolio. After a slow start to the year, the number of new and
follow-on investments increased significantly during the last three months of
the year to 30 April 2013.
Performance for the year ended 30 April 2013
The net asset value ("NAV") per share at 30 April 2013 was 106.8 pence (2012:
98.7 pence), an increase over the year of 8.1 pence (2012: increase of 2.5
pence). To measure the NAV per share total return over the year on a
like-for-like basis, the interim dividend of 4 pence paid to Shareholders on 19
April 2013, in respect of the year ended 30 April 2013, should be added to
closing NAV per share, producing a closing return of 110.8 pence. Comparing
this to an opening NAV of 98.7 pence, the Company's underlying NAV return per
share was 12.1 pence or 12.3%.
This increase compares with an increase of 26.1% in the FTSE SmallCap Total
Return index and a decrease of 8.3% in the FTSE AIM Total Return index.
The share price total return for the year, being the share price at 30 April
2013 after adding the dividend of 4 pence paid before the year end, rose by
10.9% during the year from 67.0 pence to 74.3 pence.
Unrealised increases in the valuation of investments held, notably by ATG Media
Holdings Limited and Blaze Signs Holdings Limited, are primarily responsible
for the increase in returns for the year.
Performance of former share classes
Shareholders should note that the performance data above relates to the one
ordinary share class now in existence, which was formerly called the C share
class, before the share class merger completed on 10 September 2010.
Shareholders in both the former `O' and `C' share classes may wish to see the
performance of their own investment, and this is shown in the Financial
Highlights on page 2, and in the Investor Performance appendix on page 53.
Revenue and Capital returns for the year ended 30 April 2013
The results for the year ended 30 April 2013 are set out in the following
pages. The total return (after tax) attributable to Ordinary Shareholders for
the year was a profit of £2,685,399 (2012: £1,333,109), comprising a net
capital return of £2,223,498 (2012: £816,532) and a revenue return of £461,901
(2012: £516,577). This improved performance for the year is mainly due to net
increases of £2.6 million in the value of the investment portfolio.
Portfolio Activity
Management buy-out transactions ("MBOs") continue to represent a significant
proportion of the portfolio with two new MBO transactions occurring in the
year. MBOs now represent 80.8% of the portfolio, with 13.8% in acquisition
companies, 3.9% in development capital and 1.5% invested in AIM investments.
The portfolio is now invested in a wide range of market sectors with the
largest of those being Support Services at 56.5%.
There have been four significant investments in the year, two of which were new
investments and two of which were further investments into existing portfolio
companies to build on success so far and to assist both investee companies to
generate further growth.
During the year, the VCT invested £3.7 million in total, in new and follow-on
investments. This includes funds from the acquisition vehicles Sawrey Limited,
Almsworthy Trading Limited, Fosse Management Limited and Peddars Management
Limited.
In July 2012, the Company made a new investment of £906,762 into Tessella
Holdings Limited, via the acquisition vehicle Sawrey Limited, as part of the
Manager's Operating Partner programme.
In February 2013, the VCT provided an additional £624,769 from Almsworthy
Trading Limited into existing portfolio company Fullfield Limited (Motorclean)
to enable their acquisition of rival company Forward Valeting Services, to
create the UK's largest provider of car valeting services.
In March 2013, a new investment of £1,056,417 was made to support the MBO of
Gro-Group Holdings Limited, including £1 million from its existing investment
in the acquisition vehicle Fosse Management. Based in Devon, Gro-Group is the
market leader for baby sleep time products in the UK and Australia.
Finally, in April 2013, the VCT invested a further £863,923 from Peddars
Management Limited into an existing portfolio company, ATG Media Holdings
Limited, to enable ATG, to acquire Bidspotter Inc., a US company providing live
bidding and auction software to industrial and commercial auctioneers.
A further investment of £167,647 was also made into Newquay Helicopters (2013)
Limited (formerly British International Holdings Limited) in order to provide
working capital support. After the year end this support has enabled the
company to sell the major part of its business, in turn enabling it to repay
most of the VCT's loan stock and accrued interest, resulting in proceeds to
date of £1,671,825.
After the year end, the Company made an investment of £967,781 in Veritek
Global Limited, using the acquisition vehicle Madacombe Trading Limited.
There have been a number of realisations and loan stock repayments during the
year. In May 2012, IGLU.com Holidays Limited was realised for £1,486,978, which
contributed to a total return on original investment of 2.5 times money in two
and a half years. Blaze Signs Holdings Limited has repaid £979,639 of their
outstanding loan including premium during the year which brings total loan
proceeds (including interest) received to date to £1,580,136.
In March 2013, a portion of loan stock and the entire equity holding of
Faversham House Holdings Limited was realised for £154,435 proceeds and
generated a gain of £41,471 in the year. The VCT retains loan stock valued at
cost, being £111,335.
There were three further loan repayments in the year: £83,179 from Fullfield
Limited, £84,087 from DiGiCo Global Limited and £26,037 from Tessella Holdings
Limited, which is a reflection of the strength of these investee companies'
trading.
Portfolio review
As explained earlier, the performance of the portfolio is the main source of
the VCT's good performance this year. The higher valuations for ATG Media
Holdings Limited, Blaze Signs Holdings Limited, Fullfield Limited (Motorclean
Limited), Ingleby (1879) Limited (EMaC Limited), DiGiCo Global Limited and
Focus Pharma Holdings Limited reflect strong trading performances, as also was
the case with a number of other companies. There are a smaller number of
companies that are struggling to make progress. This is either because they are
related to the construction sector or are simply trading below plan. Overall,
portfolio companies' performance for the year has been encouraging.
The Company now holds 28 investments at the year-end, which were valued at
100.7% of cost, up from 95.6% at the previous year end.
Further details of these investments and transactions are provided in the
Investment Manager's Review on pages 7 to 12.
Income returns
Revenue returns have been broadly consistent this year, generating a profit of
£461,901, a fall of £54,676 from £516,577 in 2012. This decline is mainly as a
result of a large DiGiCo Global Limited dividend (£135,282) received in the
previous year before the partial sale of that investment last year, partially
offset by an encouraging increase in loan interest receipts.
Loan stock interest from investee companies rose to £865,768 (2012: £789,960),
as several new investments generated new income, while some investee companies
were able to pay interest arrears. The annualised yield from loan stocks at
valuation is higher at 6.1% (2012: 4.9%), reflecting a number of new
investments yielding good rates of interest. This higher running yield is
despite a number of loan repayments in the year.
Excluding DiGiCo Global Limited, dividend income from other investee companies
has risen 67% to £135,481. The majority of dividends received have either risen
on last year's level or have been a maiden dividend by that investee company.
Low interest rates continue to restrict revenue generation on bank deposits and
money-market funds. Total income from cash and money market funds was £17,675
(2012: £36,458). The Board remains committed to security as the primary aim for
uninvested funds rather than attempting to increase the rate of return at the
expense of an increase in risk.
Investment management fees have remained steady over the year. Running expenses
have risen by £17,128, due to higher registrar, audit and trail commission fees
(the last primarily a result of higher net assets).
Dividends
The revenue account generated a net revenue gain for the year, as explained
above, of 1.87 pence per share (2012: gain of 2.03 pence). Your Board declared
an interim dividend totalling 4 pence per share, of which 1.25 pence was income
and 2.75 pence was capital. This was paid on 19 April 2013 and brought total
dividends paid to Ordinary Shareholders to 18 pence and the total paid to
former O fund Shareholders to 36.7 pence.
The Company is required to pay a minimum income dividend each year, to comply
with VCT rules. The amount of 1.25p, which was part of the interim dividend of
4p per share already paid on 19 April 2013, is fractionally less than the
minimum required. To address this issue, the Board has declared a further
interim income dividend of 0.1p in respect of income earned for the year ended
30 April 2013. To save postage costs, this will be paid at the same time as
paying the interim dividend for the year ending 30 April 2014, currently
planned to be on 22 April 2014 to Shareholders on the Register on 28 March
2014.
Share buy-backs
During the year ended 30 April 2013, the Company continued to implement its
buy-back policy and bought back 776,749 Ordinary Shares in five transactions,
representing 3.1% of the shares in issue at the start of the year for an
aggregate consideration of £541,894. These shares were subsequently cancelled
by the Company. The shares above were bought back for an average price of 69.76
pence per share, at discounts to the net asset value at the date of each
buyback ranging from 34.13 % to 30.83%. The value of these discounts has
contributed to an increase in net asset value per share of 1.06p, based on the
closing number of shares in issue at the year end.
Change of ownership at Mobeus Equity Partners, previously Matrix Private Equity
Partners
As mentioned in last year's Annual Report, the partners of the Investment
Manager, Mobeus Equity Partners LLP (formerly Matrix Private Equity Partners
LLP) acquired a full interest in the business on 29 June 2012. This led to the
Investment Manager becoming a fully independent owner-managed firm.
Since this management buy-out, the Company's arrangements with Mobeus have not
changed and the Directors continue to look forward to working with Mobeus to
provide attractive long term returns on your Company investment, whilst
reserving the Company's rights under the investment management agreement.
Shareholder communication
May I remind you that the Company continues to have its own website which is
available at www.mig2vct.co.uk.
Around 140 Mobeus VCT Shareholders attended the Manager's third annual
Shareholder Workshop in January 2013. Shareholders attending heard
presentations from the Manager and the CEO of DiGiCo Global Limited, one of the
VCT's portfolio companies.
Auditor
With effect from 28 March 2013, the Company's auditor, PKF (UK) LLP merged with
BDO LLP to become part of BDO LLP. The Board has subsequently appointed BDO LLP
as the Company's auditor to fill the casual vacancy arising as a result of the
resignation of PKF (UK) LLP following the merger.
Strategy
Your Board considers the Company's strategy at least annually. The main issues
addressed are the investment objectives and policies, the role and performance
of the Investment Manager and the methods of providing Shareholders with a
satisfactory return on their investment.
As Shareholders will know, our strategy has been to seek to maximise the Net
Asset Value return by:
1. setting the Investment Manager a target of a minimum average annual return
of 8%;
2. not issuing new shares while additional funds are not required to take up
new investment opportunities or until the renewal vote due in September 2015;
3. buying back shares at a price which considers the interests of the
continuing Shareholders, together with those of Shareholders seeking to realise
their investment; and
4. paying a consistent annual dividend while maintaining the net asset value of
the fund.
It is pleasing to report that:
1. returns on the Ordinary Shares for the three years and the year to 30 April
2013 were 36.9% (11% compound per year) and 12.2% respectively. These are
significantly higher than achieved in previous years;
2. the proportion of net assets invested in businesses is higher than it would
have been if more new shares had been issued since the Company's last
fund-raising in 2009. Given the very low return earned on uninvested funds,
this has delivered higher returns;
3. buying back shares at the discount to net asset value has created demand
from outside investors for the Company's shares and has increased the returns;
and
4. an annual dividend of 4p has been paid over the past three years. The
increase in the net asset value to 106.8p allows for higher dividends to be
paid in future years.
The level of uninvested funds, augmented by regular disposals of portfolio
investments, has enabled the Company to take up all the available new
investment opportunities to date. However, as part of our most recent strategy
review, the analysis of the anticipated cash inflows and outflows from
operations and investment activities over the next 18 months indicated that, as
a result of a recovery in the market and of an increase in the average size of
new investments, the amount of new investment opportunities will exceed the
amount of disposals to an extent that additional funds will be required if all
the new investment opportunities are to be taken up.
Consequently, your Board is considering raising additional funds during the
current financial year. If a fund-raising were to proceed, it would entail the
following revisions to our current stategy:
1. extending the life of the Company until the fifth anniversary of the latest
allotment of shares, in order to maintain the tax reliefs on the new shares to
be issued. Resolutions to authorise the allotment of shares arising from a
fund-raising and to extend the life of the Company will be put to Shareholders
at the Annual General Meeting to be held on 20 September 2013. If either of the
resolutions were not passed or if they were passed but the fund-raising were
not to proceed, it would be the Directors' intention to continue to hold a
renewal vote as currently scheduled, in September 2015; and
2. adopting a buy-back policy with the objective of maintaining the discount to
NAV at 10% or less. The attractiveness of any fundraising will be enhanced if
prospective investors can see a clearer opportunity to exit at a level closer
to net asset value.
Outlook
So far during 2013, global quoted stock markets have shown a significant amount
of volatility. Markets are adjusting to the expectation of future reductions in
support, from the quantitative easing programme undertaken by central banks. On
balance, it seems that the threats to economic growth posed by the Eurozone
crisis are perceived as lower for now. Against this, the UK Government's
continued austerity plan limits the scope for fiscal stimulus to provide a
source of growth to the small business sector. The environment for smaller
companies remains uncertain, if UK economic growth is limited. On a more
positive note, recent data on the UK economy appears to indicate that a
recovery from the financial crisis is underway, and business surveys reveal a
cautious optimism in the corporate sector.
As explained above, the Board is mindful that the VCT should have adequate
liquidity to take advantage of the increased number and quality of businesses
currently being evaluated by the Manager. In view of the uncertain environment
above, it is imperative that only the highest quality businesses are selected
with the terms of the deal structured so as to minimise the downside risk to
Shareholders. The cautious approach of selecting well-run profitable companies
operating in niche markets is the primary reason for the quality of the
investment portfolio currently held within the VCT.
Annual General Meeting
The Annual General Meeting of the Company will be held at 12.00 noon on 20
September 2013 at the offices of SGH Martineau LLP, One America Square,
Crosswall, London EC3N 2SG. An explanation of the resolutions to be proposed at
this meeting may be found in the Directors' Report.
I would like to take this opportunity to thank Shareholders for their continued
support and I hope I have the opportunity of meeting you at the Annual General
Meeting.
Nigel Melville
Chairman
1 August 2013
SUMMARY OF THE STATEMENT OF DIRECTORS' RESPONSIBILITIES REPORT
The Directors confirm, to the best of their knowledge:
• that the Financial Statements have been prepared in accordance with UK
Generally Accepted Accounting Practice and give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company;
and
• that the annual report includes a fair review of the development and
performance of the business and the position of the Company, together with
a description of the principal risks and uncertainties that it faces.
By order of the Board
Nigel Melville
Chairman
1 August 2013
INVESTMENT POLICY
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 own. Investments are
primarily made in companies that are established and profitable.
The Company's cash and liquid resources may be invested to maximise income
returns in a range of instruments of varying maturities, subject to the
overriding criterion that the risk of loss of capital be minimised.
UK companies
The companies in which investments are made must have no more than £15 million
of gross assets at the time of investment and £16 million immediately following
the investment to be classed as a Venture Capital Trust ("VCT") qualifying
holding.
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 per cent. of
its investments in a single company and must achieve at least 70 per cent. by
value of its investments throughout the period in shares or securities in VCT
qualifying holdings, of which a minimum overall of 30 per cent. by value must
be ordinary shares which carry no preferential rights. In addition, although
the Company can invest less than 30 per cent. of an investment in a specific
company in ordinary shares, it must have at least 10 per cent. 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 VCT regulations in respect of funds raised after 6 April 2011 have changed,
such that 70% of qualifying holdings invested with such funds must be held in
equity.
Asset mix
The Investment Manager aims to hold approximately 80 per cent of net assets by
value in the Company's qualifying investments. The balance is held in readily
realisable interest bearing investments and deposits and in some non-qualifying
holdings in the same investee companies in which qualifying investments have
been made.
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 using a significant proportion of loan
stock (up to 70 per cent. of the total investment in each VCT qualifying
company). Initial investments in VCT qualifying companies are generally made in
amounts ranging from £200,000 to £2 million at cost, or such amounts as VCT
legislation permits. Normally, no holding in any one company will be greater
than 10 per cent. (but in any event will not be greater than 15 per cent.) of
the value of the Company's investments, based on cost, at the time of
investment. Ongoing monitoring of each investment is carried out by the
Investment Manager, generally through taking a seat on the board of each VCT
qualifying company.
Co-investment
The Company aims to invest alongside the three other VCTs advised by the
Investment Manager with a similar investment policy. This enables the Company
to participate in larger combined investments advised on by the Investment
Manager .
Borrowing
The VCT has no borrowing and does not have any current plans for future
borrowings.
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 Investment Manager (Mobeus Equity
Partners LLP) and are then subject to formal approval by the Directors. Mobeus
Equity Partners LLP also provides Company Secretarial and Accountancy services
to the VCT.
INVESTMENT MANAGER'S REVIEW
Overview
The investment portfolio has benefitted from two main developments over the
year. The continued positive trend in the volume and quality of opportunities
seen by the team has led to a number of completions, and strong performance
across the portfolio has led to further valuation uplifts.
The UK economy continues to present challenges to the small company sector.
Despite this, the investment portfolio is demonstrating resilience, and many
portfolio companies are growing profits. Our strategy of selecting established,
profitable and cash flow generative companies with high quality, motivated
management teams is generating good returns.
As a result of both realisations and loan repayments, the Company's liquidity
position has strengthened and so it is well resourced to invest. Where
appropriate, we have actively encouraged management teams to pursue an
acquisition strategy, supported by additional investment. This approach has led
to two follow-on investments to support sizeable acquisitions, both completed
in the early part of 2013.
The long-standing investment strategy of investing in well-structured MBO
deals, partly in equity and partly in income yielding loan stocks, gives
substantial downside protection to Shareholders' capital.
A large part of the investment management team's work involves being actively
engaged with the management teams of investee companies and encouraging them to
question budgets, forecasts and cost structures and to take cost cutting
measures as necessary to ensure that their business is robust to the difficult
economic environment within which many are operating. The fruits of this are
shown in the financial robustness and profitability of most companies in the
portfolio, and the way in which many have recovered from the depths of the
recession in 2008-9.
New investment
There have been two significant investments into new portfolio companies during
the year. In July 2012, the Company invested £906,762 into the MBO of Tessella
Holdings Limited, an international provider of science-powered technology and
consulting services. The Company used its acquisition vehicle Sawrey Limited,
in which it had already invested £1 million, to acquire Tessella, resulting in
a small partial return of capital. Founded in 1980, Tessella 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 and is already making staged loan stock repayments.
In March 2013, the Company completed a new investment of £1,056,417, to support
the MBO of Gro-Group Holdings Limited. The amount invested included £1 million
from the Company's existing investment in the acquisition vehicle Fosse
Management Limited. Devon based Gro-Group created the original, and now
internationally renowned, Gro-bag which has become the number one baby sleep
bag brand in the UK and Australia. Market penetration of the product has
increased from zero to around 90% since the company was founded in 2000 and
turnover has grown to £12 million.
Shortly after the period-end in July 2013, the VCT completed a further new
investment of £967,781 in Veritek Global Limited (resulting in a small refund
of the VCT's existing investment of £1 million in the acquisition vehicle,
Madacombe Trading) to support the MBO of Veritek, a Europe-wide provider of
installation, maintenance and support services for blue-chip owners of printing
equipment.
Follow-on investment
As explained earlier, the investment management team has focussed on the
opportunities for expansion by acquisition within the existing portfolio. The
principal aim of this is enhancing the value of existing successful investments
through further funding; backing successful management teams within the
portfolio is likely to involve a materially lower investment risk than a first
investment in a new portfolio company.
Two such investments have been completed in 2013. The first of these was
completed in February; the VCT provided an additional £624,769, via acquisition
vehicle Almsworthy Trading Limited, to finance Motorclean Limited's acquisition
of a competitor, Forward Valeting Services, to create the UK's largest provider
of car valeting services. This resulted in a repayment of funds to the Company
from Almsworthy of £375,231.
In April 2013, a further £863,923 was invested into ATG Media Holdings Limited
to enable it to acquire Bidspotter Inc., a US business engaged in providing
live bidding and auction software to industrial and commercial liquidation
auctioneers. £1 million already invested into Peddars Management Limited was
used to finance the transaction, resulting in a net repayment to the VCT of £
136,077.
Although most portfolio companies have shown significant resilience during the
year, two portfolio companies required relatively small amounts of further
funds. In June 2012, £57,143 was further advanced to PXP Holdings Limited, as
part of a major-restructuring of the company following a sustained period of
poor trading in a challenging market. Improved performance is expected during
2013.
A further loan of £167,647 was advanced to support the working capital
requirements of Newquay Helicopters (2013) Limited (formerly British
International Holdings Limited). This was to provide working capital pending
the disposal of the company's major trading subsidiary which has now occurred.
The company has now repaid the principal and premiums of the first two loan
stocks, together with all premiums and interest arrears for total cash proceeds
of £1,671,825. The capital proceeds of £1,248,800 compare with a related
investment cost of £934,000. This is a pleasing outcome and there is prospect
for further returns of capital as the company realises its remaining assets and
activities.
The Operating Partner Programme as a whole has continued to generate successful
investments for the Company. Four of the seven acquisition vehicles in the
portfolio at the start of the year have been utilised in either new or
follow-on investments. The programme has £2 million remaining in two vehicles,
each headed by an experienced chairman well known to the Investment Manager.
Realisations
There have been a number of cash returns in the period, comprising investment
realisations and loan stock repayments. During the year these have generated
net cash proceeds of £3,380,036.
In May 2012, the Company realised its entire investment in IGLU.com Holidays
Limited, the specialist online ski and cruise holiday travel agent, for net
cash proceeds of £1,455,265 through a sale to Growth Capital Partners. This
realisation contributed to total cash proceeds of £2,530,414 to the Company
over the two and a half year life of the investment, representing a 2.53 times
return on the Company's original investment of £1,000,000. 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, and the largest independent retailer
of ski holidays. This company's annual revenue now exceeds £90 million.
In March 2013, a portion of loan stock and the entire equity holding of
Faversham House Holdings Limited was realised for proceeds of £154,435,
generating a gain of £41,471 in the year, but a loss against original cost of £
109,100. The VCT retains loan stock valued at cost, being £111,335.
Strong cash generation is a continuing feature of a number of companies in the
portfolio and as a result the VCT has received several loan stock repayments.
Blaze Signs Holdings Limited has now fully repaid its original loan and also
made repayments of its second loan totalling £979,639 (including premium of £
226,071). In addition to this, Blaze has paid arrears of loan interest of £
109,073 in the current year. Fullfield Limited (£83,179), DiGiCo Global Limited
(£84,087) and Tessella Holdings Limited (£26,037) have also made loan
repayments in the year.
The Portfolio
The portfolio at 30 April 2013 comprised 28 investments (2012: 31) with a cost
of £21.6 million (2012: £23.3 million) and valued at £21.8 million (2012: £22.3
million). On a like-for-like basis, the portfolio's value has increased by
11.8% compared with the valuations prevailing at 30 April 2012.
Many portfolio companies have performed well over the year. ATG Media Holdings
Limited and DiGiCo Global Limited have again traded strongly despite the
pressures of the economic environment. DiGiCo has recently launched a new range
of products. Blaze Signs Holdings Limited has made an impressive recovery over
the last two years and has benefitted from high profile contracts including
work for the Olympics, enabling it to repay a large part of its loans as noted
above. Focus Pharma Holdings Limited achieved record results, is performing
well on product development and launches and has a healthy pipeline of new
products. Fullfield Limited continues to show strong cash generation, and is
expected to improve further following its acquisition of Forward Valeting. EMaC
Limited has exceeded expectations since investment last year, and its value has
now moved significantly above cost. The partial disposal of the investment in
Faversham House for in excess of the opening valuation has enabled an uplift in
the remaining value of the loan stock. Tessella Holdings Limited has made a
solid start since investment, with the pipeline of opportunities across the
group remaining good.
Against these positive performances, PXP Holdings Limited and The Plastic
Surgeon Holdings Limited continue to suffer from the downturn in the
construction and house building sectors. However, management have worked well
to reposition both of these businesses and make the necessary cut in costs.
Youngman Group Limited's trading environment remains fragile, although it has
traded profitably throughout the period. ASL Technology Holding Limited's
performance is improving but the group's overall performance is behind
investment plan. RDL Corporation Limited has continued to perform below
expectations, with its IT recruitment business in particular at lower than
planned levels.
Overall, we are encouraged by the strong and resilient performance of the
majority of our investee companies. Our strategy remains to invest in mature,
profitable companies and by retaining investments until they have reached the
optimum point for exit, maximum value will be achieved for shareholders.
Outlook
The UK economy outlook remains uncertain, but the Investment Manager remains
committed to pursue its MBO strategy and we are encouraged by the healthy deal
flow and the quality of opportunities being seen. We will continue to apply a
more broad touch to our investments looking at both new businesses and at
opportunities that may arise within the existing portfolio.
The uncertainty in the small company sector necessitates that each investee
company takes appropriate actions to respond to the challenges ahead. We are
maintaining our prudent and measured risk approach to making new investments
and aim to ensure that the portfolio remains well capitalised. We are confident
we can deliver good returns to investors over the medium to long term.
Details of the Company's ten largest investments by value (excluding the three
acquisition companies), representing 50.1% by cost and 67.0% by value of the
portfolio, are set out in the Annual report.
INVESTMENT PORTFOLIO SUMMARY
as at 30 April 2013
Date of first Total Book Valuation Additions Disposals Valuation Change in % of
investment/ cost at 30 at 30 at cost at at 30 valuation net
Sector April 2013 April 2012 valuation April 2013 for year assets
by
value
£ £ £ £ £ £
Qualifying
investments
AIM quoted
investments
Omega December 2010 214,998 259,789 - - 331,455 71,666 1.3%
Diagnostics
Group plc
In vitro Pharmaceuticals
diagnostics for
food
intolerance,
auto-immune
diseases and
infectious
diseases
Vphase plc March 2001 254,586 1,014 - - 507 (507) 0.0%
Development of Electronic and
energy saving electrical
devices for equipment
domestic use
Sub-total AIM 469,584 260,803 - - 331,962 71,159 1.3%
investments
Unquoted
investments
ATG Media October 2008 1,631,830 1,865,911 863,923 - 3,334,643 604,809 13.0%
Holdings
Limited1
Publisher and Media
online auction
platform
operator
Fullfield July 2011 1,624,769 1,062,194 624,769 - 1,920,275 233,312 7.5%
Limited trading
as Motorclean
Limited2
Vehicle Support
cleaning and services
valet services
Ingleby (1879) October 2008 1,000,000 1,000,000 - - 1,328,301 328,301 5.2%
Limited trading
as EMaC Limited
Service plans Support
for the motor services
trade
Blaze Signs April 2006 644,930 1,422,619 - 979,639 1,143,484 700,504 4.5%
Holdings
Limited
Manufacturing Support
and services
installation of
signs
Gro-Group March 2013 1,056,417 - 1,056,417 - 1,056,417 - 4.1%
Holdings
Limited3
Baby sleep General
products retailers
Ackling January 2012 1,000,000 1,000,000 - - 1,000,000 - 3.9%
Management
Limited
Food Food production
manufacturing, & distribution
distribution
and brand
management
Culbone Trading April 2012 1,000,000 1,000,000 - - 1,000,000 - 3.9%
Limited
Outsourced Support
services services
Madacombe April 2012 1,000,000 1,000,000 - - 1,000,000 - 3.9%
Trading Limited
Engineering Support
services services
Newquay June 2006 1,000,000 1,005,644 - - 997,500 (8,144) 3.9%
Helicopters
(2013) Limited
(previously
British
International
Holdings
Limited)
Helicopter Support
service services
operators
Focus Pharma October 2007 517,827 578,529 - - 914,513 335,984 3.6%
Holdings
Limited
Licensor and Support
distributer of services
generic
pharmaceuticals
Tessella July 2012 880,725 - 906,762 26,037 880,725 - 3.4%
Holdings
Limited4
Provider of Support
science powered services
technology and
consulting
services
EOTH Limited October 2011 817,185 817,185 - - 842,294 25,109 3.3%
trading as
Equip Outdoor
Technologies
Limited
Branded outdoor General
equipment and retailers
clothing
Youngman Group October 2005 1,000,052 699,966 - - 699,966 - 2.7%
Limited
Manufacturer of Support
ladders and services
access towers
Machineworks April 2006 25,727 550,340 - - 674,691 124,351 2.6%
Software
Limited
Software for Software and
CAM and machine Computer
tool vendors Services
RDL Corporation October 2010 1,000,000 921,169 - - 663,859 (257,310) 2.6%
Limited
Recruitment Support
consultants for services
the
pharmaceutical
, business
intelligence
and IT
industries
ASL Technology December 2010 1,360,130 801,951 - - 611,725 (190,226) 2.4%
Holdings
Limited
Printer and Support
photocopier services
services
The Plastic April 2008 392,264 203,433 - - 353,544 150,111 1.4%
Surgeon
Holdings
Limited
Snagging and Support
finishing of services
domestic and
commercial
properties
Racoon December 2006 878,527 254,441 - - 250,551 (3,890) 1.0%
International
Holdings
Limited
Supplier of Personal goods
hair
extensions,
hair care
products and
training
Vectair January 2006 60,293 154,045 - - 222,027 67,982 0.9%
Holdings
Limited
Design and sale Support
of washroom services
products
Lightworks April 2006 25,727 116,629 - - 146,059 29,430 0.6%
Software
Limited
Software for Software and
CAD vendors Computer
Services
Monsal Holdings December 2007 847,614 76,897 - - 76,897 - 0.3%
Limited
Supplier of Engineering
engineering
services to the
water and waste
sectors
PXP Holdings December 2006 1,220,579 - 57,143 - 57,143 - 0.2%
Limited
(Pinewood
Structures)
Design, Construction
manufacture and
supply of
timber frames
for buildings
IGLU.com December 2009 - 1,455,265 - 1,455,265 - - 0.0%
Holidays
Limited
Online ski and Retail
cruise travel
agent
Almsworthy March 2012 - 1,000,000 - 375,231 - - 0.0%
Trading Limited
2
Specialist Support
construction, services
building
support
services,
building
products and
related
services
Peddars January 2012 - 1,000,000 - 136,077 - - 0.0%
Management
Limited1
Database Support
management, services
mapping, data
mapping and
management
services to
legal and
building
industries
Fosse January 2012 - 1,000,000 - - - - 0.0%
Management
Limited3
Brand Support
management, services
consumer
products and
retail
Sawrey Limited4 March 2011 - 1,000,000 - 93,238 - 0.0%
Marketing Support
services and services
media
Legion Group August 2005 150,000 - - - - - 0.0%
plc
Provision of Support
manned Services
guarding,
mobile
patrolling, and
alarm response
services
Sub-total 19,134,596 19,986,218 3,509,014 3,065,487 19,174,614 2,140,323 74.9%
unquoted
investments
Total 19,604,180 20,247,021 3,509,014 3,065,487 19,506,576 2,211,482 76.2%5
qualifying
investments
Non-qualifying
investments
Money market 3,727,300 2,099,906 - - 3,727,300 14.5%
funds6
DiGiCo Global December 2011 1,250,204 1,334,291 - 84,087 1,587,065 336,861 6.1%
Limited
(formerly
Newincco1124
Limited)
Design and Technology,
manufacture of hardware and
audio mixing equipment
desks
Newquay as above 327,647 320,000 167,647 - 487,647 - 1.9%
Helicopters
(2013) Limited
(formerly
British
International
Holdings
Limited)
Cash 211,420 79,786 - - 211,420 0.8%
Faversham House December 2010 111,335 216,647 - 112,964 111,335 7,652 0.4%
Holdings
Limited
Publisher, Media
exhibition
organiser and
operator of
websites for
the
environmental,
visual
communications
and building
services
sectors
Ingleby (1879) as above 95,723 95,723 - - 95,723 - 0.4%
Limited trading
as EMaC Limited
ATG Media as above 104 443 - - 647 204 0.0%
Holdings
Limited1
Fullfield as above - 83,179 - 83,179 - - 0.0%
Limited trading
as Motorclean
Limited
Fuse 8 plc March 2004 250,000 - - - - - 0.0%
(Award
International
Holdings plc)
Promotional Support
goods and Services
services agency
Legion Group as above 106 - - - - - 0.0%
plc
Total 5,973,839 4,229,975 167,647 280,230 6,221,137 344,717 24.1%
non-qualifying
investments
Debtors 157,722 213,610 157,722 0.6%
Creditors (190,059) (163,967) (190,059) (0.9)%
Net assets 25,545,682 3,676,661 3,345,717 2,556,199
7
Net assets at 24,526,639 25,695,376 100.0%
year-end
1£863,923 was further invested into ATG Media Holdings Limited. This finance
was provided by the acquisition vehicle Peddars Management Limited and resulted
in a net repayment to the Company of £136,077.
2£624,769 was further invested into Fullfield Limited (trading as Motorclean).
This finance was provided by the acquisition vehicle Almsworthy Trading Limited
and resulted in a net repayment to the Company of £375,231.
3£1,000,000 of this investment into Gro-Group Limited was provided by Fosse
Management Limited, one of the Company's acquisition vehicles.
4£906,762 of this investment into Tessella Holdings Limited was provided by
Sawrey Limited, one of the Company's acquisition vehicles and resulted in a net
repayment to the Company of £93,238.
5As at 30 April 2013, the Company held more than 70% of its total investments
in qualifying holdings, and therefore complied with the VCT Investment test.
6Disclosed within current assets as current investments in the Balance Sheet.
7 Total investment additions figure of £3,676,661 differs to that shown in note
9 of £281,207. This is due to recent investments in Fullfield Limited,
Gro-Group Holdings Limited, Tessella Holdings Limited and ATG Media Holdings
Limited being funded via amounts already invested in acquisition vehicles
Almsworthy Trading Limited, Fosse Management Limited, Sawrey Limited, and
Peddars Management Limited respectively.
PRINCIPAL RISKS, MANAGEMENT AND REGULATORY ENVIRONMENT
The Board believes that the principal risks faced by the VCT 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 VCT's qualifying investments.
Loss of approval as a Venture Capital Trust the VCT must comply with section
274 of the Income Tax Act 2007 which allows it to be exempted from capital
gains tax on investment gains. Any breach of these rules may lead to the VCT
losing its approval as a 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 VCT becoming subject to tax. The
VCT would also lose its exemption from corporation tax on capital gains. Funds
raised after 5 April 2012 and used by an investee company for the acquisition
of shares in another company are restricted from being qualifying for VCT
purposes. This may reduce the number of investment opportunities for such
funds.
Investment and strategic risk inappropriate strategy or consistently weak VCT
qualifying investment recommendations might lead to under performance 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 VCT is required to comply with the Companies Act 2006, the
rules of the UK Listing Authority and United Kingdom Accounting Standards.
Breach of any of these might lead to suspension of the VCT's Stock Exchange
listing, financial penalties or a qualified audit report. In addition, rules
and regulations, or their interpretation, may change from time to time, which
may limit the types of investments the Company can make and/or reduce the level
of returns which would otherwise be achievable.
Financial and operating risk inadequate controls might lead to misappropriation
of assets. Inappropriate accounting policies might lead to misreporting or
breaches of regulations. Failure of the 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. They may also be
more susceptible to changes to political, exchange rate, taxation, economic and
other regulatory changes and conditions.
Asset liquidity risk the VCT's investments may be difficult to realise
especially in the current economic climate.
Market liquidity risk Shareholders may find it difficult to sell their shares
at a price which is close to the net asset value.
Credit/counterparty risk a counterparty may fail to discharge an obligation or
commitment that it has entered into with the Company. For further information,
please see the discussion on `credit risk' in Note 12 below.
Fraud and dishonesty risk fraud may occur involving company assets perpetrated
by a third party, the Investment Manager or other service provider.
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 Mobeus on a six
monthly basis. In the mitigation and management of these risks, the Board
applies rigorously the principles detailed in the AIC Code of Corporate
Governance. The Board also has a share buyback policy to try to mitigate the
Market Liquidity risk. This policy is reviewed at each quarterly Board Meeting.
Income Statement Year ended 30 April 2013 Year ended 30 April 2012
for the year ended
30 April 2013
Notes Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Unrealised 9 - 2,556,199 2,556,199 - 949,129 949,129
gains on
investments
Realised gains 9 - 34,319 34,319 - 230,239 230,239
on investments
Income 2 1,025,133 - 1,025,133 1,042,824 - 1,042,824
Investment 3 (151,992) (455,974) (607,966) (152,221) (456,662) (608,883)
management fees
Other expenses (322,286) - (322,286) (280,200) - (280,200)
Profit on 550,855 2,134,544 2,685,399 610,403 722,706 1,333,109
ordinary
activities
before taxation
Taxation on 4 (88,954) 88,954 - (93,826) 93,826 -
profit on
ordinary
activities
Profit on 461,901 2,223,498 2,685,399 516,577 816,532 1,333,109
ordinary
activities
after taxation
Basic and 1.87p 9.00p 10.87p 2.03p 3.20p 5.23p
diluted
earnings per S
hare:
Ordinary shares 6
All the items in the above statement derive from continuing operations.
There were no other gains or losses in the year.
The total column of this statement is the profit and loss account of the
Company.
Other than revaluation movements arising on investments held at fair value
through profit and loss, there were no differences between the profit as stated
above and historical cost.
The notes below form part of these financial statements.
Balance Sheet
as at 30 April 2013
Company number: 3946235
As at As at
Notes 30 April 2013 30 April 2012
£ £
Fixed assets
Investments at fair value 9 21,788,993 22,297,304
Current assets
Debtors and prepayments 7 157,722 213,610
Current Investments 8 3,727,300 2,099,906
Cash at bank 8 211,420 79,786
4,096,442 2,393,302
Creditors: amounts falling due (190,059) (163,967)
within one year
Net current assets 3,906,383 2,229,335
Net assets 25,695,376 24,526,639
Capital and reserves
Called up share capital 10 240,707 248,475
Capital redemption reserve 10 65,940 58,172
Revaluation reserve 10 2,827,063 1,478,804
Special distributable reserve 10 13,176,946 14,350,803
Profit and loss account 10 9,384,720 8,390,385
Equity shareholders' funds 25,695,376 24,526,639
Net asset value per share - basic
and diluted
Ordinary Shares 6 106.75p 98.71p
Nigel Melville
Chairman
1 August 2013
The notes below form part of these financial
statements.
Reconciliation of Movements
in Shareholders' Funds for
the year ended 30 April 2013
Year ended Year ended
Notes 30 April 2013 30 April 2012
£ £
Opening shareholders' funds 24,526,639 24,863,968
Share capital bought back 10 (541,894) (668,744)
Profit for the year 2,685,399 1,333,109
Dividends paid in year 5 (974,768) (1,001,694)
Closing shareholders' funds 25,695,376 24,526,639
Cash Flow Statement
for the year ended 30 April 2013
Year ended Year ended
30 April 2013 30 April 2012
Notes £ £
Interest income received 884,548 671,990
Dividend income 157,147 241,452
Other income 6,678 -
Investment management fees paid (607,966) (608,883)
Cash payments for other expenses (287,611) (280,803)
Net cash inflow from operating 152,796 23,756
activities
Investing activities
Purchase of investments 9 (281,207) (8,152,849)
Disposals of investments 9 3,380,036 5,421,329
Net cash inflow/(outflow) from 3,098,829 (2,731,520)
investing activities
Dividends
Equity dividends paid 5 (974,768) (1,001,694)
Cash inflow/(outflow) before financing 2,276,857 (3,709,458)
and liquid resource management
Financing
Purchase of own shares (517,829) (725,638)
Net cash outflow from financing (517,829) (725,638)
Management of liquid resources
(Increase)/decrease in monies held in (1,627,394) 4,438,591
current investments
Increase in cash for the year 131,634 3,495
Notes to the Accounts
for the year ended 30 April 2013
1.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
measurement of certain financial instruments at fair value.
2.Income
2013 2012
£ £
Income from bank deposits 991 764
Income from investments
- from equities 135,481 216,406
- from overseas based OEICs 12,066 22,552
- from UK based OEICs 4,618 13,142
- from loan stock 865,768 789,960
1,017,933 1,042,060
Other income 6,209 -
Total income 1,025,133 1,042,824
Total income comprises
Dividends 152,165 252,100
Interest 866,759 790,724
Other 6,209 -
1,025,133 1,042,824
Income from investments comprises
Listed overseas securities 12,066 22,552
Unlisted UK securities 140,099 229,548
Loan stock interest 865,768 789,960
1,017,933 1,042,060
Total loan stock interest due but not recognised in the year was £405,722
(2012: £232,301).
3.Investment Manager's fees
Revenue Capital Total Revenue Capital Total
2013 2013 2013 2012 2012 2012
£ £ £ £ £ £
Mobeus Equity 151,992 455,974 607,966 152,221 456,662 608,883
Partners LLP
Under the terms of a revised investment management agreement dated 10 September
2010, Mobeus Equity Partners LLP ("Mobeus") (formerly called Matrix Private
Equity Partners LLP ("MPEP") up to 29 June 2012) provides investment advisory,
administrative and company secretarial services to the Company, for a fee of 2%
per annum calculated on a quarterly basis by reference to the net assets at the
end of the preceding quarter, plus a fee of £113,589 per annum, the latter
being subject to changes in the retail prices index each year. This agreement
replaced the previous agreements with MPEP dated 10 May 2000 and 20 September
2005, and the accounting services agreement and the secretarial services
agreement with Matrix-Securities Limited both dated 20 September 2005, all of
which were terminated on 10 September 2010. In accordance with the policy
statement published under "Management and Administration" in the Company's
prospectus dated 10 May 2000, the Directors have charged 75% of the investment
management expenses to the capital account. This is in line with the Board's
expectation of the long-term split of returns from the investment portfolio of
the Company. For the year ended 30 April 2013, the expense cap hasn't been
breached (2012: £nil).
The following performance incentive fee arrangements continue to be in place,
and operated as detailed below:
C share fund
• the performance incentive fee payable will be calculated as an amount
equivalent to 20 per cent of the excess of annual dividends paid to the
holders of New Ordinary Shares but then reduced to the proportion which
the C Shares aggregate merger net asset value represents of the entire
merger net asset value of the Company; and
• the dividend shortfall per former C Share at 30 April 2013 is 22.93p (£
3,593,163 in aggregate, being 65.1% of the total shortfall at the
year-end (where 65.1% was the proportion of C shares to the total number
of shares in issue at the date of the Share Merger) and taking into
account the target rate of dividends and the dividends paid to
shareholders).
The 6p annual dividend hurdle (as adjusted for RPI) and the £1 NAV maintenance
provisions will continue to apply in respect of shares in issue and funds
raised at the date of the Share Merger.
Ordinary share fund
During the year, the rights to any performance fee from the original Ordinary
share fund lapsed. This is because the hurdle of 80p of cumulative dividends
paid on each former Ordinary Share had to be fulfilled by 22 December 2012,
which has not occurred.
4.Taxation on ordinary activities
2013 2013 2013 2012 2012 2012
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
a) Analysis of tax
charge:
UK Corporation tax on (88,954) 88,954 - (93,826) 93,826 -
profits for the year
Total current tax (88,954) 88,954 - (93,826) 93,826 -
charge
Corporation tax is
based on a rate of
20% (2012: 20%)
b) Profit on ordinary 550,855 2,134,544 2,685,399 610,403 722,706 1,333,109
activities before tax
Profit on ordinary 110,171 426,909 537,080 122,081 144,541 266,622
activities multiplied
by small company rate
of corporation tax in
the UK of 20% (2012:
20%)
Effect of:
UK dividends (27,097) - (27,097) (43,282) - (43,282)
Unrealised gains not - (511,240) (511,240) - (189,826) (189,826)
allowable
Realised gains not - (6,864) (6,864) - (46,048) (46,048)
taxable
Marginal rate relief 5,880 (5,880) - 15,027 (15,027) -
Unrelieved - 8,121 8,121 - 12,534 12,534
expenditure
Actual current tax 88,954 (88,954) - 93,826 (93,826) -
charge
Tax relief relating to investment management fees is allocated between revenue
and capital where such relief can be utilised.
No asset or liability has been recognised for deferred tax in relation to
capital gains or losses on revaluing investments as the Company is exempt from
corporation tax in relation to capital gains or losses as a result of
qualifying as a Venture Capital Trust.
There is no potential liability to deferred tax (2012: nil). There is an
unrecognised deferred tax asset of £362,594 (2012: £307,179). This unrecognised
deferred tax asset relates to taxable losses arising from expenses exceeding
taxable income. In the directors' opinion, these are unlikely to be recovered
for the foreseeable future and therefore have not been recognised.
5.Dividends paid and payable
2013 2012
£ £
Amounts recognised as distributions to equity holders in the
year:
Ordinary shares
Interim income dividend paid for the year ended 30 April 303,182 500,847
2013 of 1.25p (2012: 2p) per share
Interim capital dividend paid for the year ended 30 April 671,586 500,847
2013 of 2.75p (2012: 2p) per share
Total paid 974,768 1,001,694
Any proposed final dividend is subject to approval by Shareholders at the
Annual General Meeting and has not been included as a liability in these
financial statements.
Set out below are the total income dividends payable in respect of the
financial year, which is the basis on which the requirements of section 274 of
the Income Tax Act 2007 are considered.
2013 2012
£ £
Ordinary shares
Revenue available for distribution by way of dividends 461,901 516,577
for the year
Interim income dividend for the year ended 30 April 2013 303,182 500,847
paid of 1.25p (2012: 2p) per share
Second interim income dividend for the year ended 30 24,071 -
April 2013 of 0.1p (2012: nil p) per share
6.Basic and diluted earnings and return per share
2013 2012
£ £
Total earnings after taxation: 2,685,399 1,333,109
Basic and diluted earnings per share (note a) 10.87p 5.23p
Net revenue from ordinary activities after 461,901 516,577
taxation
Basic and diluted revenue earnings per share 1.87p 2.03p
(note b)
Net realised capital gains 34,319 230,239
Net unrealised capital gains 2,556,199 949,129
Capital expenses (net of taxation) (367,020) (362,836)
Total capital return 2,223,498 816,532
Basic and diluted capital earnings per share 9.00p 3.20p
(note c)
Weighted average number of shares in issue in 24,697,137 25,484,692
the year
Notes:
a.Basic earnings per share is total earnings after taxation divided by the
weighted average number of shares in issue.
b.Revenue earnings per share is the revenue return after taxation divided by
the weighted average number of shares in issue.
c.Capital earnings per share is the total capital return after taxation divided
by the weighted average number of shares in issue.
d.There are no instruments that will increase the number of shares in issue in
future. Accordingly, the above figures currently represent both basic and
diluted returns.
7.Debtors
2013 2012
£ £
Amounts due within one year:
Accrued income 152,748 200,946
Prepayments 4,974 12,664
157,722 213,610
8.Current asset investments
Current asset investments total £3,727,300 (2012: £2,099,906) and comprise
investments in four OEIC money market funds (three Dublin based and one London
based). The share of each OEIC represented by these holdings is less than 1% in
all cases. All of this sum is subject to same day access. These sums are
regarded as monies held pending investment and are treated as liquid resources
in the Cash Flow Statement and in note 18 contained in the Annual Report &
Accounts.
9.Investments at fair value
Movements in investments during the year are summarised as follows:
Traded on Unquoted Unquoted Loan Stock Total
AIM equity preference
shares shares
£ £ £ £ £
Cost at 30 April 2012 469,584 7,015,231 43,413 15,797,142 23,325,370
Permanent impairment at (250,000) (150,106) - (774,864) (1,174,970)
30 April 2012
Unrealised gains/ 41,219 618,637 (17,565) (495,387) 146,904
(losses) at 30 April
2012
Valuation at 30 April 260,803 7,483,762 25,848 14,526,891 22,297,304
2012
Purchases at cost - 57,143 - 224,064 281,207
Sale proceeds - (1,729,512) (2,326) (1,687,063) (3,418,901)
Reclassified* - (1,060,980) 476 1,060,504 -
Realised gains - 47,258 - 25,926 73,184
Unrealised gains/ 71,159 2,102,333 (1,000) 383,707 2,556,199
(losses)
Closing valuation at 30 331,962 6,900,004 22,998 14,534,029 21,788,993
April 2013
Cost at 30 April 2013 469,584 6,365,282 39,734 14,764,699 21,639,299
Permanent impairment at (254,586) (400,106) - (774,864) (1,429,556)
30 April 2013
Unrealised gains/ 116,964 934,828 (16,736) 544,194 1,579,250
(losses) at 30 April
2013
Valuation at 30 April 331,962 6,900,004 22,998 14,534,029 21,788,993
2013
8 The equity of acquisition vehicles was exchanged for equity and loan stock
issued by the eventual acquirer of the target business.
A breakdown of the increases and the decreases in unrealised valuations of the
portfolio is shown in the Investment Portfolio Summary above.
Reconciliation of investment transactions to cash and income statement
movements
The difference between sales proceeds above of £3,418,901 and disposals of
investments shown by the Cash Flow Statement of £3,380,036, is transaction
costs of £38,865. These transaction costs also account for the difference
between realised gains above of £73,184 and that shown in the Income Statement
of £34,319.
Unrealised gains/(losses) at 30 April 2013 of £1,579,250 differ to that shown
in the Revaluation Reserve of £2,827,063. The difference of £1,247,813 is loan
stock received (net of a £84,087 repayment made during the year) as part of the
disposal of DiGiCo Europe Limited in December 2011 which was not recognised as
a realised gain in that year.
10.Movement in share capital and reserves
Called Capital Revaluation Special Profit Total
up Share redemption reserve distributable and loss
capital reserve reserve * account*
£ £ £ £ £ £
At 30 April 248,475 58,172 1,478,804 14,350,803 8,390,385 24,526,639
2012
Share (7,768) 7,768 - (541,894) - (541,894)
buybacks
Transfer of - - - (631,963) 631,963 -
realised
losses to
Special
distributable
reserve
(note)
Realised gain - - - - 34,319 34,319
on
investments
Realisation - - (1,207,940) - 1,207,940 -
of previously
unrealised
gain
Dividends - - - - (974,768) (974,768)
paid
Profit for - - 2,556,199 - 94,881 2,651,080
the year
As at 30 240,707 65,940 2,827,063 13,176,946 9,384,720 25,695,376
April 2013
*These reserves less net unrealised losses on Level 1 investments per note 9
total £22,424,044 (2012: £22,532,407) and are regarded as distributable
reserves for the purpose of assessing the Company's ability to pay dividends to
shareholders.
The Company's revaluation reserve represents the capital reserve (unrealised)
upon investments held at the year end.
The cancellation of the formerly named C Share Fund's share premium account (as
approved at the Extraordinary General meeting held on 10 September 2008 and by
the order of the Court dated 28 October 2009), together with the previous
cancellation of the share premium account attributable to the former Ordinary
Share Fund and C Shares, has provided the Company with a special distributable
reserve. The purpose of this reserve is to fund market purchases of the
Company's own shares as and when it is considered by the Board to be in the
interests of the Shareholders, and to write-off existing and future losses as
the Company must take into account capital losses in determining distributable
reserves. The total transfer of £631,963 to the special distributable reserve
from the profit and loss account is the total of realised losses incurred by
the Company in the year.
11.Basic and diluted net asset value per share
Net asset value per Ordinary Share is based on net assets at the end of the
year, and on 24,070,716 (2012: 24,847,465) Ordinary Shares, being the number of
Ordinary Shares in issue on that date.
12.Management of capital
The Company's objectives when managing capital are to safeguard the Company's
ability to continue as a going concern, so that it can continue to provide
returns for shareholders and to provide an adequate return to shareholders by
allocating its capital to assets commensurate with the level of risk.
By its nature, the Company has an amount of capital, at least 70% (as measured
under the tax legislation) of which is and must be, and remain, invested in the
relatively high risk asset class of small UK companies within three years of
that capital being subscribed. The Company accordingly has limited scope to
manage its capital structure in the light of changes in economic conditions and
the risk characteristics of the underlying assets. Subject to this overall
constraint upon changing the capital structure, the group may adjust the amount
of dividends paid to shareholders, return capital to shareholders, issue new
shares, or sell assets if so required to maintain a level of liquidity to
remain a going concern.
Although, as the Investment Policy implies, the Board would consider levels of
gearing, there are no current plans to do so. It regards the net assets of the
Company as the Company's capital, as the level of liabilities are small and the
management of them is not directly related to managing the return to
shareholders. There has been no change in this approach from the previous year.
13.Post balance sheet events
On 30 May 2013, Newquay Helicopters (2013) Limited (formerly British
International Holdings Limited ) repaid the principal, premiums and loan
interest arrears of its first two loan stocks for total cash proceeds of £
1,671,825. The capital proceeds of £1,248,800 within this sum compares to a
related investment cost of £934,000.
On 26 July 2013, £967,781 was invested in Veritek Global Limited, using the
acquisition vehicle Madacombe Trading Limited.
14. Statutory information
The financial information set out in these statements does not constitute the
Company's statutory accounts for the year ended 30 April 2013 in terms of
section 434 of the Companies Act 2006 but is derived from those accounts.
Statutory accounts for the year ended 30 April 2013 will be delivered to
Companies House following the Company's Annual General Meeting. The auditors
have reported on those accounts: their report was unqualified and did not
contain a statement under Section 498 of the Companies Act 2006.
15. Annual Report
The Annual Report for the year ended 30 April 2013 will shortly be made
available on the Company's website: www.mig2vct.co.uk. and Shareholders will be
notified of this by email or post
or sent a hard copy in the post in accordance with their instructions. Copies
will be available thereafter to members of the public from the Company's
registered office.
16. Annual General Meeting
The Annual General Meeting of the Company will be held at 12.00 noon on 20
September 2013 at the offices of SGH Martineau LLP, One America Square,
Crosswall, London EC3N 2SG.
Contact details for further enquiries:
Robert Brittain of Mobeus Equity Partners LLP (the Company
Secretary) on 020 7024 7600 or by e-mail to mig2@mobeusequity.co.uk.
Mark Wignall or Mike Walker at Mobeus Equity Partners LLP (the
Investment Manager) on 020 7024 7600 or by e-mail to info@mobeusequity.co.uk.
DISCLAIMER
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.