Inc&gwth Vct Regulatory News (IGV)

The Income & Growth VCT plc ("the Company", "the VCT" or "I&G VCT") is a Venture Capital Trust ("VCT") listed on the London Stock Exchange. Its investment portfolio is advised by Mobeus Equity Partners LLP ("Mobeus").

Company Objective

The objective of the Company is to provide investors with an attractive return, by maximising the stream of tax-free dividend distributions from the income and capital gains generated by a diverse and carefully selected portfolio of investments, while continuing at all times to qualify as a VCT.

Financial Highlights

Results for the six months ended 31 March 2017

Performance Summary

The table below shows the recent past performance of the Company's current class* of shares for each of the last five years, and the current year to date.

1 Source: Panmure Gordon & Co (mid-price).

2 Cumulative total return per share comprises the NAV per share (NAV basis) or the mid-market price per share (share price basis) plus cumulative dividends paid since launch of the current share class*.

3 The share price at 30 September 2014 has been adjusted to add back the dividend of 8.00 pence per share paid on 30 October 2014, which was excluded from the listed share price at that year end.

4 An interim dividend of 3.00 pence, referred to in the Financial Highlights above, is payable to shareholders on 20 June 2017.

* The first allotment of the former 'S' share class, now the current share class, took place on 6 February 2008.

Chairman's Statement

I am pleased to present the Company's Half-Year Report for the six months ended 31 March 2017.

The half-year has again seen steady progress with a further positive return for the period, which is detailed in the Performance section below, and an increase in the rate of growth capital investments made, in accordance with the amended Investment Policy approved by shareholders in February 2016.

Seven investments have now been completed in accordance with the amended Investment Policy, in response to the new VCT legislation introduced by the Finance (No 2) Act 2015 (the "new VCT Rules"). The main features of this legislation are disclosed in the Summary of VCT Regulations in the Half-Year Report. Five of these seven investments were made in the period under review. Levels of new investment across the VCT industry have been lower than the comparable periods, so the Company has made a relatively strong start to investing under the new VCT rules.

The existing MBO focused portfolio constructed under the previous VCT rules has continued to perform steadily.

Performance

The Company's NAV total return per share was 2.0% for the six months to 31 March 2017 (2016 3.8%) while the total share price return was 1.9% (2016: 7.0%).

Cumulative NAV total return per share (being the closing net asset value plus total dividends paid to date) has risen to180.93 pence compared to 179.01 pence at the year-end. This represents a further increase of 1.1% over the period.

Investment portfolio

The portfolio has performed steadily during the period, increasing in value by 1.5% (2016: 6.5%) on a like-for-like basis. The aggregate portfolio saw a net increase of £0.07 million in realised gains and £0.73 million in unrealised gains over the six month period. The portfolio was valued at £51.90 million at the period-end (30 September 2016: £54.36 million).

During the six months under review, the Company invested a total of £ 4.07 million (including £0.72 million via a company preparing to trade), (2016: £4.47 million, including £4.18 million via companies preparing to trade) into five (2016: three) investments. These were BookingTek, a company that has developed a real-time booking platform for hotel meeting rooms and restaurant reservations; Biosite, a fast growing provider of biometric access control and software-based workforce management solutions for the construction sector; Preservica, an existing portfolio company which has developed software to preserve past and current data for future retrieval; Tapas Revolution, a leading Spanish themed restaurant chain; and most recently, Buster & Punch, a contemporary interiors brand.

The Company received cash proceeds of £6.61 million during the six month period, mostly being partial loan stock repayments.

Details of all these transactions and the performance of the portfolio are contained in the Investment Review.

Revenue account

The results for the period are set out in the Unaudited Condensed Income Statement in the Half-Year Report and show a revenue return (after tax) of 1.42 pence per share (2016: 1.69 pence). The revenue return for the period of £1.02 million has fallen from last year's comparable figure of £1.19 million. This fall is mainly due to a large interest receipt arising from the exit of Original Additions, which was included in the 2016 figure. Ignoring the effect of this non-recurring income, the underlying loan stock interest fell only slightly, which highlights the resilience of the income from the current portfolio.

Dividends

The Board continues to be committed to providing an attractive dividend stream to shareholders and is pleased to declare an interim dividend of 3.00 pence per share for the year ending 30 September 2017, comprising 1.50 pence of income and 1.50 pence of capital. This dividend will be paid on 20 June 2017 to shareholders on the Register on 26 May 2017 and will bring cumulative dividends per share paid to date to 87.50 pence.

In respect of the past five financial years, and this half-year, the Company has now paid or declared dividends totalling 79.00 pence per share.

Shareholders are encouraged to ensure that Capita, the Company's Registrar, has up-to-date details for them and to check whether they have received all dividends payable to them. This is particularly important if they have recently moved house or changed their bank account. We are aware that a number of dividends remain unclaimed by shareholders and whilst we will continue to endeavour to contact you if this is the case, we cannot guarantee that we will be able to do so if the Registrars do not have an up-to-date address and/or email address for you.

Dividend Investment Scheme

The Company's Dividend Investment Scheme ("the Scheme") is a convenient, easy and cost effective way for shareholders to build up their shareholding in the Company. Instead of receiving cash dividends, shareholders can elect to receive new shares in the Company. By opting to receive a dividend in this manner, there are three benefits to shareholders:

- The dividend remains tax free;

- Shareholders are allotted new shares in the Company which will, subject to their particular circumstances, attract VCT tax reliefs applicable for the tax year in which the shares are allotted. The tax relief currently available to investors in new VCT shares is 30% for the 2017/18 tax year for investments up to £200,000 in any one tax year; and

- The Scheme also has one particular advantage. Under its terms, a member is able to re-invest at an advantageous price, being the average market price of the shares for the five business days prior to the dividend being paid. This price is likely to be at a discount of 10% to the underlying net asset value (provided that this is greater than 70% of the latest published net asset value per share).

Shareholders wishing to join the Scheme should submit a mandate form to Capita Asset Services, the Scheme Administrator, by no later than Monday, 5 June 2017, to ensure that they receive the above dividend as shares. Details of where to obtain an application form can be found in Shareholder Information in the Half-Year Report.

Industry developments

An announcement in the recent Budget has brought VCTs within the remit of the current Patient Capital Review. The review, led by HM Treasury, is considering the current availability of long-term finance for innovative and growing companies looking to expand their businesses and changes in government policy that may support the expansion of long-term capital for growing innovative firms. We are closely monitoring developments and are continuing to support industry bodies such as the Association of Investment Companies, BVCA and EISA who are contributing their views to the Government on the Company's behalf.

A summary of current VCT regulation is included below.

Liquidity

Annual fundraisings by the Company have provided it with a satisfactory level of liquidity sufficient to pursue its Objective and to meet the Company's running costs. The Board will consider additional fundraising in the future in line with its liquidity and new investment requirements, together with an assessment of the effects of possible future legislative changes.

Cash available for investment

The Board continues to monitor credit risk in respect of its cash balances and to prioritise the security and protection of the Company's capital. Cash and liquidity fund balances as at 31 March 2017 amounted to £17.70 million. This figure included £6.74 million held in money market funds with AAA credit ratings and

£10.96 million held in deposit accounts with a number of well-known financial institutions across a range of maturities. In addition, the investment portfolio contained £4.53 million in companies preparing to trade that also hold cash in money market funds.

Share buy-backs

During the six months ended 31 March 2017, the Company bought back 32,790 of its own shares, representing 0.1% (2016: 0.3%) of the shares in issue at the beginning of the period, at a total cost of £0.03 million (2016: £0.21 million) inclusive of expenses.

It is the Company's policy to cancel all shares bought back by the Company. The Board regularly reviews its buyback policy and currently seeks to maintain the discount to NAV at which the Company's shares trade at around 10% below the latest published NAV.

Shareholder communications

May I remind you that the Company has its own website which is available at www.incomeandgrowthvct.co.uk.

The Investment Adviser held its seventh annual Shareholder Event in January 2017 which, from the feedback submitted, was well received by shareholders. The event included presentations on the investment activity and performance of the Mobeus VCTs. I would like to thank those shareholders who attended for helping to make it such a success. The next Event will take place in January 2018. Shareholders will be sent further details and an invitation nearer to the time.

Outlook

The outlook for the UK economy over the next year and the medium-term remains somewhat unclear, although current forecasts still predict economic growth over the next few years for the UK economy. The UK Government will presumably commence formal negotiations for the UK to leave the EU, after the General Election in June. The outcome of these negotiations with the EU will in due course provide more clarity to the UK economic environment.

In the meantime, the Board and Investment Adviser consider that the portfolio is well positioned to withstand this uncertainty. We will continue our measured and cautious approach to investment appraisal and our 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, this portfolio mix is expected to change towards younger growth capital companies. These sorts of companies typically exhibit more volatility in returns and generate less income as they tend to re-invest profits during their growth phase. Your Board remains confident that, within the current regulatory environment, and with the Investment Adviser's expanded investment team, attractive opportunities will continue to be identified.

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

Colin Hook

Chairman

16 May 2017

Investment Policy

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

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

The Company's cash and liquid resources are held in a range of instruments of varying maturities, subject to the overriding criterion that the risk of loss of capital be minimised.

VCT regulation

The Investment Policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HMRC.

Amongst other conditions, the Company may not invest more than 15% of its investments (by VCT value at the time of investment) in a single company or group and must have at least 70% by VCT value of its investments throughout the period in shares or securities comprised in VCT qualifying holdings of which a minimum overall of 30% by VCT value (70% for funds raised after 6 April 2011) must be in ordinary shares which carry no preferential rights (save as may be permitted under VCT rules). In addition, although the VCT can invest less than 30% (70% for funds raised after 6 April 2011) of an investment in a specific company in ordinary shares it must have at least 10% by VCT value of its total investments in each VCT qualifying company in ordinary shares which carry no preferential rights (save as may be permitted under VCT rules).

The companies in which investments are made must have no more than £15 million of gross assets at the time of investment and £16 million immediately following the investment to be classed as a VCT qualifying holding.

Asset Mix

The Company initially holds its funds in a portfolio of interest bearing investments and deposits. The investment portfolio of qualifying investments is built up over a three year period with the aim of investing and maintaining at least 70% of net funds raised in qualifying investments.

Risk diversification and maximum exposures

Risk is spread by investing in a number of different businesses across different industry sectors. To reduce the risk of high exposure to equities, each qualifying investment is structured to achieve the optimum balance between loan stock and equity to provide protection against downside risk alongside the best potential overall returns.

Co-investment

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

Borrowing

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

Summary of VCT Regulation

To assist shareholders, the following table contains a summary of the most important rules that determine VCT approval.

Investment Review

New investment in the half-year

A total of £4.07 million was invested into five companies during the six months under review. This comprised new investments into BookingTek, Biosite, Tapas Revolution, Buster & Punch and a further investment into an existing portfolio company, Preservica.

Realisations in the half-year

There have been no full realisations during the six month period under review although the Company received total cash proceeds of £6.61 million (2016: £10.65 million). This was in the form of loan stock repayments of £6.45 million (2016: £1.75 million) detailed below, deferred consideration of £0.06 million from Focus Pharma and MachineWorks, realised in a previous period, and other receipts of £0.10 million.

Loan stock repayments

Partial loan stock repayments received from seven companies totalled £6.45 million for the six months as summarised below:

Investment Portfolio Summary

as at 31 March 2017

1 - A further £935,000 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 - £1,504,000 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 £778,774

Statement of the Directors' Responsibilities

Responsibility statement

In accordance with Disclosure and Transparency Rule (DTR) 4.2.10, Colin Hook (Chairman), Jonathan Cartwright (Chairman of the Audit and Nomination & Remuneration Committees) and Helen Sinclair (Chairman of the Investment Committee), being the Directors of the Company, confirm that to the best of their knowledge:

(a) The condensed set of financial statements, which has been prepared in accordance with Financial Reporting Standard 104 "Interim Financial Reporting" gives a true and fair view of the assets, liabilities, financial position and profit of the Company as required by DTR 4.2.10;

(b) the Half-Year Management Report which comprises the Chairman's Statement, Investment Policy, Investment Review and Investment Portfolio Summary includes a fair review of the information required by DTR 4.2.7, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements;

(c) a description of the principal risks and uncertainties facing the Company for the remaining six months is set out below, in accordance with DTR 4.2.7; and

(d) there were no related party transactions in the first six months of the current financial year that are required to be disclosed, in accordance with DTR 4.2.8.

Principal risks and uncertainties

In accordance with DTR 4.2.7, the Board confirms that the principal risks and uncertainties facing the Company have not materially changed from those identified in the Annual Report and Accounts for the year ended 30 September 2016 ("the Annual Report").

The principal risks faced by the Company are:

• Investment and strategic

• Loss of approval as a Venture Capital Trust;

• Regulatory;

• Counterparty;

• Economic;

• Financial and operating;

• Market;

• Asset liquidity; and

• Market liquidity;

A detailed explanation of the principal risks facing the Company can be found in the Annual Report on page 25 and in Note 16 on Financial Instruments on pages 59- 66. Copies can be viewed or downloaded from the Company's website: www.incomeandgrowthvct.co.uk

Going concern

The Board has assessed the Company's operation as a going concern. The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the Half-Year Management Report. The Directors have satisfied themselves that the Company continues to maintain a significant cash position. The majority of companies in the portfolio continue to trade profitably and the portfolio taken as a whole remains resilient and well-diversified. The major cash outflows of the Company (namely investments, share buybacks and dividends) are within the Company's control.

The Board's assessment of liquidity risk and details of the Company's policies for managing its capital and financial risks are shown in Notes 16 and 17 on page 59 to 66 of the Annual Report. Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the half-year report and financial statements.

Cautionary statement

This report may contain forward looking statements with regards to the financial condition and results of the Company, which are made in the light of current economic and business circumstances. Nothing in this report should be construed as a profit forecast.

For and on behalf of the Board:

Colin Hook

Chairman

16 May 2017

Unaudited Condensed Income Statement

for the six months ended 31 March 2017

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 UK GAAP, including Financial Reporting Standard 102. 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 period.

Unaudited Condensed Balance Sheet

as at 31 March 2017

Unaudited Condensed Statement of Changes in Equity

for the six months ended 31 March 2017

Notes

a) The Special distributable reserve provides the Company with a reserve to fund market purchases of the Company's own shares, to absorb any existing and future losses and for any other corporate purpose.

Unaudited Condensed Statement of Changes in Equity

for the six months ended 31 March 2016

Unaudited Condensed Statement of Cash Flows

for the six months ended 31 March 2017

The notes below form part of these Half-Year Financial Statements.

Notes to the Unaudited Condensed Financial Statements

for the six months ended 31 March 2017

1. Company information

The Income and Growth VCT plc is a public limited company incorporated in England, registration number 4069483. The registered office is 30 Haymarket, London, SW1Y 4EX.

2. Basis of preparation of the Financial Statements

These Financial Statements prepared in accordance with accounting policies consistent with Financial Reporting Standard 102 ("FRS102"), Financial Reporting Standard 104 ("FRS104") - Interim Financial Reporting, 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 Financial Statements have been prepared on the historical cost basis except for the modification to a fair value basis for certain financial instruments as 

specified in note 9.

The Half-Year Report has not been audited, nor has it been reviewed by the auditor pursuant to the Financial Reporting 

Council's (FRC) guidance on Review of Interim Financial Information.

The Company has elected to apply early the revised disclosure requirements as set out in Amendments to FRS 102 - Fair value hierarchy disclosures, issued in March 2016.

3. Principal accounting policies

The accounting policies have been applied consistently throughout the period. Full details of principal accounting policies 

will be disclosed in the Annual Report, while the policy in respect of investments is included within an outlined box at the 

top of note 9 on investments.

4. Income

5. Investment Adviser's fees and performance fees

The Directors have charged 75% of the fees payable under the Investment Adviser's agreement, and 100% of the amounts payable under the Incentive Agreements, to the capital reserve. The Directors believe it is appropriate to charge the incentive 

fees wholly against the capital return, as any fees payable depend on capital performance, as explained below.

On 30 September 2014, a new incentive fee agreement was signed between the Board and Mobeus, with effect from 1 October 2013, to amend and replace the previous agreement. The previous agreement remains in force, but only with the former adviser, Foresight. For the period ended 31 March 2017, no amount has been accrued under the previous agreement. Mobeus waived their right to their portion of the fee under the previous agreement. This agreement is due to expire on 10 March 2019.

Any payment under the new incentive agreement is now 15% of net realised gains for each year, payable in cash. It is payable only if Cumulative Net Asset Value (NAV) total return per share (being the closing NAV at a year end plus cumulative dividends paid to that year end, since 1 October 2013 equals or exceeds a "Target Return". The Target Return is the greater oftwo targets, being either:

i. compound growth of 6% per annum (but 5% per annum for the year ended 30 September 2014 only), before deducting any incentive fee payable (for the year of calculation only) under both this amended agreement and the existing incentive agreement with Foresight in Cumulative NAV total return per share; or

ii. the cumulative percentage change in the Consumer Prices Index since 1 October 2013 to the relevant 

financial year end, theresultant figure then being multiplied by (100+A)/100, where A is the number of full 

12 month periods (or part thereof ) that have passed between 1 October 2013 and the relevant financial year end.

Both measures of Target Return are applied to the same opening base, being NAV per share as at 30 September 2013 of 113.90 pence. The objective of this Target Return is to enable shareholders to benefit from a cumulative NAV return of at 

least 6% per annum (5% in the financial year ended 30 September 2014), before any incentive fee is payable. Once a payment has been made, cumulative NAV total return is calculated after deducting past years' incentive fees paid and payable.

Under this new incentive agreement, any fee payments to Mobeus are subject to an annual cap of an amount equal to 2% of the net assets of I&G VCT as at the immediately preceding year end. This cap will include any fee payable to Foresight under the old agreement, although any such payment to Foresight is not capped. Any excess over the 2% remains payable to Mobeus in the following year(s), subject to the 2% annual cap in such subsequent year(s) and after anypayment in respect of such subsequent year(s).

For the year ending 30 September 2017, the Target Return will be 142.44p per share (being a 6% uplift on the Target Return at the previous year end of 134.38 pence per share). As at 31 March 2017, the Cumulative Total NAV return is 140.43p per share, so the Target Return for the 2017 financial year has currently not been met and so no fee has been accrued.

6. Taxation

There is no tax charge for the period as the Company has tax losses brought forward from previous periods, which can be 

offset against taxable income.

7. Basic and diluted earnings and return per share

8. Dividends paid

* - £2,875,256 (31 March 2016: £4,241,526; 30 September 2016: £8,506,206) disclosed above differs to that shown in the Statement of Cash Flows of £2,368,798 (31 March 2016: £3,584,090; 30 September 2016: £7,160,312) due to £506,458 (31 March 2016: £657,436; 30 September 2016: £1,345,894) of new shares issued as part of the Company's Dividend Investment Scheme.

9. Summary of movement on investments during the period