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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Mobeus Income & Growth 2 Vct Plc | LSE:MIG | London | Ordinary Share | GB00B0LKLZ05 | ORD 1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 59.00 | 57.50 | 60.50 | 59.00 | 59.00 | 59.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Trust,ex Ed,religious,charty | -7.57M | -9.64M | -0.0987 | -5.98 | 57.62M |
TIDMMIG
RNS Number : 8065I
Mobeus Income & Growth 2 VCT PLC
21 June 2017
Mobeus Income & Growth 2 VCT plc
Legal Entity Identifier (LEI) 213800LY62XLI1B4VX35
Results announcement for the year ended 31 March 2017
Mobeus Income & Growth 2 VCT plc, ("MIG2", the "Company", "VCT", or the "Fund") is a Venture Capital Trust ("VCT") advised by Mobeus Equity Partners LLP ("Mobeus"), investing primarily in established, unquoted companies.
OBJECTIVE OF COMPANY
The Objective of the Company is to provide investors with a regular income stream, arising both from the income generated by companies selected for the portfolio and from realising any growth in capital, while continuing at all times to qualify as a VCT.
VENTURE CAPITAL TRUST STATUS
Mobeus Income & Growth 2 VCT has satisfied the requirements for full approval as a Venture Capital Trust under section 274 of the Income Tax Act 2017 ("ITA"). It is the Directors' intention to continue to manage the Company's affairs in such a manner as to comply with section 274 of the ITA.
FINANCIAL HIGHLIGHTS
Results for the year ended 31 March 2017
-- Net Asset Value ("NAV") Total Return per share was 1.7% and Share Price Total Return per share for the year was 4.0%.
-- Shareholders received an interim dividend of 5 pence per share and a second interim dividend of 10 pence per share for the year ended 31 March 2017, paid on 8 August 2016 and 31 March 2017 respectively. This brings total dividends paid to date since inception of the current share class(1) to 62 pence per share.
-- GBP2.70 million(2) was invested during the year into five new investments totalling GBP2.21 million(2) with a further GBP0.49 million invested into an existing investment.
-- The current total liquid assets available are GBP12.58 million.
Note: The above data does not reflect the benefit of income tax relief.
(1) The first allotment of the former "C" share class, now the current share class, took place on 5 January 2006.
(2) Includes GBP0.45 million previously held in a company preparing to trade.
Performance Summary
The NAV per share as at 31 March 2017 was 106.70 pence.
The table below shows the recent past performance of the current share class, first raised in 2005/06 at an original subscription price of 100p per share before the benefit of income tax relief. Performance data for all fundraising rounds are shown in tables in the Annual Report and Financial Statements (the "Annual Report").
Cumulative total return per share Dividends since launch(2) paid and proposed in respect of each year ---------------------- ----------- ------------------------------------ ------------------------------- ------------------------------------ ---------------------------------- (NAV basis) (Share price basis) Net assets Share price (mid-market price) Cumulative dividends paid per share (p) (p) (p) Reporting date as at (GBP m) Net asset value (NAV) per share (p) (p)(1) (p) ---------------------- ----------- ------------------------------------ ------------------------------- ------------------------------------ ------------ -------------------- ---------- 31 March 2017 38.06 106.70 94.50 62.00 168.70 156.50 15.00 31 March 2016 43.14 119.61 105.25 47.00 166.61 152.25 5.00 31 March 2015 42.10 115.45 104.50 42.00 157.45 146.50 19.00 31 March 2014(3) 33.88 120.73 103.50 23.00 143.73 126.50 4.90 30 April 2013 25.70 106.75 70.30 18.00 124.75 88.30 4.10
(1) Source: Panmure Gordon & Co (mid-market price).
(2) Cumulative total return per share comprises either the NAV per share (NAV basis) or the mid-market price per share (Share Price Basis) plus cumulative dividends since shares were first allotted in the fund in December 2005.
(3) Data relates to an 11 month period, as the Company shortened its accounting period by 1 month during the year.
The data in the table above excludes the benefit of any income tax relief.
Chairman's Statement
I am pleased to present the annual results of Mobeus Income & Growth 2 VCT plc for the year ended 31 March 2017.
Overview
This has been a year of transition for your Company. The adoption of the new Investment Policy, approved by shareholders at last year's Annual General Meeting in response to the new VCT measures introduced by the Finance (No 2) Act 2015 ("New VCT Rules"), meant that we could no longer make investments to finance management buyouts ("MBO"). Consequently, although we can retain the MBOs in which we had already invested because they continue to be qualifying investments, we are now focusing on investing in younger and smaller companies requiring capital to finance their expansion.
Performance
The Net Asset Value ("NAV") Total Return was 1.7% for the year (compared with 7.9% for the previous year). These returns (expressed in pence per share) were derived from:
Year ended 31 2017 2016 March (p) (p) ---------------------- ------- ------- Realised and net unrealised gains on the investment portfolio 0.86 7.82 Income on investment portfolio and on liquidity 4.71 4.81 Share buyback and adjustments 0.13 0.10 ---------------------- ------- ------- Gross return 5.70 12.73 Less: Investment Adviser's fees and other expenses (3.61) (3.57) ---------------------- ------- ------- Net Return 2.09 9.16
After accounting for the dividends of 15.00 pence paid during the year and this net return of 2.09 pence, the NAV at 31 March 2017 was 106.70 pence, compared to 119.61 pence at the start of the year. The share price total return for the year, also after accounting for the dividends paid, was 4.0% (compared with 5.5% for the previous year).
Your Board regards these returns as satisfactory in the context of the significant changes in the New VCT Rules concerning qualifying investments.
At 31 March 2017, your Company was rated 3rd out of 43 VCTs, over the last 5 years, in the Association of Investment Companies' analysis of NAV Cumulative Total Return for all Generalist VCTs. For further performance details please see the Annual Report.
Target return
You will recall that in 2011 the Board set a minimum average annual total NAV return target of 8.0% from 30 April 2010. During the subsequent six years to 31 March 2016, the actual average return was 12.0% per annum.
As explained in my Statement last year, your Board decided to consider what an appropriate target should now be. In recognition of the disruption caused by the significant changes in the rules concerning qualifying investments, we decided to exclude the year ended 31 March 2017 and to reset the target from 1 April 2017.
Over the past six years, MBO investments have yielded good income and capital returns for your VCT. Over the next five years, we assume these returns will continue, as the majority of the portfolio is still comprised of such investments, but will gradually decline as the VCT realises its remaining MBO investments. At the same time, it will continue to make growth capital investments, causing the portfolio mix and returns to move towards being substantially comprised of growth capital investments. The Board believes the income return on growth capital investments is likely to be a lower proportion of total returns, replaced by a higher share represented by capital returns, albeit with a more volatile profile.
As well as returns from portfolio investments, a key component of overall NAV return is the proportion of liquidity held by the VCT on deposit or in money market funds. Given the current minimal rate of interest available to the VCT on cash, the Board remains mindful that excess liquidity will reduce overall returns. Finally, the Board has also considered the projected level of Investment Adviser's fees and other annual expenses. After considering all these factors, our conclusion is to set an unchanged minimum average return target of 8.0% per annum.
Dividends
Dividends paid in respect of the year ended 31 March 2017 totalled 15 pence per share (2016: one interim dividend of 5 pence). On 8 August 2016, a special interim dividend of 5 pence per share was paid, followed by payment of a second interim dividend of 10 pence per share, on 31 March 2017. Of this second interim dividend, 5 pence per share was paid as a further special dividend. The balance of 5 pence per share fulfilled the Company's annual dividend target of paying a dividend in respect of each financial year of not less than 5 pence per share.
Dividends are in part paid to help the VCT comply with the requirements of VCT legislation. Cumulative dividends paid per share since the launch of the current share class have increased to 62 pence per share.
Investment portfolio
This year, all investments made by the Company were in accordance with the New VCT Rules. In summary, VCT capital is to be applied:-
-- to provide companies with funds for growth and development purposes; -- to companies that are generally under seven years old;
-- where the maximum amount of funds such companies can receive from State Aid risk finance is subject to two limits, firstly, of GBP5 million per annum (already in place) and secondly, of an overall lifetime amount (generally GBP12 million).
In response to these changes, the Company targeted its investment activity towards younger and smaller companies seeking growth capital funding. Partly as a consequence, the total cost of new investment completed by the Company was lower in the year under review than in previous years, which occurred across the whole of the VCT generalist sector.
This slower rate of investment coincided with the first half of the year when the Board and the Investment Adviser continued to adapt to the changes in investment criteria, required by these New VCT Rules. In the second half of the financial year, the rate of new investment picked up. A total of GBP2.70 million (2016: GBP4.51 million), including GBP0.45 million previously held in a company preparing to trade, has been invested in six (2016: six) new and existing companies. Although this amount of investment is lower than in recent previous years, it compares favourably with the levels achieved elsewhere, as Mobeus advised VCTs invested around 15% of the total invested by the VCT generalist sector over a comparable period. These investments were made into MPB, BookingTek (including a small follow-on), Biosite, Preservica (an existing portfolio company), Tapas Revolution, and Buster & Punch during the year. An investment of GBP0.35 million in MyTutor has been made after the year-end.
The average transaction size of these new investments is around half of that last year, which again reflects the change in investment focus to younger, smaller companies outlined above. Further details of all of these transactions are included in the Investment Review in the Annual Report.
In addition to these new investments already made, the Investment Adviser is reporting a growing pipeline of opportunities, from which we expect a healthy level of new investment to be maintained. While the Board remains of the view that the changes in the VCT legislation clearly restrict the universe of companies that the Company can invest in, it has been encouraged by the numbers and quality of the opportunities identified by the Investment Adviser so far. The Board also believes that such earlier stage investments will carry higher risk alongside potentially higher, but more variable, capital returns, and that loan stock income will represent a lower proportion of total returns from such investments. Transactions to date have sought to mitigate these factors by use of the capital structure applied to that investment.
Shareholders should note that, at the year-end, 86.1% of the value of the investment portfolio (excluding companies preparing to trade) is still held in investments made under the previous MBO-focused investment strategy. A number of companies in the portfolio have experienced more mixed results but the performance of the portfolio as a whole remained satisfactory. Overall, performance of this principal portion of the portfolio remains solid, and should continue to yield annual income returns to shareholders, supplemented by capital returns as they are realised over time.
Net proceeds totalling GBP3.81 million were received during the year under review. Of this total, GBP3.67 million was via partial loan stock repayments and GBP0.14 million was received in the form of partial realisation proceeds, which included GBP0.08 million as deferred consideration arising from the previous year's realisations of Focus Pharma and MachineWorks. Unless a compelling case for exit is presented, the Board and Investment Adviser would prefer to develop this portfolio to further maturity.
These portfolio movements for the year are summarised below:
GBPm ---------------------------------- ------- Portfolio value at 31 March 2016 29.33 New investments 2.25 Disposal proceeds (3.81) Realised gains 0.08 Valuation movements 0.23 ---------------------------------- ------- Portfolio value at 31 March 2017 28.08
Industry and regulatory developments
There remain several areas of the New VCT Rules where further clarity is still required and the VCT, the Investment Adviser and the VCT industry as a whole, are continuing to work constructively with Government departments, through its industry bodies, to develop an improved practical approach. It welcomes the inclusion of VCTs in the Government's Patient Capital Review, where it believes VCT funding provides strong support to helping small companies grow successfully.
Liquidity
At 31 March 2017, net assets were GBP38.06 million (2016: GBP43.14 million), comprising principally GBP25.44 million (2016: GBP22.60 million) in investments (66.8% of net assets (2016: 52.3%)) and liquidity was GBP12.58 million (2016: GBP20.44 million) which includes liquidity held in companies preparing to trade of GBP2.64 million (2016: GBP6.74 million). Liquidity thus represents 33.1% (2016: 47.4%) of net assets at the year-end.
Liquidity comprises GBP7.84 million held in a selection of money market funds with AAA credit ratings and GBP4.74 million held in deposit accounts in a number of well-known financial institutions. Alternative ways of prudently investing cash continue to be sought, although the risk of a loss of capital remains the overriding consideration.
Fundraising
The Board has decided to launch a further fundraising in the current tax year (2017/18) to ensure the Company has adequate levels of funds to pursue its current strategy for the foreseeable future. More details will be announced later this year.
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 auditor can, however, be appointed for up to twenty years provided a public tender process has been carried out after ten years. The Company therefore held an audit tender process over the summer of 2016. The Board, on the recommendation of the Audit Committee, has decided to recommend the reappointment of BDO LLP as the Company's external auditor. For further information on the audit tender, please see the Audit Committee section of the Corporate Governance Statement in the Annual Report.
Share buybacks
During the year ended 31 March 2017, the Company bought back 1.1% (2016: 1.1%) of its share capital in issue at the beginning of the year, maintaining an average discount of 10%. Further details are included in the Strategic Report and the Directors' Report.
Shareholder communications
The annual shareholder event was held on Tuesday 24 January 2017 at the Royal Institute of British Architects in central London. This annual event included presentations on the Mobeus advised VCTs' investment activity and performance and presentations from investee companies. There were separate day-time and evening sessions, and feedback from those who attended indicated that they found it informative and worthwhile.
Succession planning
As I mentioned in my Half-Year Statement, the Board has been planning Board succession. I am pleased to report the appointment to the Board of Ian Blackburn with effect from 1 July 2017. Ian will bring to the Board a wealth of experience of investing in, advising and managing small and medium-sized companies; a short CV
is set out in the Annual Report. Ian will stand for election at the forthcoming AGM.
In the light of this appointment, Kenneth Vere Nicoll will not be seeking re-election at the AGM. He joined the Board at the launch of the Company in 2000 and has given it 17 years' valuable service. His experience and wisdom over the years have made a major contribution to the Company's success. We wish him well in his future endeavours.
Annual General Meeting
The Annual General Meeting of the Company will be held at 11.00 am on Thursday, 14 September 2017 at a new venue: The Clubhouse, 8 St James's Square, London SW1Y 4JU. Both the Board and the Investment Adviser look forward to welcoming shareholders to the meeting which will provide shareholders with the opportunity to ask questions and to receive a presentation from the Investment Adviser on the investment portfolio. The Notice of the Meeting is included in the Annual Report.
Future prospects
The political uncertainty arising from the recent general election is a risk to both the effective management of the UK economy and the ability to negotiate a satisfactory exit from the European Union. In this environment, the Company and the Investment Adviser will continue to adopt a measured and cautious approach to investment appraisal and maintain active engagement with existing portfolio companies.
The portfolio has a solid foundation of investments made under the previous MBO strategy, the majority of which are mature and profitable companies providing consistent income returns. Over the coming years as these investments are realised, the proportion of investments in younger growth capital companies will increase. Your Board is confident that, with the Investment Adviser's expanded management team, interesting investment opportunities will continue to be identified. The Board remains optimistic about the Company's future prospects.
Finally, I would like to express my thanks to all shareholders for their continuing support of the Company.
Nigel Melville
Chairman
21 June 2017
Investment Review
Portfolio review
This has been a year of continued progress within the portfolio. The exceptional level of disposals in 2014 and 2015 has reduced the age of the remaining portfolio such that 49.5% by value (51.6% by number) of the current portfolio comprises investments made since the start of 2014. The year has seen investment in six (plus one after the year-end) new growth capital opportunities, which, along with the investment in Redline in February 2016, at the date of this Report represent 15.0% of the portfolio. Many of the MBO portfolio companies are generating cash, have made repayments of their loan stock and are trading well.
Having experienced an unprecedented number of profitable realisations in 2014 and 2015, the Investment Adviser does not anticipate this level to be repeated in the near to medium term. As the portfolio now has a younger profile, development time is required for these more recent investments to mature and grow in value. Unless a compelling offer is made for one of our investments, we plan to hold those that are performing, that are generating income and that show potential to grow their value further.
The value of the portfolio that was held at 31 March 2016 increased by 1.0% over the year. This like-for-like* basis comprised uplifts via realised gains of GBP0.08 million and net unrealised increases in valuations of GBP0.23 million.
* - Like-for-like basis is calculated by dividing the value of the portfolio at 31 March 2017 plus the proceeds of any realisations that occurred in the year less the total cost of new investments made in the year, with the portfolio valuation at 31 March 2016.
Investment by market sector at valuation
Investments remain spread across a number of sectors, primarily in support services, software and computer services, and general retailers.
Impact of Changes in VCT Rules
The amendments to VCT legislation in November 2015 were a significant change for the VCT industry and required all VCTs to reconsider the type of investments that VCTs can make in future. The Investment Adviser has responded to this by adding experienced growth capital investment resource to its existing team. In common with other investment advisers in the industry, Mobeus has focused on gaining familiarity with the practical implications of the rules on the types of investment opportunities it can now consider for VCT investment. That process is continuing, including discussions with HMRC in response to their draft Guidance to the legislation. The Investment Adviser is also gaining additional practical experience from assessing prospective opportunities at a detailed level and from continuing to seek HMRC Advance Assurance in respect of new investments as appropriate.
There was an inevitable initial slowdown in new deal activity in the first half of the year. This resulted 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 the amount of completed new investment across the generalist VCT industry in the 2016 calendar year had fallen by 28.5% and 47.1% compared to 2015 and 2014 respectively. We are pleased that the rate of new investment has recently picked up.
Impact of Brexit
It is too early to comment on the eventual impact of the UK leaving the EU upon the portfolio, as the particular form that departure will take is subject to considerable political and economic uncertainty. 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 have not yet emerged. Some portfolio companies will be beneficiaries of a weaker pound. Faced with such uncertainty, the Investment Adviser will maintain its cautious stance to new investment and monitoring of the companies in the existing portfolio
New investment
Against this background outlined earlier, we are therefore pleased to have made eight new investments since the implementation of the New VCT Rules in November 2015. A total of GBP2.70 million (including GBP0.45 million via a company preparing to trade) was invested in six companies during the year under review. This comprised new investments into MPB, BookingTek, Biosite, Preservica (an existing portfolio company), Tapas Revolution and Buster & Punch. After the year-end, GBP0.35 million was invested into MyTutor. Further details are set out below.
Principal new investments in the year
Company Business Date of Amount of Investment new Investment (GBPm) ------------------ ---------------------- ------------- ---------------- Online marketplace for used photo MPB and video equipment June 2016 0.37 ------------------ ---------------------- ------------- ---------------- 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 GBP8.37 million and loss before interest, tax and amortisation of goodwill of GBP0.001 million. --------------------------------------------------------------------------- Direct booking October BookingTek software for hotels 2016 0.45 ------------------ ---------------------- ------------- ---------------- Based in London, BookingTek has developed software that enables hotels to reduce their reliance on third-party booking systems by means of a real-time booking platform for meeting rooms and restaurant reservations. The investment is to support further growth. The company's latest audited accounts for the year ended 31 July 2016 show turnover of GBP2.03 million and loss before interest, tax and amortisation of goodwill of GBP0.29 million. --------------------------------------------------------------------------- November Biosite Workforce management 2016 0.50 ------------------ ---------------------- ------------- ---------------- Based in the Midlands, Pattern Analytics (trading as Biosite) is a fast-growing provider of biometric access control and software- based workforce management solutions for the construction sector. The investment was made to support the expansion of the team to facilitate the development of new site-management tools to enable managers to oversee all aspects of a construction project. The company's latest accounts for the year ended 31 July 2016 show turnover of GBP4.69 million and profit before interest, tax and amortisation of goodwill of GBP0.49 million. --------------------------------------------------------------------------- January Tapas Revolution Restaurant 2017 0.45 ------------------ ---------------------- ------------- ---------------- Based in London, Ibericos Etc. Limited (which trades as Tapas Revolution) is a leading Spanish restaurant chain in the casual dining sector focusing on shopping centres sites with high footfall. Having opened its first restaurant in Shepherd's Bush Westfield, the business has since opened a further six restaurants. The investment provided growth capital to a high-calibre team with significant restaurant rollout experience who have spent the past five years building and refining their offer and are now well placed to capitalise on a strong pipeline of new sites. The company's latest accounts for the year ended 25 October 2016 show a turnover of GBP4.25 million and loss before interest, tax and amortisation of goodwill of GBP0.25 million.
--------------------------------------------------------------------------- Buster & Punch Retailer March 2017 0.44 ------------------ ---------------------- ------------- ---------------- Chatfield Services Limited (trading as Buster & Punch) is a London-based interiors brand founded in 2012 by architect and industrial designer Massimo Buster Minale. Buster + Punch (www.busterandpunch.com) started in a small garage in East London, where it built the "world's first designer LED light bulb" (Buster Bulb) and made its name with its industrial-inspired lighting. Its products are now sold in over 50 countries, both directly to end-consumers, designers and architects, and through well-known retailers including John Lewis, Harvey Nichols and Harrods. The investment will support the business's international expansion plans and the broadening of its product range. The company's latest accounts for the year ended 31 March 2016 show turnover of GBP1.98 million and profit before interest, tax and amortisation of goodwill of GBP0.47 million. ---------------------------------------------------------------------------
Further Investment into existing portfolio companies in the year
Company Business Date of Amount of Investment new Investment (GBPm) --------------------------- -------------------------- --------------------- ---------------------- Sellers of proprietary digital archiving December Preservica software 2016 0.49 --------------------------- -------------------------- --------------------- ---------------------- Preservica has developed the world's leading software for the long-term preservation of digital records, ensuring that digital content remains accessible, irrespective of future changes in technology. Previously a subsidiary of Tessella it was demerged prior to the sale of Tessella in December 2015. The new investment provided growth capital to finance the development of the business. The company's latest accounts for the year ended 31 March 2016 show turnover of GBP1.78 million and profit before interest, tax and amortisation of goodwill of GBP0.16 million. ------------------------------------------------------------------------------------------------------ New investment post year-end ------------------------------------------------------------------------------------------------------ Company Business Date of investment Amount of new investment (GBPm) -------------------------- -------------------------- ---------------------- ---------------------- MyTutor Online tutoring May 2017 0.35 -------------------------- -------------------------- ---------------------- ---------------------- Mytutorweb Limited is a digital marketplace that connects school pupils who are seeking private one-to-one tutoring with university students. The business is satisfying a growing demand from both schools and parents to improve pupils' exam results to enhance their academic and career prospects. This investment represents an opportunity to consolidate the sizeable GBP2bn UK tutoring market and the investment will be used to drive technological development and build MyTutor's market presence. For the year ended 31 December 2016, the business delivered around 27,000 tutorials with Gross Booking Value of GBP0.55 million. ------------------------------------------------------------------------------------------------------ Realisations There have been no full realisations during the year under review although the Company received total cash proceeds of GBP3.81 million (2016: GBP5.00 million). This was in the form of loan stock repayments of GBP3.67 million (2016: GBP2.06 million) detailed below, deferred consideration of GBP0.08 million from Focus Pharma and MachineWorks, realised in a previous period and other receipts of GBP0.06 million. Loan stock repayments Loan stock repayments totalled GBP3.67 million for the year. These are summarised below:- Company Business Month Amount (GBP000's) --------------------------- -------------------------- -------------------- ------------------------- Company preparing Backhouse Management to trade January 679 Company preparing December, Barham Consulting to trade March 679 Company preparing Creasy Marketing to trade March 679 Company preparing January, McGrigor Management to trade February 679 Company preparing Hollydale Management to trade March 531 Company preparing Chatfield Services to trade March 380 --------------------------- -------------------------- -------------------- ------------------------- Expanded polystyrene Jablite products April 42 Total 3,669
Investment Portfolio Summary
as at 31 March 2017
Total Book Valuation Valuation Change % of Date of cost at at in net first at 31 Additions Disposals 31 valuation assets investment 31 March March at at March for by and Sector 2017 2016 cost valuation 2017 year value GBP GBP GBP GBP GBP GBP ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Qualifying investments ASL Technology Holdings Limited December Printer and 2010 photocopier Support services services 2,092,009 2,397,086 - - 2,258,388 (138,698) 5.9% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Tovey Management Limited (trading as Access IS) October Provider of 2015 data capture Software and scanning and Computer hardware Services 1,733,500 1,733,500 - - 2,119,958 386,458 5.6% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Virgin Wines Holding Company November Limited 2013 Online wine General retailer retailers 1,284,333 1,886,136 - - 1,761,822 (124,314) 4.6% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Entanet Holdings Limited February Wholesale 2014 voice and data Fixed communications Line provider Telecommunications 1,444,090 2,045,102 - - 1,550,227 (494,875) 4.1% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Turner Topco Limited (trading as ATG Media) Publisher and online auction October platform 2008 operator Media 1,320,963 798,686 - - 1,151,484 352,798 3.0% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Fullfield Limited (trading as Motorclean Limited) Vehicle cleaning July 2011 and valet Support services services 1,025,152 1,281,548 - - 1,053,281 (228,267) 2.8% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- RDL Corporation Limited Recruitment consultants for the pharmaceutical, business October intelligence 2010 and IT Support industries services 1,000,000 669,057 - - 1,031,100 362,043 2.7% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- EOTH Limited
(trading as Rab and Lowe Alpine) Branded outdoor October equipment and 2011 General clothing retailers 817,185 842,686 - - 1,001,498 158,812 2.6% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Manufacturing Services Investment Limited Company seeking to carry on a business in February the 2014 manufacturing Support sector services 1,000,300 1,000,300 - - 1,000,300 - 2.6% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Vian Marketing Limited (trading as RedPaddle Co) Design, manufacture and sale of stand-up paddleboards July 2015 and windsurfing Leisure sails goods 717,038 717,038 - - 987,739 270,701 2.6% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Media Business Insight Holdings Limited A publishing and events business focused on the creative January production 2015 industries Media 1,447,188 910,360 - - 979,875 69,515 2.6% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Gro-Group Holdings March Limited 2013 Baby sleep General products retailers 1,123,088 751,930 - - 973,928 221,998 2.6% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Tharstern Group Limited Software based management July 2014 information Software systems to the and Computer print sector Services 789,815 977,681 - - 942,138 (35,543) 2.5% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- CGI Creative Graphics International Limited Vinyl graphics to global automotive, recreation vehicle June 2014 and aerospace General markets Industrials 999,568 889,634 - - 888,418 (1,216) 2.3% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- TPSFF Holdings Limited (formerly The Plastic Surgeon Holdings Limited) Snagging and finishing of April domestic and 2008 commercial Support properties services 392,348 767,053 - - 881,275 114,222 2.3% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Redline Worldwide Limited Provider of security February services 2016 to the aviation Support industry services 682,222 682,222 - - 837,283 155,061 2.2% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Veritek Global Holdings Limited Maintenance July 2013 of imaging Support equipment services 967,780 974,052 - - 715,856 (258,196) 1.8% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Blaze Signs Holdings Limited Manufacturing April and 2006 installation Support of signs services 437,030 738,939 - - 526,492 (212,447) 1.4% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Master Removers Group Limited (formerly Leap New Co Limited (trading as Anthony Ward Thomas, Bishopsgate and Aussie Man & Van)) A specialist logistics, December storage 2014 and removals Support business services 369,625 534,927 - - 526,134 (8,793) 1.4% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Bourn Bioscience Limited January Management of 2014 In-vitro Healthcare fertilisation Equipment clinics & Services 757,101 626,517 - - 504,586 (121,931) 1.3% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Pattern Analytics Limited (trading as Biosite) Workforce management and security services for November the 2016 Software construction and computer industry services 495,479 - 495,479 - 495,479 - 1.3% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Preservica Limited(1) Seller of December proprietary 2015 digital Software archiving and Computer software Services 485,770 - 485,770 - 485,770 - 1.3% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Ibericos Etc. Limited (trading as Tapas Revolution) January Spanish 2017 restaurant Travel chain & leisure 451,248 - 451,248 - 451,248 - 1.2% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- BookingTek October Limited 2016 Software Software for and Computer hotel groups Services 450,442 - 450,442 - 450,442 - 1.2% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Chatfield Services Limited (trading as Buster & Punch)(2) Industrial inspired March lighting and 2017 interiors General retailer retailers 436,391 848,500 - 412,109 436,391 - 1.1% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Vectair Holdings Limited Designer and January distributor 2006 of washroom Support products services 60,293 271,156 - - 403,701 132,545 1.1% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Jablite Holdings Limited Manufacturer April of expanded 2015 polystyrene Construction products and materials 281,398 788,021 - 42,425 401,864 (343,732) 1.1% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- MPB Group Limited Online marketplace for photographic June 2016 and video General equipment retailers 374,244 - 374,244 - 374,244 - 1.0% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Hollydale Management Limited Company seeking March to carry on 2015 a business in Support the food sector Services 566,400 885,000 - 318,600 354,000 - 0.9% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Backhouse Management Limited Company seeking to carry on April a business in 2015 the motor Support sector Services 441,220 848,500 - 407,280 169,700 - 0.4% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Barham Consulting Limited Company seeking to carry on April a business in 2015 the catering Support sector Services 441,220 848,500 - 407,280 169,700 - 0.4% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Creasy Marketing Services Limited Company seeking to carry on April a business in 2015 the textile Support
sector Services 441,220 848,500 - 407,280 169,700 - 0.4% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- McGrigor Management Limited Company seeking to carry on a business in April the 2015 pharmaceutical Support sector Services 441,220 848,500 - 407,280 169,700 - 0.4% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Lightworks Software Limited April Provider of 2006 software for Software CAD and CAM and Computer vendors Services 25,727 65,592 - - 92,737 27,145 0.2% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Racoon International Holdings Limited Supplier of hair extensions, December hair care 2006 products Personal and training goods 1,045,985 167,458 - - 83,729 (83,729) 0.2% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Newquay Helicopters (2013) Limited (in members' voluntary liquidation) Helicopter June 2006 service Support operators services 30,469 66,169 - 35,700 - (30,469) 0.0% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Total qualifying investments 26,869,061 27,710,350 2,257,183 2,437,954 26,400,187 169,088 69.1%(3) ------------------------------------- ---------- ---------- --------- --------- ---------- --------- -------- Non-qualifying investments Media Business Insight Limited as above 561,884 794,824 - - 855,516 60,692 2.3% Manufacturing Services Investment Limited as above 608,000 608,000 - - 608,000 - 1.6% Tovey Manufacturing Limited (trading as Access IS) as above 219,873 219,873 - - 219,873 - 0.6% 365 Agile Group plc (formerly Iafyds plc) Development March of energy 2001 saving Electronic devices for and electrical domestic use equipment 254,586 8 - - - (8) 0.0% ---------------- ------------------- ---------- ---------- --------- --------- ---------- --------- -------- Total non-qualifying investments 1,644,343 1,622,705 - - 1,683,389 60,684 4.5% ------------------------------------- ---------- ---------- --------- --------- ---------- --------- -------- Total investments per note 8 28,513,404 29,333,055 2,257,183 2,437,954 28,083,576 229,772 73.6% ------------------------------------- ---------- ---------- --------- --------- ---------- --------- -------- Cash and current asset investments(4) 13,702,539 - - 9,935,913 - 26.1% ------------------------------------- ---------- ---------- --------- --------- ---------- --------- -------- Total investments including cash and current asset investments 28,513,404 43,035,594 2,257,183 2,437,954 38,019,489 229,772 99.7% ------------------------------------- ---------- ---------- --------- --------- ---------- --------- -------- Other current assets 266,308 185,596 0.6% Current liabilities (160,890) (144,100) (0.3)% ------------------------------------- ---------- ---------- --------- --------- ---------- --------- -------- Totals 28,513,404 2,257,183 2,437,954 ------------------------------------- ---------- ---------- --------- --------- ---------- --------- -------- Net assets at the year end 43,141,012 38,060,985 100.0% ------------------------------------- ---------- ---------- --------- --------- ---------- --------- --------
1 A further GBP485,770 was invested into Preservica Limited, adding to the Company's existing shareholding that was received as part of the disposal of Tessella Holdings Limited in December 2015.
2 GBP848,500 invested in Chatfield Services Limited, a company preparing to trade, was used for the investment into Buster & Punch. This resulted in a net repayment to the company of GBP412,109.
3 As at 31 March 2017, the Company held more than 70% of its total investments in qualifying holdings, and therefore complied with the VCT Qualifying Investment test. For the purposes of the VCT qualifying test, the Company is permitted to disregard disposals of investments for six months from the date of disposal. It also has up to three years to bring in new funds raised, before these need to be included in the qualifying investment test.
4 Disclosed as Current asset investments and Cash at bank within Current assets in the Balance Sheet.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year and the Directors have elected to prepare the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for the Company for that period.
In preparing these Financial Statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgements and accounting estimates that are reasonable and prudent;
-- state whether the Financial Statements have been prepared in accordance with United Kingdom accounting standards, subject to any material departures disclosed and explained in the Financial Statements;
-- prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;
-- prepare a Strategic Report, a Directors' Report and Directors' Annual 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 that the Annual Report and Financial Statements, taken as a whole, as fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
Neither the Company nor the Directors accept any liability to any person in relation to the Annual Report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A and schedule 10A of the Financial Services and Markets Act 2000.
The names and functions of the Directors are stated in the Annual Report.
For and on behalf of the Board
Nigel Melville
Chairman
21 June 2017
FINANCIAL STATEMENTS
Income Statement
for the year ended 31 March 2017
Year ended 31 Year ended 31 March 2017 March 2016 Revenue Capital Total Revenue Capital Total GBP GBP GBP GBP GBP GBP -------------------------- ----- --------- --------- --------- ---------- --------- --------- Unrealised gains on investments 8 - 229,772 229,772 - 1,089,897 1,089,897 Realised gains on investments 8 - 76,067 76,067 - 1,732,241 1,732,241 Income 3 1,679,033 - 1,679,033 1,736,490 - 1,736,490 Investment Adviser's fees 4a (237,791) (713,374) (951,165) (246,651) (739,953) (986,604) Investment Adviser's 4a performance fees & 4b - (2,692) (2,692) - - - Other expenses 4c (304,306) - (304,306) (302,518) - (302,518) Profit/(loss) on ordinary activities before taxation 1,136,936 (410,227) 726,709 1,187,321 2,082,185 3,269,506 Taxation on profit/(loss) on ordinary activities 5 (172,122) 143,213 (28,909) (147,991) 147,991 - Profit/(loss) for the year and total comprehensive income 964,814 (267,014) 697,800 1,039,330 2,230,176 3,269,506 Basic and diluted earnings per ordinary share: 7 2.69p (0.75)p 1.94p 2.86p 6.14p 9.00p
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 and performance fee charged to capital.
The total column is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS"). In order to better reflect the activities of a VCT and in accordance with the 2014 Statement of Recommended Practice ("SORP") (updated in January 2017) by the Association of Investment Companies ("AIC"), supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of profit attributable to equity shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 Income Tax Act 2007.
All the items in the above statement derive from continuing operations of the Company. No operations were acquired or discontinued in the year.
Balance Sheet
as at 31 March 2017
Company number: 03946235
31 March 31 March 2017 2016 Notes GBP GBP Fixed assets Investments at fair value 8 28,083,576 29,333,055 Current assets Debtors and prepayments 185,596 266,308 Current asset investments 5,197,301 9,337,621 Cash at bank 4,738,612 4,364,918 10,121,509 13,968,847 Creditors: amounts falling due within one year (144,100) (160,890) Net current assets 9,977,409 13,807,957 Net assets 38,060,985 43,141,012 Capital and reserves Called up share capital 356,724 360,685 Share premium reserve 15,901,497 15,901,497 Capital redemption reserve 87,583 83,622 Revaluation reserve 2,001,764 1,783,724 Special distributable reserve 7,540,615 8,524,729 Realised capital reserve 11,142,462 15,529,419 Revenue reserve 1,030,340 957,336 Equity shareholders' funds 38,060,985 43,141,012 Basic and diluted net asset value per ordinary share 106.70p 119.61p
Statement of Changes in Equity
for the year ended 31 March 2017
Non-distributable reserves Distributable reserves Called up Share Capital Special Realised share premium redemption Revaluation distributable capital Revenue capital reserve reserve reserve reserve reserve Reserve Total (Note (Note (Note a) b) b) GBP GBP GBP GBP GBP GBP GBP GBP ----------------- -------- ---------- ----------- ----------- -------------- ----------- --------- ----------- At 1 April 2016 360,685 15,901,497 83,622 1,783,724 8,524,729 15,529,419 957,336 43,141,012 Comprehensive income for the year Profit/(loss) for the year - - - 229,772 - (496,786) 964,814 697,800 Total comprehensive income for the year - - - 229,772 - (496,786) 964,814 697,800 Contributions by and distributions to owners - Shares bought back (note c) (3,961) - 3,961 - (411,261) - - (411,261) Dividends paid - - - - - (4,474,756) (891,810) (5,366,566) Total contributions by and distributions to owners (3,961) - 3,961 - (411,261) (4,474,756) (891,810) (5,777,827) Other movements Realised losses transferred to special reserve (note a) - - - - (572,853) 572,853 - - Realisation of previously unrealised appreciation - - - (11,732) - 11,732 - - Total other movements - - - (11,732) (572,853) 584,585 - - At 31 March 2017 356,724 15,901,497 87,583 2,001,764 7,540,615 11,142,462 1,030,340 38,060,985
Notes
a): The cancellation of the formerly named C Share Fund's share premium reserve (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 reserve 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 GBP572,853 from the realised capital reserve to the special distributable reserve above is the total of realised losses incurred by the Company in the year.
b): The realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the
Company.
c): During the year, the Company purchased 396,076 of its own shares at the prevailing market price for a total cost of GBP411,261, which were subsequently cancelled. The difference between the total cost above of GBP411,261 and that per the Statement of Cash Flows of GBP412,046 is due to a stamp duty creditor at 31 March 2016 of GBP785.
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 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 Offers for Subscription in 2014 and 2015.
Revaluation reserve
Increases and decreases in the valuation of investments held at the year-end are accounted for in this reserve, except to the extent that the diminution is deemed permanent. In accordance with stating all investments at fair value through profit and loss (as recorded in note 8), all such movements through both revaluation and realised capital reserves are shown within the Income Statement for the year.
Special distributable reserve
The cost of share buybacks is charged to this reserve. In addition, any realised losses on the sale or impairment of investments (excluding transaction costs), and 75% of the Investment Adviser's fee and 100% of any performance 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;
-- 75% of the Investment Adviser's fee (subsequently transferred to the Special distributable reserve along with the related tax effect) 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 Changes in Equity
for the year ended 31 March 2016
Non-distributable reserves Distributable reserves Called up Share Capital Special Realised share Premium redemption Revaluation distributable capital Revenue capital reserve reserve reserve reserve reserve Reserve Total GBP GBP GBP GBP GBP GBP GBP GBP ------------------ -------- ---------- ----------- ----------- -------------- ---------- --------- ----------- At 1 April 2016 364,686 15,901,497 79,621 1,116,647 9,537,078 14,279,820 823,468 42,102,817 Comprehensive income for the year Profit for the year - - - 1,089,897 - 1,140,279 1,039,330 3,269,506 Total comprehensive income for the year - - - 1,089,897 - 1,140,279 1,039,330 3,269,506 Contributions by and distributions to owners Shares bought back (4,001) - 4,001 - (420,387) - - (420,387) Dividends paid - - - - - (905,462) (905,462) (1,810,924) Total contributions by and distributions to owners (4,001) - 4,001 - (420,387) (905,462) (905,462) (2,231,311) Other movements Realised losses transferred to special reserve - - - - (591,962) 591,962 - - Realisation of previously unrealised appreciation - - - (422,820) - 422,820 - - Total other movements - - - (422,820) (591,962) 1,014,782 - - At 31 March 2016 360,685 15,901,497 83,622 1,783,724 8,524,729 15,529,419 957,336 43,141,012
Statement of Cash Flows
for the year ended 31 March 2017
Year ended Year ended 31 March 31 March 2017 2016 Notes GBP GBP Cash flows from operating activities Profit for the financial year 697,800 3,269,506 Adjustments for: Net unrealised gains on investments (229,772) (1,089,897) Net gains on realisations on investments (76,067) (1,732,241) Tax charge for the current year 28,909 - Decrease/(increase) in debtors 80,712 (86,327) Decrease in creditors and accruals (44,914) (47,047) Net cash inflow from operating activities 456,668 313,994 Cash flows from investing activities Purchase of investments 8 (2,257,183) (9,164,569) Disposal of investments 8 3,812,501 5,001,367 Decrease/(increase) in bank deposits with a maturity over three months 507,061 (7,061) Net cash inflow/(outflow) from investing activities 2,062,379 (4,170,263) Cash flows from financing activities Equity dividends paid 6 (5,366,566) (1,810,924) Purchase of own shares (412,046) (376,756) Net cash outflow from financing activities (5,778,612) (2,187,680) Net decrease in cash and cash equivalents (3,259,565) (6,043,949) Cash and cash equivalents at start of year 13,195,478 19,239,427 Cash and cash equivalents at end of the year 9,935,913 13,195,478 Cash and cash equivalents comprise: Cash equivalents 5,197,301 8,830,560 Cash at bank and in hand 4,738,612 4,364,918
Notes to the Financial Statements
for the year ended 31 March 2017
1 Company Information
Mobeus Income and Growth 2 VCT plc is a public limited company incorporated in England, registration number 03946235. 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 within an outlined box.
These Financial Statements have been prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 ("FRS102"), with the Companies Act 2006 and the 2014 Statement of Recommended practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('the SORP') (updated in January 2017) issued by the Association of Investment Companies. The Company has a number of financial instruments which are disclosed under FRS102 s11/12 as shown in Note 15 of the Annual Report.
The Company has elected to apply early the revised disclosure requirements as set out in Amendments to FRS102 - 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 31 March 2017 has been classified as capital and has been included within gains on investments. ------------------------------------------------------- 2017 2016 GBP GBP ------------------------------------- ------------ --------- Income from bank deposits 29,594 49,237 Income from investments - from equities 181,950 87,073 - from overseas based OEICs 15,605 14,913 - from UK based OEICs 8,549 6,493 - from loan stock 1,443,335 1,578,774 1,649,439 1,687,253 Total income 1,679,033 1,736,490 Total income comprises Dividends 206,104 108,479 Interest 1,472,929 1,628,011 1,679,033 1,736,490 Total loan stock interest due but not recognised in the year was GBP275,960 (2016: GBP166,537). 4 Investment Adviser's fees and Other expenses All expenses are accounted for on an accruals basis. ----------------------------------------------
a) 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. ---------------------------------------------------- 2017 2016 Revenue Capital Total Revenue Capital Total GBP GBP GBP GBP GBP GBP --------------------- ------- ------- ------- ------- ------- ------- Mobeus Equity Partners LLP Investment Adviser's fees 237,791 713,374 951,165 246,651 739,953 986,604 Investment Adviser's performance fee - 2,692 2,692 - - - --------------------- ------- ------- ------- ------- ------- ------- 237,791 716,066 953,857 246,651 739,953 986,604
Under the terms of a revised investment management agreement dated 10 September 2010, Mobeus Equity Partners LLP ("Mobeus") 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 GBP113,589 per annum, the latter being subject to changes in the retail prices index each year. In 2013, Mobeus has agreed to waive such further increases due to indexation, until otherwise agreed by the Board. 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 Adviser's fees 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.
Under the terms of the management agreement the total Investment Adviser and administration expenses of the Company excluding any irrecoverable VAT, exceptional costs and any performance incentive fee, are linked to a maximum of 3.6% of the value of the Company's closing net assets. For the year ended 31 March 2017, the expense cap has not been breached (2016: GBPnil).
The Company is responsible for external costs such as legal and accounting fees, incurred on transactions that do not proceed to completion ("abort expenses") subject to the cap on total annual expenses referred to above.
In accordance with general market practice, the Investment Adviser earned arrangement fees and fees for supplying Directors and/or monitoring services from investee companies. The share of such fees attributable to the investments made by the Company were GBP67,353 (2016: GBP111,903) and GBP139,556 (2016: GBP124,601) respectively. The fees for supplying directors and/or monitoring services were from 28 (2016: 26) investee companies during the year.
b) Performance fees
Performance incentive agreement
The following performance incentive fee arrangement dated 20 September 2005 continues to be in place, and operated as detailed below:
New Ordinary and former C share fund shares
Basis of Calculation
The performance incentive fee payable is calculated as an amount equivalent to 20 per cent of the excess of a "Target rate" comprising:-
(i) an annual dividend target (indexed each year for RPI), and
(ii) a requirement that any cumulative shortfalls below the annual dividend target must be made up in later years. Any excess is not carried forward, whether a fee is payable for that year or not.
Payment of a fee is also conditional upon the average Net Asset Value ("NAV") per share for each such year equalling or exceeding the average "Base NAV" per share for the same year. Base NAV commenced at GBP1 per share when C fund shares were first issued in 2005, which is adjusted for subsequent shares issued and bought back.
Any performance fee will be payable annually. It will be reduced to the proportion which the number of "Incentive Fee Shares" represent of the total number of shares in issue at any calculation date. Incentive Fees Shares are the only shares upon which an incentive fee is payable. They will be the number of C fund shares in issue just before the Merger of the two former share classes on 10 September 2010, (which subsequently became Ordinary shares) plus Ordinary shares issued under new fundraisings since the Merger. This total is then reduced by an estimated proportion of the shares bought back by the Company since the Merger, that are attributable to the Incentive Fee Shares.
Clarifications to the agreement
During the year ended 31 March 2016, the Board and the Investment Adviser agreed to confirm and clarify in more detail a number of principles and interpretations applied to the agreement. The principal ones are reflected in the paragraphs above and explained below:-
First, the incentive fee is paid upon dividends paid in a year, not declared and paid in a year, as the original agreement stated. Secondly, the average NAV referred to above is calculated on a daily weighted average basis throughout the year. In turn, this average NAV is compared to a Base NAV that is also calculated on a daily weighted average basis throughout the year. Thirdly, the methodologies to account for new shares issued and buybacks of shares, their inclusion in the incentive fee calculations and to identify the proportion of all shares upon which an incentive fee is payable have been clarified.
Finally, it has been agreed that any excess of cumulative dividends paid over the cumulative annual dividend target is not carried forward, whether a fee is paid for that year or not.
These clarifications have been incorporated into the performance incentive agreement. The Board has been advised that, as these and a number of more minor clarifications, are clarifications of the Incentive Agreement, rather than changes to it, there was no need to seek shareholder approval for them.
Position at 31 March 2017
The cumulative dividends paid exceeded the annual cumulative dividend target at 31 March 2017 by 0.05p per share (GBP13,458 surplus in aggregate being 78.1% of the total surplus) at the year-end, (where 78.1% is the proportion of Incentive Fee Shares to the total number of shares in issue at the year-end date) and taking into account the target rate of dividends and the dividends paid to shareholders.
The 6p annual dividend hurdle was 7.55p per share at the year-end after adjustment for RPI. The Base NAV was 106.14 per share at the year-end and an average of 106.13p for the year, compared to an average NAV for the year of 116.23p.
Accordingly, an Incentive payment of GBP2,692 is payable for the year, being 20% of the surplus of GBP13,458 referred to above.
c) Other expenses
Expenses are charged wholly to revenue, with the exception of expenses incidental to the acquisition or disposal of an investment, which are written off to the capital column of the Income Statement or deducted from the disposal proceeds as appropriate. --------------------------------------------------------- 2017 2016 GBP GBP Directors' remuneration (including NIC of GBP5,080 (2016: GBP6,080)) (note a) 96,080 97,080 IFA trail commission 15,395 27,009 Broker's fees 12,000 12,000 Auditors' fees- audit (excluding VAT) 22,550 27,947 - tax compliance services (note b) (excluding VAT) 3,550 3,707 - audit related assurance services (note b) (excluding VAT) 4,510 4,767 Registrar's fees 30,707 26,914 Printing 33,215 24,194 Legal & professional fees 13,059 6,091 VCT monitoring fees 8,400 7,500 Directors' insurance 8,310 8,838 Listing and regulatory fees 23,219 20,810 Sundry 18,466 10,818 Running costs 289,461 277,675 Provision against loan interest receivable (note c) 14,845 24,843 Other expenses 304,306 302,518
a): See analysis in the Directors' emoluments table in the Annual Report, which excludes the NIC above. The key management personnel are the non-executive directors. The Company has no employees.
b): The Directors consider the Auditor was best placed to provide the other services disclosed above. The Audit Committee reviews the nature and extent of these services to ensure that auditor independence is maintained.
c): Provision against loan interest receivable of GBP14,845 (2016: GBP24,843) is a provision made against loan stock interest recognised in previous years.
5 Taxation on ordinary activities The tax expense for the year comprises current tax and is recognised in profit or loss. The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date. Any tax relief obtained in respect of Investment Adviser 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. ------------------------------------------------------- 2017 2016 Revenue Capital Total Revenue Capital Total GBP GBP GBP GBP GBP GBP
------------------------ --------- --------- -------- --------- --------- --------- a) Analysis of tax charge: UK Corporation tax on profits for the year 172,122 (143,213) 28,909 147,991 (147,991) - Total current tax charge 172,122 (143,213) 28,909 147,991 (147,991) - Corporation tax is based on a rate of 20% (2016: 20%) b) Profit/(loss) on ordinary activities before tax 1,136,936 (410,227) 726,709 1,187,321 2,082,185 3,269,506 Profit/(loss) on ordinary activities multiplied by small company rate of corporation tax in the UK of 20% (2016: 20%) 227,387 (82,046) 145,341 237,464 416,437 653,901 Effect of: UK dividends (36,390) - (36,390) (17,414) - (17,414) Unrealised gains not taxable (45,954) (45,954) - (217,979) (217,979) Realised gains not taxable - (15,213) (15,213) - (346,449) (346,449) Utilisation of losses on which deferred tax not recognised (18,875) - (18,875) (72,059) - (72,059) Actual tax charge 172,122 (143,213) 28,909 147,991 (147,991) -
Tax relief relating to Investment Adviser fees is allocated between revenue and capital where such relief can be utilised.
No asset or liability has been recognised for deferred tax in relation to capital gains or losses on revaluing investments as the Company is exempt from corporation tax in relation to capital gains or losses as a result of qualifying as a Venture Capital Trust.
There is no potential liability to deferred tax (2016: GBPnil). There is an unrecognised deferred tax asset of GBPnil (2016: GBP18,875).
6 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. A key judgement in applying the above accounting policy is in determining the amount of minimum income dividend to be paid in respect of a year. 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. -------------------------------------------------- Amounts recognised as distributions to equity shareholders in the year: For year ended Pence 2017 2016 Dividend Type 31 March per share Date Paid GBP GBP Interim Income 2016 2.50p 18/03/2016 - 905,462 Interim Capital 2016 2.50p 18/03/2016 - 905,462 Interim Capital 2017 5.00p 08/08/2016 1,799,327 - Second Interim Income 2017 2.50p 31/03/2017 891,810 - Second Interim Capital 2017 7.50p 31/03/2017 2,675,429 - 5,366,566 1,810,924
Any proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these Financial Statements.
Set out below are the total income dividends payable in respect of the financial year, which is the basis on which the requirements of section 274 of the Income Tax Act 2007 are considered.
Recognised income distributions in the financial statements for the year: For year ended Pence 2017 2016 Dividend Type 31 March per share Date Paid GBP GBP Revenue available for distribution by way of dividends for the year 964,814 1,039,330 Interim Income 2016 2.50p 18/03/2016 - 905,462 Second Interim Income 2017 2.50p 31/03/2017 891,810 - Total income dividends for the year 891,810 905,462 7 Basic and diluted earnings per share 2017 2016 GBP GBP ------------------------------------- ---------- ----------- Total earnings after taxation: 697,800 3,269,506 Basic and diluted earnings per share (note a) 1.94p 9.00p Net revenue earnings from ordinary activities after taxation 964,814 1,039,330 Basic and diluted revenue earnings per share (note b) 2.69p 2.86p Unrealised capital gains 229,772 1,089,897 Realised capital gains 76,067 1,732,241 Capital Investment Adviser's fees (net of taxation) (570,161) (591,962) Investment Adviser's performance fee (2,692) - Total capital earnings (267,014) 2,230,176 Basic and diluted capital earnings per share (note c) (0.75)p 6.14p Weighted average number of shares in issue in the year 35,877,280 36,312,815
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 earnings.
8 Investments at fair value The most critical estimates, assumptions and judgements relate to the determination of the carrying value of investments at "fair value through profit and loss" (FVTPL). All investments held by the Company are classified as FVTPL and measured in accordance with the International Private Equity and Venture Capital Valuation ("IPEV") 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 IPEV guidelines: All investments are held at the price of a recent investment for an appropriate period where there is considered to have been no change in fair value. Where such a basis is no longer considered appropriate, each investment is considered as a whole on a 'unit of account' basis, alongside 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). or:- b) where a company's underperformance against plan indicates a diminution in the value of the investment, provision against cost is made, as appropriate. (iii) Premiums, to the extent that they are considered capital in nature, and that will be received upon repayment of loan stock investments are accrued at fair value when the Company receives the right to the premium and when considered recoverable. (iv) Where an earnings multiple or cost less impairment basis is not appropriate and overriding factors apply, discounted cash flow or net asset valuation bases may be applied. A key judgement made in applying the above accounting policy relates to investments that are permanently impaired. Where the value of an investment has fallen permanently below cost, the loss is treated as a permanent impairment and as a realised loss, even though the investment is still held. The Board assesses the portfolio for such investments and, after agreement with the Investment Adviser, will agree the values that represent the extent
to which an investment loss has become realised and treated as a realised loss in the Income Statement. 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. -----------------------------------------------------------
Movements in investments during the year are summarised as follows:
Unquoted Unquoted Traded equity preference Loan on AIM shares shares Stock Total GBP GBP GBP GBP GBP -------------------------- --------- ------------ ----------- ------------ ------------ Cost at 31 March 2016 254,586 10,176,306 23,311 19,698,819 30,153,022 Permanent impairments at 31 March 2016 (254,586) (1,537,968) (739) (810,398) (2,603,691) Unrealised gains/(losses) at 31 March 2016 8 (385,285) (1,037) 2,170,038 1,783,724 Valuation at 31 March 2016 8 8,253,053 21,535 21,058,459 29,333,055 Purchases at cost - 1,933,524 - 323,659 2,257,183 Sale proceeds (note a) - (144,214) - (3,668,287) (3,812,501) Reclassification at value - (84) 84 - - Realised (losses)/gains on investments - (1,222,413) - 1,298,480 76,067 Unrealised (losses)/gains on investments (note b) (8) (1,886,002) 378,155 1,737,627 229,772 Valuation at 31 March 2017 - 6,933,864 399,774 20,749,938 28,083,576 Cost at 31 March 2017 254,586 10,571,020 23,395 17,664,403 28,513,404 Permanent impairments at 31 March 2017 (note c) (254,586) (1,365,869) (739) (810,398) (2,431,592) Unrealised (losses)/gains at 31 March 2017 - (2,271,287) 377,118 3,895,933 2,001,764 Valuation at 31 March 2017 - 6,933,864 399,774 20,749,938 28,083,576
A breakdown of the increases and the decreases in unrealised valuations of the portfolio is shown in the Investment Portfolio Summary in the Annual Report.
Major movements in investments
Note a) Disposals of investment portfolio companies during the year were:
Type Investment Disposal Opening Realised Cost Proceeds Valuation gain in year --------------------- GBP GBP GBP GBP GBP --------------------- --------------- ---------------------- --------------- ---------------------- ------------- Share buyback Chatfield Services and loan Limited repayment 412,109 412,109 412,109 - Backhouse Management Limited Loan repayment 407,280 678,800 407,280 -1 Barham Consulting Limited Loan repayment 407,280 678,800 407,280 -1 Creasy Marketing Services Limited Loan repayment 407,280 678,800 407,280 -1 McGrigor Management Limited Loan repayment 407,280 678,800 407,280 -1 Hollydale Management Limited Loan repayment 318,600 531,000 318,600 -1 Jablite Holdings Limited Loan repayment 30,693 42,425 42,425 - Others 35,700 111,767 35,700 76,067 -------------------------------------- ---------------------- --------------- ---------------------- ------------- 2,426,222 3,812,501 2,437,954 76,067 ------------------------------------- ---------------------- --------------- ---------------------- -------------
1 - The gain on the loan repayments above of GBP1,298,480 has been set against an equivalent permanent impairment in the equity instrument of the investments in these companies (see note c). Thus, no gain or loss resulted.
Note b) Within net unrealised gains of GBP229,772 for the year, the significant gains in value compared to last year were as follows: GBP386,458 in Tovey Management Limited (trading as Access IS), GBP362,043 in RDL Corporation Limited, GBP352,798 in Turner Topco Limited (trading as ATG Media), and GBP270,701 in Vian Marketing Limited (trading as Red Paddle Co). These gains were partially set off by unrealised falls in valuation compared to last year, being: GBP494,875 in Entanet Holdings Limited, GBP343,732 in Jablite Holdings Limited, GBP258,196 in Veritek Global Limited, and GBP228,267 in Fullfield Limited (trading as Motorclean).
The increase in unrealised valuations of the loan stock investments above reflects the changes in the entitlements to loan premiums, and/or in the underlying enterprise value of the investee company. The increase does not arise from assessments of credit risk or market risk upon these investments.
Note c) During the year, permanent impairments of the cost of investments have reduced from GBP2,603,691 to GBP2,431,592. The net reduction of GBP172,099 is due to a) two investee companies being dissolved in the year, which removes the cost and related impairment of these investments of GBP1,470,579 from these Financial Statements, and b) impairments of equity of five investee companies of GBP1,298,480, referred to in note a) above.
9 Post balance sheet events
On 3 May 2017, TPSFF Holdings Limited (formerly The Plastic Surgeon Holdings Limited) repaid loan stock of GBP0.04 million.
On 22 May 2017, GBP0.35 million was invested into MyTutor.
10 Statutory information
The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 31 March 2017 in terms of section 434 of the Companies Act 2006 but is derived from those accounts. Statutory accounts for the year ended 31 March 2017 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.
11 Annual Report
The Annual Report for the year ended 31 March 2017 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.
12 Annual General Meeting
The Annual General Meeting of the Company will be held at 11.00 am on Thursday, 14 September 2017 at a new venue The Clubhouse, 8 St James's Square, London SW1Y 4JU.
Contact details for further enquiries:
Robert Brittain of Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by e-mail to vcts@mobeusequity.co.uk.
Mark Wignall or Clive Austin at Mobeus Equity Partners LLP (the Investment Adviser) on 020 7024 7600 or by e-mail to info@mobeusequity.co.uk.
DISCLAIMER
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UAUNRBOANUAR
(END) Dow Jones Newswires
June 21, 2017 12:28 ET (16:28 GMT)
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