Final Results

RNS Number : 8759R

Income & Growth VCT (The) PLC

15 December 2016

 

The Income & Growth VCT plc

Annual Financial Results of the Company for the Year ended 30 September 2016

Financial Highlights

-	Net asset value total return per share was 3.9% for the year.
-	Share price total return per share was 7.8% for the year.
-	Dividends paid and proposed in respect of the year total 10.00 pence per share. The proposed final dividend of 4.00 pence per share, if approved, will bring cumulative dividends paid to shareholders in respect of the past five years to 76.00 pence per share.
-	This was another exceptional year of realisations, raising £10.74 million of cash proceeds and generating realised gains over cost of £7.31 million.
-	£5.12 million1 was invested into new companies during the year.
1 This figure includes £4.18 million previously held in companies preparing to trade.

PERFORMANCE SUMMARY

The net asset value ("NAV") per share at 30 September 2016 was 98.51 pence.

The table below shows the recent past performance of the Company's existing class of shares for each of the last five years.

Reporting date		Net assets	NAV per share	Share price1	Cumulative dividends  paid per share	Cumulative total return per share to shareholders2		Dividends paid and proposed per share in respect of each year
As at 30 September						(NAV basis)	(Share price basis)
		(£m)	(p)	(p)	(p)	(p)	(p)	(p)
2016		70.84	98.51	88.80	80.50	179.01	169.30	10.00	4
2015		75.20	106.38	93.50	68.50	174.88	162.00	12.00
2014		69.31	114.60	103.503	50.50	165.10	154.00	18.00
2013		60.47	113.90	99.50	40.50	154.40	140.00	10.00
2012		50.55	109.62	97.00	28.50	138.12	125.50	26.00
1	Source: London Stock Exchange.
2	Cumulative total return per share comprises the NAV per share (NAV basis) or the mid-market price per share (share price basis) plus cumulative dividends paid since the launch of the current share class (former 'S' shares) 2006/7.
3	The share price at 30 September 2014 has been adjusted to add back the dividend of 8.00 pence per share paid on 30 October 2014, as the listed share price was quoted ex this dividend at the year-end.
4	Dividends paid and proposed per share in respect of 2016 include the final dividend of 4.00 pence referred to above, which is subject to shareholder approval at the Annual General Meeting ("AGM").
Detailed performance data for each of the VCT's fundraisings is provided in the Performance Data appendix which will be published in the Annual Report. The tables, which give information by allotment date on NAVs and dividends paid per share, will also be available on the Company's website following the publication of the Annual Report at www.incomeandgrowthvct.co.uk where they can be downloaded by clicking on "table" in "Reviewing the performance of your investment".

Chairman's Statement

I am pleased to present to shareholders the Annual Report of the Company for the year ended 30 September 2016.

Overview

This has been another year of solid performance by the Company. Returns to shareholders have again been positive, due both to profitable realisations in the first quarter and steady progress overall from the portfolio.

The results of the EU Referendum and the US election have added further uncertainty to the outlook for the UK and global economies, alongside volatility in financial markets. In this environment, we are continuing to adopt a measured approach to prospective investment opportunities and to valuations within the existing portfolio.

The year also reflects a period of adjustment in response to the new VCT measures introduced by the Finance (No2) Act 2015 ("New VCT Rules"). You will no doubt recall that shareholders approved a new Investment Policy at the Company's annual general meeting in February 2016. As explained to shareholders in my Statement last year, the purpose of this new Investment Policy was to comply with the New VCT Rules, necessary to retain VCT status. Further information on the impact of the New VCT Rules was given in my Statement in last year's Annual Report and in the more recent Half-Year Report. In summary, the New VCT Rules require VCT capital to be invested in younger and smaller companies for growth and development purposes. As a consequence of these more restrictive criteria, a slowdown in new investment has occurred across the whole of the VCT generalist sector. Nonetheless, the Company has now made four new investments, under the Company's new Investment Policy, two of which completed after the year end. Descriptions of these investments are set out under Investment portfolio and in the Investment Adviser's Review below. The Board is pleased to note that the Investment Adviser is reporting a growing pipeline of opportunities, from which we expect the rate of new investment to increase.

Performance

The Company's NAV total return per share was 3.9% for the year ended 30 September 2016 (2015: 8.5%), after adjusting for 12.00 pence per share of dividends paid in the year. This positive NAV return for the year was primarily attributable to first, realised gains from the sale of two investments, namely Tessella and Westway in the first half of the year; secondly, another year of good revenue returns, arising principally from income from loan stock investments; and finally, net unrealised gains due to the strong performances of some of the portfolio companies, reflected notably in rises in the valuations of IDOX plc and Jablite Holdings. There were some falls in valuations too, notably Entanet, although this investment remains valued above cost. A number of other portfolio companies have continued to make steady progress and have increased their profits and cash flow, which have in some cases enabled them to make early repayments of their loan stock.

As a result of this year's performance, the cumulative NAV total return per share (being the closing net asset value plus total dividends paid to date since launch) rose during the year by 2.4% (2015: 5.9%) from 174.88 pence to 179.01 pence.

Using the benchmark of NAV cumulative total return, it is pleasing to report strong relative performance over the long-term as well as in recent years, as compared with the Company's peers. The VCT was ranked in the top quartile over five and ten years amongst generalist (including planned exit) VCTs used by the Association of Investment Companies ("AIC") to measure performance at
31 October 2016. For further details please see the section on performance in the Strategic Report in the Annual Report.

Final dividend

Your Directors are recommending a final dividend in respect of the year ended 30 September 2016 of 4.00 (2015: 6.00) pence per share. The dividend, comprising 3.00 pence from capital and 1.00 penny from income, will be proposed to shareholders at the AGM of the Company to be held on 8 February 2017, for payment to shareholders on the register on 13 January 2017, on 15 February 2017.

This final dividend is in addition to the interim dividend of 6.00 pence (2015: 6.00 pence) per share, comprising 5.00 pence from capital and 1.00 penny from income, paid on 7 July 2016.

If approved by shareholders, this forthcoming final dividend will bring dividends paid per share in respect of the year ended 30 September 2016 to 10.00 pence (2015: 12.00 pence) and the Company will have paid dividends totalling 76.00 pence per share in respect of the last five years. Shareholders should note, however, as a result of the recent changes to the VCT Rules and the Company's Investment Policy, the Directors believe that the Company will find it a challenge to generate a similar level of dividends over the next five years. We are also reviewing whether the current minimum annual dividend of 6.00 pence per share, set by the Board, remains sustainable in this new investment environment. We will update shareholders in due course.

The Company's Dividend Investment Scheme ("the Scheme") will apply to this dividend and new elections under the Scheme should be received by the Scheme administrator, Capita Asset Services, by no later than Tuesday, 31 January 2017.

Investment portfolio

For the year, the portfolio as a whole achieved a net increase of £2.51 million on investments realised and an increase of £0.55 million on investments still held. Investment proceeds over the original cost of the investment were £7.31 million. The portfolio under management was valued at £54.36 million at the year-end representing 101% of cost and an increase of 5.0% in valuation on a like-for-like basis over the year.

During the year £5.12 million (including £4.18 million previously held in companies preparing to trade) was invested in three new companies and one existing portfolio company. The last MBO investment which the Company made, before the change in VCT legislation took effect, was in Access IS, a leading provider of data capture and scanning hardware.

Four new investments that comply with the New VCT Rules have since been made, two of which were made in the financial year under review. These were Redline, a market leader in the provision of security consultancy and training services to airlines, airports, governments and global distribution companies and MPB Group, Europe's leading online marketplace (www.mpb.com) for used photo and video equipment. Two further new investments were made following the year-end. £0.69 million was invested into BookingTek Limited, a provider of enterprise software to major hotel groups and £0.86 million was invested into Pattern Analytics Ltd (trading as Biosite) a provider of workforce management and security services for the construction sector.

Cash proceeds totalling £10.74 million were received from fourteen companies, that were either sold or which repaid loans. Of this total, £7.39 million was received in the first half of the Company's financial year as cash proceeds from three substantial disposals of Tessella, Westway and Original Additions. Each of these companies achieved significant returns during the time of the Company's investment and jointly realised total gains over cost of £5.95 million.

Full details of the investment activity during the year and a summary of the performance highlights can be found in the Investment Adviser's Review below.

Industry and regulatory developments

HMRC published its guidance on the New VCT Rules in May 2016 which has provided further information on the new requirements at a detailed and practical level. There remain several areas where further clarity is required and the VCT, the Investment Adviser and the VCT industry as a whole, are continuing to work with Government departments, through its industry bodies, to develop a definitive approach. We hope that further clarity will emerge over time.

Despite the EU Referendum result, the Board is working on the assumption that there will be no further changes to the existing VCT legislation in the near future. Industry bodies are still continuing discussions with HMRC and HM Treasury regarding an amendment to the VCT Rules to permit VCTs to provide some replacement capital as part of an investment. If obtained, this would enlarge the pool of possible investment opportunities for VCTs compared to the more restricted regime that now applies under the New VCT Rules.

The Board's view thus remains that the changes in VCT legislation restrict the universe of companies that the Company can invest in. These changes may cause new investments to carry a higher risk, but could also hold the prospect of higher but more variable returns. The VCT's recent investments into Redline, MPB Group, BookingTek and Biosite are examples of the type of investment the Company is likely to make in the future.

Fundraising and liquidity

The Company held cash or near cash resources of £29.31 million, including the liquidity held in companies preparing to trade ("CPTs"), at 30 September 2016 representing 41.3% of net assets. The Board is mindful that this level of liquidity is high. This results partly from the impact of the unexpected changes to the VCT Rules which have led to a lower than anticipated amount of new investment in the short to medium term. However, the Investment Adviser has developed a larger pipeline of prospective deals, which should reduce this liquidity over time. The final dividend of 4.00 pence per share being proposed to shareholders at the AGM will have a similar effect.

The Company is not anticipating that there will be any additional fundraising in this tax year to enable the Board to assess further the impact of the New VCT Rules upon future levels of investment.

Audit tender

New legislation has been introduced in the UK on audit firm rotation, resulting from the new European Audit Regulation Directive, making it mandatory for listed companies to undergo a tender process for the audit of their company at least every ten years. An audit firm can, however be appointed for up to twenty years provided a public tender process has been carried out after ten years. The Company, therefore, held an audit tender process in August-September 2016. The Board, on the recommendation of the Audit Committee, has decided to recommend the re-appointment of BDO LLP as the Company's external auditor. For further information on the audit tender process and the performance of the auditor, please see the Report of the Audit Committee in the Annual Report.

Shareholder Event

The Investment Adviser holds an annual VCT event for shareholders in Central London. The event will include presentations on the Mobeus advised VCTs' investment activity and performance. We have been pleased to receive positive comments from those attending in previous years. The next event will again be held at the Royal Institute of British Architects in Central London on Tuesday, 24 January 2017. There will be day-time and separate evening sessions. Shareholders have already been sent an invitation to this event with further details. If you have not replied to the invitation, but would like to attend, please visit the Mobeus website to register. The Board looks forward to meeting all shareholders able to join them at the event.

Outlook

The outcomes of the UK's EU Referendum vote on 23 June 2016 and the more recent US election have had significant and unexpected political repercussions and created a higher degree of global economic uncertainty. The prospect of greater political certainty in the UK followed the appointment of a new Prime Minister and Cabinet. With the possible exception of currency markets, global markets have partially rebalanced from the initial negative reactions. Uncertainty is likely to prevail until the direction of, and potential outcome from, the Brexit negotiations with the EU, trade discussions with other countries and the direction of the new US government become clearer.

In this context, it is too early to comment definitively on the outlook for your Company, but both the Board and Investment Adviser remain positive around future prospects.

Finally, I would like to take this opportunity once again to thank all shareholders for their continued support.

Colin Hook
Chairman

INVESTMENT POLICY

The Company's policy is to invest primarily in a diverse portfolio of UK unquoted companies. Investments are generally structured as part loan and part equity in order to receive regular income and to generate capital gains upon sale.

Investments are made selectively across a number of sectors, principally in established companies.

The Company's cash and liquid resources are held 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 HMRC.

Amongst other conditions, the Company may not invest more than 15% of its investments (by VCT value at the time of investment) in a single company or group and must have at least 70% by VCT value of its investments throughout the period in shares or securities comprised in VCT qualifying holdings of which a minimum overall of 30% by VCT 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 VCT 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 £15 million of gross assets at the time of investment and £16 million immediately following the investment to be classed as a VCT qualifying holding.

Asset Mix

The Company initially holds its funds in a portfolio of 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 businesses across different industry sectors. To reduce the risk of high exposure to equities, each qualifying investment is structured to achieve the optimum balance between loan stock and equity to provide protection against downside risk alongside the best potential overall returns.

Co-investment

The Company is entitled to invest alongside other VCTs advised by Mobeus that have a similar investment policy, normally on a pro rata to net assets basis.

Borrowing

The Company's Articles of Association permit borrowing of up to 10% of the adjusted capital and reserves (as defined therein). However, it has never borrowed and the Board has currently no plans to undertake any borrowing.

 Investment ADVISER'S Review

Portfolio Review

This has been a year of continued progress within the portfolio. The exceptional level of disposals in 2014 and 2015 has reduced the age of the remaining portfolio such that 44% by value (35% by number) of the current portfolio (excluding companies preparing to trade) comprises investments made since the start of 2014. Many of the portfolio companies are generating cash and have made repayments of their loan stock and are trading well.

Having experienced an unprecedented number of profitable realisations over the last two years, the Investment Adviser does not anticipate this level to be repeated in the near to medium term. The focus will generally be on the expansion opportunities our management teams are pursuing, although our recent experience shows that our portfolio companies are often attractive targets for both mid-market private equity houses and acquisitive corporates. In the meantime, the companies held in the existing portfolio continue to generate a solid income streams for the VCT, principally from attractive yields from the loan stock investments held.

Impact of Changes in VCT Rules

The amendments to VCT legislation were a significant change for the VCT industry and required all VCTs to reconsider the type of investments that VCTs can make in future. We have responded to this by adding experienced growth capital investment resource to our existing team. Along with other investment advisers in the industry, we have been focused on familiarising ourselves with the practical implications of the rules on the types of investment opportunities we can now consider for VCT investment. That process is continuing. Although further clarification is still awaited on HMRC's draft Guidance to the legislation, we are gaining additional practical experience from assessing prospective opportunities at a detailed level and from continuing to seek HMRC Advance Assurance in respect of all new investment proposals. There has been an inevitable slowdown in new deal activity resulting from both the more restrictive criteria for VCT investment under the new VCT rules and delays at HMRC in processing applications for Advance Assurance. Independent research shows that as at 30 September 2016 the amount of completed new investment across the generalist VCT Industry for the first nine months of 2016 had fallen by 35.7% and 53.1% compared to the same periods in 2015 and 2014 respectively.

Against this background we are therefore pleased to have made four new investments under the New VCT Rules, being Redline and MPB Group during the year and BookingTek and Pattern Analytics (trading as Biosite) after the year-end, detailed on below.  We intend that the pace and the quantum of new investment will increase over the coming months.

Impact of Brexit

It is too early to comment on the eventual impact of the UK leaving the EU upon the portfolio, in whatever form that departure takes. Whilst the SME sector will not be immune to any general downturn in the UK economy, the portfolio has historically proved to be resilient and we believe will continue to be so. Portfolio companies with foreign currency exposure routinely cover this exposure and any negative effects of a longer term adjustment in exchange rate will not emerge for some months. Some portfolio companies will be beneficiaries of a weaker pound.

Investments by market sector at valuation

Investments remain spread across a number of sectors, primarily in support services, software and computer services and general retailers.

New investment in the year

A total of £5.12 million (including £4.18 million previously held in companies preparing to trade) was invested into new and existing companies during the year under review. This comprised new investments into Access IS, Redline and MPB Group.

Company	Business	Date of investment	Amount of new investment (£m)
Access IS	Data capture and scanning hardware	October 2015	3.31*
Access IS is a leading provider of data capture and scanning hardware. The company has a significant share of the worldwide market for this technology in airports and strong positions in the fast growing markets of both ID & Security and Transport & Ticketing. This was an opportunity to invest in a longstanding and profitable business that is well positioned in its niche market. The company's latest audited accounts for the year ended 31 December 2015 show annual sales of £11.49 million and profit before interest, tax and amortisation of goodwill of £1.53 million.
* Amounts held in existing companies preparing to trade, Knighton Management (£1.55 million) and Tovey Management (£1.50 million), along with a further £0.26 million from the Company, were used for this investment.
Redline	Provision of security products and services	February 2016	1.13*
Redline is a market leader in the provision of security consultancy and training services to airlines, governments, airports and global distribution companies. Redline currently operates predominantly in the aviation security market and is at the forefront of counter terrorism training and services. The investment is being applied to enable the Company to grow in its core aviation market and in other sectors. The company's latest accounts for the year ended 31 March 2016 show turnover of £5.01 million and underlying profit before interest, tax and amortisation of goodwill of £1.04 million.
* £1.50 million previously held in Pound FM Consultants Limited, a company preparing to trade, was used for this investment. This resulted in a net repayment of £0.37 million. Pound FM Consultants Limited has subsequently changed its name to Redline Worldwide Limited.
MPB Group	Online marketplace for used photo and video equipment	June 2016	0.65
MPB is Europe's leading online marketplace for used photo and video equipment. Based in Brighton, their custom-designed pricing technology enables MPB to offer both buy and sell services through the same platform and offers a one-stop shop for all its customers. The investment is to fund expansion of its platform globally, with launches into both the US and German markets. The company's latest audited accounts for the year ended 31 March 2016 show turnover of £8.37 million and profit before interest, tax and amortisation of goodwill of £0.001 million.

Further investment into an existing portfolio company

In October 2015, the VCT made a further investment of £0.03 million into Racoon, a premier supplier of ethically sourced hair for hair extensions, to provide additional working capital to enable the business to strengthen its sales team and to allow the company to broaden its product range.

New investment post year-end

Company	Business	Date of investment	Amount of new investment (£m)
BookingTek	Direct booking software for hotels	October 2016	0.69
Based in London, BookingTek has developed software that enables hotels to reduce their reliance on third-party booking systems through a real-time booking platform for meeting rooms and restaurant reservations. The investment is to support further growth. The company's latest audited accounts for the year ended 31 July 2015 show turnover of £2.19 million and loss before interest, tax and amortisation of goodwill of £0.33 million.
Biosite	Workforce management	November 2016	0.86
Based in the Midlands, Biosite is a fast growing provider of biometric access control and software-based workforce management solutions for the construction sector. The investment will support the expansion of the Biosite team to facilitate the development of new site-management tools to enable managers to oversee all aspects of a construction project. The Company's latest accounts for the year ended 31 July 2016 show turnover of £4.69 million and profit before interest, tax and amortisation of goodwill of £0.49 million.

Realisations in the year

The VCT realised three investments during the year under review for cash proceeds totalling £7.39 million. This comprised the very successful realisations of Tessella and Westway as well as the final loan stock payment and related interest from Original Additions. Other realisations were £1.53 million, including post-sale receipts from the companies referred to below. With the loan repayments of £1.82 million listed below, total net cash proceeds for the year amounted to £10.74 million.

Company	Business	Period of investment	Total cash proceeds over the life of the investment/ Multiple over cost
Tessella	Science powered technology and consulting services	July 2012 - December 2015	£4.91 million 2.8 times cost
The VCT sold its investment in Tessella to the French engineering consultancy, Altran Group plc for £4.04 million. Founded in 1980, Tessella is now a global business. In 2011 the company received the prestigious Queen's Award for Enterprise in Innovation for its work on preserving the integrity of digital information over long periods of time, irrespective of numerous changes in technology. As part of the sale transaction, the Company has retained a small investment in this data archiving business, Preservica, which was previously held within Tessella. The sale returned an IRR of 42% and during the three and a half years of this investment, revenue increased by 43% from £18.5 million in 2012 to £26.5 million forecast for the current financial year. The Company has realised a gain, over current cost, of £2.68 million, being 3.80 pence per share.
Westway	Air conditioning systems	June 2009 - December 2015	£3.76 million 6.7 times cost
The VCT sold its investment in Westway to ABM Industries Inc, one of the largest facility management services providers in the US, for £2.81 million. During the period of the investment Westway, which is headquartered in Middlesex and was founded in 2001, expanded its range of services from heating, ventilation and air conditioning and now offers other technical services including mechanical and electrical maintenance, energy services, communications, security systems and the servicing of electronic garment picking systems. The sale returned an IRR of 48%. The Company has realised a gain over current cost of £2.76 million, being 3.90 pence per share.
Original Additions	Beauty products	September 2004 - March 2016	£4.41 million 4.4 times cost
Original Additions repaid the final tranche of its loan stock on the sale of the company to PDC Brands, a US private equity backed personal products business. Original Additions serves the retail and professional beauty markets with three leading brands. Over the lifetime of the investment, the company returned an IRR of 41%.

In addition to the above, the Company received a further £1.53 million from investments realised in a previous period. This mainly comprised £1.29 million as deferred consideration primarily from App-DNA (£0.78 million), Focus (£0.29 million) and Alaric (£0.12 million). In addition, £0.24 million was received in consideration for the shares of Pound FM (a company preparing to trade).

Loan stock repayments

Loan stock repayments totalled £4.35 million for the year, including £2.53 million as part of the proceeds from the companies realised above. Positive cash flow at three other companies (in addition to Pound FM, a company preparing to trade) contributed to the balance of £1.82 million, summarised below:-

Company	Business	Month	Amount (£000's)
Ward Thomas	Logistics, storage and removals business	December-January	1,225
Jablite	Expanded polystyrene products	October-April	316
Motorclean	Vehicle cleaning and valeting services	October-February	143
Pound FM	Company preparing to trade	February	136
Total			1,820

Mobeus Equity Partners LLP

Investment Adviser

INVESTMENT PORTFOLIO SUMMARY

for the year ended 30 September 2016

		Total Cost at 30 September 2016	Total Valuation at 30 September 2015	Additional investments	Total Valuation at 30 September 2016	% of equity Held1,2	% of portfolio by value
		£	£	£
	Virgin Wines Holding Company Limited Online wine retailer	2,745,503	3,462,350	-	3,706,526	13.7%	6.8%
	Tovey Management Limited (trading as Access IS)3 Provider of data capture and scanning hardware	3,313,932	1,504,000	255,932	3,532,917	13.6%	6.5%
	Entanet Holdings Limited Wholesale communications provider	3,175,171	4,790,700	-	3,351,685	14.0%	6.2%
	Media Business Insight Holdings Limited A publishing and events business focused on the creative production industries	3,666,556	3,666,556	-	2,980,641	21.2%	5.5%
	ASL Technology Holdings Limited Printer and photocopier services	2,722,106	3,196,284	-	2,870,789	13.3%	5.3%
	I-Dox plc4 Developer and supplier of knowledge management products	453,881	1,687,581	-	2,833,470	1.2%	5.2%
	Manufacturing Services Investment Limited Company seeking to carry on a business in the manufacturing sector	2,708,100	2,708,100	-	2,708,100	16.7%	5.0%
	Veritek Global Holdings Limited Maintenance of imaging equipment	2,289,859	2,494,306	-	2,297,607	14.6%	4.2%
	Fullfield Limited (trading as Motorclean) Vehicle cleaning and valet services	1,517,734	1,634,751	-	2,020,433	13.2%	3.7%
	Tharstern Group Limited Software based management information systems for the printing industry	1,454,278	2,012,448	-	1,777,923	16.2%	3.3%
	CGI Creative Graphics International Limited Vinyl graphics to global automotive, recreation vehicle and aerospace markets	1,943,948	1,990,351	-	1,768,414	8.4%	3.3%
	Gro-Group Holdings Limited Baby sleep products	2,398,928	1,788,187	-	1,651,824	16.3%	3.0%
	Vian Marketing Limited (trading as Tushingham Sails) Design, manufacture and sale of stand-up paddleboards and windsurfing sails	1,207,437	1,207,437	-	1,593,103	9.5%	2.9%
	Hollydale Management Limited Company seeking to carry on a business in the food sector	1,554,000	1,554,000	-	1,554,000	15.5%	2.8%
	Backhouse Management Limited Company seeking to carry on a business in the motor sector	1,504,000	1,504,000	-	1,504,000	15.0%	2.8%
	Barham Consulting Limited Company seeking to carry on a business in the catering sector	1,504,000	1,504,000	-	1,504,000	15.0%	2.8%
	Chatfield Services Limited Company seeking to carry on a business in the retail sector	1,504,000	1,504,000	-	1,504,000	15.0%	2.8%
	Creasy Marketing Services Limited Company seeking to carry on a business in the textile sector	1,504,000	1,504,000	-	1,504,000	15.0%	2.8%
	McGrigor Management Limited Company seeking to carry on a business in the pharmaceutical sector	1,504,000	1,504,000	-	1,504,000	15.0%	2.8%
	EOTH Limited (trading as Equip Outdoor Technologies) Distributor of branded outdoor equipment and clothing including the Rab and Lowe Alpine brands	1,383,313	1,696,968	-	1,495,307	2.5%	2.7%
	RDL Corporation Limited Recruitment consultants within the pharmaceutical, business intelligence and IT industries	1,441,667	892,906	-	1,409,809	13.0%	2.6%
	Jablite Holdings Limited (formerly Duncary 16 Limited) Manufacturer of expanded polystyrene products	498,790	727,290	-	1,271,052	12.1%	2.3%
	Bourn Bioscience Limited Management of In-vitro fertilisation clinics	1,610,379	1,220,035	-	1,206,547	10.9%	2.2%
	Redline Worldwide Limited (formerly Pound FM Consultants Limited)5 Provider of security services to the aviation industry and other sectors	1,129,121	1,504,000	-	1,129,121	9.1%	2.1%
	Turner Topco Limited (trading as ATG Media)6 Publisher and online auction platform operator	1,529,075	1,135,058	-	1,114,321	3.8%	2.0%
	Leap New Co Limited (trading as Ward Thomas Removals, Bishopsgate and Aussie Man & Van) A specialist logistics, storage and removals business	682,183	1,907,095	-	878,989	5.8%	1.6%
	The Plastic Surgeon Holdings Limited Supplier of snagging and finishing services to the property sector	406,169	618,566	-	836,215	7.6%	1.5%
	Aquasium Technology Limited7 Manufacturing and marketing of bespoke electron beam welding and vacuum furnace equipment	250,000	799,825	-	681,377	16.7%	1.3%
	MPB Group Limited Online marketplace for used photographic equipment	650,075	-	650,075	650,075	7.3%	1.2%
	Blaze Signs Holdings Limited Manufacturer and installer of signs	418,281	858,687	-	608,241	12.5%	1.1%
	Omega Diagnostics Group plc In-vitro diagnostics for food intolerance, autoimmune diseases and infectious diseases	280,026	320,843	-	367,511	2.1%	0.7%
	Vectair Holdings Limited Designer and distributor of washroom products	53,400	235,230	-	302,340	4.6%	0.6%
	Racoon International Holdings Limited Supplier of hair extensions, hair care products and training	655,851	74,999	30,000	104,999	14.2%	0.2%
	LightWorks Software Limited Provider of software for CAD and CAM vendors	20,471	51,266	-	61,212	9.2%	0.1%
	BG Training Limited Technical training business	70,833	-	-	70,833	0.0%	0.1%
	Corero Network Security plc7 Provider of e-business technologies	600,000	12,033	-	9,577	0.1%	0.0%
	Newquay Helicopters (2013) Limited (in liquidation) Helicopter service operator	24,684	42,500	-	-	5.0%	0.0%
	CB Imports Group Limited (trading as Country Baskets) Importer and distributor of artificial flowers, floral sundries and home decor products	175,000	-	-	-	6.0%	0.0%
	Oxonica Limited7 International nanomaterials group	2,524,527	-	-	-	10.6%	0.0%
	NexxtDrive Limited/Nexxt E-drive Limited8 Developer and exploiter of mechanical transmission technologies	487,014	-	-	-	3.9%	0.0%
	alwaysOn Group Limited7 Design, supply and integration of data storage solutions	165,661	-	-	-	10.3%	0.0%
	Biomer Technology Limited8 Developer of biomaterials for medical devices	137,170	-	-	-	3.5%	0.0%
	Watchgate Limited Holding company	1,000	-	-	-	33.3%	0.0%
	Preservica Limited9 Seller of proprietary digital archiving software	-	-	-	-	6.3%	0.0%
	Disposed in year
	Tessella Holdings Limited9 Provider of science powered technology and consulting services	-	3,448,417	-	-	0.0%	0.0%
	Westway Services Holdings (2014) Limited Installation, service and maintenance of air conditioning systems	-	1,561,033	-	-	0.0%	0.0%
	AppDNA Limited7 Provider of software repackaging services	-	-	-	-	0.0%	0.0%
	Original Additions Topco Limited Sale of beauty products	-	537,948	-	-	0.0%	0.0%
	Focus Pharma Holdings Limited Licensor and distributor of generic pharmaceuticals	-	-	-	-	0.0%	0.0%
	Alaric Systems Limited Software developer and provider of support services for retail credit card payment systems	-	-	-	-	0.0%	0.0%
	Monsal Holdings Limited Supplier of engineering services to the water and waste sectors	-	-	-	-	0.0%	0.0%
	Youngman Group Limited Manufacturer of ladders and access towers	-	-	-	-	0.0%	0.0%
	Knighton Management Limited3 Former company preparing to trade, used to support the investment into Tovey Management Limited (trading as Access IS)	-	1,554,000	-	-	0.0%	0.0%
	Total	53,866,123	60,415,750	936,007	54,364,958		100.0%

Notes

1	The percentage of equity held, and the amounts co-invested, in these companies by funds managed by Mobeus Equity Partners LLP are disclosed in Note 10 of the financial statements.
2	The percentage of equity held for these companies is the fully diluted figure, in the event that for example, management of the investee company exercises share options where available.
3	£1,504,000 invested in Tovey Management, a company preparing to trade, was used to acquire Knighton Management, a second company preparing to trade held at 30 September 2015, and Azio Limited (the holding company for Access IS) on 2 October 2015. The Company also advanced a non-qualifying loan of £255,932 to Access IS Limited.
4	Investment formerly managed by Nova Capital Management Limited until 31 August 2007.
5	£1,129,121 invested in Pound FM Consultants Limited, a company preparing to trade, was used for the investment into Redline Worldwide. This resulted in a net repayment to the Company of £374,879.
6	Shares and loan stock in Turner Topco Limited arose as proceeds from the part realisation of ATG Media Holdings Limited.
7	Investment formerly managed by Foresight Group LLP up to various dates ending on or before 10 March 2009.
8	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.
9	The Company realised its investment in December 2015. As part of the consideration, in addition to cash, the company received a small shareholding in Preservica, a subsidiary of Tessella that was demerged as part of the transaction. The fair value of the holding was deemed to be zero at the date of the transaction and therefore, the investment cost is zero.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Financial Statements for each financial year and the Directors have elected to prepare the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these Financial Statements, the Directors are required to:

-	select suitable accounting policies and then apply them consistently;
-	make judgements and accounting estimates that are reasonable and prudent;
-	state whether the Financial Statements have been prepared in accordance with United Kingdom accounting standards, subject to any material departures disclosed and explained in the Financial Statements;
-	prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;
-	prepare a Strategic Report, a Director's Report and Directors' Remuneration Report which comply with the requirements of the Companies Act 2006.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Website publication

The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial Statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the Financial Statements contained therein.

Directors' responsibilities pursuant to Disclosure and Transparency Rule 4 of the UK Listing Authority

The Directors confirm to the best of their knowledge that:

(a)	The Financial Statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice give a true and fair view of the assets, liabilities, financial position and the profit of the Company.
(b)	The Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

Having taken advice from the Audit Committee, the Board considers the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

Neither the Company nor the Directors accept any liability to any person in relation to the Annual Report except to the extent that such liability could arise under English law.

For and on behalf of the Board

Colin Hook

FINANCIAL STATEMENTS

INCOME STATEMENT

 for the year ended 30 September 2016

		Year ended 30 September 2016					Year ended 30 September 2015
	Notes	Revenue	Capital	Total		Revenue		Capital	Total
		£	£	£		£		£	£
Net unrealised gains on investments	8	-	549,889	549,889		-		4,574,928	4,574,928
Net gains on realisation of investments	8	-	2,506,146	2,506,146		-		2,053,151	2,053,151
Income	3	3,201,629	-	3,201,629		2,997,718		-	2,997,718
Investment Adviser's fees	4a	(419,260)	(1,257,781)	(1,677,041)		(405,687)		(1,217,061)	(1,622,748)
Investment Advisers' performance fees	4b	-	(1,140,221)	(1,140,221)		-		(667,622)	(667,622)
Other expenses		(392,228)	-	(392,228)		(471,279)		-	(471,279)
Profit on ordinary activities before taxation		2,390,141	658,033	3,048,174		2,120,752		4,743,396	6,864,148
Taxation on profit on ordinary activities	5	(479,600)	479,600	-		(386,360)		386,360	-
Profit for the year and total comprehensive income		1,910,541	1,137,633	3,048,174		1,734,392		5,129,756	6,864,148
Basic and diluted earnings per ordinary share:	6	2.68p	1.60p	4.28p		2.58p		7.63p	10.21p

The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the unrealised gains and realised gains on investments and the proportion of the Investment Adviser's fee charged to capital.

The total column is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS"). In order to reflect better the activities of a VCT and in accordance with the Statement of Recommended Practice ("SORP") issued in November 2014 by the Association of Investment Companies ("AIC"), supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of profit attributable to equity shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 Income Tax Act 2007.

All the items in the above statement derive from continuing operations of the Company. No operations were acquired or discontinued in the year.

BALANCE SHEET

 as at 30 September 2016

Company No. 4069483

		as at 30 September 2016	as at 30 September 2015
	Notes	£	£
Fixed assets
Investments at fair value	8	54,364,958	60,415,750
Current assets
Debtors and prepayments		304,935	1,082,567
Current asset investments	9	15,338,067	11,158,555
Cash at bank and in hand	9	2,189,856	3,675,257
		17,832,858	15,916,379
Creditors: amounts falling due within one year		(1,357,178)	(1,129,833)
Net current assets		16,475,680	14,786,546
Net assets		70,840,638	75,202,296
Capital and reserves
Called up share capital	10	719,140	706,930
Capital redemption reserve		11,985	9,288
Share premium reserve		18,308,887	16,977,902
Revaluation reserve		4,744,396	8,997,633
Special distributable reserve		24,980,045	27,147,965
Profit and loss account		22,076,185	21,362,578
Equity shareholders' funds		70,840,638	75,202,296
Basic and diluted net asset value per share Ordinary shares	11	98.51p	106.38p

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2016
		Non-distributable reserve										Distributable reserves					Total
		Notes		Called up share capital		Capital redemption reserve		Share premium reserve		Revaluation reserve		Special distributable reserve	Realised capital reserve		Revenue reserve
				£		£		£		£		£	£		£		£
At 1 October 2015				706,930		9,288		16,977,902		8,997,633		27,147,965	19,653,747		1,708,831		75,202,296
Comprehensive income for the year
Profit for the year				-		-		-		549,889		-	587,744		1,910,541		3,048,174
Total comprehensive income for the year				-		-		-		549,889		-	587,744		1,910,541		3,048,174
Contributions by and distributions to owners
Shares issued via Offer for Subscription				-		-		-		-		-	-		-		-
Dividends re-invested into new shares				14,907		-		1,330,985		-		-	-		-		1,345,892
Shares bought back (note c)				(2,697)		2,697		-		-		(249,518)	-		-		(249,518)
Dividends paid		7		-		-		-		-		-	(6,737,039)		(1,769,167)		(8,506,206)
Total contributions by and distributions to owners				12,210		2,697		1,330,985		-		(249,518)	(6,737,039)		(1,769,167)		(7,409,832)
Other movements
Realised losses transferred to special reserve (note d)				-		-		-				(1,918,402)	1,918,402		-		-
Realisation of previously unrealised appreciation				-		-		-		(4,803,126)		-	4,803,126		-		-
Total other movements				-		-		-		(4,803,126)		(1,918,402)	6,721,528		-		-
At 30 September 2016				719,140		11,985		18,308,887		4,744,396		24,980,045	20,225,980		1,850,205		70,840,638
a)	The Company's special reserve is available to fund buybacks of shares as and when it is considered by the Board to be in the interests of the shareholders, and to absorb any existing and future realised losses and for other corporate purposes. As at 30 September 2016, the Company has a special reserve of £24,980,045, all of which relates to reserves from shares issued on or before 5 April 2014.
b)	The realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the Company shown in the Balance Sheet.
c)	The shareholders authorised the Company to purchase its own shares for cancellation pursuant to section 701 of the Companies Act 2006 at the Annual General Meeting held on 10 February 2016. The authority was limited to a maximum number of 10,596,882 shares (this being approximately 14.99% of the issued share capital at the date of the Notice of the meeting). This authority will, unless previously revoked or renewed, expire on the conclusion of the Annual General Meeting of the Company to be held on 8 February 2017. The minimum price which may be paid for a share is 1 penny per share, the nominal value thereof. The maximum price that may be paid for a share is an amount that is not more than 5% above the average of the middle market quotations of the shares as derived from the Daily Official List of the London Stock Exchange for the five business days preceding such purchase. The authorities provide that the Company may make a contract or contracts to purchase its own shares prior to the expiry of the authority which may be executed in whole or part after the expiry of such authority, and may purchase its shares in pursuance of any such contract. A resolution to renew these authorities will be proposed at the Annual General Meeting to be held on 8 February 2017.
d)	The transfer of £1,918,402 to the special distributable reserve from the realised capital reserve above is the total of realised losses incurred by the Company this year.

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2015
		Non-distributable reserves				Distributable reserves			Total
		Called up share capital	Capital redemption reserve	Share premium reserve	Revaluation reserve	Special distributable reserve	Realised capital reserve	Revenue reserve
		£	£	£	£	£	£	£	£
At 1 October 2014		604,769	3,750	5,662,818	7,662,673	29,576,755	23,917,139	1,878	69,306,405
Comprehensive income for the year
Profit for the year		-	-	-	4,574,928	-	554,828	1,734,392	6,864,148
Total comprehensive income for the year		-	-	-	4,574,928	-	554,828	1,734,392	6,864,148
Contributions by and distributions to owners
Shares issued under Offer for Subscription		90,435	-	9,716,707	-	(42,292)	-	-	9,764,850
Dividends re-invested into new shares		17,264	-	1,598,377	-	-	-	-	1,615,641
Shares bought back		(5,538)	5,538	-	-	(527,852)	-	-	(527,852)
Dividends paid		-	-	-	-	-	(9,916,834)	(1,904,062)	(11,820,896)
Total contributions by and distributions to owners		102,161	5,538	11,315,084	-	(570,144)	(9,916,834)	(1,904,062)	(968,257)
Other movements
Realised losses transferred to special reserve		-	-	-		(1,858,646)	1,858,646	-	-
Realisation of previously unrealised appreciation		-	-	-	(3,239,968)	-	3,239,968	-	-
Total other movements		-	-	-	(3,239,968)	(1,858,646)	5,098,614	-	-
At 30 September 2015		706,930	9,288	16,977,902	8,997,633	27,147,965	19,653,747	1,708,831	75,202,296
The composition of each of these reserves is explained below: Called up share capital - The nominal value of shares originally issued, increased for subsequent share issues either via an Offer for Subscription or Dividend Investment Scheme or reduced due to shares bought back by the Company. Capital redemption reserve - The nominal value of shares bought back and cancelled is held in this reserve, so that the company's capital is maintained. Share premium reserve - This reserve contains the excess of gross proceeds less issue costs over the nominal value of shares allotted under recent Offers for Subscription and the Company's Dividend Investment Scheme. Revaluation reserve - Increases and decreases in the valuation of investments held at the year-end are accounted for in this reserve, except to the extent that the diminution is deemed permanent. In accordance with stating all investments at fair value through profit and loss (as recorded in Note 9 to these Financial Statements), all such movements through both revaluation and realised capital reserves are shown within the Income Statement for the year. Special distributable reserve - The cost of share buybacks is charged to this reserve. In addition, any realised losses on the sale or impairment of investments (excluding transaction costs), and 75% of the Investment Adviser fee expense, and the related tax effect, are transferred from the realised capital reserve to this reserve. Realised capital reserve - The following are accounted for in this reserve:
-	Gains and losses on realisation of investments;
-	Permanent diminution in value of investments;
-	Transaction costs incurred in the acquisition and disposal of investments; and
-	75% of the Investment Adviser fee expense and 100% of any performance fee payable, together with the related tax effect to this reserve in accordance with the policies, and
-	Capital dividends paid.
Revenue reserve - Income and expenses that are revenue in nature are accounted for in this reserve together with the related tax effect, as well as income dividends paid that are classified as revenue in nature.

STATEMENT OF CASH FLOWS

 for the year ended 30 September 2016 

	Notes	Year ended 30 September 2016	Year ended 30 September 2015
		£	£
Cash flows from operating activities
Profit for the financial year		3,048,174	6,864,148
Adjustments for:
Net unrealised gains on investments		(549,889)	(4,574,928)
Net gains on realisations on investments		(2,506,146)	(2,053,151)
Decrease in debtors		77,630	171,028
Increase/(decrease) in creditors and accruals		190,471	(1,020,953)
Net cash inflow/(outflow) from operating activities		260,240	(613,856)
Cash flows from investing activities
Purchase of investments	8	(936,007)	(26,134,832)
Disposal of investments	8	10,742,834	12,247,446
Decrease/(increase) in bank deposits with a maturity over three months		1,960,755	(2,031,611)
Net cash inflow/(outflow) from investing activities		11,767,582	(15,918,997)
Cash flows from financing activities
Shares issued as part of Offer for subscription		-	9,764,851
Equity dividends paid	7	(7,160,312)	(10,205,256)
Purchase of own shares		(212,644)	(527,387)
Net cash outflow from financing activities		(7,372,956)	(967,792)
Net increase/(decrease) in cash and cash equivalents		4,654,866	(17,500,645)
Cash and cash equivalents at start of year		7,693,045	25,193,690
Cash and cash equivalents at end of year		12,347,911	7,693,045
Cash and cash equivalents comprise:
Cash at bank and in hand	9	2,189,856	3,675,257
Cash equivalents	9	10,158,055	4,017,788

Notes TO THE financial statements

For the year ended 30 September 2016

1		Company Information
		The Income and Growth VCT plc is a public limited company incorporated in England, registration number 4069483. The registered office is 30 Haymarket, London, SW1Y 4EX.
2		Basis of preparation
		A summary of the principal accounting policies, all of which have been applied consistently throughout the year are set out at the start of the related disclosure throughout the Notes to the Financial Statements. All accounting policies are included within an outlined box at the top of each relevant Note.
		These financial statements have been prepared in accordance with applicable United Kingdom accounting standards, Financial Reporting Standard 102 ("FRS102"), with the Companies Act 2006 and the 2014 Statement of Recommended practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('the SORP') issued by the Association of Investment Companies.
		This is the first year in which the financial statements have been prepared under FRS102. There has been no material change in the accounting policies and so there has been no restatement of comparatives, other than in relation to Cash at bank and Current asset investments. This is just a presentational change in both cases and has no effect on net assets. The Company has elected to apply early the revised disclosure requirements as set out in Amendments to FRS 102 - Fair Value hierarchy disclosures issued in March 2016.
3		Income
		Dividends receivable on quoted equity shares are brought into account on the ex-dividend date. Dividends receivable on unquoted equity shares are brought into account when the Company's right to receive payment is established and there is no reasonable doubt that payment will be received. Interest income on loan stock is accrued on a daily basis. Provision is made against this income where recovery is doubtful or where it will not be received in the foreseeable future. Where the loan stocks only require interest or a redemption premium to be paid on redemption, the interest and redemption premium is recognised as income or capital as appropriate once redemption is reasonably certain. When a redemption premium is designed to protect the value of the instrument holder's investment rather than reflect a commercial rate of revenue return the redemption premium is recognised as capital. The treatment of redemption premiums is analysed to consider if they are revenue or capital in nature on a company by company basis. Accordingly, the redemption premium recognised in the year ended 30 September 2016 has been classified as capital and has been included within realised gains on investments.

		2016 £	2015 £
	Income from bank deposits	101,393	121,523
	Income from investments
	- from equities	114,915	167,656
	- from OEIC funds	38,412	29,977
	- from loan stock	2,946,909	2,667,443
		3,100,236	2,865,076
	Other income	-	11,119
	Total income	3,201,629	2,997,718
	Total income comprises
	Revenue dividends received	153,327	197,633
	Interest	3,048,302	2,788,966
	Other income	-	11,119
	Total Income	3,201,629	2,997,718
	Income from investments comprises
	Listed UK securities	36,086	16,000
	Listed overseas securities	38,412	29,977
	Unlisted UK securities	3,025,738	2,819,099
	Total investment income	3,100,236	2,865,076
	Total loan stock interest due but not recognised in the year was £525,395 (2015: £269,052) due to uncertainty over its recoverability.

4	Investment Adviser's fees and performance fees
	25% of the Investment Adviser's fees are charged to the revenue column of the Income Statement, while 75% is charged against the capital column of the Income Statement. This is in line with the Board's expected long-term split of returns from the investment portfolio of the Company. 100% of any performance incentive fee payable for the year is charged against the capital column of the Income Statement, as it is based upon the achievement of capital growth.
	a)	Investment Adviser's fees
					Revenue	Capital	Total		Revenue	Capital	Total
					2016	2016	2016		2015	2015	2015
					£	£	£		£	£	£
		Mobeus Equity Partners LLP			419,260	1,257,781	1,677,041		405,687	1,217,061	1,622,748
		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 £150,000 (2015: £150,000) and £170,000 (2015: £170,000) per annum respectively. The Investment Adviser fees disclosed above are 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 Adviser. The excess expenses during the year attributable to the Investment Adviser amounted to £nil (2015: £nil).
	b)	Investment Advisers' performance fees
					Revenue	Capital	Total		Revenue	Capital	Total
					2016	2016	2016		2015	2015	2015
					£	£	£		£	£	£
		Portfolio
		Mobeus Equity Partners LLP			-	1,096,391	1,096,391		-	667,622	667,622
		Foresight Group LLP			-	43,830	43,830		-	-	-
						1,140,221	1,140,221		-	667,622	667,622

		Under a Deed of Termination and Variation relating to Performance Incentive Agreements dated 29 March 2010, the Investment Adviser's Incentive Agreement for the former 'O' Share Fund was continued, while the former 'S' Share Fund's Incentive Agreement was terminated. Under the terms of the pre-merger 'O' Share Fund Incentive Agreement, each of the ongoing Investment Adviser, Mobeus Equity Partners LLP and a former Investment Adviser, Foresight Group LLP ("F oresight") 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 Adviser'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. On 30 September 2014, a new incentive fee agreement was signed between the Board and Mobeus, with effect from 1 October 2013, to amend and replace the previous agreement. The previous agreement remains in force, but only with the former adviser, Foresight Group LLP, to whom, for the year ended 30 September 2016, £43,830 (2015: £nil) is payable. The agreement is due to expire on 10 March 2019. Mobeus waived their right to their portion of the fee, under the previous agreement. Any payment under the new incentive agreement is now 15% of net realised gains for each year, payable in cash. It is payable only if Cumulative Net Asset Value (NAV) total return per share (being the closing NAV at a year-end plus cumulative dividends paid to that year-end, since 1 October 2013) equals or exceeds a Target Return. The Target Return is the greater of two targets, being:
			i)	compound growth of 6% per annum (but 5% per annum for the year ended 30 September 2014 only), before deducting any incentive fee payable (for the year of calculation only) under both this amended agreement and the existing incentive agreement with Foresight Group LLP in Cumulative NAV total return per share; or
			ii)	the cumulative percentage change in the Consumer Prices Index since 1 October 2013 to the relevant financial year end, the resultant figure then being multiplied by (100+A)/100, where A is the number of full 12 month periods (or part thereof) that have passed between 1 October 2013 and the relevant financial year end.
			Both measures of Target Return are applied to the same opening base, being NAV per share as at 30 September 2013 of 113.90 pence. The objective of this Target Return is to enable shareholders to benefit from a cumulative NAV return of at least 6% per annum (5% in the financial year ended 30 September 2014), before any incentive fee is payable. Once a payment has been made, cumulative NAV total return is calculated after deducting past years' incentive fees paid and payable. Under this amended agreement, any fee payments to Mobeus are subject to an annual cap of an amount equal to 2% of the net assets of the Company as at the immediately preceding year-end. This cap will include any fee payable to Foresight Group LLP under the old agreement, although any such payment to Foresight Group LLP is not capped. Any excess over the 2% remains payable to Mobeus in the following year(s), subject to the 2% annual cap in such subsequent year(s) and after any payment in respect of such subsequent year(s). The Target Return for the year ended 30 September 2016 was a 6% uplift on the previous year's Target Return of 126.77 pence, being 134.38 pence. As Cumulative Total NAV return is 140.09 pence per share, the Target Return has been met and a fee is payable. This fee amounts to £1,096,391 and has been accrued in these Financial Statements. This is payable following the approval of this Annual Report by shareholders at the AGM.
	c)		Offer for Subscription fees
			No funds were raised by an offer by the VCT in the year (2015: £10 million). Accordingly, no subscription fees were payable to Mobeus in the year (2015: £0.33 million, where all costs associated with the Offer were met out of these fees by Mobeus, excluding any payments to financial advisers facilitated under the terms of the Offer).

5	Taxation on profit on ordinary activities
	The tax expense for the year comprises current tax and is recognised in profit or loss. The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date. Any tax relief obtained in respect of investment advisory fees allocated to capital is reflected in the capital reserve - realised and a corresponding amount is charged against revenue. The tax relief is the amount by which corporation tax payable is reduced as a result of these capital expenses. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the Company's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in the tax assessments in periods different from those in which they are recognised in the Financial Statements. Deferred tax is measured at the average tax rates that are expected to apply in the years in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted at the balance sheet date. Deferred tax is measured on a non-discounted basis. A deferred tax asset would be recognised only to the extent that it is more likely than not that future taxable profits will be available against which the asset can be utilised.
		2016 Revenue £	2016 Capital £	2016 Total £		2015 Revenue £	2015 Capital £	2015 Total £
	a)  Analysis of tax charge:
	UK Corporation tax on profits/(losses) for the year	479,600	(479,600)	-		386,360	(386,360)	-
	Total current tax charge/(credit)	479,600	(479,600)	-		386,360	(386,360)	-
	Corporation tax is based on a rate of 20% (2015: 20.5%)
	b) Profit on ordinary activities before tax	2,390,141	658,033	3,048,174		2,120,752	4,743,396	6,864,148
	Profit on ordinary activities multiplied by main company rate of corporation tax in the UK of 20.0% (2015: 20.5%)	478,028	131,607	609,635		434,754	972,396	1,407,150
	Effect of:
	UK dividends	(22,983)	-	(22,983)		(34,369)	-	(34,369)
	Unrealised gains not taxable	-	(109,978)	(109,978)		-	(937,860)	(937,860)
	Realised gains not taxable	-	(501,229)	(501,229)		-	(420,896)	(420,896)
	Losses carried forward/(utilised)	24,555	-	24,555		(14,025)	-	(14,025)
	Actual current tax charge	479,600	(479,600)	-		386,360	(386,360)	-
	Tax relief relating to Investment Adviser fees is allocated between revenue and capital where such relief can be utilised. The rate of Corporation tax applied to the company has reduced due to a reduction in HMRC's main company rate of corporation tax to 20% on 1 April 2015, from the previous rate of 21%. No asset or liability has been recognised for deferred tax in relation to capital gains or losses on revaluing investments as the Company is exempt from corporation tax in relation to capital gains or losses as a result of qualifying as a Venture Capital Trust. There is no potential liability to deferred tax (2015: £nil). There is an unrecognised deferred tax asset of £1,034,000 (2015: £1,192,000).

6	Basic and diluted earnings and return per share
			2016 £	2015 £
	Total earnings after taxation:		3,048,174	6,864,148
	Basic and diluted earnings per share (note a)		4.28p	10.21p
	Revenue profit from ordinary activities after taxation		1,910,541	1,734,392
	Basic and diluted revenue earnings per share (note b)		2.68p	2.58p
	Net unrealised capital gains on investments		549,889	4,574,928
	Net realised capital gains on investments		2,506,146	2,053,151
	Capitalised Investment Adviser fees less taxation		(778,181)	(830,701)
	Investment Adviser's performance fees		(1,140,221)	(667,622)
	Total capital return		1,137,633	5,129,756
	Basic and diluted capital earnings per share (note c)		1.60p	7.63p
	Weighted average number of shares in issue in the year		71,198,046	67,212,047
	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 capital return after taxation divided by the weighted average number of shares in issue.

7	Dividends paid and payable
	Dividends payable are recognised as distributions in the financial statements when the Company's liability to pay them has been established. This liability is established for interim dividends when they are paid, and for final dividends when they are approved by the shareholders, usually at the Company's Annual General Meeting. The Company's status as a VCT means it has to comply with Section 259 of the Income Tax Act 2007, which requires that no more than 15% of the income from shares and securities in a year can be retained from the revenue available for distribution for the year. Accordingly, the Board is required to determine the amount of minimum income dividend.
	Dividend	Type	For the year ended 30 September		Pence per share				Date paid			2016 £		2015 £
	Second interim	Income	2014		2.00p				30 October 2014			-		1,210,445
	Second interim	Capital	2014		6.00p				30 October 2014			-		3,631,337
	Final	Capital	2014		4.00p				20 March 2015			-		2,778,526
	Interim	Income	2015		1.00p				30 June 2015			-		701,394
	Interim	Capital	2015		5.00p				30 June 2015			-		3,506,972
	Final	Income	2015		1.00p				15 February 2016			706,921		-
	Final	Capital	2015		5.00p				15 February 2016			3,534,606		-
	Interim	Income	2016		1.00p				07 July 2016			1,067,478		-
	Interim	Capital	2016		5.00p				07 July 2016			3,202,433		-
		Previous dividends not claimed within the statutory period										(5,232)		(7,778)
		Total dividends paid in year										8,506,206		11,820,896
	*  £8,506,206 (30 September 2015: £11,820,896) disclosed above differs to that shown in the Statement of Cash Flows of £7,160,312; (30 September 2015: £10,205,256) due to £1,345,894 (30 September 2015: £1,615,640) of new shares issued as part of the Company's Dividend Investment Scheme.
				2016 Revenue £		2016 Capital £		2016 Total £			2015 Revenue £	2015 Capital £		2015 Total £
	Proposed distribution to equity holders at the year-end
	Final dividend for the year ended 30 September 2016 of 1.00 penny (income) (2015: 1.00 penny), 3.00 pence (capital) (2015: 5.00 pence) per ordinary share			719,140		2,157,421		2,876,561			706,930	3,534,650		4,241,580
	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.
										2016 £			2015 £
	Revenue available by way of dividends for the year									1,910,541			1,734,392
	Interim income dividend for the year - 1.00 penny (2015: 1.00 penny)									1,067,478			701,394
	Proposed final income dividend for the year - 1.00 penny (2015: 1.00 penny)									719,140			706,930
	Total income dividends for the year									1,786,618			1,408,324

8		Investments at fair value
		The most critical estimates, assumptions and judgments relate to the determination of the carrying value of investments at "fair value through profit and loss" (FVTPL). All investments held by the Company are classified as FVTPL and measured in accordance with the International Private Equity and Venture Capital ("IPEVC") guidelines, as updated in December 2015. This classification is followed as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income. For investments actively traded 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 IPEVC guidelines: All investments are held at the price of a recent investment for an appropriate period where there is considered to have been no change in fair value. Where such a basis is no longer considered appropriate, each investment is considered as a whole on a 'unit of account' basis, alongside the following factors:
		(i)		Where a value is indicated by a material arms-length transaction by an independent third party in the shares of a company, this value will be used.
		(ii)		In the absence of i) and depending upon both the subsequent trading performance and investment structure of an investee company, the valuation basis will usually move to either:-
				a)	an earnings multiple basis. The shares may be valued by applying a suitable price-earnings ratio to that company's historic, current or forecast post-tax earnings before interest and amortisation (the ratio used being based on a comparable sector but the resulting value being adjusted to reflect points of difference identified by the Investment Adviser compared to the sector including, inter alia, a lack of marketability).
				b)	where a company's underperformance against plan indicates a diminution in the value of the investment, provision against cost is made, as appropriate.
				c)	Premiums that will be received upon repayment of loan stock investments are accrued at fair value when the Company receives the right to the premium and when considered recoverable.
				d)	Where an earnings multiple or cost less impairment basis is not appropriate and overriding factors apply, discounted cash flow or net asset valuation bases may be applied.
		A key judgement made in applying the above accounting policy relates to investments that are permanently impaired. Where the value of an investment has fallen permanently below cost, the loss is treated as a permanent impairment and as a realised loss, even though the investment is still held. The Board assesses the portfolio for such investments and, after agreement with the Investment Adviser, will agree the values that represent the extent to which an investment loss has become realised. This is based upon an assessment of objective evidence of that investment's future prospects, to determine whether there is potential for the investment to recover in value. No additional such losses were identified in the year.
										2016			2015
		Traded on AIM								3,210,558			2,020,457
		Unquoted equity shares								12,137,532			18,105,585
		Unquoted preference shares								22,646			24,581
		Unquoted loan stock								38,994,222			40,265,127
		Total								54,364,958			60,415,750
		Brought forward net unrealised gains now realised								4,803,126			3,239,968
		Realised gains during the year								2,724,579			2,400,249
		Transaction costs								(218,433)			(173,549)
		Total realised gains								7,309,272			5,466,668
		Unrealised gains for the year								549,889			4,574,928
		Total realised and unrealised gains								7,859,161			10,041,596
		Summary of movements on investments during the year
						Traded on AIM		Unquoted ordinary shares	Unquoted preference shares		Unquoted loan stock		Total
						£		£	£		£		£
		Cost at 30 September 2015				1,333,907		19,298,676	27,040		36,819,426		57,479,049
		Realised losses on investments still held				(500,000)		(4,582,683)	(787)		(227,462)		(5,310,932)
		Unrealised gains/(losses) at  30 September 2015				1,186,550		3,389,592	(1,672)		3,673,163		8,247,633
		Valuation at 30 September 2015				2,020,457		18,105,585	24,581		40,265,127		60,415,750
		Purchases at cost				-		495,295	-		440,712		936,007
		Sales - proceeds				-		(6,396,821)	-		(4,346,013)		(10,742,834)
		Reclassification at value				-		(301)	301		-		-
		Net realised gains				-		2,418,807	-		87,339		2,506,146
		Unrealised gains/(losses) in the year				1,190,101		(2,485,033)	(2,236)		2,547,057		1,249,889
		Valuation at 30 September 2016				3,210,558		12,137,532	22,646		38,994,222		54,364,958
		Cost at 30 September 2016				1,333,907		18,112,271	27,341		34,392,604		53,866,123
		Realised losses on investments still held				(500,000)		(3,467,312)	(787)		(227,462)		(4,195,561)
		Unrealised gains/(losses) at 30 September 2016				2,376,651		(2,507,427)	(3,908)		4,829,080		4,694,396
		Valuation at 30 September 2016				3,210,558		12,137,532	22,646		38,994,222		54,364,958
		Realised gains above of £1,249,889 differ from that shown in the Income Statement and the Investment Portfolio Summary of £549,889. The difference of £700,000 is a reduction for the year in the estimated fair value of contingent consideration held at the Balance Sheet date to £50,000 (2015: £750,000), included within other debtors in Note 11 to the Financial Statements. This reduction is because consideration of £906,837 was received in the year, of which £700,000 was recognised in the previous year, now realised. The remaining £50,000 of contingent consideration at the Balance Sheet date also explains all of the difference between unrealised gains at 30 September 2016 above of £4,694,396 and that shown on the Statement of Changes in Equity of £4,744,396. Provisions and write-offs against unlisted investments The amounts valued below cost at the end of the year ('provisions') or written-off against unlisted investments ('permanent impairments') were as follows:
							Total Provisions at end of year £				Net write-offs in year1 £
		Financial Year
		2016					11,500,860				(1,115,371)
		2015					9,793,793				65,779
		2014					7,709,509				(1,876,253)
		2013					10,475,290				2,001,476
		2012					11,991,733				313,850
		2011					11,206,678				1,881,554
		2010					11,575,422				2,524,527
		2009					10,537,427				300,000
		1	During the year, £1,115,371 of the cost of certain investments which were permanently impaired were written back, as these investments were liquidated in the year.
		Details of the movements in unrealised gains and losses in the year are disclosed within the Investment Portfolio Summary below.
		Major movements in investments Tessella Holdings Limited was realised in the year for net proceeds of £4,043,706, realising a net gain in the year of £595,289. Westway Services (2014) Limited was realised in the year for net proceeds of £1,502,957, realising a net gain in the year of £1,252,209. Net unrealised gains of £549,889 include valuation uplifts of £1,145,889 relating to IDOX plc, and £772,262 relating to Jablite Holdings Limited and valuation reductions of £1,439,015 for Entanet Holdings Limited and £685,915 for Media Business Insight Holdings Limited.
9	Current asset investments and Cash at bank
	Cash equivalents, for the purposes of the Statement of Cash Flows, comprise bank deposits repayable on up to three months' notice and funds held in OEIC money-market funds. Current asset investments are the same but also include bank deposits that mature after three months. Current asset investments are disposable without curtailing or disrupting the business and are readily convertible into known amounts of cash at their carrying values at immediate or up to six months' notice. Cash, for the purposes of the Statement of Cash Flows is cash held with banks in accounts subject to immediate access. Cash at bank in the Balance Sheet is the same.
												2016 £		2015 £
	OEIC Money market funds											10,158,055		1,471,708
	Bank deposits that mature within three months but are not immediately repayable											-		2,546,080
	Cash equivalents per Statement of Cash Flows											10,158,055		4,017,788
	Bank deposits that mature after three months											5,180,012		7,140,767
	Current asset investments											15,338,067		11,158,555
	Cash at bank											2,189,856		3,675,257

10	Called up share capital
		2016 £	2015 £
	Allotted, called-up and fully paid:
	Ordinary Shares of 1p each: 71,914,023 (2015: 70,693,007)	719,140	706,930
	Under the terms of the Dividend Investment Scheme, a total of 1,490,729 (2015: 1,726,349) ordinary shares were allotted during the year for a total consideration of £1,345,892 (2015: £1,615,641). During the year, the Company purchased 269,713 (2015: 553,800) of its own ordinary shares for cash (representing 0.4% (2015: 0.9%) of the ordinary shares in issue at the start of the year) at the prevailing market price for a total cost of £249,518 (2015: £527,852). The shares bought back were subsequently cancelled.

11	Basic and diluted net asset value per share
		2016 £	2015 £
	Net assets	70,840,638	75,202,296
	Number of shares in issue	71,914,023	70,693,007
	Basic and diluted net asset value per share	98.51 p	106.38 p

12	Post balance sheet events
	On 20 October 2016, £0.69 million was invested into BookingTek Limited. On 23 November 2016, £0.86 million was invested into Pattern Analytics Ltd (trading as Biosite.
13	Statutory information
	The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 30 September 2016 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.
14	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.  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: [e-mail].
15	Annual General Meeting
	The Annual General Meeting of the Company will be held at 11.00 am on Wednesday, 8 February 2017 at The Clubhouse, 8 St James's Square, London, SW1Y 4JU.

Contact details for further enquiries:

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

Mark Wignall or Mike Walker at Mobeus Equity Partners LLP (the Investment Adviser) on 020 7024 7600 or by e-mail to [e-mail].

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.

 

END

 

 

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