Last checked at 
20 Mar 2018 17:39
Mobeus Income & Growth 4 VCT plc ("MIG4" or the "Company" or the "VCT")
Annual Results Announcement for the year ended 31 December 2017
INVESTMENT OBJECTIVE
Mobeus Income & Growth 4 VCT plc, ("MIG4", the "Company" or the "Fund") is a Venture Capital Trust ("VCT") advised by Mobeus Equity Partners LLP ("Mobeus"), investing primarily in established, unquoted companies.
The Objective of the Company is to provide investors with a regular income stream by way of tax-free dividends and to generate capital growth through portfolio realisations which can be distributed by way of additional tax-free dividends, while continuing at all times to qualify as a VCT.
DIVIDEND POLICY
The Company seeks to pay dividends at least annually out of income and capital as appropriate, and subject to fulfilling certain regulatory requirements.
FINANCIAL HIGHLIGHTS
Annual results for the year ended 31 December 2017
Net assets: £58.41 million
Net Asset Value ("NAV") per share: 86.57 pence
§ | Net Asset Value ("NAV") Total Return per share of 6.5% for the year. |
§ | Share Price Total Return per share of 7.2% for the year. |
§ | Shareholders received a total of 28.00 pence per share in dividends during the year. Cumulative dividends paid to date now stand at 101.20 pence per share. |
§ | £4.27 million1 was invested into four new and two existing growth capital investments during the year. |
§ | A total of £12.98 million cash proceeds was received primarily from two profitable realisations and loan stock repayments. 1Includes £2.09 million previously held in companies preparing to trade. |
Cumulative total shareholder return per share (NAV basis)*
The longer term trend of performance on this measure is shown in the chart below:-
As at | Net assets | Net asset value (NAV) per share | Cumulative dividends paid per share | Cumulative total shareholder return per share (NAV basis)* |
(£m) | (p) | (p) | (p) | |
31 December 2017 | 58.41 | 86.57 | 101.20 | 187.77 |
31 December 2016 | 52.76 | 107.57 | 73.20 | 180.77 |
31 December 2015 | 57.01 | 117.89 | 62.20 | 180.09 |
31 December 2014 | 50.29 | 118.21 | 52.20 | 170.41 |
31 December 2013 | 42.12 | 119.92 | 34.20 | 154.12 |
*Cumulative total shareholder return (NAV basis) is net asset value plus cumulative dividends paid since 1999 to 31 December 2017.
The net asset value (NAV) per share as at 31 December 2017 was 86.57 pence.
The table above shows the recent past performance of the original funds raised in 1999. The original subscription price was 200p per share before the benefit of income tax relief. Subscription prices from subsequent fundraisings and historic performance data from 2008 are shown in the Performance Data on the Company's website, www.mig4vct.co.uk, where they can be downloaded by clicking on "table" under "Reviewing the performance of your investment" on the home page.
On 31 July 2006, Mobeus became sole Investment Adviser to the Company. The cumulative NAV total return at this date was 122.51 pence.
CHAIRMAN'S STATEMENT
I am pleased to present the annual results of Mobeus Income & Growth 4 VCT plc for the year ended 31 December 2017.
Overview
This has been another year of solid performance by the Company. Returns to shareholders have again been positive due to profitable portfolio investment realisations as well as a good income return. Further comment can be found under the 'Performance' section below and in the Investment Review in the Annual Report.
The Company and the Investment Adviser have responded well to the significant changes to the VCT Rules introduced by the Finance (No 2) Act 2015, having completed twelve growth capital investments that reflect the change in the Company's investment policy in May 2016. The Investment Adviser has continued to recruit experienced growth capital investors into the team and reports a healthy pipeline of investments.
Most recently, additional changes to VCT legislation were proposed in the 2017 Autumn Budget. Your Board has no reason to believe that the changes will materially affect the Company's existing strategic objectives. Further details can be found under the 'Industry and Regulatory Developments' section of my Statement below.
Performance
The NAV total return per share for the year was 6.5%. (2016: 0.6%) (being the closing NAV plus dividends paid in the year, divided by the opening NAV) while the share price total return was up to 7.2% (2016: 3.3%). As a result of this performance, the NAV cumulative total return per share (being the closing NAV plus total dividends paid to date) rose during the year by 3.9% from 180.77 pence to 187.77 pence. The NAV at 31 December 2017 was 86.57 pence. For details of these calculations, please refer to the Strategic Report.
The rise in NAV total return over the year was primarily due the realisation of two investments (Entanet and Gro-Group) as well as a strong income return.
For more details on the performance of your investment in the Company, please consult the Investor Performance Appendix on the Company's website.
Fundraising
As announced in my Half-Year Statement, the Company launched an Offer for Subscription on 6 September 2017 to raise up to £15 million. I am pleased to report that the Offer closed on 13 March 2018 having raised the full amount.
A total of 16,658,350 shares were allotted to shareholders under the Offer at prices ranging between 85.54 pence and 94.30 pence. The Board appreciates the continued support from existing shareholders and welcomes new shareholders.
Dividends
The Board has declared two interim dividends in respect of the year ended 31 December 2017. The first was 18.00 pence per share and was paid on 11 September 2017. The second was 3.00 pence per share and was paid on 21 December 2017. This brought dividends paid in respect of the year ended 31 December 2017 to 21.00 pence (2016: 9.00 pence) per share and cumulative dividends paid since inception to 101.20 pence (2016: 73.20 pence) per share. Given the size of these interim dividends, no final dividend is being proposed.
The Company's target of paying a dividend of at least 4.00 pence per share in respect of each financial year has been exceeded in each of the last seven years. While the Board still believes in the attainment of the dividend target, the steady move of the portfolio to growth capital investments is likely to result, at least in the medium term, in lower dividends than have been paid in the recent past.
A chart showing the dividends paid in respect of each of the last five years and cumulative dividends on the same basis is included in the Strategic Report.
Investment Portfolio
For the year under review, the portfolio as a whole achieved a net increase of £4.14 million on investments realised but a decrease of £0.79 million on investments still held. Investment realisations produced £3.98 million in capital gains over the original investment costs. On a like for like basis (adding back realisations and excluding new investments) the portfolio produced a positive return of 8.6% over the year. Including companies preparing to trade, the portfolio under management at the year-end was valued at £31.48 million (2016: £38.93 million) representing 94.9% of cost.
During the year £4.27 million, £2.09 million of which was previously held in companies preparing to trade, was invested in four new companies and two existing portfolio companies. The new growth capital investments included: £0.58 million into Tapas Revolution, a leading Spanish restaurant chain; £0.53 million into Buster + Punch, a London based interiors retailer; £0.47 million into MyTutorweb, an online tutoring business; and £2.33 million into Wetsuit Outlet, a leading online retailer in the water sports market. In addition, two follow-on investments were made into existing portfolio companies; £0.14 million into BookingTek, a provider of enterprise software to major hotel groups and £0.22 million was invested into MPB, an online marketplace for used camera and video equipment.
Shortly after the year-end £0.34 million was invested into Proactive Investors, a provider of investor media services, £0.52 million was invested into Hemmels, a classic car restorer, £0.49 million was invested into SuperCarers, an online carer matching service and a further £0.34 million was invested into MPB.
It is important to note that several of these growth investments are loss-making, as one would expect from most early stage investment opportunities. Early receipts from dividends or interest payments are therefore likely to be limited while the companies build long term value. Also, some valuations are now revenue based rather than earnings based.
Cash proceeds totalling £12.98 million were received; £7.65 million from the realisation of two investments; £4.68 million from loan repayments; and other receipts of £0.65 million. Of the realisation total, £4.89 million was received as cash from the disposal of Entanet Holdings Limited, (realising a gain of 5.48 pence per share) generating a return on the original investment of 2.5 times at completion. This may increase upon receipt of potential deferred consideration. A further £2.76 million was received following a profitable disposal of Gro-Group realising a gain of 1.76 pence per share representing a return on the original investment of 2.2 times.
Full details of the investment activity during the year and a summary of the performance highlights can be found in the Investment Review in the Annual Report.
Industry and regulatory developments
As referred to in my Half-Year Statement, the UK Government has undertaken a Patient Capital Review ("the Review") to identify and tackle factors considered to be adversely affecting the supply of longer term capital to small and developing firms. The consultation period closed on 22 September 2017 and strong representations were made on behalf of the VCT industry by Mobeus as Investment Adviser, the Venture Capital Trust Association and the Association of Investment Companies.
The 2017 Autumn Budget Statement outlined the key findings from the Review including a number of legislative changes to the VCT scheme, the earliest of which came into effect from 15 March 2018. These changes are designed to exclude tax-motivated investments where capital is not at risk (that is, transactions principally seeking to preserve an investor's capital) and to encourage VCTs to put their money to work faster.
Your Board notes the initiatives behind these changes. Whilst some of these changes place further restrictions on the way investments may be structured, the Board has no reason to believe that they will materially affect the Company's existing investment policy or strategic objectives.
A summary of the current VCT regulations and those proposed in the Autumn Budget is included in the Annual Report.
Share buybacks
During the year ended 31 December 2017, the Company bought back 1.1% of the issued share capital of the Company which was subsequently cancelled. Further details of the purchases are included in the Directors' Report in the Annual Report.
Shareholder Communications
The annual shareholder event was held on Tuesday 30 January 2018 at the Royal Institute of British Architects in central London. This annual event included presentations on the Mobeus advised VCTs' investment activity and performance including presentations from investee companies. There were separate day-time and evening sessions, and feedback from those who attended, circa 300, found it to be informative and worthwhile. The next shareholder event will be held in February 2019.
Annual General Meeting
The Annual General Meeting of the Company will be held at 11.30 am on Friday, 11 May 2018 at The Clubhouse, 8 St James's Square, London SW1Y 4JU. Both the Board and the Investment Adviser look forward to welcoming shareholders to the meeting which will include a presentation from the Investment Adviser on the investment portfolio and provide an opportunity to ask questions of the Board and the Investment Adviser. The Notice of the meeting is included in the Annual Report and an explanation of the resolutions to be proposed can be found in the Directors' Report in the Annual Report.
Future prospects
Your Board has carefully monitored how Mobeus has expanded its investment team to adapt to the new rules for VCTs and believe that your Company is well positioned to find advantageous investments in this new environment.
Your Board would again like to caution investors that investing in earlier stage companies involves increased risk as such companies need longer to achieve scale. Returns may take longer to achieve and will be less predictable. On the other hand the new more adventurous investment policy imposed on the Company may result in some investments producing much higher returns and the success of the recent fundraising means that cash and investment requirements will be covered for the medium term. The twelve growth capital investments already completed reflect exciting business opportunities and the pipeline for future investments is active.
Apart from the vagaries of being in a transition period for VCTs there are obvious uncertainties facing the UK particularly, and the world economy. Statistically the current investment cycle is well advanced. There is much one could comment on regarding the UK's unsatisfactory, indeed at times embarrassing, political situation but this is amply covered elsewhere. All UK investment, not just the VCT sector, could suffer if improved delivery cannot be achieved.
The Board's and Mobeus's response is to concentrate on those investment disciplines which have served investors well to date and will, in the Board's view, continue to do so in the future. Investment in the unquoted sector is not a short term exercise.
Finally, I would like to express my thanks once again to shareholders for their support.
Christopher Moore
Chairman
20 March 2018
Investment Review
Portfolio Review
This has been a year of continued progress within the portfolio with the addition of six new growth capital investments totalling £3.91 million, two existing investments receiving follow-on funding totalling £0.36 million, and two significant, profitable disposals. One disposal (Entanet) generated net proceeds of £4.89 million resulting in a 2.5 times multiple over cost over the three and a half year life of the investment, while the second (Gro-Group) generated net proceeds of £2.76 million representing a 2.2 times multiple over cost over the period of the investment. Total cash proceeds were £12.98 million, comprising the two realisations above, loan repayments of £4.68 million and £0.65 million of other receipts.
The investment and divestment activity completed during the year has increased the proportion of the growth capital element of the investment portfolio to 39%. Within this, at the year-end the Company holds growth capital investments valued at £8.34 million that were invested since the introduction of the VCT regulations in 2015.
The valuations of the existing portfolio decreased by £0.79 million during the year under review. This net decrease in value was primarily due to reductions in the valuations of Veritek Global, Media Business Insight and Virgin Wines which outweighed uplifts achieved elsewhere in the portfolio such as Master Removers Group and Biosite (a growth investment). A small number of new, growth investments have shown initial uplifts from cost, due in large part to the structure of the company investment, but also due to the underlying investee company performance. On the whole, we are encouraged by the early performance of investment in the growth portfolio.
Demand for growth capital investment remains strong and there is a large pipeline of investment opportunities. We also expect that follow on funding into existing companies to support growth plans will be a significant feature over the coming months and year.
New Investments
We are pleased to have made six investments in the year, totalling £4.27 million. This comprised new investments into Tapas Revolution, Buster + Punch, MyTutorweb and Wetsuit Outlet, as well as follow on investments into BookingTek and MPB, existing portfolio growth companies. After the year-end, a few investments have been made with a total value of £1.69 million. Further details are set out below.
Principal new investments in the year
Company | Business | Date of Investment | Amount of new investment (£m) | |
Tapas Revolution |
| January 2017 | 0.58 | |
Based in London, Ibericos Etc. Limited (which trades as Tapas Revolution) is a leading Spanish restaurant chain in the casual dining sector focussing on shopping centres sites with high footfall. Having opened its first restaurant in Shepherd's Bush Westfield, the business has since opened a further six restaurants. The investment provided growth capital to a high-calibre team with significant restaurant rollout experience which has spent the past five years building and refining its offer and is now well placed to capitalise on a strong pipeline of new sites. The company's latest accounts for the year ended 25 October 2016 shows a turnover of £4.25 million and loss before interest, tax and amortisation of goodwill of £0.25 million. | ||||
Buster + Punch | Retailer | March 2017 | 0.53* | |
Buster and Punch Holdings Limited (formerly Chatfield Services Limited) is a London-based interiors brand founded in 2012 by architect and industrial designer Massimo Buster Minale. Buster + Punch (www.busterandpunch.com) started in a small garage in East London, where it built the "world's first designer LED light bulb" (the Buster Bulb) and made its name with its industrial-inspired lighting. Its products are now sold in over 50 countries, both directly to end-consumers, designers and architects, and through well-known retailers including John Lewis, Harvey Nichols and Harrods. The investment will support the business's international expansion plans and the broadening of its product range. The company's latest accounts for the year ended 31 March 2017 show turnover of £3.43 million and profit before interest, tax and amortisation of goodwill of £0.40 million. | ||||
* - £1.13 million previously held in Chatfield Services Limited, a company preparing to trade, was used for this investment into Buster + Punch. This resulted in a net repayment to the company of £0.60 million. The Company subsequently changed its name to Buster and Punch Holdings Limited. | ||||
My Tutorweb | Online tutoring | May 2017 | 0.47 | |
My Tutorweb Limited is a digital marketplace that connects school pupils who are seeking private one-to-one tutoring with university students. The business is satisfying a growing demand from both schools and parents to improve pupils' exam results to enhance their academic and career prospects. This investment supports an opportunity to consolidate the sizeable £2bn UK tutoring market, grow My Tutorweb's market presence and drive technological development within the company. The company's latest accounts for the year ended 31 December 2016 show turnover of £0.21 million and a loss before interest, tax and amortisation of goodwill of £0.79 million. | ||||
Wetsuit Outlet | Retailer | July 2017 | 2.33* | |
B2C Holdings Limited (trading as Wetsuit Outlet) has established itself as a leading online retailer in the water sports market, stocking an impressive brand portfolio including Musto, Billabong, Rip Curl, O'Neill, Red Paddle (an existing Mobeus VCT investment) and Gul. The investment is to fund working capital and growth in the existing activity and enter two new markets. Established in 2005, the company, has developed into a successful and profitable business with revenues of £11.51 million and £1.77 million net profit before interest, tax and amortisation of goodwill in the financial year ended 31 March 2017. | ||||
* - £2.02 million held in Manufacturing Services Investment Limited, a company preparing to trade, was used for the investment into Wetsuit Outlet. This resulted in a net repayment to the Company of £0.46 million. A further £0.77 million was invested directly by the Company into Wetsuit Outlet. | ||||
New investments post year end
Company | Business | Date of investment | Amount of new investment (£m) |
Proactive Investors | Investor media services | January 2018 | 0.34 |
Proactive Investors specialises in up-to-the-minute multi-media news provision, events organisation, digital services and investor research. Proactive provides breaking news, commentary and analysis on hundreds of small-cap listed companies and pre-IPO businesses across the globe, 24/7. The investment will enable Proactive to expand its services into the US market, which is the largest global market for investor media services in the world. The company's accounts for the year ended 30 June 2017 show turnover of £3.99 million and a profit before interest, tax and amortisation of goodwill of £0.53 million. | |||
SuperCarers Limited | Online care provision | March 2018 | 0.49 |
SuperCarers provides an online platform connecting people seeking home care, typically family members seeking care for their elderly parents, from experienced independent carers. Carers and care-seekers manage care directly thus reducing the administrative burden and the need for care managers enabling care to be delivered in a less rigid and formal fashion. The company's accounts for the year ended 31 March 2017 generated revenues of £0.18 million and a net loss before interest, tax and amortisation of £0.72 million. | |||
Hemmels Limited | Classic car restoration | March 2018 | 0.52 |
Hemmels specialises in the sourcing, restoration, selling and servicing of high value classic cars. Hemmels currently focuses on classic Mercedes Benz, but plan to expand into the Porsche marque under a separate brand, RYKRR. The investment will enable Hemmels to proceed with their expansion plans and secure sufficient development stock. Hemmels generated £1.21million of revenues and (£0.28 million) net loss before interest, tax and amortisation for the year ended 31 December 2017, surpassing revenue forecast by £0.11 million. | |||
Further investment into existing portfolio companies in the year
Company | Business | Date of investment | Amount of new investment (£m) |
BookingTek | A provider of direct-booking systems to major hotel groups | March 2017/November 2017 | 0.14 |
London-based BookingTek provides software that enables hotels to reduce their reliance on third-party booking systems through an enterprise-grade, real-time booking platform for meeting rooms and restaurant reservations. BookingTek's existing clients include two of the world's top 10 hotel groups and the UK's largest hotel group. The company's latest accounts for the year ended 31 July 2016 shows turnover of £2.03 million and a loss before interest, tax and amortisation of goodwill of £0.29 million. | |||
MPB Group | Online marketplace for used camera and video equipment | September 2017/December 2017 | 0.22* |
MPB is Europe's leading online marketplace for used camera and video equipment. Based in Brighton, its custom-designed pricing technology enables MPB to offer both buy and sell services through the same platform and offers a one-stop shop for all its customers. The investment is to provide expansion of its platform globally, with launches into both the US and German markets. The company's latest audited accounts for the year ended 31 March 2017 show turnover of £13.20 million and loss before interest, tax and amortisation of goodwill of £0.45 million. | |||
*A further £0.34 million was invested into MPB on 27 February 2018 following the year end. | |||
Realisations
There were two realisations during the year under review, namely: Entanet Holdings Limited and Gro-Group Holdings Limited as set out below:
Company | Business | Period of investment | Total cash proceeds over the life of the investment/Multiple over cost |
Entanet | Wholesale voice and data communications provider | February 2014 to August 2017 | £5.53 million 2.5 times cost |
The Company sold its investment in Entanet to AIM quoted CityFibre Infrastructure Holdings Limited for £4.89 million in August 2017. Deferred consideration of up to £0.50 million is potentially payable over the next two years. Excluding this deferred consideration, the Company has so far realised a gain over the life of the investment of £3.36 million, a multiple of 2.5 times cost and has returned an IRR of 39% to date - an excellent outcome. | |||
Gro-Group | Baby sleep products | March 2013 to December 2017 | £3.48 million 2.2 times cost |
The Company sold its investment in Gro-Group for £2.76 million in December 2017. Deferred consideration of up to £0.09 million is potentially payable over the next year. Excluding this deferred consideration, the Company has so far realised a gain over the life of the investment of £1.90 million, a multiple of 2.2 times cost and has returned an IRR of 21% to date. | |||
Funds available for investment
As a result of the successful fundraising (£13.63 million raised in 2017), divestments referred to above (£4.89 million) and loan stock repayments of £4.68 million cash and other liquid investments amounted to £24.34 million. Of this £2.85 million is held as cash in bank accounts, and the balance is placed in AAA rated money market funds. The returns on these funds remain very low, but the Board retains its policy of seeking above all to preserve capital for its uninvested funds.
Investment Portfolio Summary
at 31 December 2017
Total Cost at 31 Dec 2017 £ | Total Valuation at 31 Dec 2016 £ | Total Valuation at 31 Dec 2017 £ | % of equity held | % of Portfolio by value | |
Mobeus Equity Partners Portfolio | |||||
Tovey Management Limited (trading as Access IS) Provider of data capture and scanning hardware | 2,469,013 | 2,601,197 | 2,758,626 | 9.7% | 8.7% |
Manufacturing Services Investment Limited (trading as Wetsuit Outlet)1 Online retailer in the water sports market | 2,333,102 | 2,016,900 | 2,333,102 | 6.4% | 7.3% |
Virgin Wines Holding Company Limited Online wine retailer | 1,930,813 | 2,685,675 | 2,173,407 | 9.7% | 6.9% |
ASL Technology Holdings Limited Printer and photocopier services | 1,933,591 | 2,082,980 | 2,049,558 | 9.5% | 6.5% |
Media Business Insight Holdings Limited A publishing and events business focused on the creative production industries | 2,722,760 | 2,218,152 | 1,663,142 | 15.7% | 5.3% |
Vian Marketing Limited (trading as Red Paddle Co) Design, manufacture and sale of stand-up paddleboards and windsurfing sails | 899,074 | 1,188,439 | 1,416,746 | 7.1% | 4.5% |
EOTH Limited (trading as Equip Outdoor Technologies) Distributor of branded outdoor equipment and clothing | 951,471 | 1,197,945 | 1,405,478 | 1.7% | 4.5% |
Tharstern Group Limited MIS & Commercial print software solutions | 1,091,886 | 1,217,396 | 1,401,361 | 12.2% | 4.5% |
Turner Topco Limited (trading as ATG Media) Publisher and online auction platform operator | 1,529,075 | 1,330,326 | 1,292,718 | 3.8% | 4.1% |
Fullfield Limited (trading as Motorclean) Vehicle cleaning and valet services | 1,131,444 | 1,459,525 | 1,185,517 | 9.8% | 3.8% |
Master Removers Group Limited (formerly Leap Newco Limited (trading as Anthony Ward Thomas, Bishopsgate and Aussie Man & Van)) A specialist logistics, storage and removals business | 511,855 | 734,387 | 1,173,348 | 4.3% | 3.7% |
CGI Creative Graphics International Limited Vinyl graphics to global automotive, recreation vehicle and aerospace markets | 1,449,746 | 1,311,572 | 1,087,900 | 6.6% | 3.5% |
Pattern Analytics Limited (trading as Biosite) Workforce management and security services for the construction industry | 640,171 | 640,171 | 960,257 | 4.8% | 3.0% |
Preservica Limited Seller of proprietary digital archiving software | 679,617 | 679,617 | 929,117 | 8.6% | 3.0% |
Redline Worldwide Limited Provider of security services to the aviation industry and other sectors | 838,377 | 838,377 | 897,989 | 6.7% | 2.9% |
BookingTek Limited Software for hotel groups | 652,137 | 512,137 | 867,257 | 3.5% | 2.8% |
Bourn Bioscience Limited Management of In-vitro fertilisation clinics | 1,132,521 | 864,082 | 818,429 | 7.7% | 2.6% |
TPSFF Holding Limited (formerly The Plastic Surgeon Holdings Limited) Snagging and finishing of domestic and commercial properties | 190,467 | 902,329 | 809,939 | 8.7% | 2.6% |
MPB Group Limited Online marketplace for used photographic equipment | 695,604 | 471,216 | 777,331 | 5.3% | 2.5% |
RDL Corporation Limited Recruitment consultants for the pharmaceutical, business intelligence and IT industries | 1,000,000 | 926,025 | 632,005 | 9.1% | 2.0% |
Ibericos Etc. Limited (trading as Tapas Revolution) Spanish restaurant chain | 580,469 | - | 580,469 | 5.8% | 1.8% |
Veritek Global Holdings Limited Maintenance of imaging equipment | 1,620,086 | 1,283,041 | 547,806 | 11.9% | 1.7% |
Buster and Punch Holdings Limited (formerly Chatfield Services Limited)2 Industrial inspired lighting and interiors retailer | 530,392 | 1,134,000 | 530,392 | 4.5% | 1.7% |
My Tutorweb Limited Digital marketplace connecting school pupils seeking one-to-one online tutoring | 466,639 | - | 466,639 | 4.5% | 1.5% |
Hollydale Management Limited Company seeking to carry on a business in the food sector | 701,120 | 1,095,500 | 438,200 | 11.0% | 1.4% |
Vectair Holdings Limited Designer and distributor of washroom products | 24,732 | 183,729 | 303,233 | 2.1% | 1.0% |
Omega Diagnostics Group plc3 In-vitro diagnostics for food intolerance, auto-immune diseases and infectious diseases | 200,028 | 291,682 | 274,849 | 1.3% | 0.9% |
Jablite Holdings Limited Manufacturer of expanded polystyrene products | 376,083 | 606,998 | 229,783 | 9.1% | 0.7% |
Backhouse Management Limited Company seeking to carry on a business in the motor sector | 589,680 | 1,134,000 | 226,800 | 11.3% | 0.7% |
Creasy Marketing Services Limited Company seeking to carry on a business in the textile sector | 589,680 | 1,134,000 | 226,800 | 11.3% | 0.7% |
McGrigor Management Limited Company seeking to carry on a business in the pharmaceutical sector | 589,680 | 1,134,000 | 226,800 | 11.3% | 0.7% |
Barham Consulting Limited Company seeking to carry on a business in the catering sector | 589,680 | 680,400 | 226,800 | 11.3% | 0.7% |
Blaze Signs Holdings Limited Manufacturer and installer of signs | 190,631 | 280,944 | 193,997 | 5.7% | 0.6% |
Lightworks Software Limited Provider of software for CAD and CAM vendors | 9,329 | 34,926 | 33,847 | 4.2% | 0.1% |
BG Training Limited City-based provider of specialist technical training | 10,625 | 14,167 | 5,313 | 0.0% | 0.0% |
Racoon International Group Limited Supplier of hair extensions, hair care products and training | 484,347 | 38,771 | - | 8.0% | 0.0% |
Newquay Helicopters (2013) Limited (in creditors' voluntary liquidation) Helicopter service operator | 7,617 | - | - | 2.5% | 0.0% |
CB Imports Group Limited (trading as Country Baskets) Importer and distributor of artificial flowers, floral sundries and home décor products | 175,000 | - | - | 5.8% | 0.0% |
Watchgate Limited Holding company | 1,000 | - | - | 33.3% | 0.0% |
Disposals in year | |||||
Entanet Holdings Limited Wholesale communications provider | - | 2,254,135 | - | 0.0% | 0.0% |
Gro-Group Holdings Limited Baby sleep products | - | 1,361,293 | - | 0.0% | 0.0% |
Total | 32,519,542 | 38,540,034 | 31,144,955 | - | 98.9% |
Former Elderstreet Private Equity Portfolio | |||||
Cashfac Limited Provider of virtual banking application software solutions to corporate customers | 260,101 | 288,932 | 339,098 | 2.9% | 1.1% |
Sparesfinder Limited Supplier of industrial spare parts online | 250,854 | 64,067 | - | 2.0% | 0.0% |
Sift Group Limited Developer of business-to-business internet communities | 135,391 | 33,401 | - | 1.3% | 0.0% |
Total | 646,346 | 386,400 | 339,098 | - | 1.1% |
Investment Adviser's Total | 33,165,888 | 38,926,434 | 31,484,053 | - | 100.0% |
Notes
1 £2,016,900 held in Manufacturing Services Investment Limited, a company preparing to trade, was used for the investment into Wetsuit Outlet. This resulted in a net repayment to the Company of £456,400. A further £772,602 was invested directly by the Company into Wetsuit Outlet.
2 £1,134,000 held in Chatfield Services, a company preparing to trade, was used for the investment into Buster and Punch. This resulted in a net repayment to the Company of £603,608. The company subsequently changed its name to Buster and Punch Holdings Limited.
3 Quoted on AIM.
Principal risks, management and regulatory environment
The Directors acknowledge the Board's responsibilities for the Company's internal control systems and have instigated systems and procedures for identifying, evaluating and managing the significant risks faced by the Company. This includes a key risk management review which takes place at each quarterly Board meeting. Further details of these are contained in the corporate governance section of the Directors' Report on pages in the Annual Report. The principal risks identified by the Board are set out below:
Risk | Possible consequence | How the Board manages risk |
Economic | Events such as an economic recession and movement in interest rates could affect trading conditions for smaller companies and consequently the value of the Company's qualifying investments.
| · The Board monitors the portfolio as a whole to (1) ensure that the Company invests in a diversified portfolio of companies and (2) ensure that developments in the macro-economic environment such as movements in interest rates are monitored.
|
Loss of approval as a Venture Capital Trust | The Company must comply with section 274 of the Income Tax Act 2007 ("ITA") which allows it to be exempted from capital gains tax on investment gains. Any breach of these rules may lead to the Company losing its approval as a Venture Capital Trust (VCT), qualifying shareholders who have not held their shares for the designated holding period having to repay the income tax relief they obtained and future dividends paid by the Company becoming subject to tax. The Company would also lose its exemption from corporation tax on capital gains.
| · The Company's VCT qualifying status is continually reviewed by the Investment Adviser.
· The Board receives regular reports from its VCT Status Adviser who has been retained by the Board to monitor the VCT's compliance with the VCT Rules.
|
Investment | Investment in unquoted small companies involves a higher degree of risk than investment in fully listed 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. This may lead to variable investment returns.
Following the introduction of the VCT Rules in 2015 the Company is no longer permitted to invest in MBOs. The focus of investment has therefore moved to providing capital development investment to younger companies.
| · The Board regularly reviews the Company's investment strategy.
· Careful selection and review of the investment portfolio on a regular basis.
· The Investment Adviser has provided a growing pipeline of compliant investment opportunities following a continuing strengthening of its investment team. |
Regulatory | The Company is required to comply with the Companies Act, the listing rules of the UK Listing Authority and United Kingdom Accounting Standards. Changes to and breach of any of these might lead to suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report.
| · Regulatory and legislative developments are kept under review by the Company's solicitors and the Board. Please see the Chairman's Statement in the Annual Report for the latest details of the impact of recent VCT legislation. |
Financial and operating | Failure of the systems at any of the third party service providers that the Company has contracted with could lead to inaccurate reporting or monitoring. Inadequate controls could lead to the misappropriation or insecurity of assets.
| · The Board carries out an annual review of the internal controls in place and reviews the risks facing the Company at each quarterly Board meeting and receives reports by exception.
· It reviews the performance of the service providers annually.
|
Market | Movements in the valuations of the VCT's investments will, inter alia, be connected to movements in UK Stock Market indices.
| · The Board receives quarterly valuation reports from the Investment Adviser.
· The Investment Adviser alerts the Board about any adverse movements.
|
Asset liquidity | The Company's investments may be difficult to realise. | · The Board receives reports from the Investment Adviser 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 difficult to sell their shares at a price which is close to the net asset value given the limited secondary market in VCT shares. | · The Board has a share buyback policy which seeks to mitigate market liquidity risk. This policy is reviewed at each quarterly Board meeting.
|
Counterparty | A counterparty may fail to discharge an obligation or commitment that it has entered into with the Company. This may lead to financial loss for the Company. | · The Board regularly reviews and agrees policies for managing these risks. Further details can be found under 'credit risk' in Note 15 to the accounts.
|
The risk profile of the Company has changed as a result of changes to VCT legislation. As the Company is required to focus its new investment activity on development capital investments in younger companies it is anticipated that investment returns will be more volatile and have a higher risk profile. The Board remain confident that the Investment Adviser has the resources to adapt to these changing investment requirements, although the early stage investment process remains unproven. The combination of high liquidity levels in the Company and the challenge of new VCT rules may also result in continuing high liquidity which may be a drag on performance. The Board continues to manage excess liquidity through dividend distributions where appropriate. These issues will be monitored by the Board during the year.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year and the Directors have elected to prepare the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for the Company for that period.
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· state whether the Financial Statements have been prepared in accordance with the United Kingdom
accounting standards, subject to any material departures disclosed and explained in the Financial Statements;
· prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that
the Company will continue in business;
· prepare a Strategic Report, a Directors' Report and Directors' Remuneration Report which comply with
the requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial Statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the Financial Statements contained therein.
Directors' responsibilities pursuant to Disclosure and Transparency Rule 4 of the UK Listing Authority
The Directors confirm to the best of their knowledge that:
(a) The Financial Statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, gave a true and fair view of the assets, liabilities, financial position and the profit of the Company.
(b) The Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
Having taken advice from the Audit Committee, the Board considers the Annual Report and Financial Statements, taken as a whole, as fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
Neither the Company nor the Directors accept any liability to any person in relation to the Annual Report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A and schedule 10A of the Financial Services and Markets Act 2000.
The names and functions of the Directors are stated in the Annual Report.
For and on behalf of the Board:
Christopher Moore
Chairman
20 March 2018
FINANCIAL STATEMENTS
Income Statement
for the year ended 31 December 2017
Year ended 31 December 2017 Year ended 31 December 2016 | |||||||
Notes | Revenue | Capital | Total | Revenue | Capital | Total | |
| £ | £ | £ | £ | £ | £ | |
Unrealised losses on investments | 8 | - | (792,838) | (792,838) | - | (377,677) | (377,677) |
Realised gains on investments | 8 | - | 4,142,375 | 4,142,375 | - | 381,087 | 381,087 |
Income | 3 | 2,381,649 | - | 2,381,649 | 2,019,579 | - | 2,019,579 |
Investment Adviser's fees | 4a | (293,312) | (879,937) | (1,173,249) | (304,628) | (913,884) | (1,218,512) |
Other expenses | 4d | (422,206) | - | (422,206) | (370,899) | - | (370,899) |
Profit/(loss) on ordinary activities | |||||||
before taxation | 1,666,131 | 2,469,600 | 4,135,731 | 1,344,052 | (910,474) | 433,578 | |
Taxation on profit/(loss) on ordinary activities | 5 | (286,870) | 169,388 | (117,482) | (212,864) | 182,776 | (30,088) |
Profit/(loss) for the year and total | |||||||
comprehensive income | 1,379,261 | 2,638,988 | 4,018,249 | 1,131,188 | (727,698) | 403,490 | |
Basic and diluted earnings per ordinary share | 6 | 2.60p | 4.99p | 7.59p | 2.32p | (1.49)p | 0.83p |
The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the unrealised losses and realised gains on investments and the proportion of the Investment Adviser's fee charged to capital.
The total column is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS"). In order to better reflect the activities of a VCT and in accordance with the 2014 Statement of Recommended Practice ("SORP") and updated in January 2017, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of profit attributable to equity shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 Income Tax Act 2007.
All the items in the above statement derive from continuing operations of the Company. No operations were acquired or discontinued in the year.
Balance Sheet
As at 31 December 2017
|
Notes | 31 December 2017 £ | 31 December 2016 £ |
Fixed assets | |||
Investments at fair value | 8 | 31,484,053 | 38,926,434 |
Current assets | |||
Debtors and prepayments | 3,166,996 | 860,011 | |
Current investments | 21,494,921 | 9,511,810 | |
Cash at bank | 2,847,849 | 3,662,074 | |
27,509,766 | 14,033,895 | ||
Creditors: amounts falling due within one year | (582,179) | (205,173) | |
Net current assets | 26,927,587 | 13,828,722 | |
Net assets | 58,411,640 | 52,755,156 | |
Capital and reserves | |||
Called up share capital | 674,751 | 490,430 | |
Share premium reserve | 29,895,865 | 13,540,891 | |
Capital redemption reserve | 14,589 | 9,342 | |
Revaluation reserve | 517,952 | 1,152,007 | |
Special distributable reserve | 20,029,787 | 31,646,338 | |
Realised capital reserve | 6,346,235 | 4,702,557 | |
Revenue reserve | 932,461 | 1,213,591 | |
Equity shareholders' funds | 58,411,640 | 52,755,156 | |
Basic and diluted net asset value per ordinary share | 86.57p | 107.57p |
Statement of changes in equity
for the year ended 31 December 2017
Non-distributable reserves | Distributable reserves | |||||||
Called up | Share | Capital | Special | Realised | Revenue | |||
share | premium | redemption | Revaluation | distributable | capital | reserve | ||
capital | reserve | reserve | reserve | reserve | reserve | Total | ||
| £ | £ | £ | £ | £ | £ | £ | £ |
At 1 January 2017 | 490,430 | 13,540,891 | 9,342 | 1,152,007 | 31,646,338 | 4,702,557 | 1,213,591 | 52,755,156 |
Comprehensive income for the year | ||||||||
(Loss)/profit for the year | - | - | - | (792,838) | - | 3,431,826 | 1,379,261 | 4,018,249 |
Total comprehensive income for the year | - | - | - | (792,838) | - | 3,431,826 | 1,379,261 | 4,018,249 |
Contributions by and distributions to owners | ||||||||
Shares issued via Offer for Subscription (note c) | 154,721 | 13,570,259 | - | - | (94,364) | - | - | 13,630,616 |
Dividends re-invested into new shares | 34,847 | 2,784,715 | - | -- | - | - | -- | 2,819,562 |
Shares bought back (note d) | (5,247) | - | 5,247 | - | (408,125) | - | - | (408,125) |
Dividends paid | - | - | - | - | (10,403,513) | (2,339,914) | (1,660,391) | (14,403,818) |
Total contributions by and distributions to owners |
184,321 |
16,354,974 |
5,247 |
- |
(10,906,002) |
(2,339,914) |
(1,660,391) |
1,638,235 |
Other movements | ||||||||
Realised losses transferred to special reserve (note a below) |
- |
- |
- |
- |
(710,549) |
710,549 |
- |
- |
Realisation of previously unrealised appreciation |
- |
- |
- |
158,783 |
- |
(158,783) |
- |
- |
Total other movements | - | - | - | 158,783 | (710,549) | 551,766 | - | - |
At 31 December 2017 | 674,751 | 29,895,865 | 14,589 | 517,952 | 20,029,787 | 6,346,235 | 932,461 | 58,411,640 |
Notes a) The Special distributable reserve also provides the Company with a reserve to absorb any existing and future realised losses and, when considered by the Board to be in the interests of shareholders, to fund share buybacks and for other corporate purposes. All of this reserve originates from funds raised prior to 6 April 2014. The transfer of £710,549 to the special reserve from the realised capital reserve above is the total of realised losses incurred by the Company in the year. b) The realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the Company. c) Under the 2017/18 Offer, 15,472,097 shares were allotted between September and November 2017, raising net funds of £13,630,616 for the Company. d) During the year, the Company purchased 524,730 of its own shares at the prevailing market price for a total cost of £408,125, which were subsequently cancelled. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Statement of changes in equity for the year ended 31 December 2016
The composition of each of these reserves is explained below: Called up share capital - The nominal value of shares originally issued increased for subsequent share issues either via an Offer for Subscription or Dividend Investment Scheme or reduced due to shares bought back by the Company. Share premium reserve - This reserve contains the excess of gross proceeds less issue costs over the nominal value of shares allotted under recent Offers for Subscription and the Company's Dividend Investment Scheme. Capital redemption reserve - The nominal value of shares bought back and cancelled is held in this reserve, so that the company's capital is maintained. Revaluation reserve - Increases and decreases in the valuation of investments held at the year-end are accounted for in this reserve, except to the extent that the diminution is deemed permanent. In accordance with stating all investments at fair value through profit and loss (as recorded in note 8), all such movements through both revaluation and realised capital reserves are shown within the Income Statement for the year. Special distributable reserve - The cost of share buybacks is charged to this reserve. In addition, any realised losses on the sale or impairment of investments (excluding transaction costs), and 75% of the Investment Adviser fee expense, and the related tax effect, are transferred from the realised capital reserve to this reserve. The cost of any IFA facilitation fee payable as part of the Offer for Subscription is also charged to this reserve. Realised capital reserve - The following are accounted for in this reserve: • Gains and losses on realisation of investments; • Permanent diminution in value of investments; • Transaction costs incurred in the acquisition of investments; • 75% of the Investment Adviser's fee expense and 100% of any performance incentive fee payable, together with the related tax effect to this reserve in accordance with the policies; and • Capital dividends paid. Revenue reserve - Income and expenses that are revenue in nature are accounted for in this reserve together with the related tax effect, as well as dividends paid that are classified as revenue in nature.
Statement of cash flows For the year ended 31 December 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES TO THE ACCOUNTS
for the year ended 31 December 2017
1 Company Information
Mobeus Income and Growth 4 VCT plc is a public limited company incorporated in England, registration number 03707697. The registered office is 30 Haymarket, London, SW1Y 4EX.
2 Basis of preparation
A summary of the principal accounting policies, all of which have been applied consistently throughout the year are set out next to the related disclosure throughout the Notes to the Financial Statements. All accounting policies are included within an outlined box at the top of each relevant note.
These Financial Statements have been prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 ("FRS102"), with the Companies Act 2006 and the 2014 Statement of Recommended Practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('the SORP') (updated in January 2017) issued by the Association of Investment Companies. The Company has a number of financial instruments which are disclosed under FRS102 s11/12 as shown in note 15 of the Annual Report.
3 Income
Dividends receivable on quoted equity shares are brought into account on the ex-dividend date. Dividends receivable on unquoted equity shares are brought into account when the Company's right to receive payment is established and there is no reasonable doubt that payment will be received. Interest income on loan stock is accrued on a daily basis. Provision is made against this income where recovery is doubtful or where it will not be received in the foreseeable future. Where the loan stocks only require interest or a redemption premium to be paid on redemption, the interest and redemption premium is recognised as income or capital as appropriate once redemption is reasonably certain. When a redemption premium is designed to protect the value of the instrument holder's investment rather than reflect a commercial rate of revenue return, the redemption premium is recognised as capital. The treatment of redemption premiums is analysed to consider if they are revenue or capital in nature on a company by company basis. Accordingly, the redemption premium recognised in the year ended 31 December 2017 has been classified as capital and has been included within gains on investments. |
| 2017 £ | 2016 £ |
Income from bank deposits | 28,578 | 48,157 |
Income from investments - from equities |
176,448 |
106,043 |
- from overseas based OEICs | 25,097 | 47,986 |
- from loan stock | 2,145,824 | 1,817,393 |
- from interest on preference share dividend arrears | 92 | - |
2,347,461 | 1,971,422 | |
Other income | 5,610 | - |
Total income | 2,381,649 | 2,019,579 |
Total income comprises Dividends |
201,545 |
154,029 |
Interest | 2,174,494 | 1,865,550 |
Other Income | 5,610 | - |
2,381,649 | 2,019,579 | |
Total loan stock interest due but not recognised in the year was £257,512 (2016: £446,862). | ||
4 Investment Adviser's fees and other expenses
All fees and expenses are accounted for on an accruals basis. |
a) Investment Adviser's fees
25% of the Investment Adviser's fees are charged to the revenue column of the Income Statement, while 75% is charged against the capital column of the Income Statement. This is in line with the Board's expected long-term split of returns from the investment portfolio of the Company.
100% of any performance incentive fee payable for the year is charged against the capital column of the Income Statement, as it is based upon the achievement of capital growth. |
2017 | 2016 | |||||
Revenue | Capital | Total | Revenue | Capital | Total | |
£ | £ | £ | £ | £ | £ | |
Mobeus Equity Partners LLP | 293,312 | 879,937 | 1,173,249 | 304,628 | 913,884 | 1,218,512 |
Under the terms of a revised investment management agreement dated 12 November 2010, Mobeus Equity Partners LLP ("Mobeus LLP") (formerly Matrix Private Equity Partners LLP ("MPEP") provides investment advisory, administrative and company secretarial services to the Company, for a fee of 2% per annum of closing net assets, calculated on a quarterly basis by reference to the net assets at the end of the preceding quarter, plus a fixed fee of £115,440 per annum, the latter being subject to indexation, if applicable. In 2013, Mobeus agreed to waive such further increases due to indexation, until otherwise agreed with the Board.
The Investment Adviser fee includes provision for a cap on expenses excluding irrecoverable VAT and exceptional items set at 3.4% of closing net assets at the year-end. In accordance with the investment management agreement, any excess expenses are borne by the Investment Adviser. The excess expenses during the year amounted to £nil (2016: £nil).
The Company is responsible for external costs such as legal and accounting fees, incurred on transactions that do not proceed to completion ("abort expenses") subject to the cap on total annual expenses referred to above.
In line with common practice, Mobeus Equity Partners LLP retain the right to charge arrangement and syndication fees and Directors' or monitoring fees to companies in which the Company invests. The Investment Adviser received fees totalling £285,904 (2016: £219,348) during the year ended 31 December 2017, being £99,523 (2016: £62,480) for arrangement fees, and £186,381 (2016: £156,868) for acting as non-executive directors on a number of investee company boards. These fees attributable to MIG4 VCT are based upon the investment allocation to MIG4 VCT which applied at the time of each investment. These figures are not part of these Financial Statements.
b) Incentive fee agreement
Under the terms of a separate agreement dated 1 November 2006, from the end of the accounting period ending on 31 January 2009 and in each subsequent period throughout the life of the company, the Investment Adviser will be entitled to receive a performance related incentive fee of 20% of the dividends paid in excess of a "Target Rate" comprising firstly, an annual dividend target of 6% of the Net Asset Value ("NAV") per share at 5 April 2007 (indexed each year for RPI) and secondly a requirement that any cumulative shortfalls below the 6% hurdle must be made up in later years, while any excess is not carried forward, whether a fee is payable for that year or not. Payment of a fee is also conditional upon the average NAV per share for each year equalling the average Base NAV per share for the same year. The performance fee will be payable annually. No incentive fee is payable to date.
c) Offer for subscription fees
2017 | 2016 | |
£(m) | £(m) | |
Funds raised by MIG4 VCT | 13.96 | - |
Offer costs payable to Mobeus at 3.25% of funds raised by MIG4 VCT | 0.45 | - |
Under the terms of an Offer for Subscription, with the other Mobeus advised VCTs, launched on 6 September 2017, Mobeus is entitled to fees of 3.25% of the investment amount received from investors. This amount totalled £1.96 million for the first five allotments which took place between September and November 2017 across all four VCTs, out of which all the costs associated with the allotments were met, excluding any payments to advisers facilitated under the terms of the Offer.
d) Other expenses
Expenses are charged wholly to revenue, with the exception of expenses incidental to the acquisition or disposal of an investment, which are written off to the capital column of the Income Statement or deducted from the disposal proceeds as appropriate. |
| 2017 £ | 2016 £ |
Directors' remuneration (including NIC of £8,313 (2016: £8,327) (note i) |
98,813 |
98,827 |
IFA trail commission | 86,124 | 73,779 |
Broker's fees | 12,000 | 12,000 |
Auditor's fees - Audit of Company (excluding VAT) | 23,832 | 21,525 |
- audit related assurance services (excluding VAT) - note ii) | 4,562 | 4,203 |
- tax compliance services (excluding VAT) note ii) | 1,358 | 3,752 |
Registrar's fees | 65,302 | 40,518 |
Printing | 42,480 | 38,171 |
Legal & professional fees | 7,174 | 10,686 |
VCT monitoring fees | 9,600 | 9,600 |
Directors' insurance | 8,152 | 8,350 |
Listing and regulatory fees | 53,507 | 40,680 |
Sundry | 9,302 | 8,808 |
Other expenses | 422,206 | 370,899 |
Note i): See analysis in Directors' Remuneration table in the Report and Accounts, which excludes the NIC above. The key management personnel are the three non-executive directors. The Company has no employees.
Note ii): The Directors consider the Auditor was best placed to provide the audit related assurance services disclosed above relating to the audit of the Financial Statements of the Half Year Report. The Audit Committee reviews the nature and extent of these services to ensure that auditor independence is maintained. In this regard, compliance tax services, with effect from the current year, are to be carried out by another firm, so are included within legal and professional fees.
5 Taxation on profit/(loss) on ordinary activities
The tax expense for the year comprises current tax and is recognised in profit or loss. The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date.
Any tax relief obtained in respect of adviser fees allocated to capital is reflected in the capital reserve - realised and a corresponding amount is charged against revenue. The tax relief is the amount by which corporation tax payable is reduced as a result of these capital expenses.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the Company's taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in the tax assessments in periods different from those in which they are recognised in the financial statements.
Deferred tax is measured at the average tax rates that are expected to apply in the years in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted at the balance sheet date. Deferred tax is measured on a non-discounted basis.
A deferred tax asset would be recognised only to the extent that it is more likely than not that future taxable profits will be available against which the asset can be utilised. |
|
Revenue £ |
Capital £ | 2017 Total £ |
Revenue £ |
Capital £ | 2016 Total £ |
a) Analysis of tax charge: | ||||||
UK Corporation tax on profits for the year | 286,870 | (169,388) | 117,482 | 212,864 | (182,776) | 30,088 |
Total current tax charge | 286,870 | (169,388) | 117,482 | 212,864 | (182,776) | 30,088 |
Corporation tax is based on a rate of 19.25% (2016: 20%)
| ||||||
b) Profit/(loss) on ordinary activities before tax |
1,666,131 |
2,469,600 |
4,135,731 |
1,344,052 |
(910,474) |
433,578 |
Profit/(loss) on ordinary activities multiplied by company rate of corporation tax in the UK of 19.25% (2016: 20%) |
320,730 |
475,398 |
796,128 |
268,810 |
(182,095) |
86,715 |
Effect of: | ||||||
UK dividends not taxable | (33,966) | - | (33,966) | (21,209) | - | (21,209) |
Unrealised losses/(gains) not taxable | - | 152,621 | 152,621 | - | 75,535 | 75,535 |
Realised gains not taxable | - | (797,407) | (797,407) | - | (76,216) | (76,216) |
Losses brought forward | - | - | - | (34,737) | - | (34,737) |
Unrelieved expenditure | 106 | - | 106 | - | - | - |
Actual tax charge | 286,870 | (169,388) | 117,482 | 212,864 | (182,776) | 30,088 |
Tax relief relating to Investment Adviser fees is allocated between revenue and capital where such relief can be utilised.
No asset or liability has been recognised for deferred tax in relation to capital gains or losses on revaluing investments as the Company is exempt from corporation tax in relation to capital gains or losses as a result of qualifying as a Venture Capital Trust.
There is no potential liability to deferred tax (2016: £nil). There is no unrecognised deferred tax asset in 2017 (2016: £nil).
6. Basic and diluted earnings per share
| 2017 £ | 2016 £ |
Total earnings after taxation: | 4,018,249 | 403,490 |
Basic and diluted earnings per share (note a) | 7.59p | 0.83p |
Net revenue from ordinary activities after taxation | 1,379,261 | 1,131,188 |
Basic and diluted revenue returns per share (note b) | 2.60p | 2.32p |
Net unrealised capital losses | (792,838) | (377,677) |
Net realised capital gains | 4,142,375 | 381,087 |
Capital expenses (net of taxation) | (710,549) | (731,108) |
Total capital return | 2,638,988 | (727,698) |
Basic and diluted capital return per share (note c) | 4.99p | (1.49)p |
Weighted average number of shares in issue in the year | 52,973,939 | 48,793,978 |
Note a) Basic earnings per share is total earnings after taxation divided by the weighted average number of shares in issue.
Note b) Revenue earnings per share is the revenue return after taxation divided by the weighted average number of shares in issue.
Note c) Capital earnings per share is the total capital profit after taxation divided by the weighted average number of shares in issue.
Note d) There are no instruments that will increase the number of shares in issue in future. Accordingly, the above figures currently represent both basic and diluted returns.
7. Dividends paid and payable
Dividends payable are recognised as distributions in the financial statements when the Company's liability to pay them has been established. This liability is established for interim dividends when they are paid, and for final dividends when they are approved by the shareholders, usually at the Company's annual general meeting. A key judgement in applying the above accounting policy is in determining the amount of minimum income dividend to be paid in respect of a year. The Company's status as a VCT means it has to comply with Section 259 of the Income Tax Act 2007, which requires that no more than 15% of the income from shares and securities in a year can be retained from the revenue available for distribution for the year. |
Amounts recognised as distributions to equity shareholders in the year:
For year | Pence per | Date Paid | 2017 | 2016 | ||
Dividend | Type | ended 31 December | share | £ | £ | |
Final | Income | 2015 | 1.50p | 25/05/2016 | - | 725,346 |
Final | Capital | 2015 | 7.50p | 25/05/2016 | - | 3,626,735 |
Interim | Income | 2016 | 1.00p | 08/09/2016 | - | 489,895 |
Interim | Capital | 2016 | 1.00p | 08/09/2016 | - | 489,895 |
Second Interim | Income | 2016 | 1.00p | 17/03/2017 | 490,434 | - |
Second Interim | Capital* | 2016 | 6.00p | 17/03/2017 | 2,942,602 | - |
Interim | Income | 2017 | 1.00p | 11/09/2017 | 497,394 | - |
Interim | Capital | 2017 | 2.00p | 11/09/2017 | 994,788 | - |
Interim | Capital* | 2017 | 15.00p | 11/09/2017 | 7,460,911 | - |
Second Interim | Income | 2017 | 1.00p | 21/12/2017 | 672,563 | - |
Second Interim | Capital | 2017 | 2.00p | 21/12/2017 | 1,345,126 | - |
14,403,818** | 5,331,871 |
* - 6.00p of the dividend paid on 17 March 2017, and 15.00p of the dividend paid on 11 September 2017, were paid out of the Company's special distributable reserve.
** - £14,403,818 (2016: £5,331,871) disclosed above differs to that shown in the Statement of Cash Flows of £11,584,256 (2016: £4,411,541) due to £2,819,562 (2016: £920,330) of new shares issued as part of the DIS scheme.
Distributions to equity holders after the year end:
For year | Pence | Date | 2017 | 2016 | ||
Dividend | Type | ended 31 December | per share | Payable | £ | £ |
Second Interim | Income | 2016 | 1.00p | 17/03/2017 | - | 490,434 |
Second Interim | Capital | 2016 | 6.00p | 17/03/2017 | - | 2,942,602 |
- | 3,433,036 |
Any proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these Financial Statements.
Set out below are the total income dividends payable in respect of the financial year, which is the basis on which the requirements of section 274 of the Income Tax Act 2007 are considered
Recognised income distributions in the financial statements for the year
For year | Pence | Date | 2017 | 2016 | ||
Dividend | Type | ended 31 December | per share | paid/ payable | £ | £ |
Revenue available for distribution by way of dividends for the year | 1,379,261 | 1,131,188 | ||||
Interim | Income | 2016 | 1.00p | 08/09/2016 | - | 489,895 |
Second Interim | Income | 2016 | 1.00p | 17/03/2017 | - | 490,434 |
Interim | Income | 2017 | 1.00p | 11/09/2017 | 497,394 | - |
Second interim | Income | 2017 | 1.00p | 21/12/2017 | 672,563 | - |
Total income dividends for the year | 1,169,957 | 980,329 | ||||
8. Investment at fair value
The most critical estimates, assumptions and judgements relate to the determination of the carrying value of investments at "fair value through profit and loss" (FVTPL). All investments held by the Company are classified as "fair value through profit and loss" ("FVTPL") and measured in accordance with the International Private Equity and Venture Capital Valuation ("IPEV") guidelines, as updated in December 2015. This classification is followed as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income.
For investments actively traded on organised financial markets, fair value is generally determined by reference to Stock Exchange market quoted bid prices at the close of business on the balance sheet date. Purchases and sales of quoted investments are recognised on the trade date where a contract of sale exists whose terms require delivery within a time frame determined by the relevant market. Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional. Were the terms of a disposal state that consideration may be received at some future date and subject to the conditionality of the amount of deferred consideration, an estimate of the fair value, discounted for the time value of money may be recognised through the Income Statement. In other cases, the proceeds will only be recognised once the right to receive payment is established and there is no reasonable doubt that payment will be received.
Unquoted investments are stated at fair value by the Directors in accordance with the following rules, which are consistent with the IPEV guidelines:
All investments are held at the price of a recent investment for an appropriate period where there is considered to have been no change in fair value. Where such a basis is no longer considered appropriate, each investment is considered as a whole on a 'unit of account' basis, alongside consideration of:
(i) Where a value is indicated by a material arms-length transaction by an independent third party in the shares of a company, this value will be used.
(ii) In the absence of i), and depending upon both the subsequent trading performance and investment structure of an investee company, the valuation basis will usually move to either:-
a) a multiple basis. The shares may be valued by applying a suitable price-earnings ratio, revenue or gross profit multiple to that company's historic, current or forecast post-tax earnings before interest and amortisation, or revenue, (the ratio used being based on a comparable sector but the resulting value being adjusted to reflect points of difference identified by the Investment Adviser compared to the sector including, inter alia, a lack of marketability).
or:-
b) where a company's underperformance against plan indicates a diminution in the value of the investment, provision against cost is made, as appropriate.
(iii) Premiums, to the extent that they are considered capital in nature, and that they will be received upon repayment of loan stock investments are accrued at fair value when the Company receives the right to the premium and when considered recoverable.
(iv) Where a multiple or cost less impairment basis is not appropriate and overriding factors apply, a discounted cash flow, net asset valuation or realisation proceeds basis may be applied.
Capital gains and losses on investments, whether realised or unrealised, are dealt with in the profit and loss and revaluation reserves, and movements in the period are shown in the Income Statement.
All investments are initially recognised and subsequently measured at fair value. Changes in fair value are recognised in the Income Statement.
A key judgement made in applying the above accounting policy relates to investments that are permanently impaired. Where the value of an investment has fallen permanently below cost, the loss is treated as a permanent impairment and as a realised loss, even though the investment is still held. The Board assesses the portfolio for such investments and, after agreement with the Investment Adviser, will agree the values that represent the extent to which an investment loss has become realised. This is based upon an assessment of objective evidence of that investment's future prospects, to determine whether there is potential for the investment to recover in value.
The methods of fair value measurement are classified into hierarchy based on the reliability of the information used to determine the valuation.
Level 1 - Fair value is measured based on quoted prices in an active market. Level 2 - Fair value is measured based on directly observable current market prices or indirectly being derived from market prices. Level 3 - Fair value is measured using valuation techniques using inputs that are not based on observable market data. |
Movements in investments during the year are summarised as follows:
| Traded on AIM £ £ | Unquoted equity shares £ | Unquoted preference shares £ | Loan stock
£ | Total
£ |
Cost at 31 December 2016 |
200,028 |
13,111,998 |
15,144 |
25,036,502 |
38,363,672 |
Unrealised gains/(losses) at 31 December 2016 | 91,654 | (2,887,001) | (728) | 3,948,082 | 1,152,007 |
Permanent impairment in value of investments as at 31 December 2016 |
- |
(20,110) |
(1,649) |
(567,486) |
(589,245) |
Valuation at 31 December 2016 | 291,682 | 10,204,887 | 12,767 | 28,417,098 | 38,926,434 |
Purchases at cost (Note b) | - | 1,657,673 | - | 526,425 | 2,184,098 |
Sale proceeds (Note c) | - | (4,515,316) | (1,810) | (8,458,890) | (12,976,016) |
Reclassification at value (Note d) | - | 393,851 | 98 | (393,949) | - |
Net realised gains in the year | - | 2,445,389 | - | 1,696,986 | 4,142,375 |
Unrealised (losses)/gains in the year (Note e) | (16,833) | 465,891 | 443,034 | (1,684,930) | (792,838) |
Valuation at 31 December 2017 | 274,849 | 10,652,375 | 454,089 | 20,102,740 | 31,484,053 |
Cost at 31 December 2017 |
200,028 |
14,062,390 |
13,432 |
18,890,038 |
33,165,888 |
Unrealised gains/(losses) at 31 December 2017 | 74,821 | (1,274,615) | 440,657 | 1,277,089 | 517,952 |
Permanent impairment in value of investments at 31 December 2017 (Note f) |
- |
(2,135,400) |
- |
(64,387) |
(2,199,787) |
Valuation at 31 December 2017 | 274,849 | 10,652,375 | 454,089 | 20,102,740 | 31,484,053 |
Note a) Details of investment transactions such as disposal proceeds, valuation movements cost and carrying value at the end of previous year are contained in the Investment Portfolio Summary in the Annual Report.
Major movements in investments
Disposals of investment portfolio companies during the year were:
Company | Type | Investment cost
| Disposal proceeds
| Valuation at 31 December 2016 | Realised gainin year | |
£ | £ | £ | £ | |||
Entanet Holdings Limited | Realisation | 2,167,662 | 4,892,454 | 2,254,135 | 2,638,319 | 1 |
Gro-Group Holdings Limited | Realisation | 1,577,977 | 2,758,765 | 1,361,293 | 1,397,472 | |
Manufacturing Services Investment Limited | Share buyback | 456,400 | 456,400 | 456,400 | - | |
Chatfield Services Limited | Share buyback and loan repayment | 603,608 | 603,608 | 603,608 | - | |
Backhouse Management Limited | Loan repayment | 544,320 | 907,200 | 544,320 | - | 2 |
Barham Consulting Limited | Loan repayment | 272,160 | 453,600 | 272,160 | - | 2 |
Creasy Marketing Services Limited | Loan repayment | 544,320 | 907,200 | 544,320 | - | 2 |
McGrigor Management Limited | Loan repayment | 544,320 | 907,200 | 544,320 | - | 2 |
Hollydale Management Limited | Loan repayment | 394,380 | 657,300 | 394,380 | - | 2 |
Others | 276,735 | 432,289 | 325,705 | 106,584 | ||
7,381,882 | 12,976,016 | 7,300,641 | 4,142,375 |
Note 1) Deferred contingent consideration of £0.50 million is potentially payable over the next 12-18 months. There are conditions attached to this deferred consideration such that the amount receivable is uncertain and so has not been recognised in the current year's financial statements.
Note 2) The gain on the loan repayments above of £1,533,000 has been set off against an equivalent permanent impairment in the equity instrument of the investments in these companies (see note c). Thus, no gain or loss resulted.
Reconciliation of investment transactions to Statement of Cash flows
Note b) Purchases above of £2,184,098 are more than that shown in the Statement of Cash Flows of £1,603,629, by £580,469. This relates to the Tapas Revolution investment that completed on 4 January 2017. These funds were shown as part of opening debtors at the beginning of the year.
Note c) The cash flow from investment proceeds shown above of £12,976,016 differs from the sale proceeds shown in the Statement of Cash flows of £10,217,251, by £2,758,765. These are funds due from the disposal of Gro-Group and are held in debtors at the year end.
Other explanatory notes
Note d) During the year, two investee companies were reorganised whereby loan stocks held at a value of £393,949 were reclassified as ordinary shares, and ordinary shares of value £98 were reclassified as preference shares.
Note e) The major components of the decrease in unrealised valuations of £792,838 in the year were decreases of £735,235 in Veritek Global Limited, £555,010 in Media Business Insight Holdings Limited, and £512,268 in Virgin Wines Holding Company Limited. This fall was partly offset by increases of £438,961 in Master Removers Group Limited (formerly Leap New Co), £320,086 in Pattern Analytics Limited (trading as Biosite), and £249,500 in Preservica Limited.
The decrease in unrealised valuations of the loan stock investments above reflects the changes in the entitlement to loan premiums, and/or in the underlying enterprise value of the investee company. The increase does not arise from assessments of credit risk or market risk upon these instruments.
Note f) During the year, permanent impairments of the cost of investments have increased from £589,245 to £2,199,787. The increase of £1,610,542 is due the impairments of equity of five investee companies referred to in note 2 to note a) above, and the impairment of £77,542 of another company's remaining investment cost.
9. Cash at bank and current investments
Cash equivalents, for the purposes of the Statement of Cash flows, comprises bank deposits repayable on up to three months' notice and funds held in OEIC money-market funds. Current asset investments are the same but also include bank deposits that mature after three months. Current asset investments are disposable without curtailing or disrupting the business and are readily convertible into known amounts of cash at their carrying values at immediate or up to three months' notice. Cash, for the purposes of the Statement of Cash Flows is cash held with banks in accounts subject to immediate access. Cash at bank in the Balance Sheet is the same. |
2017 | 2016 | |||
£ | £ | |||
OEIC Money market funds | 19,494,921 | 7,511,810 | ||
Cash equivalents per Statement of Cash Flows | 19,494,921 | 7,511,810 | ||
Bank deposits that mature after three months | 2,000,000 | 2,000,000 | ||
Current asset investments | 21,494,921 | 9,511,810 | ||
Cash at bank | 2,847,849 | 3,662,074 |
10. Post balance sheet events
On 18 January 2018, the Company invested £0.34 million into Proactive Investors
On 24 January 2018 and 13 March 2018, 1,186,253 ordinary shares were allotted under the Company's Offer for Subscription, raising net funds of £1.00 million for the Company. Having received applications totalling £15 million, the full amount sought, the Offer is therefore closed to new applications.
On 28 February 2018, the Company invested a further £0.34 million into MPB, an existing portfolio company.
On 7 March 2018, the Company invested £0.49 million into SuperCarers.
On 13 March 2018, the Company invested £0.52 million into Hemmels Limited.
11. Statutory information
The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 31 December 2017, prepared in accordance with section 435 of the Companies Act 2006, 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.
12. Annual Report
The Annual Report for the year ended 31 December 2017 will shortly be made available on the Company's website: www.mig4vct.co.uk and shareholders will be notified of this by email or post or sent a hard copy in the post in accordance with their instructions. Copies will be available thereafter to members of the public from the Company's registered office.
13. Annual General Meeting
The Annual General Meeting of the Company will be held at 11.30 am on Friday 11 May 2018 at
The Clubhouse, 8 St James's Square, London, SW1Y 4JU.
Contact details for further enquiries:
Robert Brittain of Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by e-mail to vcts@mobeusequity.co.uk.
DISCLAIMER
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.