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27 Mar 2018 16:13
mobeus Income & Growth VCT plc
Annual Financial Results of the Company for the Year ended 31 December 2017
Mobeus Income & Growth VCT plc (the "Company") today announces the final results for the year ended 31 December 2017. These results were approved by the Board of Directors on 27 March 2018.
You may, in due course, view the Annual Report & Financial Statements, comprising the statutory accounts of the Company by visiting www.migvct.co.uk.
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Financial Highlights
As at 31 December 2017: Net assets: £69.90 million Net asset value ("NAV") per share: 71.75 pence |
- | Net asset value total return per share was 8.6% for the year. |
- | Share price total return per share was 9.7% for the year. |
- | Dividends paid and proposed in respect of the year total 16.00 pence per share. The proposed final dividend of 3.00 pence per share, if approved, will bring cumulative dividends paid to shareholders in respect of the past five years to 71.75 pence per share. |
- | The Company realised investments totalling £17.19 million of cash proceeds and generated realised gains over original investment cost of £5.41 million. |
- | The company invested a total of £5.10* million into four new growth capital investments and two follow-on investments during the year. |
* Includes £2.76 million previously held in companies preparing to trade | |
PERFORMANCE SUMMARY
As at 31 December 2017 the Company had net assets of £69.90 million and the net asset value ("NAV") per share was 71.75 pence.
The table below shows the recent past performance of the Company's existing class of shares for each of the last five years. |
Reporting date | Netassets
| NAVpershare | Share price1
| Cumulative dividends paid pershare | Cumulative total return per share to shareholders2 | Dividends paid and proposed per share in respect of each year | |||
As at 31 December | (NAVbasis) | (Shareprice basis) | |||||||
(£m) | (p) | (p) | (p) | (p) | (p) | (p) | |||
2017 | 69.90 | 71.75 | 63.00 | 108.80 | 180.55 | 171.80 | 16.00 | 3 | |
2016 | 63.15 | 83.53 | 74.75 | 89.80 | 173.33 | 164.55 | 14.50 |
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2015 | 74.11 | 97.54 | 86.50 | 74.360 | 171.84 | 160.80 | 10.00 |
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2014 | 60.41 | 99.44 | 86.00 | 64.30 | 163.74 | 150.30 | 24.00 | ||
2013 | 54.27 | 102.18 | 87.50 | 44.05 | 146.23 | 131.55 | 7.25 | ||
1 | Source: Panmure Gordon & Co. (mid-market price)
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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 in October 2004.
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3 | The figure of 16.00 pence includes the proposed final dividend of 3.00 pence per share referred to in the Financial Highlights above, payment of which, if approved, will reduce the net assets per share from the 31 December 2017 figure of 71.75 pence by the amount of the dividend.
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Chairman's Statement
I am pleased to present the annual results of Mobeus Income & Growth VCT plc for the year ended 31 December 2017.
Overview This has been another year of good performance by the Company. Returns to shareholders have again been positive, principally due to three profitable portfolio company exits as well as a strong income return. Further comment can be found under the 'Performance' section of my Statement below and in the Investment Adviser's Review.
The Company and the Investment Adviser have responded well to the VCT Rules introduced by the Finance (No2) Act 2015, having completed twelve growth capital investments since the change in the Company's investment policy. The Investment Adviser has continued to recruit experienced growth capital investors into its team and reports a healthy pipeline of investments.
Most recently, additional changes to VCT legislation were proposed in the 2017 Autumn Budget Statement. Your Board does not believe that the changes arising from the Patient Capital Review will materially affect the Company's existing investment policy. Further details can be found under the 'Industry and Regulatory Developments' section of my statement below.
Fundraising On 6 September 2017, the Company launched an Offer for Subscription to raise up to £25 million in aggregate. I am delighted to report that there was strong demand for the Offer and that the full amount was raised by 13 March 2018. 33,543,458 shares have been allotted at offer prices ranging from 70.08 to 79.69 pence per share, depending on the prevailing net asset value at the date of each allotment and the method by which each investor subscribed for the Offer. The Board is pleased to achieve its fundraising target comfortably ahead of the end of the current tax year and would like to thank all new investors and shareholders, their advisers and intermediaries, for their support.
Performance The NAV total return per share for the year ended 31 December 2017 was 8.6% (2016: 1.5%) (being the closing NAV plus dividends paid in the year, divided by the opening NAV) while the share price total return was 9.7% (2016: 4.3%). The uplift in Net Asset Value per share was 7.22 pence per share based upon the number of shares in issue at the year end. As a result of this performance, the NAV cumulative total return per share (being the closing NAV plus total dividends paid to date since launch) rose during the year by 4.2% from 173.33 pence to 180.55 pence.
This NAV return for the year was primarily attributable to the sale of the Company's investments in Entanet Holdings Limited and Gro-Group Holdings Limited and another year of good revenue returns, arising principally from income from loan stock investments.
Dividends Your Board is proposing a final dividend in respect of the year ended 31 December 2017 of 3.00 pence per share (2016: nil).
The dividend, comprising 1.50 pence from capital, of which 1.00 pence was from the special distributable reserve, and 1.50 pence from income, will be proposed to shareholders at the Annual General Meeting of the Company to be held on 9 May 2018, to shareholders on the register on 27 April 2018, for payment on 17 May 2018. This final dividend is in addition to the first interim dividend of 9.00 pence paid on 13 September 2017 and the second interim dividend of 4.00 pence paid on 8 December 2017.
If approved by shareholders, this forthcoming final dividend will bring total dividends paid in respect of the year ended 31 December 2017 to 16.00 pence (2016: 14.50 pence) per share, bringing cumulative dividends paid since inception in 2004 to 111.80 pence (2016: 95.80 pence) per share.
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 eight years. While the Board still believes in the attainment of the dividend target, the gradual move of the portfolio to growth capital investments may make it harder to achieve in a given year without recourse to the Company's reserves. A full dividend history is contained in the Performance Data appendix in the Annual Report and on the Company's website.
Investment portfolio For the year under review, the portfolio as a whole achieved a net increase of £5.25 million on investments realised but a decrease of £0.57 million on investments still held. Investment realisations produced £5.41 million in capital gains in excess of original investment cost. On a like-for-like basis, adding back realisations and excluding new investments, the value of the portfolio increased by 9.1% (2016: 0.8% increase). At the year end the remaining portfolio, including companies preparing to trade, was valued at £41.52 million or 98.3% of cost (2016: £51.68 million / 104.2% of cost).
During the year £4.65 million was invested in four new growth capital investments and £0.45 million in two existing portfolio companies. These new growth capital companies were: Tapas Revolution, a leading Spanish restaurant chain; Buster + Punch, a London-based interiors brand; MyTutorweb, an online tutoring business; and Wetsuit Outlet, a leading online retailer in the water sports market. In addition, two follow-on investments were made: £0.29 million was invested into Mpb, an online marketplace for used camera and video equipment and £0.16 million was invested into BookingTek, a provider of direct booking systems to major hotel groups. Following the year end, new investments were made into Proactive Investors (£0.42 million); SuperCarers Limited (£0.58 million) and Hemmels Limited (£0.60 million) and a follow-on investment was made into Mpb (£0.43 million). Further details of these investments are set out in the Investment Adviser's Review below.
Shareholders should note that, at the year end, 62.5% of the value of the investment portfolio was held in MBO type investments and 37.5% was held in growth capital investments. Of the growth capital investments, £10.21 million has been invested since the introduction of the VCT rules in 2015.
The Company received cash proceeds totalling £17.19 million; £9.94 million from the realisation of three investments; £6.35 million from loan stock repayments; and £0.90 million of other receipts. Of the amount received from realisations, £9.94 million was received as cash proceeds from the disposals of Entanet Holdings Limited, Omega Diagnostics and Gro-Group Holdings Limited, (equating to a 5.20 pence uplift in NAV based upon the number of shares at the year-end).
Full details of the investment activity during the year and a summary of the performance highlights can be found in the Investment Adviser's Review below.
Review of longer term performance Shareholders who invested in 2004 at the launch of the Company have seen a NAV cumulative total return of 180.55 pence per share compared with their initial investment cost of 100 pence per share, or a net cost of 60 pence per share (after initial income tax relief of 40 pence of their investment). As part of this return 108.80 pence per share has been paid to shareholders in dividends. This represents an average annual yield on the initial 100 pence investment of 8.2% and 13.7% on the adjusted investment cost of 60 pence (net of 40 pence of initial income tax relief). The balance of the total return is the closing NAV of 71.75 pence per share.
The Board also regularly reviews the Company's total (income and capital) return performance on both a NAV and Share Price basis compared to its peer group. Based on the statistics prepared by Morningstar at 31 December 2017, the Company was ranked 9th on both a NAV total return basis and a Share Price total return basis out of 30 generalists (including planned exit) VCTs monitored by the Association of Investment Companies ("AIC") over the last ten years. The Board believes this to be a satisfactory performance.
Buybacks of the Company's own shares During the year ended 31 December 2017, the Company made three purchases of its shares, buying back a total of 559,948 shares, allowing shareholders who wanted to sell their shares to do so. The buybacks represented 0.7% of the issued share capital of the Company at the beginning of the year. Further details are included in the Strategic Report in the Annual Report. The shares bought back were subsequently cancelled.
Industry and regulatory developments As mentioned in my overview, the UK Government has undertaken a Patient Capital 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 on 15 March 2018. These changes are designed to exclude tax-motivated investments where capital is not at risk (that is, principally seeking to preserve investors' capital) and to encourage VCTs to put their money to work faster.
Your Board notes the initiatives behind these changes. While some of these changes place further restrictions on the way investments may be structured, the Board currently has no reason to believe they will materially affect the Company's existing investment policy.
A summary of the current VCT regulations and the new changes are included in the Annual Report.
Key Information Document From 1st January 2018 the EU PRIIPs regulations came into force, mandating the format and content of a Key Information Document ('KID') to be provided by investment products, including VCTs.
The KID is intended to allow comparison of certain aspects of investments on a common basis, for the benefit of investors. The KID is required to show both a risk rating and a projection of future possible returns under various scenarios. These numbers come from adherence to prescribed and detailed calculation methodologies but, in essence, derive from the historical volatility of the share price over the last five years.
Whilst historic volatility is one measure of risk, it is not the only measure nor is it necessarily an accurate guide and returns, particularly under the stress scenario, could be lower than those indicated in the table. Whilst not wishing to detract from the KID, I would therefore like to caution investors not to place too much reliance on either the risk rating or the future returns, where historic volatility alone over a particular five year period may not be the most useful guide. Investors should also note that the historic volatility was largely derived from a portfolio of MBO investments whereas, over time, the portfolio will now be shifting towards growth capital investments.
Shareholder Event This year's annual shareholder event was held on Tuesday, 30 January 2018 at the Royal Institute of British Architects in Central London. Separate day time and evening sessions included presentations on the Mobeus advised VCTs' investment activity and performance. We have received positive feedback from many of the c.300 people who attended the event and were pleased to hear that overall they found the day informative and worthwhile. The next shareholder event will be held in February 2019.
Annual General Meeting The next Annual General Meeting of the Company will be held at 2:00 p.m. on Wednesday, 9 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. Shareholders are encouraged to attend and to ask questions of the Board and the Investment Adviser. The Notice of the meeting and an explanation of the resolutions to be proposed can be found in the Annual Report.
Outlook Your Board considers that your Company is well positioned to take advantage of the strong demand for growth capital investment, although entry valuations can be quite full for the most interesting opportunities. The portfolio has a solid foundation of investments made under the previous MBO strategy, the majority of which are mature and profitable companies providing attractive income returns. We are delighted with the strong support from shareholders for our fundraising, which is currently anticipated to be fully subscribed. This will provide the Company with sufficient funds to meet its cash needs and to continue the current investment rate in the medium term.
Finally, I would like to take this opportunity once again to thank all Shareholders for their continued support.
Clive BoothmanChairman |
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, to generate capital gains upon sale and to reduce the risk of high exposure to equities. To spread the risk further, investments are made in a number of businesses across different industry sectors. The Company's cash and liquid resources are held in a range of instruments which can be of varying maturities, subject to the overriding criterion that the risk of loss of capital be minimised. The Company seeks to make investments in accordance with the requirements of VCT regulation. The full text of the Company's Investment Policy is available in the Strategic Report section of the Annual Report. Investment ADVISER'S Review Portfolio Review This has been a year of continued progress within the portfolio with the addition of four new growth capital investments totalling £4.65 million, two existing growth investments receiving follow-on funding totalling £0.45 million, and three profitable disposals generating net cash proceeds of £9.94 million. The past year's investment and divestment activity has increased the proportion of the investment portfolio comprised of growth capital investments to 37.5%. The Company now holds £10.21 million in growth capital investments made since the change in VCT regulations in 2015.
The valuation of the remaining portfolio decreased by £0.57 million during the year under review. This net decrease in value is primarily due to reductions in the valuations of Veritek Global, Media Business Insight and Virgin Wines outweighing uplifts elsewhere in the portfolio such as Vectair and Master Removers. A small number of new growth investments have shown initial uplifts from cost, due in large part to the structure of the Company's investment, but also due to the underlying investee company performance. On the whole, the growth capital portfolio is trading within plan which is an encouraging start.
Demand for growth capital investment remains strong and there is a large pipeline of investment opportunities. We expect that follow-on funding into existing portfolio companies to support growth plans will be a significant feature over the coming months and years.
Impact of Budget Changes As the Chairman's Statement noted, over the course of 2017 the UK Government conducted a review to identify and tackle factors considered to be adversely affecting the supply of longer term capital to small and developing firms.
As anticipated, the 2017 Autumn Budget outlined the key findings from the review, including a number of changes to the VCT scheme, the earliest of which came into effect on 15 March 2018. These changes are summarised in the Annual Report.
Mobeus, as Investment Adviser, believe that, overall, these changes should not materially affect the ability of the Company to continue to make successful growth capital investments.
New investment in the year A total of £5.10 million was invested in new and existing investments during the year under review. New investments of £4.65 million were made into Tapas Revolution, Buster + Punch, MyTutorweb and Wetsuit Outlet; all new growth capital investments. In addition, the Company made £0.45 million of follow-on investment into BookingTek and Mpb to support growth and development. |
Further details of these investments are set out below:
Company | Business | Date of investment | Amount of new investment (£m) |
Tapas Revolution | Restaurant chain | January 2017 | 0.69 |
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 centre 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 period ended 25 October 2016 show a turnover of £4.25 million and loss before interest, tax and amortisation of goodwill of £0.25 million.
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Buster + Punch | Retailer | March 2017 | 0.67* |
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 and 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. | |||
* - £1.51 million held in Chatfield Services, a company preparing to trade, was used for the investment into Buster and Punch, after a net repayment to the company of £0.84 million. The company subsequently changed its name to Buster and Punch Holdings Limited. | |||
MyTutorweb | Online tutoring | May 2017 | 0.55 |
MyTutorweb is a digital marketplace that connects school pupils seeking private one-to-one tuition with university students. The business is satisfying growing demand from both students and parents to improve pupil's exam results and enhance their academic and career prospects. This investment supports and opportunity to consolidate the sizable £2 billion UK tutoring market, grow MyTutorweb'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 £0.94 million. | |||
Wetsuit Outlet | Retailer | July 2017 | 2.74* |
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 investment) and Gul. The investment is to fund working capital and growth in existing activities and enter two new markets. Established in 2005, the company has developed into a successful and profitable business achieving turnover of £11.51 million and a profit before interest, tax and amortisation of goodwill of £1.98 million in the financial year ended 31 March 2017. | |||
* - This investment utilised £2.09 million previously held in Manufacturing Services Investment Limited, a company preparing to trade, after a net repayment to the Company of £0.57 million. A further £0.65 million was invested directly by the Company into Wetsuit Outlet. | |||
Further investments in existing portfolio companies
The Company made further investments of £0.16 million into BookingTek, a provider of direct booking systems to major hotel groups, and £0.29 million into Mpb, a leading online marketplace for used camera and video equipment, during the year under review. |
Company | Business | Date of investment | Amount of new investment (£m) |
BookingTek | A provider of direct booking systems to major hotel groups | March and November 2017 | 0.16 |
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 accounts for the year ended 31 July 2016 show 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 and December 2017 | 0.29 |
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 fund expansion of its platform globally, with launches into both the US and German markets. The company's latest audited accounts for the year ended 31 March 2017 show turnover of £13.20 million and a loss before interest, tax and amortisation of goodwill of £0.45 million. A further £0.43 million was invested into Mpb on 27 February 2018 following the year end. | |||
New investment post year end
Following the year end, a new investment of £0.42 million was made into Proactive Investors; a new investment of £0.58 million was made into SuperCarers Limited; and a new investment of £0.60 million was made into Hemmels Limited, further details of which are set out below: |
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Company | Business | Date of investment | Amount of new investment (£m) | |
Proactive Investors | Investor media services | January 2018 | 0.42 | |
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 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 | Online care provision | March 2018 | 0.58 | |
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 | 0.60 | |
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 its expansion plans and secure sufficient development stock. Hemmels generated £1.21 million of revenues and a £0.28 million net loss before interest, tax and amortisation for the year ended 31 December 2017. | ||||
Realisations during the year
The Company realised three investments during the year under review for cash proceeds totalling £9.94 million as detailed below. Including the loan stock repayments of £6.35 million, also listed below, and other receipts of £0.90 million, total net cash proceeds for the year amounted to £17.19 million. |
Company | Business | Period of investment | Total cash proceeds over the life of the investment/Multiple over cost |
Omega Diagnostics | In-vitro diagnostics for food intolerance, autoimmune and infectious diseases | December 2010 to February 2017 | £0.46 million 1.5 times cost |
The Company sold its investment in Omega Diagnostics plc, an AIM quoted stock, over a phased period generating proceeds of £0.46 million (£0.37 million during the 2017 financial year). The realisation generated a 1.50 multiple over cost over the lifetime of the investment. | |||
Entanet | Wholesale voice and data communications provider | February 2014 to August 2017 | £6.92 million 2.5 times cost |
The Company sold its investment in Entanet to AIM quoted CityFibre Infrastructure Holdings Limited for £6.12 million in August 2017. Deferred contingent consideration of up to £0.63 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 £4.21 million, a multiple of 2.5 times cost and has returned an IRR of 39% to date. | |||
Gro-Group | Manufacturer and distributor of baby sleep products | March 2013 to December 2017 | £4.36 million 2.2 times cost |
The Company sold its investment in Gro-Group for £3.45 million in December 2017. Deferred consideration of up to £0.11 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 £2.38 million, a multiple of 2.2 times cost and has returned an IRR of 21% to date. | |||
Mobeus Equity Partners LLP
Investment Adviser
Market sector | Date of investment | Total book cost
£'000 | Valuation
£'000 | Like for like valuation increase/ (decrease) over year | % value of net assets | % of equity held by funds advised by Mobeus | |
Qualifying investments | |||||||
Unquoted investments | |||||||
Tovey Management Limited (trading as Access IS) Provider of data capture and scanning hardware | Software and computer services | Oct-15 | 2,979 | 3,362 | 6.1% | 4.8% | 43.4% |
ASL Technology Holdings Limited Printer and photocopier services | Support services | Dec-10 | 2,942 | 3,119 | (1.6)% | 4.5% | 47.5% |
Virgin Wines Holding Company Limited Online Wine retailer | General retailers | Nov-13 | 2,439 | 2,746 | (19.1)% | 3.9% | 42.0% |
Manufacturing Services Investment Limited (trading as Wetsuit Outlet) Online retailer in the water sports market | General retailers | Jul-17 | 2,745 | 2,745 | New investment | 3.9% | 27.5% |
Turner Topco Limited (trading as ATG Media) Publisher and on-line auction platform operator | Media | Oct-08 | 2,501 | 2,115 | (2.8)% | 3.0% | 17.1% |
Vian Marketing Limited (trading as Red Paddle Co) Design, manufacture and sale of stand-up paddleboards and windsurfing sails | Leisure goods | Jul-15 | 1,189 | 1,874 | 19.2% | 2.7% | 31.5% |
Tharstern Group Limited Software based management information systems | Software and computer services | Jul-14 | 1,377 | 1,767 | 15.1% | 2.5% | 52.5% |
Fullfield Limited (trading as Motorclean) Provider of vehicle cleaning and valet services | Support services | Jul-11 | 1,626 | 1,703 | (18.8)% | 2.4% | 46.0% |
Vectair Holdings Limited Designer and distributor of washroom products | Support services | Jan-06 | 139 | 1,699 | 65.1% | 2.4% | 24.0% |
EOTH Limited (trading as Rab and Lowe Alpine) Branded outdoor equipment and clothing | General retailers | Oct-11 | 1,000 | 1,593 | 17.3% | 2.3% | 8.0% |
Master Removers Group Limited (trading as Anthony Ward Thomas, Bishopsgate and Aussie Man & Van) A specialist logistics, storage and removals business | Support services | Dec-14 | 614 | 1,409 | 59.8% | 2.0% | 18.4% |
CGI Creative Graphics International Limited Vinyl graphics to global automotive, recreational vehicle and aerospace markets | General Industrials | Jun-14 | 1,808 | 1,356 | (17.1)% | 1.9% | 28.1% |
TPSFF Holdings Limited (formerly The Plastic Surgeon Holdings Limited) Supplier of snagging and finishing services to the domestic and commercial property markets | Support services | Apr-08 | 193 | 1,311 | 25.5% | 1.9% | 38.0% |
Media Business Insight Holdings Limited A publishing and events business focused on the creative production industries | Media | Jan-15 | 2,518 | 1,241 | (25.0)% | 1.8% | 67.5% |
Preservica Limited Seller of proprietary digital archiving software | Software and computer services | Dec-15 | 900 | 1,230 | 36.7% | 1.8% | 37.9% |
Redline Worldwide Limited Provider of security services to the aviation industry and other sectors | Support services | Feb-16 | 1,088 | 1,165 | 7.1% | 1.7% | 30.0% |
Pattern Analytics Limited (trading as Biosite) Workforce management and security services for the construction industry | Software and computer services | Nov-16 | 757 | 1,136 | 50.0% | 1.7% | 20.5% |
BookingTek Limited Direct booking software for hotels | Software and computer services | Oct-16 | 771 | 1,026 | 42.1% | 1.6% | 14.9% |
MPB Group Limited Online marketplace for used photographic and video equipment | General retailers | Jun-16 | 892 | 997 | 17.3% | 1.4% | 23.5% |
RDL Corporation Limited Recruitment consultant for the pharmaceutical, business intelligence and IT industries | Support services | Oct-10 | 1,558 | 985 | (31.7)% | 1.4% | 45.2% |
Blaze Signs Holdings Limited Manufacturer and installer of signs | Support services | Apr-06 | 492 | 702 | (31.0)% | 1.0% | 52.5% |
Ibericos Etc. Limited (trading as Tapas Revolution) Spanish restaurant chain | Travel and leisure | Jan-17 | 692 | 692 | New investment | 1.0% | 25.0% |
Veritek Global Holdings Limited Maintenance of imaging equipment | Support services | Jul-13 | 2,045 | 692 | (57.3)% | 1.0% | 50.8% |
Buster and Punch Holdings Limited (formerly Chatfield Services Limited) Industrial inspired lighting and interiors retailer | General retailers | Mar-17 | 668 | 668 | New investment | 1.0% | 20.0% |
Hollydale Management Limited Company seeking to carry on a business in the food sector | Company preparing to trade | Mar-15 | 938 | 585 | 0.0% | 0.8% | 50.0% |
My Tutorweb Limited Digital marketplace connecting school pupils seeking one-to-one tutoring | Support services | May-17 | 547 | 547 | New investment | 0.8% | 19.3% |
Jablite Holdings Limited Manufacturer of expanded polystyrene products | Construction and materials | Apr-15 | 502 | 306 | (62.1)% | 0.4% | 40.1% |
Backhouse Management Limited Company seeking to carry on a business in the motor sector | Company preparing to trade | Apr-15 | 787 | 303 | 0.0% | 0.4% | 50.0% |
Barham Consulting Limited Company seeking to carry on a business in the catering sector | Company preparing to trade | Apr-15 | 787 | 303 | 0.0% | 0.4% | 50.0% |
Creasy Marketing Services Limited Company seeking to carry on a business in the textile sector | Company preparing to trade | Apr-15 | 787 | 303 | 0.0% | 0.4% | 50.0% |
McGrigor Management Limited Company seeking to carry on a business in the pharmaceutical sector | Company preparing to trade | Apr-15 | 787 | 303 | 0.0% | 0.4% | 50.0% |
Lightworks Software Limited Provider of software for CAD vendors | Software and computer services | Apr-06 | 223 | 159 | (3.0)% | 0.2% | 45.0% |
CB Imports Group Limited (trading as Country Baskets) Importer and distributor of artificial flowers and floral sundries. | General retailers | Dec-09 | 350 | - | 0.0% | 0.0% | 23.2% |
Newquay Helicopters (2013) Limited (in creditors' voluntary liquidation) Helicopter service operator | Support services | Jun-06 | 30 | - | 0.0% | 0.0% | 34.9% |
Racoon International Group Limited Supplier of hair extensions, hair care products and training | Personal goods | Dec-06 | 1,213 | - | 0.0% | 0.0% | 36.0% |
Watchgate Limited Holding company | Support services | Nov-11 | 1 | - | 0.0% | 0.0% | 100.0% |
Total unquoted investments | 40,885 | 40,142 | 57.4% | ||||
Total qualifying investments | 40,885 | 40,142 | 57.4% | ||||
Non-qualifying investments
| |||||||
Media Business Insight Limited | Media | Jan-15 | 764 | 764 | 1.1% | ||
EOTH Limited (Rab and Lowe Alpine) | General retailers | Oct-11 | 298 | 324 | 0.5% | ||
Tovey Management Limited (trading as Access IS) | Software and computer services | Oct-15 | 285 | 285 | 0.4% | ||
Total non-qualifying investments | 1,347 | 1,373 | 2.0% | ||||
Total investment portfolio | 42,232 | 41,515 | 59.4% | ||||
Current asset investments and cash at bank | 24,832 | 24,832 | 35.5% | ||||
Total investments | 67,064 | 66,347 | 94.9% | ||||
Other assets | 3,976 | 5.7% | |||||
Current liabilities | (423) | (0.6)% | |||||
Net assets | 69,900 | 100.0% | |||||
For further information on the Investment Portfolio, please see the Annual Report and Financial Statements
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. The principal risks identified by the Board, a description of the possible consequences of each risk and how the Board manages each risk are set out below:
Statement of Directors' Responsibilities The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year and the Directors have elected to prepare the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these Financial Statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether the Financial Statements have been prepared in accordance with United Kingdom accounting standards, subject to any material departures disclosed and explained in the Financial Statements; • prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; • prepare a Strategic Report, a Director's Report and Directors' Remuneration Report which comply with the requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Website publication The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial Statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the Financial Statements contained therein.
Directors' responsibilities pursuant to Disclosure and Transparency Rule 4 of the UK Listing Authority The Directors confirm to the best of their knowledge that:
(a) The Financial Statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice give a true and fair view of the assets, liabilities, financial position and the profit of the Company. (b) The Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
Having taken advice from the Audit Committee, the Board considers the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and that it provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
Neither the Company nor the Directors accept any liability to any person in relation to the Annual Report except to the extent that such liability could arise under English law.
For and on behalf of the Board
Clive Boothman Chairman
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FINANCIAL STATEMENTS
Income Statement for the year ended 31 December 2017 |
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Year ended 31 December 2017 | Year ended 31 December 2016 |
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Notes | Revenue | Capital | Total | Revenue | Capital | Total |
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£ | £ | £ | £ | £ | £ |
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Unrealised losses on investments | 8 | - | (572,662) | (572,662) | - | (196,760) | (196,760) |
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Realised gains on investments | 8 | - | 5,248,859 | 5,248,859 | - | 628,948 | 628,948 |
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Income | 3 | 3,131,481 | - | 3,131,481 | 2,650,934 | - | 2,650,934 |
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Investment Adviser's fees | 4a | (350,079) | (1,050,237) | (1,400,316) | (383,672) | (1,151,015) | (1,534,687) |
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Other expenses | 4c | (385,417) | - | (385,417) | (349,892) | - | (349,892) |
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Profit/(loss) on ordinary activities before taxation | 2,395,985 | 3,625,960 | 6,021,945 | 1,917,370 | (718,827) | 1,198,543 |
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Taxation on profit/(loss) on ordinary activities | 5 | (392,180) | 202,170 | (190,010) | (339,532) | 230,203 | (109,329) |
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Profit/(loss) for the year and total comprehensive income | 2,003,805 | 3,828,130 | 5,831,935 | 1,577,838 | (488,624) | 1,089,214 |
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Basic and diluted earnings per ordinary share | 7 | 2.52p | 4.82p | 7.34p | 2.08p | (0.64)p | 1.44p |
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The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the unrealised (losses)/gains and realised gains on investments and the proportion of the Investment Adviser's fee charged to capital.
The total column is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS"). In order to reflect better the activities of a VCT and in accordance with the 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.
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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
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31 December 2017 | 31 December 2016 | ||
Notes | £ | £ | |
Fixed assets | |||
Investments at fair value | 8 | 41,515,308 | 51,682,768 |
Current assets | |||
Debtors and prepayments | 3,976,235 | 1,154,144 | |
Current asset investments | 9 | 21,803,276 | 5,246,949 |
Cash at bank and in hand | 9 | 3,027,719 | 5,314,539 |
28,807,230 | 11,715,632 | ||
Creditors: amounts falling due within one year | (422,761) | (248,847) | |
Net current assets | 28,384,469 | 11,466,785 | |
Net assets | 69,899,777 | 63,149,553 | |
Capital and reserves | |||
Called up share capital | 974,257 | 755,975 | |
Capital redemption reserve | 15,040 | 9,440 | |
Share premium reserve | 35,856,430 | 19,463,849 | |
Revaluation reserve | 2,786,782 | 3,523,180 | |
Special distributable reserve | 19,058,094 | 35,605,335 | |
Realised capital reserve | 8,147,387 | 2,733,792 | |
Revenue reserve | 3,061,787 | 1,057,982 | |
Equity shareholders' funds | 69,899,777 | 63,149,553 | |
Basic and diluted net asset value per ordinary share | 71.75p | 83.53p |
Statement of Changes in Equity for the year ended 31 December 2017
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Non-distributable reserves | Distributable reserves | ||||||||
Notes | Called up share capital | Capital redemption reserve | Share premium reserve | Revaluation reserve | Special distributable reserve | Realised capital reserve | Revenue reserve | Total | |
(Note a) | (Note b) | (Note b) | |||||||
£ | £ | £ | £ | £ | £ | £ | £ | ||
At 1 January 2017 | 755,975 | 9,440 | 19,463,849 | 3,523,180 | 35,605,335 | 2,733,792 | 1,057,982 | 63,149,553 | |
Comprehensive income for the year | |||||||||
(Loss)/profit for the year | - | - | - | (572,662) | - | 4,400,792 | 2,003,805 | 5,831,935 | |
Total comprehensive income for the year | - | - | - | (572,662) | - | 4,400,792 | 2,003,805 | 5,831,935 | |
Contributions by and distributions to owners | |||||||||
Shares issued under Offer for Subscription (note c) | 223,882 | - | 16,392,581 | - | (91,557) | - | - | 16,524,906 | |
Shares bought back (note d) | (5,600) | 5,600 | - | - | (374,695) | - | - | (374,695) | |
Dividends paid | 6 | - | - | - | - | (15,231,922) | - | - | (15,231,922) |
Total contributions by and distributions to owners | 218,282 | 5,600 |
16,392,581 | - |
(15,698,174) |
- | - |
918,289 | |
Other movements | |||||||||
Realised losses transferred to special reserve (note a) | - | - | - | - | (849,067) | 849,067 | - | - | |
Realisation of previously unrealised appreciation | - | - | - | (163,736) | - | 163,736 | - | - | |
Total other movements | - | - | - | (163,736) | (849,067) | 1,012,803 | - | - | |
At 31 December 2017 | 974,257 | 15,040 | 35,856,430 | 2,786,782 | 19,058,094 | 8,147,387 | 3,061,787 | 69,899,777 | |
Note a: The purpose of this reserve is to fund market purchases of the Company's own shares, to write off existing and future losses and for any other corporate purpose. All of this reserve arose from shares issued before 5 April 2014. The transfer of £849,067 to the special reserve from the realised capital reserve above is the total of realised losses incurred by the Company in the year. | |||||||||
Note b: The realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the Company shown on the Balance Sheet. | |||||||||
Note c: Under the Offer for Subscription launched on 6 September 2017, 22,388,196 ordinary shares were allotted raising net funds of £16,524,906 for the Company. | |||||||||
Note d: During the year, the Company purchased 559,948 of its own shares at the prevailing market price for a total cost of £374,695, which were subsequently cancelled. This differs to the figure shown in the Statement of Cashflows by £46,857. This amount was included in creditors at the year end. . | |||||||||
Statement of Changes in Equity for the year ended 31 December 2016
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Non-distributable reserves | Distributable reserves | ||||||||
Called up share capital | Capital redemption reserve | Share premium reserve | Revaluation reserve | Special distributable reserve | Realised capital reserve | Revenue reserve | Total | ||
£ | £ | £ | £ | £ | £ | £ | £ | ||
At 1 January 2016 | 759,730 | 5,685 | 19,463,849 | 3,785,072 | 40,625,822 | 7,716,009 | 1,749,683 | 74,105,850 | |
Comprehensive income for the year | |||||||||
(Loss)/profit for the year | - | - | - | (196,760) | - | (291,864) | 1,577,838 | 1,089,214 | |
Total comprehensive income for the year | - | - | - | (196,760) | - | (291,864) | 1,577,838 | 1,089,214 | |
Contributions by and distributions to owners | |||||||||
Shares bought back | (3,755) | 3,755 | - | - | (318,277) | - | - | (318,277) | |
Dividends paid | - | - | - | - | (3,781,398) | (5,676,297) | (2,269,539) | (11,727,234) | |
Total contributions by and distributions to owners | (3,755) | 3,755 | - | - | (4,099,675) | (5,676,297) | (2,269,539) | (12,045,511) | |
Other movements | |||||||||
Realised losses transferred to special reserve | - | - | - | - | (920,812) | 920,812 | - | - | |
Realisation of previously unrealised appreciation | - | - | - | (65,132) | - | 65,132 | - | - | |
Total other movements | - | - | - | (65,132) | (920,812) | 985,944 | - | - | |
At 31 December 2016 | 755,975 | 9,440 | 19,463,849 | 3,523,180 | 35,605,335 | 2,733,792 | 1,057,982 | 63,149,553 | |
The composition of each of these reserves is explained below:
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Called up share capital | |||||||||
The nominal value of shares originally issued, increased for subsequent share issues either via an Offer for Subscription or reduced due to shares bought back by the Company. | |||||||||
Capital redemption reserve | |||||||||
The nominal value of shares bought back and cancelled is held in this reserve, so that the company's capital is maintained. | |||||||||
Share premium reserve | |||||||||
This reserve contains the excess of gross proceeds less issue costs over the nominal value of shares allotted under recent Offers for Subscription. | |||||||||
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.
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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. This reserve will also be charged any facilitation payments to financial advisers, which arose as part of the Offer for Subscription. | |||||||||
Realised capital reserve | |||||||||
The following are accounted for in this reserve:
• Gains and losses on realisation of investments; • Permanent diminution in value of investments; • Transaction costs incurred in the acquisition and disposal of investments; • 75% of the Investment Adviser fee expense and 100% of any performance fee payable, together with the related tax effect to this reserve in accordance with the policies; and • Capital dividends paid.
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Revenue reserve | |||||||||
Income and expenses that are revenue in nature are accounted for in this reserve together with the related tax effect, as well as income dividends paid that are classified as revenue in nature. | |||||||||
Statement of Cash Flows for the year ended 31 December 2017
Notes | Year ended 31 December 2017 | Year ended 31 December 2016 | |||
£ | £ | ||||
Cash flows from operating activities | |||||
Profit after tax for the financial year | 5,831,935 | 1,089,214 | |||
Adjustments for: | |||||
Net unrealised losses on investments | 572,662 | 196,760 | |||
Net gains on realisations of investments | (5,248,859) | (628,948) | |||
Tax charge for current year | 190,010 | 109,329 | |||
Increase in debtors | (197,500) | (38,554) | |||
Increase/(decrease) in creditors | 92,991 | (82,593) | |||
Net cash inflow from operations | 1,241,239 | 645,208 | |||
Corporation tax paid | (109,090) | (44,108) | |||
Net cash inflow from operating activities | 1,132,149 | 601,100 | |||
Cash flows from investing activities | |||||
Acquisitions of investments | 8 | (1,649,533) | (3,559,180) | ||
Disposals of investments | 8 | 13,821,745 | 3,397,012 | ||
Decrease in bank deposits with a maturity over three months | 1,715 | 2,003,484 | |||
Net cash inflow from investing activities | 12,173,927 | 1,841,316 | |||
Cash flows from financing activities | |||||
Shares issued as part of Offer for subscription | 16,524,906 | - | |||
Equity dividends paid | 6 | (15,231,922) | (11,727,234) | ||
Share capital bought back | (327,838) | (318,277) | |||
Net cash inflow/(outflow) from financing activities | 965,146 | (12,045,511) | |||
Net increase/(decrease) in cash and cash equivalents | 14,271,222 | (9,603,095) | |||
Cash and cash equivalents at start of year | 9,554,221 | 19,157,316 | |||
Cash and cash equivalents at end of year | 23,825,443 | 9,554,221 | |||
Cash and cash equivalents comprise: | |||||
Cash equivalents | 9 | 20,797,724 | 4,239,682 | ||
Cash at bank and in hand | 9 | 3,027,719 | 5,314,539 | ||
Notes to the Financial Statements for the year ended 31 December 2017
1 Company Information
Mobeus Income and Growth VCT plc is a public limited company incorporated in England, registration number 5153931. The registered office is 30 Haymarket, London, SW1Y 4EX. |
2 Basis of preparation of the Financial Statements
A summary of the principal accounting policies, all of which have been applied consistently throughout the year are set out at the start of the related disclosure throughout the Notes to the Financial Statements. All accounting policies are included within an outlined box at the top of each relevant note.
These financial statements have been prepared in accordance with applicable United Kingdom accounting standards, 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') 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
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3 Income
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. Dividends receivable on quoted equity shares are brought into account on the ex-dividend date.
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 | 17,793 | 60,115 |
Income from investments | ||
- from equities | 358,684 | 220,910 |
- from overseas based OEICs | 23,657 | 31,429 |
- from loan stock | 2,723,814 | 2,338,480 |
- from interest on preference share dividend arrears | 337 | - |
3,106,492 | 2,590,819 | |
Other income | 7,196 | - |
Total income | 3,131,481 | 2,650,934 |
Total income comprises | ||
Dividends | 382,341 | 252,339 |
Interest | 2,741,944 | 2,398,595 |
Other income | 7,196 | - |
3,131,481 | 2,650,934 |
Total loan stock interest due but not recognised in the year was £389,352 (2016: £602,221).
4 Investment adviser's fees and Other expenses
All expenses are accounted for on an accruals basis |
a) Investment adviser's fees and performance fees
25% of the Investment Adviser's fees are charged to the revenue column of the Income Statement, while 75% is charged against the capital column of the Income Statement. This is in line with the Board's expected long-term split of returns from the investment portfolio of the Company.
100% of any performance incentive fee payable for the year is charged against the capital column of the Income Statement, as it is based upon the achievement of capital growth. |
Revenue | Capital | Total | Revenue | Capital | Total | |
2017 | 2017 | 2017 | 2016 | 2016 | 2016 | |
£ | £ | £ | £ | £ | £ | |
Mobeus Equity Partners LLP | ||||||
Investment Adviser's fees | 350,079 | 1,050,237 | 1,400,316 | 383,672 | 1,151,015 | 1,534,687 |
350,079 | 1,050,237 | 1,400,316 | 383,672 | 1,151,015 | 1,534,687 |
Under the terms of a revised investment management agreement dated 20 May 2010, Mobeus Equity Partners LLP ("Mobeus") provides investment advisory, administrative and company secretarial services to the Company, for a fee of 2% per annum of closing net assets, paid in advance, calculated on a quarterly basis by reference to the net assets at the end of the preceding quarter, plus a fixed fee of £134,168 per annum, the latter inclusive of VAT and subject to annual increases in RPI. In 2013, Mobeus agreed to waive such further increases due to indexation, until otherwise agreed with the Board.
The Investment Adviser's fee includes provision for a cap on expenses excluding irrecoverable VAT and exceptional items set at 3.6% 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 retains 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 £377,188 during the year ended 31 December 2017 (2016: £326,660), being £118,381 (2016: £98,881) for arrangement fees and £258,807 (2016: £227,779) for acting as non-executive directors on a number of investee company boards. These fees attributable to MIG VCT are based upon the investment allocation applicable to MIG VCT which applied at the time of each investment. These figures are not part of these financial statements.
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Incentive agreement
Under the Incentive Agreement dated 9 July 2004, and a variation of this agreement dated 20 May 2010, the Investment Adviser is entitled to receive an annual performance-related incentive fee of 20% of the dividends paid in a year in excess of a "Target Rate" comprising firstly, an annual dividend paid in a year target which started at 6.00 pence per share on launch (indexed each year for RPI) and secondly a requirement that any shortfall of cumulative dividends paid in each year beneath the cumulative annual dividend target is carried forward and added to the Target Rate for the next accounting period. Any excess of cumulative dividends paid above the cumulative annual dividend target is not carried forward, whether an incentive fee is payable for that year or not. Payment of a fee is also conditional upon the daily weighted average Net Asset Value ("NAV") per share throughout such year equalling or exceeding the daily weighted average Base NAV per share throughout the same year. The performance fee will be payable annually.
At 31 December 2017, the annual dividend target is 7.63 pence per share and there was an excess of cumulative dividends paid over the cumulative annual dividend target of 11.37 pence per share. However, the average NAV per share is 78.75 pence for the year, which was less than the average base NAV per share for the year of 97.61 pence. Accordingly, no performance incentive fee is payable for the year and the excess of cumulative dividends paid over the cumulative annual dividend target of 11.37 pence will not be carried forward.
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b) Offer for subscription fees
| 2017 | 2016 |
£m | £m | |
Funds raised across the four Mobeus VCTs | 60.36 | - |
of which the funds raised by MIG VCT were | 16.90 | - |
Offer costs payable to Mobeus at 3.25% of funds raised by MIG VCT | 0.55 | - |
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 £1,961,764 for the first five allotments during the year across all four VCTs, out of which all the costs associated with the allotment were met, excluding any payments to advisers facilitated under the terms of the Offer. |
c) Other expenses
Expenses are charged wholly to revenue, with the exception of expenses incidental to the acquisition or disposal of an investment, which are written off to the capital column of the Income Statement or deducted from the disposal proceeds as appropriate. |
2017 | 2016 | |
£ | £ | |
Directors' remuneration (including NIC of £8,110 (2016: £8,755)) - note a) | 113,110 | 132,780 |
IFA trail commission | 87,580 | 53,684 |
Broker's fees | 14,400 | 14,400 |
Auditor's fees - Audit of Company (excluding VAT) | 23,832 | 23,575 |
- Audit related assurance services - note b) (excluding VAT) | 4,562 | 4,203 |
- tax compliance services - note b) (excluding VAT) | 1,358 | 3,393 |
Registrar's fees | 48,045 | 33,121 |
Printing | 27,299 | 20,495 |
Legal & professional fees | 7,918 | 8,544 |
VCT monitoring fees | 9,000 | 9,000 |
Directors' insurance | 8,153 | 8,349 |
Listing and regulatory fees | 30,114 | 29,176 |
Sundry | 10,046 | 9,172 |
Other expenses | 385,417 | 349,892 |
Note a): See analysis in the Directors' Remuneration Report on page 31 of the Annual Report, which excludes the NIC above. The key management personnel are the three non-executive Directors. The Company has no employees.
Note b): The Directors consider the Auditor was best placed to provide the other services disclosed above. The audit related assurance services are in relation to the audit of the Financial Statements within the Company's 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 (excluding iXBRL 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 realised capital reserve 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. |
Tax relief relating to Investment Adviser fees is allocated between revenue and capital where such relief can be utilised. The Company is an Investment Trust and Investment Trust companies are exempt from tax on capital gains if they meet the HMRC criteria set out in section 274 of the ITA. |
2017 | 2017 | 2017 | 2016 | 2016 | 2016 | |
Revenue | Capital | Total | Revenue | Capital | Total | |
£ | £ | £ | £ | £ | £ | |
a) Analysis of tax charge: | ||||||
UK Corporation tax on profits/(losses) for the year | 392,180 | (202,170) | 190,010 | 339,532 | (230,203) | 109,329 |
Total current tax charge/(credit) | 392,180 | (202,170) | 190,010 | 339,532 | (230,203) | 109,329 |
Corporation tax is based on a rate of 19.25% (2016: 20%) | ||||||
b) Profit/(loss) on ordinary activities before tax | 2,395,985 | 3,625,960 | 6,021,945 | 1,917,370 | (718,827) | 1,198,543 |
Profit/(loss) on ordinary activities multiplied by main company rate of corporation tax in the UK of 19.25% (2016: 20.0%) | 461,227 | 697,997 | 1,159,224 | 383,474 | (143,765) | 239,709 |
Effect of: | ||||||
UK dividends | (69,047) | - | (69,047) | (44,182) | - | (44,182) |
Unrealised losses not taxable | - | 110,237 | 110,237 | - | 39,352 | 39,352 |
Realised gains not taxable | - | (1,010,404) | (1,010,404) | - | (125,790) | (125,790) |
Underprovision in prior period | - | - | - | 240 | - | 240 |
Actual current tax charge | 392,180 | (202,170) | 190,010 | 339,532 | (230,203) | 109,329 |
Deferred taxation No provision for deferred taxation has been made on potential capital gains due to the Company's current status as a VCT under section 274 of the ITA and the Directors' intention to maintain that status. |
6 Dividends paid and payable
Dividends payable are recognised as distributions in the Financial Statements when the Company's liability to pay them has been established. This liability is established for interim dividends when they are paid, and for final dividends when they are approved by the shareholders, usually at the Company's Annual General Meeting.
A key judgement in applying the above accounting policy is in determining the amount of minimum 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 ITA, 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: | ||||||
Dividend | Type | For year ended 31 December | Pence per share | Date Paid | 2017 £ | 2016 £ |
Final | Income | 2015 | 1.00p | 31/05/2016 | - | 756,980 |
Final | Capital | 2015 | 6.00p | 31/05/2016 | - | 4,541,877 |
Interim | Income | 2016 | 2.00p | 20/09/2016 | - | 1,512,559 |
Interim | Capital | 2016 | 1.50p | 20/09/2016 | - | 1,134,420 |
Interim | Capital | 2016 | 5.00p | 20/09/2016 | - | 3,781,398 |
Second Interim | Capital | 2016 | 6.00p* | 31/03/2017 | 4,535,848 | - |
Interim | Capital | 2017 | 9.00p* | 13/09/2017 | 6,796,071 | - |
Second Interim | Capital | 2017 | 4.00p* | 08/12/2017 | 3,900,003 | - |
15,231,922 | 11,727,234 | |||||
Proposed distributions to equity holders at the year-end: | ||||||
Date Payable | ||||||
Second interim | Capital | 2016 | 6.00p | 31/03/2017 | - | 4,535,848 |
Final | Income | 2017 | 1.50p | 17/05/2018 | 1,628,715 | - |
Final | Capital | 2017 | 1.00p* | 17/05/2018 | 1,085,810 | - |
Final | Capital | 2017 | 0.50p | 17/05/2018 | 542,905 | - |
3,257,430 | 4,535,848 | |||||
\* These dividends were and will be paid out of the Company's special distributable reserve.
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 259 of the ITA concerning the Company not retaining more than 15% of its income from shares and securities, is considered. |
Recognised income distributions in the financial statements for the year | ||||||
Dividend | Type | For year ended 31 December | Pence per share | Date paid/payable | 2017 £ | 2016 £ |
Revenue available for distribution by way of dividends for the year
| 2,003,805 | 1,577,838 | ||||
Interim | Income | 2016 | 2.00p | 20/09/2016 | - | 1,512,559 |
Final | Income | 2017 | 1.50p | 17/05/2018 | 1,628,715 | - |
Total income dividends for the year | 1,628,715 | 1,512,559 | ||||
Notes a) Basic earnings per share is total earnings after taxation divided by the weighted average number of shares in issue. b) Revenue earnings per share is the revenue earnings after taxation divided by the weighted average number of shares in issue.
c) Capital earnings per share is the total capital earnings after taxation divided by the weighted average number of shares in issue.
d) There are no instruments that will increase the number of shares in issue in future. Accordingly, the above figures currently represent both basic and diluted earnings per share. |
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7 Basic and diluted earnings per share
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8 Investments at fair value
The most critical estimates, assumptions and judgements relate to the determination of the carrying value of investments at "fair value through profit and loss" (FVTPL). All investments held by the Company are classified as FVTPL and measured in accordance with the International Private Equity and Venture Capital Valuation ("IPEV") guidelines, as updated in December 2015. This classification is followed as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income.
Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional. 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. Where the terms of a disposal state that consideration may be received at some future date and, subject to the conditionality and materiality 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 recognized 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 policies, 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 multiple basis. The investments 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, or gross profit (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:-
- 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 ordinary shares | Unquoted preference shares | Loan stock | Total | |
£ | £ | £ | £ | £ | |
Cost at 31 December 2016 | 245,012 | 17,104,478 | 29,850 | 32,235,441 | 49,614,781 |
Net unrealised gains/(losses) at 31 December 2016 | 112,294 | (2,366,432) | 2,176 | 5,775,142 | 3,523,180 |
Permanent impairment in value of investments as at 31 December 2016 | - | (407,123) | (3,078) | (1,044,992) | (1,455,193) |
Valuation at 31 December 2016 | 357,306 | 14,330,923 | 28,948 | 36,965,591 | 51,682,768 |
Purchases at cost (note b) | - | 1,694,171 | - | 647,259 | 2,341,430 |
Sale proceeds (note c) | (367,810) | (5,739,297) | (2,265) | (11,075,715) | (17,185,087) |
Net realised gains | 10,504 | 2,985,716 | 2,265 | 2,250,374 | 5,248,859 |
Reclassification at value (note d) | - | 722,979 | 159 | (723,138) | - |
Net unrealised gains/(losses) for the year (note e) | - | 840,359 | 717,270 | (2,130,291) | (572,662) |
Valuation at 31 December 2017 | - | 14,834,851 | 746,377 | 25,934,080 | 41,515,308 |
Cost at 31 December 2017 | - | 18,094,736 | 27,744 | 24,109,079 | 42,231,559 |
Net unrealised gains at 31 December 2017 | - | 243,148 | 718,633 | 1,825,001 | 2,786,782 |
Permanent impairment in cost of investments as at 31 December 2017 (note f) | - | (3,503,033) | - | - | (3,503,033) |
Valuation at 31 December 2017 | - | 14,834,851 | 746,377 | 25,934,080 | 41,515,308 |
Note a) Disposals of investment portfolio companies during the year were: | Type | Investment cost | Disposal proceeds | Valuation at 31 December 2016 | Realised gain in year | |
£ | £ | £ | £ | |||
Entanet Holdings Limited | Full Exit | 2,713,077 | 6,123,453 | 2,819,755 | 3,303,698 | 1 |
Gro-Group Holdings Limited | Full Exit | 1,975,007 | 3,452,891 | 1,703,805 | 1,749,086 | |
Backhouse Management Limited | Loan repayment | 726,480 | 1,210,800 | 726,480 | - | 2 |
Creasy Marketing Services Limited | Loan repayment | 726,480 | 1,210,800 | 726,480 | - | 2 |
McGrigor Management Limited | Loan repayment | 726,480 | 1,210,800 | 726,480 | - | 2 |
Hollydale Management Limited | Loan repayment | 527,580 | 879,300 | 527,580 | - | 2 |
Chatfield Services Limited / Buster and Punch Holdings Limited | Share buyback and loan repayment | 845,508 | 845,508 | 845,508 | - | |
Barham Consulting Limited | Loan repayment | 363,240 | 605,400 | 363,240 | - | 2 |
Manufacturing Services Investments Limited | Share Buyback | 571,200 | 571,200 | 571,200 | - | |
TPSFF Holdings Limited | Loan repayment | 285,688 | 521,554 | 521,554 | - | |
Omega Diagnostics Group plc | Full Exit | 245,012 | 367,810 | 357,306 | 10,504 | |
Others | 18,900 | 185,571 | - | 185,571 | ||
9,724,652 | 17,185,087 | 9,889,388 | 5,248,859 |
1 - Deferred contingent consideration of £0.63 million is potentially receivable 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.
2 - The gain on the loan repayments above of £2,046,840 has been set off against an equivalent permanent impairment in the equity instrument of the investments in these companies (see note f below). Thus, no gain or loss resulted. |
Reconciliation of investment transactions to Statement of Cash flows Note b) Purchases above of £2,341,430 are more than that shown in the Statement of Cash Flows of £1,649,533 by £691,897. This relates to the investment in Ibericos Etc. Limited (trading as Tapas Revolution) that completed on 4 January 2017. These funds were included in debtors at the start of the year.
Note c) Investment proceeds shown above of £17,185,087 differs from the sale proceeds shown in the Statement of Cash flows of £13,821,745 by £3,363,342. This difference arises because of proceeds due from the disposal of Gro-Group held in debtors at the year end (£3,452,892) and proceeds relating to the disposal of Omega Diagnostics Group plc that were held in debtors at the start of the year (£89,550).
Note d) During the year, two investee companies were reorganised whereby loan stocks held at a value of £723,138 were reclassified as ordinary shares, and ordinary shares of value £159 were reclassified as preference shares.
Note e) The major components of the decrease in unrealised valuations of £572,662 in the year were decreases of £928,197 in Veritek Global Limited, £669,059 in Media Business Insight Holdings Limited, and £647,190 in Virgin Wines Holding Company Limited. These falls were partly offset by increases of £669,575 in Vectair Holdings Limited, £526,940 in Master Removers Group Limited, £378,668 in Pattern Analytics Limited (trading as Biosite), and £371,982 in TPSFF Holdings 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 decrease 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 £1,455,193 to £3,503,033. The increase of £2,047,840 is due to the impairments of equity of five investee companies referred to in note 2 to note a) above, and the impairment of £1,000 of another company's remaining investment cost.
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9 Current asset investments and Cash at bank
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 | 20,797,724 | 4,239,682 | ||
Cash equivalents per Statement of Cash Flows | 20,797,724 | 4,239,682 | ||
Bank deposits that mature after three months but are not immediately repayable | 1,005,552 | 1,007,267 | ||
Current asset investments | 21,803,276 | 5,246,949 | ||
Cash at bank | 3,027,719 | 5,314,539 | ||
10 Post balance sheet events
On 18 January 2018, the Company invested £0.42 million into Proactive Group Holdings, Inc.
On 24 January 2018, 3,537,118 ordinary shares were allotted under the Company's Offer for Subscription for applications received up to and including 15 January 2018, raising net funds of £2.48 million.
On 1 February 2018, TPSFF Holdings Limited made two loan repayments totalling £0.14 million.
On 27 February 2018, the Company invested £0.43 million into Mpb, an existing portfolio company
On 7 March 2018, the Company invested £0.58 million into SuperCarers Limited.
On 13 March 2018, the Company invested £0.60 million into Hemmels Limited.
On 13 March 2018, 7,618,144 ordinary shares were allotted under the Company's Offer for Subscription raising net funds of £5.34 million. As this meant £25 million of applications had now been subscribed, the Offer then closed.
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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 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 will be published on the Company's website at www.migvct.co.uk shortly and shareholders who have not requested a hard copy of the report will shortly receive notification from the Company on how to download a pdf of the Report from the website. Shareholders and members of the public who wish to receive a hard copy of the Annual Report, may request a copy by writing to the Company Secretary, Mobeus Equity Partners LLP, 30 Haymarket (4th floor), London SW1Y 4EX or by email: vcts@mobeusequity.co.uk.
13 Annual General Meeting The Annual General Meeting of the Company will be held at 2.00 p.m. on Wednesday, 9 May 2018 at The Clubhouse, 8 St James's Square, London, SW1Y 4JU.
Contact details for further enquiries:
Robert King or Robert Brittain of Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by e-mail to vcts@mobeusequity.co.uk.
Mark Wignall or Mike Walker at Mobeus Equity Partners LLP (the Investment Adviser) on 020 7024 7600 or by e-mail to info@mobeusequity.co.uk.
DISCLAIMER Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
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