Inc&gwth Vct Regulatory News (IGV)

The Income & Growth VCT plc Annual Financial Results of the Company for the Year ended 30 September 2013 Investment Objective The objective of the Company is to provide investors with an attractivereturn, by maximising the stream of dividend distributions from the income andcapital gains generated by a diverse and carefully selected portfolio ofinvestments. The Company invests in companies at various stages of development. In someinstances this may include investments in new and secondary issues ofcompanies which may already be quoted on the Alternative Investment Market("AiM") or PLUS. Investment policy The Company's policy is to invest primarily in a diverse portfolio of UKunquoted companies. Investments are structured as part loan and part equity inorder to receive regular income and to generate capital gains from trade salesand flotations of investee companies. FINANCIAL HIGHLIGHTS - Share price total return of 15.0% for the year.- Net asset value (NAV) total return of 14.9% for the year.- The Directors are recommending a final dividend of 4.0 pence per Share, which will bring total dividends in respect of the year to 10 pence per Share. This payment will bring cumulative dividends paid since 1 January 2008 to 44.5 pence per Share. Five Year Performance Summary The net asset value (NAV) per ordinary share of 1 penny ("Share") at 30September 2013 was 113.9 pence The table below shows the recent past performance of the Company's existingclass of Shares for each of the last five years. Net NAV per Cumulative NAV total Share Share price assets Share dividends return per price 1 total return paid per Share to per Share to Share Shareholders ShareholdersAs at (£m) (p) (p) (p) (p) (p)30 September 2013 60.5 113.9 40.5 * 154.4 99.5 140.030 September 2012 50.6 109.6 28.5 138.1 97.0 125.530 September 2011 49.2 120.8 4.5 125.3 91.6 96.130 September 2010 36.6 99.0 0.5 99.5 87.0 87.530 September 2009 11.0 93.2 0.0 93.2 94.5 94.5 1 Source: London Stock Exchange * Dividends proposed (not included in the above table) A final dividend of 4.0 pence per Share, comprising 1.25 pence from income and2.75 pence from capital will be recommended to Shareholders at the AnnualGeneral Meeting of the Company to be held on 12 February 2014. If approved,the dividend will be paid on 12 March 2014 to Shareholders on the Register on21 February 2014 and bring cumulative dividends paid per Share since 1 January2008 to 44.5 pence. Discount The Board's current intention is to continue with itsexisting buy-back policy with the objective of maintaining the discount to NAVat which the Shares trade at 10% or less. The discount for the Company'sShares at 30 September 2013 was 10.0% (2012: 9.4%) based on a NAV at 30 June2013 of 110.5 pence. Investments at valuation at 30 September 2013 Investments by market sector % of venture capital portfolio Market sector 30 September 2013 30 September 2012 Support services 48.2% 39.6%General retailers 14.5% 8.0%Software and computer services 13.3% 10.4%Media 11.6% 10.9%Acquisition vehicles 3.0% 19.2%Pharmaceuticals and biotechnology 2.8% 3.2%Industrial engineering 2.5% 2.2%Technology, hardware and equipment 2.4% 2.9%Personal goods 1.7% 2.0%Food producers Nil 1.6% Investments by stage of development % of venture capital portfolio Stage of development 30 September 2013 30 September 2012 Management buyout/buyin 84.6% 65.7%Development capital 6.4% 5.9%AiM-quoted 6.0% 9.2%Acquisition vehicles 3.0% 19.2% CHAIRMAN'S STATEMENT I am pleased to present to Shareholders the Annual Report of the Company forthe year ended 30 September 2013. OverviewIn my statement at the Half-Year stage, I reported on a period of strongperformance from many companies in the portfolio in spite of continuinguncertainty in the UK and global economies. I am pleased to report that thistrend has largely continued in the second half of the year. At the year-end,the underlying net asset value ("NAV") had increased in the second half of theyear by a further 6.1%, reflecting primarily further increases in the value ofthe investment portfolio, as a number of individual investee companies havecontinued to make good progress. The positive trend in deal flow noted by theManager at the half-year has also been sustained and a number of promisingopportunities are being reviewed from a healthy pipeline, the first of whichhas completed after the year-end. PerformanceThe Company's NAV total return per Share rose by 14.9% during the year to 30September 2013. I am pleased to report that, using the benchmark of NAV total return, the VCTis ranked first over three years, second over five years and fourth over tenyears amongst generalist VCTs by the Association of Investment Companies (AIC)(based on statistics prepared by Morningstar) at 31 October 2013. This is anencouraging indication of the consistency of the VCT's performance in thelong-term as well as the strong performance in recent years, where theincrease in the NAV has arisen from several excellent realisations. The rise in NAV total return compares with an increase of 34.2% in the FTSESmallCap Index and an increase of 13.3% in the FTSE AiM All-Share Index, bothon a total return basis. The NAV per Share at 30 September 2013 was 113.9 pence (30 September 2012:109.6 pence). Cumulative dividends paid and proposed since 1 January 2008 amount to 44.5pence per Share. The portfolioOver the year, the portfolio as a whole achieved a net increase of £5.9million in unrealised gains and £1.1 million in realised gains, net oftransaction costs. The portfolio under management was valued at £34.0 millionat the year-end representing 101% of cost and an increase of 20.9% invaluation over the year on a like for like basis. During the year £6.7 million was placed into new and existing investments(including a total of £3.9 million held in four acquisition vehicles). Two ofthese were to support new MBOs of Gro-Group and Veritek Global using existinginvestments in the acquisition vehicles Fosse Management and Madacombe Tradingrespectively. Two additional investments were made to support strategicacquisitions by existing portfolio companies, namely, ATG Media, of BidspotterInc in the US using Peddars Management, and Motorclean, of Forward ValetingServices using Almsworthy Trading. Following the year-end in November 2013, the VCT completed afurther investment of £1.8 million into the acquisition vehicle CulboneTrading to support the MBO of Virgin Wines, one of the UK's leading onlineretailers of wine. The Company's investment in this company now totals £2.8million. Realisations proceeds totalling £6.5 million were received from seventeencompanies. Of this total £2.8 million were loan repayments and £1.7 millionwas received as total proceeds from the disposal of Image Source. Full details of the investment activity during the year and a summary of theperformance highlights can be found in the Investment Manager's Review onpages 8 - 14 of this Annual Report. Cash available for investmentThe Board continues to consider and monitor credit risk in respect of its cashbalances extremely carefully. The Company has diversified its holdings of cash available for investmentduring the year as it is no longer adding to its investment in money marketfunds in response to a change in VCT regulations. It continues to hold £12.8million in a selection of money market funds with AAA credit ratings at 30September 2013. The balance of cash and current asset investments of £13.1million is held in deposit accounts with a number of well-known financialinstitutions across a range of maturities. However, whilst several of thelarger UK banks remain in a recovery stage, systemic risk remains. Inaddition, the £2 million invested in acquisition vehicles is also held inmoney market funds (reduced to £1 million following the use of Culbone Tradingto support the MBO of Virgin Wines after the year-end). The Company iscurrently well-positioned both to take advantage of favourable investmentopportunities as they arise and, if required, to make investments to supportthe existing portfolio. Cash and liquidity fund balances as at 30 September2013 amounted to £25.9 million. Revenue AccountThe revenue return has shown a large increase in the year, with a figure of£1.5 million compared with last year's return of £1.0 million, an improvementof £0.5 million. An increase in income for the year and a reduction in running costs are thetwo primary reasons for this improvement. Loan interest income has risen by£0.4 million due to a number of new investments, such as Gro-Group and VeritekGlobal, in addition to follow on loans to ATG Media and Motorclean. The VCThas also received a number of interest arrears payments from investeecompanies that have improved their financial positions e.g. Aquasium, BlazeSigns and Newquay Helicopters (formerly British International). Dividend income has fallen by a nominal amount in the year, although themajority of investee companies have increased their dividend (e.g. ATG, Focus,Tessella). This comparative fall has arisen as a result of significantdividend receipts in 2012 from Brookerpaks and Image Source which investmentshave both since been realised. However, in 2013, bank deposit interest hasincreased significantly in comparison to previous years as the VCT has spreadcash on deposit amongst several well-known financial institutions. Investment management fees charged to the revenue return have increased byless than £0.1 million, in line with the growth in the Company's net assets.Running costs have fallen by £0.1 million to £0.4 million. This fall inrunning costs is mainly due to a large reduction in trail commission payableto intermediaries, as the trail commission cap for many older holdings wasreached last year. Commission is still payable, where appropriate, on the morerecent linked fundraisings. DividendsA final dividend of 4.0 pence per Share, comprising 1.25 pence from income and2.75 pence from capital, will be recommended to Shareholders at the AnnualGeneral Meeting of the Company to be held on 12 February 2014, for payment toShareholders on the register on 21 February 2014, on 12 March 2014. Enhanced buyback facility (EBF)The VCT offered an EBF to Shareholders in January 2013 and this took place inApril 2013. A total of 8.1 million Shares were bought-back by the Company inrespect of the two tax years 2012/13 and 2013/14 (representing 17.0% of theShares in issue at the date of launch of the EBF). 7.9 million new Shares wereallotted by the VCT under the EBF as a result of this buy-back. The costs ofthe EBF were solely borne by the Shareholders who participated in it. Share buy-backsDuring the year ended 30 September 2013, the Company bought back a further 0.9million of the Company's own Shares (year to 30 September 2012: 1.0 million)representing 2.0% (2012: 2.5%) of the Shares in issue at the beginning of theyear at a total cost of £0.9 million (year to 30 September 2012: £0.9 million)net of expenses. All Shares bought-back by the Company were subsequentlycancelled by the Company. The Board regularly reviews its buyback policy and has maintained the discountto NAV at which the Company's Shares trade over the last year at around 10%.At 30 September 2013, the mid-market price for the Company's shares was 99.5pence, representing a discount of 10.0% to the NAV at 30 June 2013 of 110.5pence. FundraisingThe Company raised £8.3 million gross of issue costs in the Mobeus Linked VCTOffer launched on 29 November 2012. A further Linked Offer to raise £24million in aggregate for the Company, together with the other Mobeus VCTs waslaunched on 28 November 2013. This fundraising by the Company anticipates ahigher rate of new investment in the year ahead and the increased assets willspread the Company's fixed running costs over a larger asset base. Industry awards for the ManagerYour Board is pleased to report to Shareholders that the Manager was named VCTHouse of the Year 2013 for the second consecutive year at the unquote" BritishPrivate Equity Awards 2013. The award recognised the high level of consistencyachieved by the Manager during the year under consideration in maintaininghigh standards in all areas of its activity including deals, exits, portfoliomanagement and fundraising. Annual ReportShareholders may be aware that a number of significant changes havebeen introduced by legislation which affect the way in which companies are nowrequired to present information in the narrative sections of their annualreports. In particular, you will see that this year's report contains aStrategic Report (pages 19 - 27) for the first time. This includes theCompany's investment objective and policy and describes how these have beenmet in the year under review as well as giving information about the risksface by the Company and regulatory environment in which it operates. We areconsidering improvements to the way in which the information is presented andwill seek, in future, to make the report more concise by, in particular,reducing the amount of duplication. We are aware that with a Septemberyear-end, the Company is in the vanguard of implementing these newrequirements but may I assure you that the review process is proceedingactively, as you will see in next year's report. OutlookSince the half-year, the outlook for the UK economy appears to have improved;recent data suggests the economy is growing and will continue to grow. The UKGovernment appears to be trying to create a more optimistic mood ahead of theelection in 2015, with its measures aimed at the housing market designed toboost growth. Some business surveys reveal a cautious optimism in thecorporate sector. The Financial Times and The Daily Telegraph have bothfeatured articles on mid-sized companies which they describe as a resurgentsector of the economy. This is an area in which we are seeking to increase ourparticipation as some of our more successful investee companies look toincrease their size and profitability by making significant acquisitions.Other commentators are more pessimistic about how solid such a recovery maybe. The Board and the Manager remain wary of potential shocks to thisrecovering trend from, for example, Western governments' levels of debt, aEurozone or banking crisis. Our cautious approach of wishing to identify the right opportunities in therecent uncertain markets has meant that we have only invested in well-runprofitable companies operating in niche markets that we believe have thepotential to grow and to deliver attractive returns to Shareholders. Downsiderisk to Shareholders is minimised by specifically structuring the terms ofdeals to include loan stock as well as equity. We believe that this strategyunderpins the quality of the investment portfolio currently held within theVCT. The Company also holds a significant level of liquidity that is availableto use for future deals that we anticipate the Manager will bring to theCompany. We perceive that the banking sector largely remains reluctant to lendto the small business sector, which is creating opportunities for yourCompany, evident in the number of quality investment opportunities the Manageris evaluating. If growth in the UK economy is sustained, the economic prospects shouldimprove further for our existing and future portfolio companies. A number ofportfolio companies have performed well in the recent challenging environment.If these companies continue to produce good performance, the Company should beable to deliver good returns for Shareholders. Once again, I would like to take this opportunity to thank Shareholders fortheir continued support. Colin HookChairman INVESTMENT MANAGER'S REVIEW The portfolio has continued to perform strongly during the year resulting fromthe strong trading performance of a number of companies in the portfolio. Thisyear has seen a high level of investment activity both in terms of newinvestment and disposals. We have supported two new MBOs and two significantacquisitions by successful existing portfolio companies. A number of investeecompanies have made partial repayments of their loan stock during the year,reflecting their improving confidence and cashflow. We are benefitting from a positive dealflow which we believe is a symptom bothof improved business confidence and the continued perception that the UKbanking industry is reluctant to lend to smaller businesses. Both the numberand quality of the deals that we have considered in recent months haveincreased . We are confident that a number of new deals will complete over thecoming months. New investmentA total of £6.5 million was invested into new deals during the year underreview. In March 2013, the Company completed a new investment of £2.3 million, tosupport the MBO of Gro-Group Holdings Limited. The amount invested included £1million from the Company's existing investment in the acquisition vehicleFosse Management. Devon based Gro-Group created the original, and nowinternationally renowned, Gro-bag which has become the number one baby sleepbag brand in the UK and Australia. Market penetration of the product hasincreased from zero to around 90% since the company was founded in 2000 andturnover has grown to £12 million. In July 2013, the VCT completed a further new investment of £2.3 million(including the VCT's existing investment of £1 million in the seed company,Madacombe Trading) to support the MBO of Veritek Global Limited, a Europe-wideprovider of installation, maintenance and support services for blue-chipowners of a wide range of complex imaging and printing equipment. The companyhas revenues in excess of £25 million and around 300 staff across tencountries. The investment management team has focussed on opportunities for expansion byacquisition within the existing portfolio and as a result of this the VCT hasfunded two substantial strategic acquisitions by Fullfield (trading asMotorclean) and ATG Media. Both of these transactions have significantlyincreased the size and market share of the companies involved and improved thetrading position and potential for further growth of these companies. In the first of these, in February 2013, the VCT provided an additional £0.9million, via the acquisition vehicle Almsworthy Trading, to financeMotorclean's acquisition of Forward Valeting Services. The transaction createdthe UK's largest provider of car cleaning and valeting services to the motorindustry with a turnover in excess of £35 million and around 450 dealershipsites across the country. It brought the VCT's total investment in thiscompany to £2.4 million. In April 2013, a further £1 million was invested into ATG Media, using theVCT's existing investment of £1 million in the acquisition vehicle PeddarsManagement (the remainder of which was returned to the Company), to enable itto acquire Bidspotter Inc, a US based business engaged in providing livebidding and auction software to industrial and commercial liquidationauctioneers. This new investment brought the VCT's total investment in thiscompany to £1.9 million. These transactions were specifically structured to enhance the value ofexisting successful investments. We will continue to pursue similaropportunities as they arise as we are conscious that a materially lowerinvestment risk is likely to be involved when we back what we know aresuccessful management teams within the portfolio, compared to a firstinvestment into a new portfolio company. Following the year-end in November 2013, the VCT completed a furtherinvestment of £1.8 million into the acquisition vehicle Culbone Trading tosupport the MBO of Virgin Wines, one of the UK's leading online retailers ofwine. The Company's investment in this company now totals £2.8 million. Follow-on investmentA further loan of less than £0.1 million was advanced to support the workingcapital requirements of Newquay Helicopters (formerly British International).This was used to provide working capital pending the disposal of the company'smajor trading subsidiary, which has now occurred. The company has now repaidthe principal and premium of the first two loan stocks, together with allinterest arrears, for total cash proceeds of £0.9 million over the life ofthis investment. The capital proceeds of £0.6 million compare with aninvestment cost of £0.5 million. This is a pleasing outcome and there is theprospect of further returns of capital as the company realises its remainingassets and activities. RealisationsThe year has seen a continuation of realisation activity. Most significant ofthese was the disposal of the Company's remaining loan and equity investmentin Image Source Group for total proceeds of £1.7 million during February andMarch 2013. Over the life of the investment, total proceeds were £3.5 millioncompared to cost of £2.5 million, being 143% of cost. A few months prior tothis realisation, Image Source merged with Cultura Creative in October 2012 tocreate Europe's largest independent image business. The Company also realised its remaining investment in Brookerpaks, an importerand distributor of garlic and vacuum-packed vegetables, in November 2012, forproceeds of £0.6 million compared to the equity investment cost of less than£0.1 million; the overall cash return from this investment was £1.9 million,or a 3.8 times multiple of original investment cost. Also in November 2012, the VCT sold a total of 1.3 million of its shares inIDOX plc, representing 23.1% of the VCT's holding at the previous year-end,for total proceeds of £0.5 million. Two AiM listed companies received recommended offers in the first few monthsof the Company's financial year which both successfully completed in the earlymonths of 2013. The Company's remaining investment in Tikit was acquired byBritish Telecommunications plc in January 2013 at a price of 416 pence pershare, realising approximately £0.3 million. This, in addition to a series offurther disposals of Tikit shares earlier in the financial year and inprevious years, brought total proceeds over the life of this investment to£1.3 million or almost 2.7 times cost of £0.5 million. ANT was acquired inFebruary 2013 by Espial Group Inc, a company listed on the Toronto StockExchange, at a price of 20.5 pence per share. The transaction recovered the 30September 2012 valuation of £0.1 million compared with cost of £0.5 million. In March 2013, the VCT sold part of its loan stock, and its entire equityinvestment, in Faversham House for net proceeds of £0.2 million. Faversham'sprogress had fallen short of expectations and we took the opportunity to agreewith management a phased realisation of our holding. The Company's residualloan stock investment in this company, valued at 30 September 2013 at £0.1million, was realised following the year-end. On a total return basis(including interest received) we have recovered 93% of original cost of £0.5million. Two payments totalling £0.4 million were received during the year in respectof the deferred consideration due from the sale of App-DNA to Citrix SystemsInc in November 2011. A further payment of £0.5 million has been receivedfollowing the year-end in November 2013. The Company has continued to benefit from the profitability and strong cashgeneration of a number of investee companies. It has received partial loanstock repayments totalling £1.9 million in the twelve months covered by thisreport from Blaze Signs (£0.6 million), EMaC (£0.4 million), DiGiCo (£0.3million), Focus (£0.2 million), Westway (£0.2 million), Duncary 8 (£0.1million), and Tessella (£0.1 million), in addition to the significant partialrealisation of Newquay Helicopters mentioned above. Following the year-end in December 2013, the Company realised its investmentin Alaric Systems, which develops software for payment processing and fraudprevention, through a sale to a subsidiary of NCR Corporation for cashproceeds of £2.5 million. The realisation contributed to total receipts of£2.7 million by the Company over the life of the investment, representing areturn of over 4.4 times original cost of £0.6 million. The Company may becomeentitled to receive additional sale proceeds of up to £0.5 million over theperiod to December 2017, which is currently held in escrow. Investment outlookThe increase in the number and quality of investment opportunities that wehave seen in recent months is encouraging. We see this as a result of theupturn in business confidence in the UK. We are being approached by sellerswith much more realistic expectations of the value of their businesses and thecommitment to see deals through to completion. As a result of our cautiousapproach to new investment during the downturn, the Company still retains astrong level of liquidity which will enable it to take advantage of this morepositive environment. We believe that the current encouraging performance ofthe portfolio, and the improved outlook for new investment will create valuefor Shareholders in the medium term. LARGEST INVESTMENTS IN THE PORTFOLIO ATG Media Holdings Limited Fullfield Limited - Motorclean Ingleby (1879) Limited - EMaCwww.antiquestradegazette.com www.motorclean.net www.emac.co.uk Cost £1.9 million Cost £2.4 million Cost £1.5 million Valuation £3.7 million Valuation £2.9 million Valuation £2.5 million Basis of valuation Basis of valuation Basis of valuationEarnings multiple Earnings multiple Earnings multiple Equity % held Equity % held Equity % held8.5% 13.2% 9.4% (fully diluted) Income receivable in year Income receivable in year Income receivable in year£128,672 £190,899 £160,890 Business Business BusinessPublisher and on-line auction Provider of vehicle cleaning and Provider of service plans for theplatform operator valet services motor trade Location Location LocationLondon Laindon, Essex Crewe History History HistoryManagement buyout Management buyout Management buyout Audited financial information Audited financial information Audited financial information £ million £ million £ million Year ended 30 September 2012 Year ended 31 March 2013 Year ended 31 December 2012 1Turnover £10.9 Turnover £25.2 Turnover £6.1Operating profit £2.7 Operating profit £1.2 Operating profit £2.3Net assets £4.6 Net assets £2.6 Net assets £2.5 Year ended 30 September 2011 Period ended 31 March 2012 Year ended 31 December 2011 1Turnover £8.9 Turnover £17.3 Turnover £5.0Operating profit £1.8 Operating profit £1.2 Operating profit £0.9Net assets £3.2 Net assets £2.4 Net assets £1.5 1 The financial information quoted above relates to the operating subsidiary, EMaC Limited and includes figures relating the performance of this company prior to the MBO which completed in October 2011. Gro-Group Holdings Limited Madacombe Trading - Tessella Holdings Limited Veritek Globalwww.gro.co.uk www.veritekglobal.com www.tessella.com Cost £2.3 million Cost £2.3 million Cost £1.6 million Valuation £2.3 million Valuation £2.3 million Valuation £2.2 million Basis of valuation Basis of valuation Basis of valuationCost Cost Earnings multiple Equity % held Equity % held Equity % held12.8% 14.6% 7.5% Income receivable in year Income receivable in year Income receivable in year£94,195 £46,303 £170,256 Business Business BusinessManufacturer and Maintenance of imaging Provider of science powereddistributor of baby sleep equipment technology and consultingproducts services Location Location LocationAshburton, Devon Eastbourne, East Sussex Abingdon, Oxfordshire History History HistoryManagement buyout Management buyout Management buyout Audited financial Audited financial Audited financialinformation information information £ million £ million £ million Year ended 30 June 2012 1 Year ended 31 March 2013 1 Year ended 31 March 2013 1Turnover £10.9 Turnover £24.7 Turnover £20.9Operating profit £0.9 Operating profit £1.5 Operating profit £3.0Net assets £1.1 Net assets £6.2 Net assets £5.6 Year ended 30 June 2011 1 Year ended 31 March 2012 Year ended 31 March 2012 1Turnover £11.0 Turnover £25.4 Turnover £18.5Operating profit £0.9 Operating profit £1.6 Operating profit £0.3Net assets £0.9 Net assets £7.0 Net assets £2.4 1 The financial information 1 The financial information 1 The financialquoted above is for Gro-Group quoted above is for Veritek information quoted above relatesHolding Limited prior to the Global Limited prior to the MBO to the operating subsidiary, TessellaMBO which completed in March which completed in July 2013. Limited and includes figures relating the2013). to the performance of this company prior to the MBO which completed in July 2012. Alaric Systems Limited * I-Dox plc EOTH Limited - Equip Outdoor Technologieswww.alaric.com www.idoxplc.com www.equipuk.comCost £0.6 million Cost £0.5 million Cost £1.4 millionValuation £2.1 million Valuation £1.6 million Valuation £1.4 million Basis of valuation Basis of valuation Basis of valuationDiscounted realisation proceeds Bid price (AiM quoted) Earnings multiplemultiple Equity % held Equity % held Equity % held6.9% 1.2% 2.5% Income receivable in year Income receivable in year Income receivable in year£Nil £29,168 £132,425 Business Business BusinessProvider of software for retail Development and supply of Supplier of branded outdoorcredit card payment systems knowledge management equipment and clothing including products the Rab and Lowe Alpine brands Location Location LocationLondon London Alfreton, Derbyshire History History HistoryDevelopment capital AiM flotation Acquisition capital Audited financial information Audited financial information Audited financial information £ million £ million £ million Year ended 31 March 2013 Year ended 31 October 2012 Year ended 31 January 2013Turnover £9.8 Turnover £57.9 Turnover £27.3Operating profit £1.7 Operating profit £13.8 Operating profit £2.5Net assets £3.9 Net assets £38.9 Net assets £7.7 Year ended 31 March 2012 Year ended 31 October 2011 Year ended 31 January 2012Turnover £8.7 Turnover £38.6 Turnover £15.5Operating profit £1.8 Operating profit £9.5 Operating profit £1.8Net assets £3.3 Net assets £34.4 Net assets £6.2 * This investment was sold after the year-end for cash proceeds of £2.5 million. Blaze Signs Holdings Limited ASL Technology Holdings Limited CB Imports Group Limited - Country Basketswww.blaze-signs.com www.asl-group.co.uk www.countrybaskets.co.uk Cost £0.6 million Cost £1.8 million Cost £1.0 millionValuation £1.2 million Valuation £1.1 million Valuation £1.1 million Basis of valuation Basis of valuation Basis of valuationEarnings multiple Earnings multiple Earnings multiple Equity % held Equity % held Equity % held12.5% 9.6% 5.8% Income receivable in year Income receivable in year Income receivable in year£192,199 £Nil £76,355 Business Business BusinessManufacturer and installer of Provider of printer and photocopier Importer and distributor ofsigns services artificial flowers, floral sundries and home décor products Location Location LocationBroadstairs, Kent Cambridge East Ardsley, West Yorkshire History History HistoryManagement buyout Management buyout Management buyout Audited financial information Audited financial information Audited financial information £ million £ million £ million Year ended 31 March 2013 Year ended 30 September 2012 Year ended 31 December 2012Turnover £22.7 Turnover £13.4 Turnover £24.4Operating profit £2.3 Operating profit £0.7 Operating profit £1.4Net assets £3.3 Net assets £0.2 Net assets £4.5 Year ended 31 March 2012 Year ended 30 September 2011 Year ended 31 December 2011Turnover £20.9 Turnover £9.6 Turnover £23.1Operating profit £1.8 Operating profit £0.7 Operating profit £1.0Net assets £2.9 Net assets £1.5 Net assets £4.4 The remaining 29 investments in the portfolio (including the two acquisitionvehicles in the portfolio at 30 September 2013) had a current cost of £15.8million and were valued at 30 September 2013 at £9.7 million. Further details of the investments in the portfolio may be found on the Mobeuswebsite: www.mobeusequity.co.uk. Operating profit is stated before charging amortisation of goodwill whereappropriate for all investee companies. INVESTMENT PORTFOLIO SUMMARYfor the year ended 30 September 2013 Total Total Additional Total % of 1 2 % of cost at valuation investments valuation equity portfolio at at held by value 30-Sep-13 30-Sep-12 30-Sep-13 £ £ £ £ATG Media Holdings 1,889,006 2,270,884 1,000,013 3,686,911 8.5% 10.8%Limited 9Publisher and onlineauction platform operator Fullfield Limited 2,405,465 1,652,768 916,368 2,887,812 13.2% 8.5%(trading asMotorclean) 8Vehicle cleaning andvalet services Ingleby (1879) Limited 1,486,848 1,878,124 - 2,452,407 9.4% 7.2%trading as EMaC)Provider of serviceplans for themotor trade Gro-Group Holdings 2,341,286 - 2,341,286 2,341,286 12.8% 6.9%Limited(formerly Michco 1209Limited) 7Baby sleep products Madacombe Trading 2,289,859 - 2,289,859 2,289,859 14.6% 6.7%Limited(trading as VeritekGlobal) 10Maintenance of imagingequipment Tessella Holdings 1,645,118 1,745,351 - 2,213,488 7.5% 6.5%LimitedProvider of sciencepoweredtechnology andconsultingservices Alaric Systems Limited 565,156 468,495 - 2,064,071 0.4% 6.1%4Software developer andproviderof support servicesfor retail creditcard payment systems I-Dox plc 3 453,881 2,058,371 46 1,625,078 1.2% 4.8%Developer and supplierofknowledge managementproducts EOTH Limited (trading 1,383,313 1,383,313 - 1,397,444 2.5% 4.1%as EquipOutdoor Technologies)Distributor of brandedoutdoorequipment and clothingincludingthe Rab and LoweAlpine brands Blaze Signs Holdings 621,510 1,448,159 - 1,249,579 12.5% 3.7%LimitedManufacturer andinstaller ofsigns ASL Technology 1,769,790 654,155 - 1,088,213 9.6% 3.2%Holdings LimitedPrinter andphotocopier services CB Imports Group 1,000,000 1,128,228 - 1,050,541 5.8% 3.1%Limited (trading asCountry Baskets)Importer anddistributor ofartificialflowers, floralsundries and homedecor products Westway Services 195,141 838,782 - 1,025,054 4.7% 3.0%Holdings(2010) LimitedInstallation, serviceandmaintenance of airconditioningsystems Ackling Management 1,000,000 1,000,000 - 1,000,000 12.5% 2.9%LimitedCompany seeking toacquirebusinesses in the foodmanufacturing,distribution andbrand managementsectors Culbone Trading 1,000,000 1,000,000 1,000,000 12.5% 2.9%LimitedAcquistion vehicleused to supportthe MBO of VirginWines followingthe year-end Aquasium Technology 500,000 677,971 - 840,760 16.7% 2.5%Limited 4Manufacturing andmarketing ofbespoke electron beamweldingand vacuum furnaceequipment DiGiCo Global Limited 572,694 876,497 - 776,204 1.6% 2.3%Designer andmanufacturer ofdigital audio mixingdesks Youngman Group Limited 1,000,052 700,992 - 700,992 8.5% 2.1%Manufacturer ofladders andaccess towers RDL Corporation 1,441,667 1,271,194 - 667,316 13.0% 2.0%LimitedRecruitment providerwithin thepharmaceutical,businessintelligence and ITsectors Focus Pharma Holdings 293,913 636,574 - 583,331 2.1% 1.7%LimitedLicensor anddistributor of genericpharmaceuticals Machineworks Software 20,471 479,459 - 574,339 9.2% 1.7%LimitedProvider of softwarefor CAD andCAM vendors Original Additions 25,696 537,948 - 537,948 0.0% 1.6%Topco Limited 6Sale of false nails,nailaccessories, falseeyelashes,depilatory products,hairlightening and permingproducts Duncary 8 Limited 509,923 814,025 - 516,702 25.5% 1.5%(trading as BGConsulting)Technical trainingbusiness Omega Diagnostics 279,996 373,328 - 338,329 2.2% 1.0%Group plcIn-vitro diagnosticsfor foodintolerance,autoimmune diseasesand infectiousdiseases The Plastic Surgeon 406,082 248,878 - 315,644 6.1% 0.9%HoldingsLimitedSupplier of snaggingand finishingservices to theproperty sector Vectair Holdings 53,400 164,178 - 198,098 4.6% 0.6%LimitedDesigner anddistributor ofwashroom products Newquay Helicopters 196,824 590,909 83,824 196,824 5.0% 0.6%(2013)Limited (formerlyBritishInternational HoldingsLimited)Helicopter serviceoperator Faversham House 144,859 192,385 - 144,859 0.0% 0.4%HoldingsLimitedPublisher, exhibitionorganiserand operator ofwebsites for theenvironmental, visualcommunications andbuildingservices Lightworks Software 20,471 84,060 - 106,937 9.2% 0.3%LimitedProvider of softwarefor CAD andCAM vendors PXP Holdings Limited 965,371 45,195 - 45,195 6.0% 0.1%(trading as PinewoodStructures)Designer, manufacturerandsupplier of timberframes forbuildings Racoon International 550,852 79,026 - 31,370 7.7% 0.01%HoldingsLimitedSupplier of hairextensions, haircare products andtraining Data Continuity Group 163,345 2,171 73,311 29,632 15.0% 0.1%Limited 4Design, supply andintegration ofdata storage solutions Monsal Holdings 454,461 42,446 - 28,297 5.7% 0.1%LimitedSupplier ofengineering servicesto the water and wastesectors Corero Network 600,000 31,434 - 15,717 0.1% 0.0%Security plc 4 Sarantel Group plc 4 1,881,252 17,019 - - 0.8% 0.0%Developer andmanufacturer ofantennae for mobilephones andother wireless devices Oxonica Limited 4 2,524,527 - - - 0.0% -Internationalnanomaterialsgroup NexxtDrive Limited 5 487,014 - - - 4.5% -Developer andexploiter ofmechanicaltransmissiontechnologies Aigis Blast Protection 272,120 - - - 6.9% -Limited 4Specialist blastcontainmentmaterials company Legion Group plc 150,000 - - - 0.0% -(in administration)Provider of mannedguarding,mobile patrols andalarmresponse services Biomer Technology 137,170 - - - 3.5% -Limited 5Developer ofbiomaterials formedical devices Watchgate Limited 1,000 - - - 33.3% -Holding company Disposed in year Image Source Group - 925,470 - - - -LimitedRoyalty free picturelibrary Brookerpaks Limited - 509,209 - - - -Importer anddistributor of garlicand vacuum-packedvegetables Tikit Group plc 3 - 247,350 103 - - -Supplier of ITsolutions andsupport services tolegal andaccounting businesses ANT plc 4 - 131,319 - - - -Provider of embeddedbrowser/email softwareforconsumer electronicsand Internetappliances Almsworthy Trading - 1,000,000 - - - -Limited 8Acquisition vehicleused toprovide acquisitionfinance toFullfield Limited Fosse Management - 1,000,000 - - - -Limited 7Acquisition vehicleused toprovide acquisitionfinance tosupport the MBO ofGro-GroupLimited Madacombe Trading - 1,000,000 - - - -Limited 10Acquisition vehicleused toprovide acquisitionfinance tosupport the MBO ofVeritekGlobal Limited Peddars Management - 1,000,000 - - - -Limited 9Acquisition vehicleused toprovide acquisitionfinance toATG Media Limited --------- --------- --------- --------- ---------Total 33,699,533 31,205,667 6,704,810 34,020,237 100.0% --------- --------- --------- --------- ---------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 13 to the financial statements.2 The percentage of equity held for these companies may be subject to further dilution of an additional 1% or more if, for example, management of the investee company exercises share options.3 Investment formerly managed by Nova Capital Management Limited until 31 August 2007.4 Investment formerly managed by Foresight Group LLP up to various dates ending on or before 10 March 2009.5 Investment formerly managed by Nova Capital Management Limited until 31 August 2007 and by Foresight Group until various dates ending on or before 10 March 2009.6 As part of the consideration on the disposal of Amaldis (2008) Limited, £537,948 of Original Additions Topco Limited loan stock was issued to the Company.7 £1,000,000 of this investment into Gro-Group Limited was provided by Fosse Management Limited, one of the Company's acquisition vehicles.8 £916,368 was further invested into Fullfield Limited (trading as Motorclean). This finance was provided by the acquisition vehicle Almsworthy Trading Limited and resulted in a net repayment to the Company of £83,632.9 £1,000,000 of this investment into ATG Media Holdings Limited was provided by Peddars Management, one of the Company's acquisition vehicles.10 £1,000,000 of this investment into Madacombe Trading (trading as Veritek Global Limited) was provided by Madacombe Trading Limited, one of the Company's acquisition vehicles. STRATEGIC REPORT(Extracted information) INVESTMENT POLICY The Company's policy is to invest primarily in a diverse portfolio of UKunquoted companies. Investments are generally structured as part loan and partequity in order to receive regular income and to generate capital gains fromtrade sales and flotations of investee companies. Investments are made selectively across a number of sectors, primarily inmanagement buy-out transactions (MBOs) i.e. to support incumbent managementteams in acquiring the business they manage but do not yet own. Investmentsare primarily made in companies that are established and profitable. The Company has a small legacy portfolio of investments in companies from theperiod prior to 30 September 2008, when it was a multi-manager VCT. Thisincludes investments in early stage and technology companies and in companiesquoted on the AiM market. The Company's cash and liquid resources are held in a range of instruments ofvarying maturities, subject to the overriding criterion that the risk of lossof capital be minimised. VCT regulation The investment policy is designed to ensure that the Company continues toqualify and is approved as a VCT by HM Revenue & Customs ("HMRC"). Amongst other conditions, the Company may not invest more than 15% of itsinvestments in a single company and must have at least 70% by value of itsinvestments throughout the period in shares or securities comprised in VCTqualifying holdings of which a minimum overall of 30% by value (70% for fundsraised after 6 April 2011) must be in ordinary shares which carry nopreferential 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 April2011) of an investment in a specific company in ordinary shares it must haveat least 10% by value of its total investments in each VCT qualifying companyin ordinary shares which carry no preferential rights (save as may bepermitted under VCT rules). The companies in which investments are made must have no more than £15 millionof gross assets at the time of investment and £16 million immediatelyfollowing the investment to be classed as a VCT qualifying holding. Asset mix The Company initially holds its funds in a portfolio of interest bearinginvestments and deposits. The investment portfolio of qualifying investmentsis built up over a three year period with the aim of investing and maintainingat least 70% of net funds raised in qualifying investments. Risk diversification and maximum exposures Risk is spread by investing in a number of different businessesacross different industry sectors. To reduce the risk of high exposure toequities, each qualifying investment is structured to reduce the risk of highexposure to equities, each qualifying investment is structured to achieve theoptimum balance between loan stock and equity to provide protection againstdownside risk alongside the best potential overall returns. Co-investment The Company aims to invest in larger, more mature unquoted companies throughinvesting alongside other VCTs advised by the Investment Manager with asimilar investment policy. Borrowing The Company's Articles permit borrowing of up to 10% of the adjusted capitaland reserves (as defined therein). However, it has never borrowed and theBoard has no current plans to undertake any borrowing. Management The Board has overall responsibility for the Company's affairs including thedetermination of its investment policy. Investment and divestment proposalsare originated, negotiated and recommended by the Manager and are then subjectto comment and approval by the Directors. Key Indicators used to measure performance The Board believes that the following indicators, used in its own assessmentof the Company, will provide Shareholders with sufficient information toassess how the Company is performing against its objective. The Board places significant emphasis on the Company's performance againstbenchmarks and is satisfied that the VCT's performance remained ahead of thebenchmarks used on a consistent basis. The Company's performance compared toVCTs in the generalist sector is referred to in the Chairman's Statement . For a full review of the Company's development and performance during the yearand future prospects, please see the Chairman's Statement and the InvestmentManager's Review and Investment Portfolio Summary. The Financial Highlightsprovides data on the Company's key performance indicators. Net asset value (NAV) per share increased by 3.9% to 113.9 pencefor the year ended 30 September 2013. Cumulative NAV total return to shareholders increased by 11.8% to 154.4 pencefor the year ended 30 September 2013. Dividends paid Dividends paid in respect of the year ended 30 September 2013 will be 10 penceper Share, subject to Shareholder approval of the proposed final dividend. Cumulative dividends paid since 1 January 2008 are 40.5p per Share.Subject to approval of the payment of the final dividend of 4 pence per Shareat the AGM, this figure will increase to 44.5 pence per Share. Ongoing charges The Ongoing Charges Ratio of the Company is as follows: Ongoing charges * 2.81%\* The Ongoing Charges Ratio has been calculated, using the Association ofInvestment Companies' (AIC) recommended methodology. This figure showsShareholders the annual percentage reduction in shareholder returns as aresult of recurring operational expenses, assuming markets remain static andthe portfolio is not traded. Although the Ongoing Charges figure is based uponhistoric information, it provides Shareholders with an indication of thelikely level of costs that will be incurred in managing the fund in thefuture. The Ongong Charges Ratio replaces the Total Expense Ratio previously reported,although the latter will still form the basis of any expense cap that may beborne by the Manager. There was no breach of the expense cap for the yearended 30 September 2013 (2012: £nil). The AIC also recommends that the impact of performance fees should also bedisclosed, and this is shown below: Performance fee 0.2%Ongoing Charges plus accrued performance fee 3.0% OTHER KEY POLICIES Cash available for investment and liquidity The Company's cash and liquid resources are held in a range of instruments ofvarying maturities including liquid, low risk Money Market Funds and bankdeposits, subject to the overriding criterion that the risk of loss of capitalbe minimised. The Company has participated in the Mobeus VCTs' annual linked fundraisingsince 2010 in order to maintain a sufficient level of funds that can bedeployed in meeting the day-to-day expenses of the Company and dividendsdistributions and purchases of the Company's own Shares. This enables moneyraised prior to 6 April 2012 to be allocated for future MBO investment. Dividend policy The Company has an annual target dividend of not less than 4p per Share whichit has met or exceeded in respect of its last three financial years. However, the ability of the Company to pay dividends in the future cannot beguaranteed and will be subject to performance and available cash and reserves. Subject to certain conditions, VCT dividends are generally tax free toinvestors and attract VCT tax reliefs applicable for the tax year in which theshares are allotted. The Company has instigated a dividend investment scheme in which Shareholdersmay participate. Dividends are reinvested into Shares at the average marketprice of the Shares for the five business days prior to the dividend beingpaid which is likely to be at a discount of 10% to the underlying net assetvalue (provided that this is greater than 70% of the latest published netasset value per Share). Share buy-backs and discount policy Subject to the Company having sufficient available funds and distributablereserves, it is the Board's current intention is to pursue a buyback policywith the objective of maintaining the discount to NAV at which the Sharestrade at approximately 10% or less. Future prospects The Company's performance record reflects the success of the strategy outlinedabove and has enabled the Company to maximise the stream of dividend paymentsto Shareholders. The Board believes that this model will continue to meet theInvestment Objective and has the potential to continue to deliver attractivereturns to Shareholders. For further details on the Company's futureprospects, please see the Outlook paragraph in the Chairman's Statement above. Principal risks, management and regulatory environment The Directors acknowledge the Board's responsibilities for the Company'sinternal control systems and have established systems and procedures foridentifying, evaluating and managing the significant risks faced by theCompany. This includes a key risk management review which takes place at eachquarterly Board meeting. The Principal risks identified by the Board are setout below. Risk Possible consequence How the Board manages risk Economic risk Events such as an economic The Board monitors the recession and movements in portfolio as a whole to interest rates could affect ensure that the Company trading conditions for invests in a smaller companies and diversified portfolio consequently the value of the of companies. Company's qualifying investments. It continually monitors developments in the macro-economic environment and in interest rates with the aim of minimising this risk. Risk of loss of The Company must comply with The Company's VCTapproval as a the provisions of section 274 qualifying status isVenture Capital of the ITA to ensure that its continually reviewed byTrust investors continue to qualify the Manager. for VCT tax reliefs. Any breach of these rules may lead to the Company losing its approval as a VCT, which The Board receives would mean that qualifying regular reports from shareholders who have not Pricewaterhouse Coopers held their shares for the LLP who have been designated period would have retained by the Board to repay the income tax to undertake an relief they obtained and that independent VCT status future dividends paid by the monitoring role. Company would be subject to tax. The Company would also lose its exemption from corporation tax on capital gains. Investment and Inappropriate strategy or The Board regularlystrategic risk consistently weak VCT reviews the Company's qualifying investment investment strategy. recommendations might lead to underperformance and poor returns to shareholders. Investment in unquoted small Careful selection and companies involves a higher review of the degree of risk than investment portfolio on investment in fully listed a regular basis. companies. Smaller companies often have limited product lines, markets or financial resources and may be dependent for their management on a smaller number of key individuals. Valuation risk Investments may be valued Review and approval of inappropriately which may valuation result in an inaccurate recommendations from representation of the the Manager. Company's net assets and net asset value per share. The Board challenges assumptions used in the valuations and considers sensitivity analyses where appropriate. Monitoring of audited valuations published by co-investees. Regulatory risk The Company is required to Regulatory and comply with the Companies legislative Act, the Listing Rules of the developments are kept UKLA and United Kingdom under review by the Accounting Standards. Breach Board. of any of these might lead to suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report. Financial and The Company has no employees The Board carries outoperating risk and is therefore reliant on an annual review of the third party service Internal controls in providers. Failure of the place and reviews the systems at third party risks facing the service providers could lead Company at each to inaccurate reporting or quarterly Board monitoring. Inadequate meeting. controls could lead to the misappropriation or insecurity of assets. The Board considers the performance of the service providers annually. Market risk Movements in the valuations The Board receives of the VCT's investments quarterly valuation will, inter alia, be reports from the connected to movements in UK Manager. Stock Market indices. The Manager alerts the Board about any adverse movements. Asset liquidity The Company's investments may The Board receivesrisk be difficult to realise. reports from the Manager and reviews the portfolio at each quarterly board meeting. It carefully monitors investments where a particular risk has been identified. Market liquidity Shareholders may find it The Board has a sharerisk difficult to sell their buyback policy which shares at a price which is seeks to mitigate close to the net asset value. market liquidity risk. This policy is reviewed at each quarterly board Meeting. Counterparty risk A counterparty may fail to The Board regularly discharge an obligation or reviews and agrees commitment that it has policies for managing entered into with the these risks. Full Company. details can be found in the Chairman's Statement under `Cash available for investment' and in the discussion on `credit risk' in Note 19 to the accounts in the full statutory accounts. STATEMENT OF DIRECTORS' RESPONSIBILITIES The Directors are responsible for preparing the Strategic Report, theDirectors' Report, the Directors' Remuneration Report and the FinancialStatements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for eachfinancial year. Under that law the Directors have elected to prepare thefinancial statements in accordance with United Kingdom Generally AcceptedAccounting Practice (United Kingdom Accounting Standards and applicable law).Under company law the Directors must not approve the financial statementsunless they are satisfied that they give a true and fair view of the state ofaffairs of the Company and of the profit or loss for the Company for thatperiod. 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 they have been prepared applicable UK accounting standards have been followed,, subject to any material departures disclosed and explained in the financial statements; - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;The Directors are responsible for keeping adequate accounting records that aresufficient to show and explain the Company's transactions and disclose withreasonable accuracy at any time the financial position of the Company andenable them to ensure that the financial statements comply with the CompaniesAct 2006. They are also responsible for safeguarding the assets of the Companyand hence for taking reasonable steps for the prevention and detection offraud and other irregularities. Website publication The Directors are responsible for ensuring the annual report and the financialstatements are made available on a website. Financial statements are publishedon the Company's website in accordance with legislation in the United Kingdomgoverning the preparation and dissemination of financial statements, which mayvary from legislation in other jurisdictions. The maintenance and integrity ofthe Company's website is the responsibility of the Directors. The Directors'responsibility also extends to the ongoing integrity of the financialstatements contained therein. Directors' responsibilities pursuant to Disclosure and Transparency Rule 4 ofthe UK Listing Authority The Directors confirm to the best of their knowledge that: (a) the financial statements, which have been prepared in accordance with UK Generally Accepted Accounting Practice and the 2009 Statement of Recommended Practice, `Financial Statements of Investment Trust Companies and Venture Capital Trusts', give a true and fair view of the assets, liabilities, financial position and the profit of the Company. (b) the management report, included within the Chairman's Statement, Investment Manager's Review, Investment Portfolio Summary, Strategic Report and Directors' Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. Having taken advice from the Audit Committee, the Board considersthe report and accounts, taken as a whole, as fair, balanced andunderstandable and that it provides the information necessary for shareholdersto assess the Company's performance, business model and strategy. Neither the Company nor the Directors accept any liability to any person inrelation to the annual report except to the extent that such liability couldarise under English law. Accordingly, any liability to a person who hasdemonstrated reliance on any untrue or misleading statement or omission shallbe determined in accordance with section 90A and schedule 10A of the FinancialServices and Markets Act 2000. Colin HookChairman INCOME STATEMENT for the year ended 30 September 2013 Year ended 30 September 2013 Year ended 30 September 2012 Notes Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ Net unrealised gainson investments - 5,900,080 5,900,080 - 2,364,362 2,364,362 Net gains onrealisation ofinvestments - 1,093,304 1,093,304 - 5,243,190 5,243,190 Income 2 2,488,388 533,750 3,022,138 2,004,297 - 2,004,297 Investment Manager'sfees 3a (321,777) (965,335) (1,287,112) (290,664) (871,993) (1,162,657) Investment Managers'performance fees 3b - (106,778) (106,778) - (3,503,000) (3,503,000) Other expenses (412,241) - (412,241) (499,164) - (499,164) Provision for litigationcost no longer required - - - - 1,337,456 1,337,456 -------- -------- -------- -------- -------- -------- -------- --------Profit on ordinaryactivities beforetaxation 1,754,370 6,455,021 8,209,391 1,214,469 4,570,015 5,784,484 -------- -------- -------- -------- -------- -------- -------- --------Tax on profit onordinary activities (267,890) 267,890 - (224,747) 224,747 - -------- -------- -------- -------- -------- -------- -------- --------Profit on ordinaryactivities aftertaxation for thefinancial year 1,486,480 6,722,911 8,209,391 989,722 4,794,762 5,784,484 -------- -------- -------- -------- -------- -------- -------- --------Basic and dilutedearnings per OrdinaryShare: 4 2.98p 13.45p 16.43p 2.26p 10.97p 13.23p All the items in the above statement derive from continuing operations. Nooperations were acquired or discontinued in the year. The total column is theProfit and Loss Account of the Company. There were no other recognised gainsand losses in the year. Other than the revaluation movements arising in investments held at fair valuethrough profit and loss, there were no differences between the profit asstated above and at historical cost. BALANCE SHEETas at 30 September 2013 Company number: 4069483 as at 30 September 2013 as at 30 September 2012 Notes £ £ £ £ £ £Fixed assetsInvestments at fair value 34,020,237 31,205,667 Current assetsDebtors 1,384,798 727,598Current investments 22,799,201 17,523,440Cash at bank 3,095,005 4,861,440 --------- --------- --------- ---------Total current assets 27,279,004 23,112,478 Creditors: amounts fallingdue within one year (830,369) (3,766,160) --------- --------- --------- ---------Net current assets 26,448,635 19,346,318 --------- --------- --------- --------- --------- --------- Net assets 60,468,872 50,551,985 --------- --------- --------- --------- --------- --------- Capital and reservesCalled up share capital 530,882 461,157Share premium account 15,634,572 11,898,621Capital redemption reserve 287,932 197,265Capital reserve - unrealised 8,902,232 1,611,146Special reserve 13,193,594 12,721,596Profit and loss account 21,919,660 23,662,200 --------- --------- --------- --------- --------- --------- Equity Shareholders'funds 60,468,872 50,551,985 --------- --------- --------- --------- --------- --------- Basic and diluted netasset value per shareOrdinary Shares 5 113.90p 109.62p RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDSFor the year ended 30 September 2013 Year ended Year ended 30 September 2013 30 September 2012 £ £ Opening Shareholders' funds 50,551,985 49,152,799 Share capital bought back in the year - including expenses (9,898,671) (913,037)Share capital subscribed for in the year - net of expenses 17,647,874 6,293,673Profit for the year 8,209,391 5,784,484Dividends paid in the year (6,041,707) (9,765,934) --------- ---------Closing Shareholders' funds 60,468,872 50,551,985 --------- ---------CASH FLOW STATEMENTFor the year ended 30 September 2013 Year ended Year ended 30 September 2013 30 September 2012 £ £ £ £Operating activitiesInvestment income received 2,747,369 1,955,985 Other income 469 4,861 Investment management fees paid (1,287,112) (1,162,657) Investment Managers' performance fees paid (3,050,234) - Other cash payments (310,007) (561,556) --------- --------- --------- ---------Net cash (outflow)/inflow from operating activities (1,899,515) 236,633 Investing activitiesAcquisition of investments (2,788,442) (13,255,722)Disposal of investments 6,559,171 26,468,137 --------- --------- --------- ---------Net cash inflow from investing activities 3,770,729 13,212,415 Equity DividendsPayment of equity dividends (6,049,507) (9,765,934) --------- --------- --------- ---------Net cash (outflow)/inflow before liquidresource management and financing (4,178,293) 3,683,114 Management of liquid resourcesIncrease in monies held pending investment (5,275,761) (5,840,979) FinancingShares issued as part of joint fundraising offerfor subscription and dividend investmentscheme 8,802,776 6,293,673 Shares issued as part of the enhancedbuyback facility 250,000 - Shares bought back as part of enhancedbuyback facility (including expenses) (394,360) - Purchase of own shares (970,797) (851,788) --------- --------- --------- --------- 7,687,619 5,441,885 --------- --------- --------- ---------(Decrease)/Increase in cash for the year (1,766,435) 3,284,020 --------- --------- --------- --------- NOTES 1 Basis of accounting The accounts have been prepared under UK Generally Accepted Accounting Practice (UK GAAP) and the Statement of Recommended Practice, `Financial Statements of Investment Trust Companies and Venture Capital Trusts' ("the SORP") issued by the Association of Investment Companies in January 2009. The financial statements are prepared under the historical cost convention except for certain financial instruments, accounted for at fair value. 2 Income 2013 2012 £ £ Income - from equities 813,927 305,650 - from OEIC funds 48,954 96,138 - from loan stock 1,929,482 1,540,777 - from bank deposits 229,306 56,871 --------- --------- 3,021,669 1,999,436 Other income 469 4,861 --------- --------- Total income 3,022,138 2,004,297 --------- --------- Total income comprises Revenue dividends received 329,131 401,788 Capital dividends received 533,750 - Interest 2,158,788 1,597,648 Other income 469 4,861 --------- --------- Total Income 3,022,138 2,004,297 --------- --------- Income from investments comprises Listed UK securities 29,168 38,549 Listed overseas securities 48,954 96,138 Unlisted UK securities 2,714,241 1,807,878 --------- --------- Total Income 2,792,363 1,942,565 --------- --------- Total loan stock interest due but not recognised in the year was £294,421 (2012: £352,133). 3 Investment management and performance fees a) Investment Manager's fees Revenue Capital Total Revenue Capital Total 2013 2013 2013 2012 2012 2012 £ £ £ £ £ £ Mobeus Equity Partners LLP 321,777 965,335 1,287,112 290,664 871,993 1,162,657 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 (2012: £150,000) and £170,000 (2012: £170,000) per annum respectively. The investment management expense disclosed above is stated after applying a cap on expenses excluding IFA trail commission and exceptional items set at 3.25% of closing net assets at the year-end. In accordance with the investment management agreement any excess expenses are wholly borne by the Investment manager. The excess expenses during the year attributable to the Investment Manager amounted to £nil (2012: £nil). (b) Investment Managers' performance fees Revenue Capital Total Revenue Capital Total 2013 2013 2013 2012 2012 2012 Portfolio £ £ £ £ £ £ Mobeus Equity Partners LLP - 38,811 38,811 - 453,000 453,000 Mobeus Equity Partners LLP/ Foresight Group LLP - 67,967 67,967 - 3,050,000 3,050,000 --------- --------- --------- --------- --------- --------- - 106,778 106,778 - 3,503,000 3,503,000 --------- --------- --------- --------- --------- --------- Under a Deed of Termination and Variation relating to Performance Incentive Agreements dated 29 March 2010, the Investment Manager's Incentive Agreement for the former 'O' Share Fund has been continued while the former 'S' Share Fund's Incentive Agreement has been terminated. Under the terms of the pre-merger 'O' Share Fund Incentive Agreement, each of the ongoing Investment Manager, Mobeus Equity Partners LLP and a former Investment Manager, Foresight Group LLP ("Foresight") are entitled to a performance fee equal to 20% of the excess of the value of any realisation of an investment made after 30 June 2007, over the value of that investment in an Investment Manager's portfolio at that date ("the Embedded Value"), which value is itself uplifted at the rate of 6% per annum subject to a High Watermark test. However, two amendments were made to this agreement for Mobeus, the ongoing Investment Manager. Firstly, the High Watermark was increased by £811,430, being the 'S' Share Fund's shortfall in total net assets from net asset value of £1 per 'S' Share, at 31 December 2009. Secondly, only 70% of any new investment made by Mobeus after the Merger will be added to the calculation of the Embedded Value, the value of the Investment Manager's portfolio and the value of any realisations, for the purposes of assessing any excess. Under the above agreements, the Investment Manager (Mobeus) is entitled to a further Incentive fee for the year ended 30 September 2012 of £38,811 (on the Mobeus portfolio to be paid to Mobeus) (2012: £453,000). This further sum has arisen from a revision of the calculation of the fee due for the previous year. No fee is payable upon the Mobeus portfolio for the year ended 30 September 2013. £67,967 is payable on the ex-Foresight portfolio for the year ended 30 September 2013, to be shared between Mobeus and Foresight (2012: £3,050,000). Under the terms of the Linked Offer for Subscription launched on 29 November 2012 and which closed on 30 April 2013 ("the Offer"), Mobeus were entitled to fees of 5.5% of gross investment subscriptions up to 30 December 2012 and 3.25% of gross investment subscriptions after 30 December 2012. This amount totalled £942,656 across all three VCTs involved in the Offer, out of which all costs associated with the Offer were met. Under the terms of a Linked Offer for Subscription launched 28 November 2013, Mobeus are entitled to fees of 3.25% of the investment amount received from investors. Based upon a fully subscribed offer of £24million this would equal £780,000 across all four VCTs involved in the Offer, out of which all the costs associated with the Offer will be met. 4 Basic and diluted* earnings per share 2013 2012 £ £ Total earnings after taxation: 8,209,391 5,784,484 Basic and diluted earnings per share (Note a) 16.43p 13.23p Revenue profit from ordinary activities after taxation 1,486,480 989,722 Basic and diluted revenue earnings per share (Note b) 2.98p 2.26p Net unrealised capital gains on investments 5,900,080 2,364,362 Net realised capital gains on investments 1,093,304 5,243,190 Capital dividend 533,750 - Provision for litigation cost no longer required - 1,337,456 Capitalised management less taxation (697,445) (647,246) Investment Managers' performance fees (106,778) (3,503,000) --------- --------- Total capital return 6,722,911 4,794,762 Basic and diluted capital earnings per share (Note c) 13.45p 10.97p Weighted average number of shares in issue in the year 49,959,629 43,710,889 * Diluted earnings per share in each case are the same as basic earnings per share due to the potential extra shares that may be issued to settle the Investment Manager's incentive fee having no effect on the weighted average number of shares in issue at the year end. Notes a) Basic earnings per share is total earnings after taxation divided by the weighted average number of shares in issue. b) Revenue earnings per share is the revenue profit after taxation divided by the weighted average number of shares in issue. c) Capital earnings per share is the total capital gain after taxation divided by the weighted average number of shares in issue. 5 Net asset value per share 2013 2012 Net assets £60,468,872 £50,551,985 Number of shares in issue 53,088,219 46,115,656 Basic and diluted net asset value per share 113.90p 109.62p 6 Dividends The Directors will be recommending to Shareholders at the forthcoming Annual General Meeting a final dividend in respect of the year ended 30 September 2013 of 4 pence per share comprising 1.25 pence from income and 2.75 pence from capital. The dividend will be paid on 12 March 2014 to shareholders on the Register on 21 February 2014. The Company's Dividend Investment Scheme ("the Scheme") will apply to this dividend and elections under the Scheme should be received by the Scheme Administrator, Capita Asset Services, by no later than 25 February 2014. 7 Post balance sheet events On 4 October 2013, Blaze Signs Holdings Limited repaid its loan stock, realising proceeds of £264,198 including premium of £60,969. On 10 October 2013, DiGiCo Global Limited repaid £27,219 of its loan stock. In November and December 2013, Faversham House Holdings Limited fully repaid its outstanding loan stock generating net proceeds of £165,442 including £21,005 premium. On 8 November 2013, £2,843,557 was invested into Virgin Wines Online Limited, including £1,000,000 from acquisition vehicle Culbone Trading Limited. On 14 November 2013, £492,579 of deferred consideration as part of the sale of App-DNA Limited in December 2011, was received. On 29 November 2013, Focus Pharma Holdings Limited repaid all its remaining loan stock realising £162,543 including £50,351 premium. On 3 December 2013, the Company realised its investment in Alaric Systems Limited through a sale to a subsidiary of NCR Corporation for cash proceeds of £2,542,018. The Company may become entitled to receive additional sale proceeds of up to £0.5 million over the period to December 2017, which is currently held in escrow. 8 Statutory information The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 30 September 2013 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. 9 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: iandg@mobeusequity.co.uk. 10 Annual General Meeting The Annual General Meeting of the Company will be held at 11.00 am on Wednesday, 12 February 2014 at the offices of SGH Martineau LLP, One America Square, Crosswall, London EC3N 2SG. Contact details for further enquiries: Robert Brittain of Mobeus Equity Partners LLP (the Company Secretary) on0207024 7600 or by e-mail to i&g@mobeusequity.co.uk. Mark Wignall or Mike Walker at Mobeus Equity Partners LLP (the InvestmentManager) 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 websiteaccessible from hyperlinks on the Company's website (or any other website) isincorporated into, or forms part of, this announcement.