Interim / Quarterly Report • Mar 31, 2016
Interim / Quarterly Report
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A VENTURE CAPITAL TRUST
Unaudited Half-Year Report for the six months ended 31 March 2016
The Income & Growth VCT plc ("the Company" "the VCT" or "I&G VCT") is a Venture Capital Trust ("VCT") listed on the London Stock Exchange. Its investment portfolio is advised by Mobeus Equity Partners LLP ("Mobeus").
The Objective of the Company is to provide investors with an attractive return, by maximising the stream of dividend distributions from the income and capital gains generated by a diverse and carefully selected portfolio of investments, while continuing at all times to qualify as a VCT.
| Financial Highlights | 1 |
|---|---|
| Chairman's Statement | 2 |
| Investment Policy | 5 |
| Summary of VCT Regulation | 5 |
| Investment Review | 6 |
| Investment Portfolio Summary | 8 |
| Statement of the Directors' Responsibilities | 11 |
| Unaudited Financial Statements | 12 |
| Notes to the Unaudited Financial Statements | 18 |
| Shareholder Information | 24 |
| Performance Data at 31 March 2016 | 26 |
| Timeline of the Company | 28 |
| Corporate Information | 29 |
Results for the six months ended 31 March 2016
Net asset value total return per share was 3.8% for the six months.
Share price total return per share was 7.0% for the six months.
The Board has declared an interim dividend for the current year of 6.00 pence per share, to be paid to shareholders on 7 July 2016 which will bring cumulative dividends paid since the inception of the current share class* to 80.50 pence per share.
A total of £4.44 million was invested into two new investments, Access IS and Redline.
Total cash proceeds from realisations were £10.65 million which included £6.84 million from the realisations of Tessella and Westway.
* The first allotment of the former 'S' Share class, now the current share class, took place on 6 February 2008.
The table below shows the recent past performance of the Company's existing class of shares. Detailed performance data, including a table of dividends paid to date, for all fundraising rounds is shown in the Performance Data appendix on pages 26 - 27.
| Reporting date | Net assets |
NAV per Share |
Cumulative dividends paid per share |
Cumulative NAV total return per share to shareholders |
Share price1 |
Cumulative share price total return per share to shareholders |
Dividends paid and proposed in respect of each year |
|---|---|---|---|---|---|---|---|
| As at | (£m) | (p) | (p) | (p) | (p) | (p) | (p) |
| 31 March 2016 | 74.31 | 104.42 | 74.50 | 178.92 | 94.00 | 168.50 | 6.002 |
| 30 September 2015 | 75.20 | 106.38 | 68.50 | 174.88 | 93.50 | 162.00 | 12.00 |
| 30 September 2014 | 69.31 | 114.60 | 50.50 | 165.10 | 103.503 | 154.00 | 18.00 |
| 30 September 2013 | 60.47 | 113.90 | 40.50 | 154.40 | 99.50 | 140.00 | 10.00 |
| 30 September 2012 | 50.55 | 109.62 | 28.50 | 138.12 | 97.00 | 125.50 | 26.00 |
| 30 September 2011 | 49.15 | 120.79 | 4.50 | 125.29 | 91.60 | 96.10 | 4.00 |
1 Source: London Stock Exchange.
2 As noted in the third financial highlight above.
3 The share price at 30 September 2014 has been adjusted to add back the dividend of 8.00 pence per share paid on 30 October 2014, which was excluded from the listed share price at that year-end.
This half-year has seen a period of solid performance for the Company. Three profitable investment disposals and a good performance across the portfolio as a whole were the main contributors to a further increase in shareholder returns for the half-year. During the period, the Company also completed new investments into two companies.
The second of these investments was the first made by the Company in compliance with the new VCT legislation introduced by the Finance (No 2) Act 2015 (the "new VCT Rules") and in accordance with the Company's new Investment Policy. By way of a reminder, the new Investment Policy was required to comply with the new VCT Rules and was approved by shareholders at the Annual General Meeting on 10 February 2016. Details of the new VCT Rules were set out in the 2015 Annual Report and a summary of current VCT regulation is provided on page 5. Further information is given on more recent developments later in this statement.
The Company's NAV total return per share was 3.8% for the six months to 31 March 2016 (2015: 3.0%) while the total share price return was 7.0% (2015: 4.3%).
Cumulative NAV total return per share (being the closing net asset value plus total dividends paid to date) has risen to 178.92 pence compared to 174.88 pence at the year-end. This represents a further increase of 2.3% over the period and an increase of 88.9% since the merger of the VCT's share classes in March 2010.
Shareholders who invested in the former class of 'S' Shares in 2007 (the current share class) have seen a total NAV return to date of 178.92 pence per share. This return compares with an initial investment of 100 pence per share, or a net cost (after initial income tax relief of 30%) of 70 pence per share. As part of this return, shareholders have received 74.50 pence in dividends, representing an average annual yield upon their initial 70.00 pence net
investment of 13.0% (2015: 12.5%). The underlying net asset value, which represents the balance of their total return, is 104.42 pence per share.
Similar details are contained in the tables showing the performance for all fundraisings, including the fund of ordinary shares launched in 2000/01 ("the former 'O' Share Fund"), in the Performance Data tables on pages 26 - 27 of this Half-Year Report.
The portfolio has performed well during the period, increasing in value by 6.5% (2015: 8.0%) on a like-for-like basis. The aggregate portfolio saw a net increase of £2.47 million in realised gains and £0.73 million in unrealised gains over the six month period. The portfolio was valued at £53.95 million at the period-end (2015: £60.42 million). The movement over the six months is largely explained by disposals that are summarised below and in more detail in the Investment Review.
During the six months under review, the Company invested a total of £4.47 million, principally being £4.44 million invested into two new investments. These were Access IS, a leading provider of data capture and scanning hardware, and Redline, a market leader in the provision of security consultancy and services, particularly to airports.
The sale proceeds for the period of £10.65 million arose mainly from £7.38 million received from the full realisations of Tessella and Westway in December 2015 and the exit of Original Additions just before the period-end. The balance included proceeds from sales of investments made in previous years and receipts from partial loan stock repayments.
Details of all these transactions and the performance of the portfolio are contained in the Investment Review on pages 6 - 7.
The results for the period are set out in the Unaudited Income Statement on pages 12 - 13 and show a revenue gain (after tax) of 1.69 pence per share (2015: 1.29 pence). The revenue return for the period of £1.19 million has risen by £0.37 million from last year's comparable figure of £0.82 million. This is primarily due to an increase in income of £0.46 million partly offset by an increase in the tax charge.
The rise in income of £0.46 million is due to a rise in loan interest income of £0.52 million, mainly arising from the exit of Original Additions (but also arising from a net increase in loan stock investments). Higher yields are also now being received from several loan stock investments.
Running costs charged to revenue returns fell marginally to £0.41 million. Other expenses fell by £0.02 million resulting from lower printing costs, trail commission fees and subscription costs, countered by an increase in Investment Adviser's fees. Finally, the tax charge rose by £0.09 million due to the increase in taxable loan interest income.
As the Company has achieved two substantial and profitable exits in the period together with other realisations at gains over cost, a performance fee accrual of £1.13 million (chargeable to the capital return) has been made, which is an increase of £0.46 million over the comparable period.
The Board continues to be committed to providing an attractive dividend stream to shareholders and has set a target in respect of each financial year of at least 6.00 pence per share.
The Board has declared an interim dividend of 6.00 pence per share for the year ending 30 September 2016. I am pleased to note that this payment will meet the Board's target for the current year at the half-year stage. This dividend will be paid on 7 July 2016 to shareholders on the Register on 10 June 2016 and will bring cumulative dividends per share paid to date to 80.50 pence.
In respect of the past four financial years, and this half-year, the Company has now paid or declared dividends totalling 72.00 pence per share.
Shareholders are encouraged to ensure that Capita, as the Company's Registrar, has up-to-date details for them and to check whether they have received all dividends payable to them. This is particularly important if they have recently moved house or
changed their bank. We are aware that a number of dividends remain unclaimed by shareholders and whilst we will continue to endeavour to contact you if this is the case, we cannot guarantee that we will be able to do so if the Registrars do not have an up-to-date address and/or email address for you.
The Company's Dividend Investment Scheme ("the Scheme") is a convenient, easy and cost effective way for shareholders to build up their shareholding in the Company. Instead of receiving cash dividends they can elect to receive new shares in the Company. By opting to receive their dividend in this manner, there are three benefits to shareholders:
Shareholders wishing to join the Scheme should submit a mandate form to Capita Asset Services, the Scheme Administrator, by no later than, Wednesday, 22 June 2016, to ensure that they receive the above dividend as shares. Details of where to obtain an application form can be found in Shareholder Information on page 24.
Shareholders who already participate, or are considering whether to participate, in the Scheme should consider the following section on Industry Developments and the information given in the Annual
Report. There is an associated five year holding period required to secure income tax relief when new shares are allotted under the Scheme. Shareholders may, therefore, wish to review their participation until the implications of these changes are clearer. If you are in any doubt about whether to participate in the Scheme or not, you should consult your financial adviser.
As explained in more detail in the Annual Report, the Finance (No 2) Act 2015, enacted in November 2015, introduced a series of amendments to the VCT Scheme. In summary, VCT capital may now only be invested for growth and development purposes which means that any new investments made by the VCT are likely to be focused upon younger and smaller companies within defined limits. The VCT's recent investment into Redline is an example of the type of investment the Company is likely to make in the future.
Since the publication of the Annual Report, your Board, together with the Investment Adviser and the whole VCT industry, has sought greater clarity from HMRC at a more detailed, practical level of what investments will or will not be permitted by the legislation. The draft guidelines, published by HMRC earlier this month, have now clarified some of the implications of these new VCT rules, which the Investment Adviser is now reviewing.
Notwithstanding the above, the Board's view remains that the change in focus carries not only a higher risk, but also the prospect of more variable returns.
Generating the level of consistently high returns achieved over the last six years, for example, is likely to be more challenging. Shareholders should note that the nature of the more restrictive range and size of new potential investments is likely to reduce gradually the overall income yield on the portfolio as a whole, although there should be a commensurate increase in the level of capital returns, albeit with a more volatile profile. However, shareholders should also note that the existing portfolio is comprised almost exclusively of MBO investments whose full potential should be realised over the next five years or so and thus changes to the balance of the portfolio and, therefore, to the risk and reward metrics are likely to be
gradual. Based upon these discussions and developments to date, allied to the record of past returns achieved, the Board remains of the view that the Investment Adviser should be well able to apply its measured approach, taking account of the new VCT Rules, in order to continue to generate satisfactory returns in the future.
Annual fundraisings by the Company have provided it with a satisfactory level of liquidity sufficient to pursue its Objective and to meet the Company's running costs. The Board will consider further fundraising once it has had the opportunity to consider the implications of the new VCT Rules on the pace and scale of new investment.
The Board continues to monitor credit risk in respect of its cash balances and to prioritise the security and protection of the Company's capital. Cash and liquidity fund balances as at 31 March 2016 amounted to £21.20 million. This figure included £10.70 million held in money market funds with AAA credit ratings and £10.50 million held in deposit accounts with a number of well-known financial institutions across a range of maturities. In addition, the investment portfolio contained £11.78 million in seven companies preparing to trade that also hold cash in money market funds.
During the six months ended 31 March 2016, the Company bought back 227,619 of its own shares, representing 0.3% (2015: 0.2%) of the shares in issue at the beginning of the period, at a total cost of £0.21 million (2015: £0.12 million) inclusive of expenses.
It is the Company's policy to cancel all shares bought back by the Company. The Board regularly reviews its buyback policy and currently seeks to maintain the discount to NAV at which the Company's shares trade at around 10% below the latest published NAV.
May I remind you that the Company continues to have its own website which is available at www.incomeandgrowthvct.co.uk.
The Investment Adviser held its sixth annual Shareholder Event in January 2016 which, from the feedback submitted, was well received by shareholders. The event included presentations on the investment activity and performance of the Mobeus VCTs. I would like to thank those shareholders who attended for helping to make it such a success. The next Event will take place on Tuesday, 24 January 2017. Shareholders will be sent further details and an invitation nearer to the time.
The global economy is currently undergoing a period of particular uncertainty reflected in some volatility in financial markets. Despite this backdrop and the added uncertainty generated by the forthcoming EU referendum, the outlook for the UK economy continues to look relatively resilient. If the Government's predicted growth rate of 2.0% for the UK economy in 2016 transpires, the existing portfolio should continue to make further steady progress. It would seem reasonable to expect a reduction in the level of new investment as the Investment Adviser identifies and evaluates opportunities that comply with the requirements of the new legislation. The Board is, therefore, pleased to note the completion of the first investment, under the new VCT legislation, in Redline. The Board is confident that the Investment Adviser will be able to tailor its investment approach to comply with the new VCT Rules. Meanwhile, the existing portfolio continues to perform well and provide a good foundation for future performance.
Once again, I would like to take this opportunity to thank all shareholders for their continued support.
Chairman 25 May 2016
The Company's policy is to invest primarily in a diverse portfolio of UK unquoted companies. Investments are generally structured as part loan and part equity in order to receive regular income and to generate capital gain upon sale.
Investments are made selectively across a number of sectors, principally in established companies.
The Company's cash and liquid resources are held in a range of instruments of varying maturities, subject to the overriding criterion that the risk of loss of capital be minimised.
The Investment Policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HMRC. Amongst other conditions, the Company may not invest more than 15% of its investments (by VCT value at the time of investment) in a single company or group and must have at least 70% by VCT value of its investments throughout the period in shares or securities comprised in VCT qualifying holdings of which a minimum
overall of 30% by VCT value (70% for funds raised after 6 April 2011) must be in ordinary shares which carry no preferential rights (save as may be permitted under VCT rules). In addition, although the VCT can invest less than 30% (70% for funds raised after 6 April 2011) of an investment in a specific company in ordinary shares it must have at least 10% by VCT value of its total investments in each VCT qualifying company in ordinary shares which carry no preferential rights (save as may be permitted under VCT rules).
The companies in which investments are made must have no more than £15 million of gross assets at the time of investment and £16 million immediately following the investment to be classed as a VCT qualifying holding.
The Company initially holds its funds in a portfolio of interest bearing investments and deposits. The investment portfolio of qualifying investments is built up over a three year period with the aim of investing and maintaining at least 70% of net funds raised in qualifying investments.
Risk is spread by investing in a number of different businesses across different industry sectors. To reduce the risk of high exposure to equities, each qualifying investment is structured to achieve the optimum balance between loan stock and equity to provide protection against downside risk alongside the best potential overall returns.
The Company is entitled to invest alongside other VCTs advised by Mobeus Equity Partners LLP that have a similar investment policy, normally on a pro rata to net assets basis.
The Company's articles of association permit borrowing of up to 10% of the adjusted capital and reserves (as defined therein). However, it has never borrowed and the Board has currently no plans to undertake any borrowing.
To assist shareholders, the following table contains a summary of the most important rules that determine VCT approval.
To achieve continued status as a VCT, the Company must meet a number of conditions, the most important of which are that:-
To be VCT qualifying holdings, new investments must be in companies:-
* VCT tax value means as valued in accordance with prevailing VCT legislation.
The above takes into account legislation up to the Finance (No 2) Act 2015. The recent 2016 Budget proposes that non-qualifying investments can no longer be made, except for certain exceptions in managing the Company's short-term liquidity.
A total of £4.44 million was invested into new companies during the six months under review. This comprised new investments into Access IS and Redline.
| Company | Business | Date of investment |
Amount of new investment (£m) |
|---|---|---|---|
| Access IS | Data capture and scanning hardware |
October 2015 |
3.31* |
Access IS is a leading provider of data capture and scanning hardware. The company has a significant share of the worldwide market for this technology in airports and strong positions in the fast growing markets of both ID & Security and Transport & Ticketing. This was an opportunity to invest in a longstanding and profitable business that is well positioned in its niche market. The company's latest audited accounts for the year ended 31 December 2014 show annual sales of £9.95 million and profit before interest, tax and amortisation of goodwill of £1.22 million.
* Amounts held in existing companies preparing to trade, Knighton Management (£1.55 million) and Tovey Management (£1.50 million), along with a further £0.26 million from the Company, were used for this investment.
| Redline | Provision of security products and services |
February 2016 |
1.13* |
|---|---|---|---|
| --------- | --------------------------------------------------- | ------------------ | ------- |
Redline Assured Security ("Redline") is a market leader in the provision of security consultancy and training services to airlines, governments, institutions, airports and global distribution companies. Redline currently operates predominantly in the aviation security market and is at the forefront of counter terrorism training and services. The investment will be applied to enable the Company to grow in its core aviation market and in other sectors. The company's latest accounts for the year ended 31 March 2015 show turnover of £4.81 million and profit before interest, tax and amortisation of goodwill of £0.82 million.
* £1.13 million held in Pound FM Consultants, a company preparing to trade, was used for this investment. This resulted in a net repayment of £0.37 million. Pound FM Consultants subsequently changed its name to Redline Worldwide Limited.
In October 2015, the VCT made a further investment of £0.03 million into Racoon, a premier supplier of ethically sourced hair for hair extensions, to provide additional working capital to enable the business to strengthen its sales team and to broaden its product range.
The VCT realised three investments during the six months under review for cash proceeds totalling £7.38 million. This comprised the very successful realisations of Tessella and Westway as well as the final loan stock payment from Original Additions. Other realisations were £1.52 million, including post-sale receipts from the companies referred to opposite. With the loan repayments of £1.75 million, total net cash proceeds for the six months amounted to £10.65 million.
| Company | Business | Period of investment |
Total cash proceeds over the life of the investment/ Multiple over cost |
|---|---|---|---|
| Tessella | Science powered technology and consulting services |
July 2012 – December 2015 |
£4.91 million 2.8 times cost |
The VCT sold its investment in Tessella to the French engineering consultancy, Altran Group plc for £4.04 million. Founded in 1980, Tessella is now a global business. In 2011 the company received the prestigious Queen's Award for Enterprise in Innovation for its work on preserving the integrity of digital information over long periods of time, irrespective of numerous changes in technology. As part of the sale transaction, the Company has retained a small investment in this data archiving business, Preservica, which was previously held within Tessella. The sale returned an IRR of 42% and during the three and a half years of this investment, revenue increased by 43% from £18.5 million in 2012 to £26.5 million forecast for the current financial year. The Company realised a gain, over current cost, of £2.68 million, being 3.80 pence per share.
| Westway | Air conditioning Systems |
June 2009 – December 2015 |
£3.74 million 6.7 times cost |
|
|---|---|---|---|---|
| -- | --------- | ----------------------------- | ------------------------------ | --------------------------------- |
The VCT sold its investment in Westway to ABM Industries Inc, one of the largest facility management services providers in the US for £2.80 million. During the period of the investment Westway, which is headquartered in Middlesex, and founded in 2001, expanded its range of services from heating, ventilation and air conditioning and now offers other technical services including mechanical and electrical maintenance, energy services, communications, security systems and the servicing of electronic garment picking systems. The sale returned an IRR of 48%. The Company realised a gain over current cost of £2.74 million, being 3.88 pence per share.
| Original Additions | Beauty products | September 2004 – March 2016 |
£4.41 million 4.4 times cost |
|
|---|---|---|---|---|
| -- | -------------------- | ----------------- | -------------------------------- | --------------------------------- |
Original Additions repaid the final tranche of its loan stock on the sale of this investment to PDC Brands, a US private equity backed personal products business. Original Additions serves the retail and professional beauty markets with three leading brands. Over the lifetime of the investment, it returned an IRR of 41%.
In addition to the above, the Company received a further £1.52 million from investments realised in a previous period. This mainly comprised £1.27 million as deferred consideration primarily from App-DNA (£0.78 million), Focus Pharma (£0.29 million) and Alaric (£0.12 million). In addition £0.01 million was received from Newquay Helicopters as a second distribution resulting from the members' voluntary liquidation of that company and £0.24 million was received in consideration for the shares of Pound FM Consultants (a company preparing to trade).
Loan stock repayments totalled £4.27 million for the year, including £2.52 million as part of the proceeds from the companies realised above. Positive cash flow at three other companies (in addition to Pound FM Consultants, a company preparing to trade) contributed to the balance of £1.75 million, summarised below:-
| Company | Business | Month(s) | Amount (£000's) |
|---|---|---|---|
| Ward Thomas | Logistics, storage and removals business | December and January | 1,225 |
| Jablite | Expanded polystyrene products | October and November | 241 |
| Motorclean | Vehicle cleaning and valeting services | October and February | 143 |
| Pound FM | Former company preparing to trade | February | 136 |
| Total | 1,745 |
| Total cost at 31 March 2016 (unaudited) £ |
Valuation at 30 September 2015 (audited) £ |
Additional investments in the period £ |
Valuation at 31 March 2016 (unaudited) £ |
|
|---|---|---|---|---|
| Entanet Holdings Limited Wholesale communications provider |
3,175,171 | 4,790,700 | - | 4,496,641 |
| Virgin Wines Holding Company Limited Online wine retailer |
2,745,503 | 3,462,349 | - | 4,031,969 |
| Tovey Management Limited (trading as Access IS)1 Provider of data capture and scanning hardware |
3,313,932 | 3,058,000 | 255,932 | 3,313,932 |
| ASL Technology Holdings Limited Printer and photocopier services |
2,722,106 | 3,196,284 | - | 3,119,039 |
| Media Business Insight Holdings Limited A publishing and events business focused on the creative production industries |
3,666,556 | 3,666,556 | - | 3,111,959 |
| Manufacturing Services Investment Limited Company seeking to carry on a business in the manufacturing sector |
2,708,100 | 2,708,100 | - | 2,708,100 |
| Veritek Global Holdings Limited Maintenance of imaging equipment |
2,289,859 | 2,494,306 | - | 2,304,702 |
| Idox plc Developer and supplier of knowledge management products |
453,881 | 1,687,581 | - | 2,083,434 |
| Fullfield Limited (trading as Motorclean) Vehicle cleaning and valet services |
1,517,734 | 1,634,751 | - | 1,897,328 |
| Tharstern Group Limited Software based management Information systems for the printing industry |
1,454,278 | 2,012,448 | - | 1,800,189 |
| CGI Creative Graphics International Limited Vinyl graphics to the global automotive, recreation vehicle and aerospace markets |
1,943,948 | 1,990,351 | - | 1,730,151 |
| Gro-Group Holdings Limited Baby sleep products |
2,398,928 | 1,788,187 | - | 1,606,131 |
| Hollydale Management Limited Company seeking to carry on a business in the food sector |
1,554,000 | 1,554,000 | - | 1,554,000 |
| Backhouse Management Limited Company seeking to carry on a business in the motor sector |
1,504,000 | 1,504,000 | - | 1,504,000 |
| Barham Consulting Limited Company seeking to carry on a business in the catering sector |
1,504,000 | 1,504,000 | - | 1,504,000 |
| Chatfield Services Limited Company seeking to carry on a business in the retail sector |
1,504,000 | 1,504,000 | - | 1,504,000 |
| Creasy Marketing Services Limited Company seeking to carry on a business in the textile sector |
1,504,000 | 1,504,000 | - | 1,504,000 |
| McGrigor Management Limited Company seeking to carry on a business in the pharmaceutical sector |
1,504,000 | 1,504,000 | - | 1,504,000 |
| EOTH Limited (trading as Equip Outdoor Technologies) Distributor of branded outdoor equipment and clothing including the Rab and Lowe Alpine brands |
1,383,313 | 1,696,968 | - | 1,426,483 |
| Jablite Holdings Limited Manufacturer of expanded polystyrene products |
553,195 | 727,291 | - | 1,396,799 |
| Bourn Bioscience Limited Management of In-vitro fertilisation clinics |
1,610,379 | 1,220,035 | - | 1,332,624 |
| Vian Marketing Limited (trading as Tushingham Sails) Design, manufacture and sale of stand-up paddleboards and windsurfing sails |
1,207,437 | 1,207,437 | - | 1,207,437 |
1 - £1,504,000 invested in Tovey Management, a company preparing to trade, was used to acquire Knighton Management, a second company preparing to trade held at 31 March 2015, and Azio Limted (the holding company for Access IS) on 2 October 2015. The Company also advanced a non-qualifying loan of £255,932 to Access IS Limited.
| Total cost at 31 March 2016 (unaudited) £ |
Valuation at 30 September 2015 (audited) £ |
Additional investments in the period £ |
Valuation at 31 March 2016 (unaudited) £ |
|
|---|---|---|---|---|
| Redline Worldwide Limited (formerly Pound FM Consultants | 1,129,121 | 1,504,000 | - | 1,129,121 |
| Limited)1 Provider of security services to the aviation industry and other sectors |
||||
| Leap New Co Limited (trading as Ward Thomas Removals, Bishopsgate and Aussie Man & Van) A specialist logistics, storage and removals business |
682,183 | 1,907,095 | - | 987,267 |
| Aquasium Technology Limited Manufacturer and marketer of bespoke electron beam welding and vacuum furnace equipment |
250,000 | 799,825 | - | 967,309 |
| RDL Corporation Limited Recruitment consultants within the pharmaceutical, business intelligence and IT sectors |
1,441,667 | 892,907 | - | 964,558 |
| Turner Topco Limited (trading as ATG Media) Publisher and online auction platform operator |
1,529,075 | 1,135,058 | - | 924,515 |
| The Plastic Surgeon Holdings Limited Supplier of snagging and finishing services to the property sector |
406,169 | 618,566 | - | 794,058 |
| Blaze Signs Holdings Limited Manufacturer and installer of signs |
418,281 | 858,687 | - | 689,091 |
| Omega Diagnostics Group plc In-vitro diagnostics for food intolerance, autoimmune diseases and infectious diseases |
280,026 | 320,843 | - | 332,509 |
| Vectair Holdings Limited Designer and distributor of washroom products |
53,400 | 235,229 | - | 240,153 |
| Racoon International Holdings Limited Supplier of hair extensions, hair care products and training |
655,851 | 74,999 | 30,000 | 104,999 |
| BG Training Limited Technical training business |
70,833 | - | - | 70,833 |
| LightWorks Software Limited Provider of software for CAD and CAM vendors |
20,471 | 51,266 | - | 52,193 |
| Newquay Helicopters (2013) Limited (in members' voluntary liquidation) Helicopter service operator |
33,084 | 42,500 | - | 33,084 |
| Corero Network Security plc Provider of e-business technologies |
600,000 | 12,033 | - | 23,821 |
| Oxonica Limited International nanomaterials group |
2,524,527 | - | - | - |
| PXP Holdings Limited (no longer trading) Former designer, manufacturer and supplier of timber frames for buildings |
965,371 | - | - | - |
| NexxtDrive Limited Developer and exploiter of mechanical transmission technologies |
487,014 | - | - | - |
| CB Imports Group Limited (trading as Country Baskets) Importer and distributor of artificial flowers, floral sundries and home décor products |
175,000 | - | - | - |
| alwaysOn Group Limited Design, supply and integration of data storage solutions |
165,661 | - | - | - |
| Biomer Technology Limited Developer of biomaterials for medical devices |
137,170 | - | - | - |
| Watchgate Limited Holding company |
1,000 | - | - | - |
| Preservica Limited2 Seller of proprietary digital archiving software |
- | - | - | - |
1 - £1,129,121 invested in Pound FM Consultants Limited, a company preparing to trade, was used for the investment into Redline. This resulted in a net repayment to the Company of £374,879.
2 - The Company realised its investment in Tessella in December 2015. As part of the consideration, in addition to cash, the Company received a small share holding in Preservica, a subsidiary of Tessella that was demerged as part of the transaction. The fair value of the holding received was deemed to be zero at the date of the transaction and therefore, the investment cost is zero.
| Total cost at 31 March 2016 (unaudited) £ |
Valuation at 30 September 2015 (audited) £ |
Additional investments in the period £ |
Valuation at 31 March 2016 (unaudited) £ |
|
|---|---|---|---|---|
| Realised investments | - | 3,448,417 | - | - |
| Tessella Holdings Limited Provider of science powered technology and consulting services |
||||
| Westway Services Holdings (2014) Limited Installation, service and maintenance of air conditioning systems |
- | 1,561,033 | - | - |
| Original Additions Topco Limited Sale of beauty products |
- | 537,948 | - | - |
| Total | 54,244,224 | 60,415,750 | 285,932 | 53,954,429 |
In accordance with Disclosure and Transparency Rule (DTR) 4.2.10, Colin Hook (Chairman), Jonathan Cartwright (Chairman of the Audit and Nomination & Remuneration Committees) and Helen Sinclair (Chairman of the Investment Committee), being the Directors of the Company, confirm that to the best of their knowledge:
In accordance with DTR 4.2.7, the Board confirms that the principal risks and uncertainties facing the Company have not materially changed from those identified in the Annual Report and Accounts for the year ended 30 September 2015.
The principal risks faced by the Company are:
A detailed explanation of the principal risks facing the Company can be found in the Annual Report and Accounts for the year ended 30 September 2015 on pages 27 - 28 and in Note 18 on pages 67 - 73. Copies can be viewed or downloaded from the Company's website: www.incomeandgrowthvct .co.uk.
The Board has assessed the Company's operation as a going concern. The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the half-year management report which comprises the Chairman's
Statement, Investment Policy, Investment Review and Investment Portfolio Summary. The Directors have satisfied themselves that the Company continues to maintain a significant cash position. The majority of companies in the portfolio continue to trade profitably and the portfolio taken as a whole remains resilient and well-diversified. The major cash outflows of the Company (namely investments, share buybacks and dividends) are within the Company's control.
The Board's assessment of liquidity risk and details of the Company's policies for managing its capital and financial risks are shown in Note 18 on pages 67 - 73 of the Annual Report and Accounts for the year ended 30 September 2015. Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the half-yearly report and annual financial statements.
This report may contain forward looking statements with regards to the financial condition and results of the Company, which are made in the light of current economic and business circumstances. Nothing in this report should be construed as a profit forecast.
For and on behalf of the Board:
Colin Hook Chairman
25 May 2016
| Six months ended 31 March 2016 | ||||
|---|---|---|---|---|
| Notes | Revenue £ |
Capital £ |
(unaudited) Total £ |
|
| Net unrealised gains on investments | 9 | - | 726,630 | 726,630 |
| Net realised gains on investments | 9 | - | 2,471,203 | 2,471,203 |
| Income | 4 | 1,894,754 | - | 1,894,754 |
| Investment adviser's fees | 5 | (213,564) | (640,692) | (854,256) |
| Investment advisers' performance fees | 5 | - | (1,134,982) | (1,134,982) |
| Other expenses | (197,949) | - | (197,949) | |
| Profit on ordinary activities before taxation | 1,483,241 | 1,422,159 | 2,905,400 | |
| Tax on profit on ordinary activities | 6 | (288,818) | 288,818 | - |
| Profit and total comprehensive income | 1,194,423 | 1,710,977 | 2,905,400 | |
| Basic and diluted earnings per share | 7 | 1.69p | 2.41p | 4.10p |
The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the unrealised gains and realised gains on investments and the proportion of the Investment Adviser's fee 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 Statement of Recommended Practice ("SORP") issued in November 2014 by the Association of Investment Companies ("AIC"), supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of profit attributable to equity shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 Income Tax Act 2007.
All the items in the above statement derive from continuing operations of the Company. No operations were acquired or discontinued in the year.
The notes on pages 18 - 23 form part of these Half-Year Financial Statements.
| Year ended 30 September 2015 (audited) |
(unaudited) | Six months ended 31 March 2015 | ||||
|---|---|---|---|---|---|---|
| Total £ |
Capital | Revenue £ |
Total £ |
Capital £ |
Revenue £ |
|
| 4,574,928 | 4,574,928 | - | 885,965 | 885,965 | - | |
| 2,053,151 | 2,053,151 | - | 1,687,489 | 1,687,489 | - | |
| - 2,997,718 |
2,997,718 | 1,432,249 | - | 1,432,249 | ||
| (1,622,748) | (1,217,061) | (405,687) | (775,736) | (581,802) | (193,934) | |
| (667,622) | (667,622) | - | (679,068) | (679,068) | - | |
| - (471,279) |
(471,279) | (219,185) | - | (219,185) | ||
| 6,864,148 | 4,743,396 | 2,120,752 | 2,331,714 | 1,312,584 | 1,019,130 | |
| 386,360 | (386,360) | - | 194,620 | (194,620) | ||
| 6,864,148 | 5,129,756 | 1,734,392 | 2,331,714 | 1,507,204 | 824,510 | |
| 10.21p | 7.63p | 2.58p | 3.65p | 2.36p | 1.29p |
| Notes | 31 March 2016 (unaudited) £ |
31 March 2015 (unaudited) £ |
30 September 2015 (audited) £ |
|
|---|---|---|---|---|
| Fixed assets | ||||
| Investments at fair value | 9 | 53,954,429 | 43,762,661 | 60,415,750 |
| Current assets | ||||
| Debtors and prepayments | 532,667 | 1,005,745 | 1,082,567 | |
| Current asset investments | 10 | 18,395,656 | 15,624,649 | 11,158,555 |
| Cash at bank | 2,805,684 | 15,485,127 | 3,675,257 | |
| 21,734,007 | 32,115,521 | 15,916,379 | ||
| Creditors: amounts falling due within one year | (1,377,009) | (1,214,402) | (1,129,833) | |
| Net current assets | 20,356,998 | 30,901,119 | 14,786,546 | |
| Net assets | 74,311,427 | 74,663,780 | 75,202,296 | |
| Capital and reserves | ||||
| Called up share capital | 711,648 | 704,429 | 706,930 | |
| Capital redemption reserve | 11,564 | 4,988 | 9,288 | |
| Share premium reserve | 17,628,344 | 16,369,167 | 16,977,902 | |
| Revaluation reserve | 4,921,137 | 5,284,075 | 8,997,633 | |
| Special reserve | 25,448,930 | 28,011,329 | 27,147,965 | |
| Realised capital reserve | 23,393,471 | 22,797,227 | 19,653,747 | |
| Revenue reserve | 2,196,333 | 1,492,565 | 1,708,831 | |
| Equity shareholders' funds | 74,311,427 | 74,663,780 | 75,202,296 | |
| Basic and diluted net asset value: Basic and diluted net asset value per share |
11 | 104.42p | 105.99p | 106.38p |
The notes on pages 18 - 23 form part of these Half-Year Financial Statements.
| Non-distributable reserves | Distributable reserves | |||||||
|---|---|---|---|---|---|---|---|---|
| Called up | Capital share redemption |
premium | Share Revaluation reserve |
Special distributable |
Realised capital |
Revenue reserve |
Total | |
| capital | reserve | reserve | reserve (Note a) |
reserve (Note b) |
(Note b) | |||
| £ | £ | £ | £ | £ | £ | £ | £ | |
| At 1 October 2015 Comprehensive income |
706,930 | 9,288 | 16,977,902 | 8,997,633 | 27,147,965 | 19,653,747 | 1,708,831 | 75,202,296 |
| for the period | ||||||||
| Profit for the period | - | - | - | 726,630 | - | 984,347 | 1,194,423 | 2,905,400 |
| Total comprehensive | ||||||||
| income for the period | - | - | - | 726,630 | - | 984,347 1,194,423 | 2,905,400 | |
| Contributions by and | ||||||||
| distributions to owners | ||||||||
| Shares issued via Offer | ||||||||
| for Subscription | - | - | - | - | - | - | - | |
| Dividends re-invested | ||||||||
| into new shares | 6,994 | - | 650,442 | - | - | - | 657,436 | |
| Shares bought back | (2,276) | 2,276 | - | - | (212,179) | - | (212,179) | |
| Dividends paid | - | - | - | - | - | (3,534,605) | (706,921) | (4,241,526) |
| Total contributions | ||||||||
| by and distributions | ||||||||
| to owners | 4,718 | 2,276 | 650,442 | - | (212,179) (3,534,605) | (706,921) (3,796,269) | ||
| Other movements | ||||||||
| Realised losses transferred | ||||||||
| to special reserve (note a) | - | - | - | - | (1,486,856) | 1,486,856 | - | |
| Realisation of previously | ||||||||
| unrealised appreciation | - | - | - | (4,803,126) | - | 4,803,126 | - | |
| Total other movements | - | - | - (4,803,126) | (1,486,856) | 6,289,982 | - | - | |
| At 31 March 2016 | 711,648 | 11,564 17,628,344 | 4,921,137 | 25,448,930 23,393,471 2,196,333 74,311,427 |
a) The Special distributable reserve provides the Company with a reserve to fund market purchases of the Company's own shares, to absorb any exisiting and future losses and for any other corporate purpose.
b) The Realised capital reserve and the Revenue reserve together comprise the Profit and Loss Account of the Company.
The notes on pages 18-23 form part of these Half-Year Financial Statements.
| Non-distributable reserves | Distributable reserves | |||||||
|---|---|---|---|---|---|---|---|---|
| Called up capital £ |
Capital share redemption reserve £ |
premium reserve £ |
Share Revaluation reserve £ |
Special distributable reserve £ |
Realised capital reserve £ |
Revenue reserve £ |
Total £ |
|
| At 1 October 2014 Comprehensive income for the period |
604,769 | 3,750 | 5,662,818 | 7,662,673 | 29,576,755 | 23,917,139 | 1,878,501 | 69,306,405 |
| Profit for the period | - | - | - | 885,965 | - | 621,239 | 824,510 | 2,331,714 |
| Total comprehensive income for the period |
- | - | - | 885,965 | - | 621,239 | 824,510 | 2,331,714 |
| Contributions by and distributions to owners Shares issued via |
||||||||
| Offer for Subscription Dividends re-invested |
90,435 | - | 9,716,707 | - | (42,292) | - | - | 9,764,850 |
| into new shares Shares bought back Dividends paid |
10,463 (1,238) - |
- 1,238 - |
989,642 - - |
- - - |
- (118,985) - |
- - (6,409,863) |
- - (1,210,446) |
1,000,105 (118,985) (7,620,309) |
| Total contributions by and distributions to owners |
99,660 | 1,238 10,706,349 | - | (161,277) (6,409,863) (1,210,446) | 3,025,661 | |||
| Other movements Realised losses transferred |
||||||||
| to special reserve Realisation of previously unrealised appreciation |
- - |
- - |
- - |
- (3,264,563) |
(1,404,149) - |
1,404,149 3,264,563 |
- - |
- - |
| Total other movements | - | - | - (3,264,563) | (1,404,149) | 4,668,712 | - | - | |
| At 31 March 2015 | 704,429 | 4,988 16,369,167 | 5,284,075 | 28,011,329 22,797,227 | 1,492,565 74,663,780 |
The notes on pages 18 - 23 form part of these Half-Year Financial Statements.
| Notes | Six months ended 31 March 2016 (unaudited) £ |
Six months ended 31 March 2015 (unaudited) £ |
Year ended 30 September 2015 (audited) £ |
|
|---|---|---|---|---|
| Cash flows from operating activities | ||||
| Profit for the financial period | 2,905,400 | 2,331,714 | 6,864,148 | |
| Adjustments for: | ||||
| Net unrealised gains on investments Net realised gains on investments |
(726,630) (2,471,203) |
(885,965) (1,687,489) |
(4,574,928) (2,053,151) |
|
| (Increase)/decrease in debtors | (150,101) | 97,937 | 171,028 | |
| Increase/(decrease) in creditors and accruals | 220,474 | (1,022,075) | (1,020,953) | |
| Net cash (outflow) from operating activities | (222,060) | (1,165,878) | (613,856) | |
| Cash flows from investing activities | ||||
| Purchase of investments | 9 | (285,932) | (10,720,327) | (26,134,832) |
| Disposal of investments | 9 | 10,645,086 | 9,581,318 | 12,247,446 |
| Decrease/(increase) in bank deposits | ||||
| with a maturity over three months | 1,960,755 | (2,003,318) | (2,031,611) | |
| Net cash inflow/(outflow) from | ||||
| investing activities | 12,319,909 | (3,142,327) | (15,918,997) | |
| Cash flows from financing activities | ||||
| Shares issued as part of Offer for subscription | - | 9,764,850 | 9,764,851 | |
| Equity dividends paid | 8 | (3,584,090) | (6,620,204) | (10,205,256) |
| Purchase of own shares | (185,476) | (32,829) | (527,387) | |
| Net cash (outflow)/inflow from | ||||
| financing activities | (3,769,566) | 3,111,817 | (967,792) | |
| Net increase/(decrease) in cash and cash | ||||
| equivalents | 8,328,283 | (1,196,388) | (17,500,645) | |
| Cash and cash equivalents at start of period | 7,693,045 | 25,193,690 | 25,193,690 | |
| Cash and cash equivalents at end of period | 16,021,328 | 23,997,302 | 7,693,045 | |
| Cash and cash equivalents comprise: | ||||
| Cash at bank and in hand | 2,805,684 | 15,485,127 | 3,675,257 | |
| Cash equivalents | 10 | 13,215,644 | 8,512,175 | 4,017,788 |
The notes on pages 18 - 23 form part of these Half-Year Financial Statements.
The Income and Growth VCT plc is a public limited company incorporated in England, registration number 04069483. The registered office is 30 Haymarket, London, SW1Y 4EX.
These Financial Statements have been prepared in accordance with accounting policies consistent with Financial Reporting Standard 102 ("FRS 102"), Financial Reporting Standard 104 - Interim Financial Reporting ("FRS 104"), 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.
This is the first period in which the Financial Statements have been prepared under FRS 102. There has been no material change in the accounting policies and so there has been no restatement of comparatives, other than in relation to Cash at bank and Current asset investments. The Company has elected to apply early the revised disclosure requirements as set out in Amendments to FRS 102 – Fair Value hierarchy disclosures, issued in March 2016.
The Half-Year Report has not been audited, nor has it been reviewed by the Auditor pursuant to the Auditing Practices Board (APB)'s guidance on Review of Interim Financial Information.
The accounting policies have been applied consistently throughout the period. Full details of principal accounting policies will be disclosed in the Annual Report, while the policy in respect of investments is included within an outlined box at the top of note 9 on investments.
| Six months ended 31 March 2016 (unaudited) £ |
Six months ended 31 March 2015 (unaudited) £ |
Year ended 30 September 2015 (audited) £ |
|
|---|---|---|---|
| Dividends | 39,150 | 69,762 | 167,656 |
| Money-market funds | 17,595 | 26,714 | 29,977 |
| Loan stock interest | 1,779,137 | 1,254,297 | 2,667,443 |
| Bank deposit interest | 58,872 | 70,881 | 121,523 |
| Other income | - | 10,595 | 11,119 |
| Total income | 1,894,754 | 1,432,249 | 2,997,718 |
| Six months ended 31 March 2016 £ |
Six months ended 31 March 2015 £ |
Year ended 30 September 2015 £ |
|
|---|---|---|---|
| Allocated to revenue return: Investment Adviser's fees | 213,564 | 193,934 | 405,687 |
| Allocated to capital return: Investment Adviser's fees | 640,692 | 581,802 | 1,217,061 |
| Investment Advisers' performance fees | 1,134,982 | 679,068 | 667,622 |
| Total | 1,989,238 | 1,454,804 | 2,290,370 |
| Investment Adviser's fees | 854,256 | 775,736 | 1,622,748 |
| Investment Advisers' performance fees | 1,134,982 | 679,068 | 667,622 |
| Total | 1,989,238 | 1,454,804 | 2,290,370 |
The Directors have charged 75% of the fees payable under the Investment Adviser's Agreement, and 100% of the amounts payable under the incentive agreements, to the capital reserve. The Directors believe it is appropriate to charge the performance fees wholly against the capital return, as any fees payable depend on capital performance, as explained below.
On 30 September 2014, a new incentive fee agreement was signed between the Board and Mobeus, with effect from 1 October 2013, to amend and replace the previous agreement. The previous agreement remains in force, but only with the former adviser, Foresight Group LLP ("Foresight"). For the period ended 31 March 2016, £43,830 has been accrued under the previous agreement. Mobeus waived its right to its portion of the fee under the previous agreement. This agreement is due to expire on 10 March 2019.
Any payment under the new Performance Fees Incentive Agreement ("new Incentive Agreement") is now 15% of net realised gains for each year, payable in cash. It is payable only if the Cumulative Net Asset Value (NAV) Total Return per share (being the closing NAV at a year-end plus cumulative dividends paid to that year-end, since 1 October 2013) equals or exceeds a "Target Return". The Target Return is the greater of two targets, being either:
Both measures of Target Return are applied to the same opening base, being NAV per share as at 30 September 2013 of 113.90 pence. The objective of this Target Return is to enable shareholders to benefit from a cumulative NAV return of at least 6% per annum (5% in the financial year ended 30 September 2014), before any incentive fee is payable. Once a payment has been made, cumulative NAV total return is calculated after deducting past years' incentive fees paid and payable.
The Target Return for the year ended 30 September 2015 was a 6% uplift on the opening Target Return of 119.60 pence, being 126.77 pence. As Cumulative NAV Total Return was 134.17 pence per share at 30 September 2015, the Target Return had been exceeded and a fee of £667,622 (along with £191,138, which was payable from a previous year as a result of the annual cap (as explained below)) was paid following the approval of the Annual Report for the year ended 30 September 2015 by shareholders at the AGM held on 10 February 2016.
Under this new Incentive Agreement, any fee payments to Mobeus are subject to an annual cap of an amount equal to 2% of the net assets of I&G VCT as at the immediately preceding year-end. This cap will include any fee payable to Foresight under the old agreement, although any such payment to Foresight is not capped. Any excess over the 2% remains payable to Mobeus in the following year(s), subject to the 2% annual cap in such subsequent year(s) and after any payment in respect of such subsequent year(s).
For the year ending 30 September 2016, the Target Return will be 134.38p (being a 6% uplift on the Target Return at the previous year end of 126.77 pence). As at 31 March 2016, the Cumulative NAV Total Return per share is 138.42p, so the Target Return for the 2016 financial year has currently been met and a fee of £1,091,152 has therefore been accrued. This fee will only be payable if the Cumulative NAV Total Return per share at 30 September 2016 exceeds the Target Return per share of 134.38p.
There is no tax charge for the period as the Company has incurred tax losses, as its tax-deductible expenses exceed its taxable income.
| Six months ended 31 March 2016 £ |
Six months ended 31 March 2015 £ |
Year ended 30 September 2015 £ |
|
|---|---|---|---|
| i) Total earnings after taxation: Basic earnings per share |
2,905,400 4.10 p |
2,331,714 3.65 p |
6,864,148 10.21 p |
| ii) Net revenue from ordinary activities after taxation Basic revenue return per share |
1,194,423 1.69 p |
824,510 1.29 p |
1,734,392 2.58 p |
| Net unrealised capital gains on investments Net realised capital gains on investments Capital Investment Adviser's fees less taxation Investment Advisers' performance fees |
726,630 2,471,203 (351,874) (1,134,982) |
885,965 1,687,489 (387,182) (679,068) |
4,574,928 2,053,151 (830,701) (667,622) |
| iii) Total capital return Basic capital return per share |
1,710,977 2.41 p |
1,507,204 2.36 p |
5,129,756 7.63 p |
| iv) Weighted average number of shares in issue in the period | 70,863,747 | 63,847,421 | 67,212,047 |
Other than the performance related incentive, there are no instruments in place that will increase the number of shares in issue in future. If shares are issued, no dilution of earnings per share will occur, as the estimated incentive fee payable has been charged in these accounts.
| Dividend | Type | For the year ended 30 September |
Pence per share |
Date paid | Six months ended 31 March 2016 £ |
Six months ended 31 March 2015 £ |
Year ended 30 September 2015 £ |
|---|---|---|---|---|---|---|---|
| Second interim | Income | 2014 | 2.00p | 30 October 2014 | - | 1,210,446 | 1,210,446 |
| Second interim | Capital | 2014 | 6.00p | 30 October 2014 | - | 3,631,337 | 3,631,337 |
| Final | Income | 2014 | 1.25p | 20 March 2015 | - | 868,289 | 868,289 |
| Final | Capital | 2014 | 2.75p | 20 March 2015 | - | 1,910,237 | 1,910,237 |
| Interim | Income | 2015 | 1.00p | 30 June 2015 | - | - | 701,394 |
| Interim | Capital | 2015 | 5.00p | 30 June 2015 | - | - | 3,506,971 |
| Final | Income | 2015 | 1.00p | 15 February 2016 | 706,921 | - | - |
| Final | Capital | 2015 | 5.00p | 15 February 2016 | 3,534,605 | - | - |
| Previous dividends not claimed within the statutory period | (7,778) | ||||||
| 4,241,526 | 7,620,309 | 11,820,896 |
* - £4,241,526 (31 March 2015: £7,620,309; 30 September 2015: £11,820,896) disclosed above differs to that shown in the Statement of Cash Flows of £3,584,090 (31 March 2015: £6,620,204; 30 September 2015: £10,205,256) due to £657,436 (31 March 2015: £1,000,105; 30 September 2015: £1,615,640) of new shares issued as part of the Company's Dividend Investment Scheme.
All investments held by the Company are classified as "fair value through profit and loss", and valued in accordance with the International Private Equity and Venture Capital Valuation ("IPEVCV") 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 in organised financial markets, fair value is generally determined by reference to Stock Exchange market quoted bid prices at the close of business on the balance sheet date. Purchases and sales of quoted investments are recognised on the trade date where a contract of sale exists whose terms require delivery within a time frame determined by the relevant market. Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional.
Unquoted investments are stated at fair value by the Directors in accordance with the following rules, which are consistent with the IPEVCV 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, the following factors will be considered:
or:-
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.
| Traded on AIM |
Unquoted ordinary shares |
Preference shares |
Qualifying loans |
Total | |
|---|---|---|---|---|---|
| £ | £ | £ | £ | £ | |
| Valuation at 1 October 2015 | 2,020,457 | 18,105,585 | 24,581 | 40,265,127 | 60,415,750 |
| Purchases at cost | - | - | - | 285,932 | 285,932 |
| Sales - proceeds | - | (5,674,273) | - | (4,270,813) | (9,945,086) |
| - realised gains | - | 2,404,659 | - | 66,544 | 2,471,203 |
| Reclassification at valuation Unrealised gains/(losses) on |
- | (301) | 301 | - | - |
| investments in the period | 419,307 | (213,505) | (565) | 521,393 | 726,630 |
| Valuation at 31 March 2016 | 2,439,764 | 14,622,165 | 24,317 | 36,868,183 | 53,954,429 |
| Book cost at 31 March 2016 | 1,333,907 | 18,590,747 | 27,341 | 34,292,229 | 54,244,224 |
| Unrealised gains/(losses) at 31 March 2016 | 1,105,857 | 1,192,350 | (3,024) | 2,575,954 | 4,871,137 |
| Permanent impairment of valuation of investments | - | (5,160,932) | - | - | (5,160,932) |
| Valuation at 31 March 2016 | 2,439,764 | 14,622,165 | 24,317 | 36,868,183 | 53,954,429 |
| Gains on investments | |||||
| Realised gains based on historical cost | - | 5,816,645 | - | 1,457,684 | 7,274,329 |
| Less amounts recognised as unrealised | |||||
| gains in previous years | - | (3,411,986) | - | (1,391,140) | (4,803,126) |
| Realised gains based on carrying | |||||
| value at 30 September 2015 | - | 2,404,659 | - | 66,544 | 2,471,203 |
| Net movement in unrealised gains/ | |||||
| (losses) in the period | 419,307 | (213,505) | (565) | 521,393 | 726,630 |
| Gains/(losses) on investments for the | |||||
| period ended 31 March 2016 | 419,307 | 2,191,154 | (565) | 587,937 | 3,197,833 |
The cash flow from investment proceeds shown above of £9,945,086 differs from the sale proceeds shown in the Statement of Cash Flows figure of £10,645,086 by £700,000. This is due to the receipt of contingent consideration, which was previously recognised as an unrealised gain in a prior year.
Unrealised gains/(losses) at 31 March 2016 above of £4,871,137 differ to that shown in the Revaluation reserve on the Statement of Changes in Equity of £4,921,137. The difference of £50,000 is the estimated fair value of contingent consideration held at the Balance Sheet date, and is included within Debtors.
There has been no significant change in the risk analysis as disclosed in Note 18 of the financial statements in the Company's Annual Report. The increase in unrealised valuations of the loan stock investments above reflect 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 or market risk upon these instruments.
| as at 31 March 2016 £ |
as at 31 March 2015 £ |
as at 30 September 2015 £ |
|
|---|---|---|---|
| Valuation methodology | |||
| Estimated realisation proceeds | 103,917 | 113,000 | 42,500 |
| Cost (reviewed for impairment) | - | - | - |
| Recent investment price | 17,537,589 | 13,317,376 | 25,431,478 |
| Earnings multiple | 33,873,159 | 28,360,558 | 32,864,282 |
| Total | 51,514,665 | 41,790,934 | 58,338,260 |
| as at 31 March 2016 £ |
as at 31 March 2015 £ |
as at 30 September 2015 £ |
|
|---|---|---|---|
| OEIC Money market funds Bank deposits that mature within three months |
10,704,092 | 1,470,978 | 1,471,708 |
| but are not immediately repayable | 2,511,552 | 7,041,197 | 2,546,080 |
| Cash equivalents per Statement of Cash Flows Bank deposits that mature after three months |
13,215,644 5,180,012 |
8,512,175 7,112,474 |
4,017,788 7,140,767 |
| Current asset investments | 18,395,656 | 15,624,649 | 11,158,555 |
| as at | as at | as at | |
|---|---|---|---|
| 31 March 2016 | 31 March 2015 | 30 September 2015 | |
| Net assets | £74,311,427 | £74,663,780 | £75,202,296 |
| Number of shares in issue | 71,164,788 | 70,442,856 | 70,693,007 |
| Net asset value per share - basic and diluted | 104.42p | 105.99p | 106.38p |
Diluted NAV per share assumes that the Investment Adviser's performance fee is satisfied by the issue of additional shares. If shares are issued, no dilution of NAV per share will occur, as the estimated incentive fee payable is already held as a creditor in these accounts.
There have been no significant post balance sheet events.
The financial information for the six months ended 31 March 2016 and the six months ended 31 March 2015 has not been audited.
The financial information contained in this Half-Year Report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Financial Statements for the year ended 30 September 2015 have been filed with the Registrar of Companies. BDO LLP, as auditor to the Company, has reported on these Financial Statements and that report was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.
Copies of this statement are being sent to all shareholders. Further copies are available free of charge from the Company's registered office, 30 Haymarket, London, SW1Y 4EX, or can be downloaded via the Company's website at www.incomeandgrowthvct.co.uk
We aim to communicate regularly with our shareholders. In addition to the Half-Year and Annual Reports, shareholders receive a twice-yearly VCT newsletter from the Investment Adviser, approved by the Board. The February annual general meetings provide a useful platform for the Board to meet shareholders and exchange views. Your Board welcomes your attendance at general meetings to give you the opportunity to meet your Directors and representatives of the Investment Adviser. The Company continues to make Interim Management Statements, in respect of those quarters when it does not publish full or half-year accounts, to keep shareholders informed of the Company's progress.
The Investment Adviser holds an annual shareholder event and further information on this year's event, held in January 2016, is given in the Chairman's Statement on page 4. The next Shareholder Event will take place on Tuesday 24 January 2017. Shareholders will be sent further details and an invitation nearer to the date.
Shareholders wishing to follow the Company's progress can visit its website at www.incomeandgrowthvct.co.uk. This section of the Investment Adviser's website includes dedicated pages on the Company providing up-to-date information on fund performance, including the most recent NAV, and dividends paid as well as publicly available information on the Company's portfolio of investments and copies of company reports. There is also a link to the London Stock Exchange's website at www.londonstockexchange.com which provides up to the minute details of the share price and latest RNS announcements, etc.
The Registrars may be contacted at: Capita Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU; VCT investor line: 0371 664 0324; or via its online shareholder portal: www.capitashareportal.com.
For enquiries concerning the Company, or to contact the Chairman or any member of Board, please contact the Investment Adviser, Mobeus Equity Partners LLP on 020 7024 7600 or by e-mail to [email protected]. Website: www.mobeusequity.co.uk.
The Directors have declared an interim dividend in respect of the year ending 30 September 2016 of 6.00 pence per share. The dividend will be paid on 7 July 2016 to shareholders on the Register on 10 June 2016. The Company Dividend Investment Scheme will apply to this dividend (see below).
Shareholders who wish to have their dividends paid directly into their bank account, rather than having them sent by cheque to their registered address, can complete a mandate for this purpose. Mandates can be obtained by contacting the Company's Registrars, Capita Asset Services ("Capita") at the address below.
Shareholders are encouraged to ensure that the Registrars have up-to-date details for them and to check whether they have received all dividends payable to them. This is particularly important if they have recently moved house or changed their bank. We are aware that a number of dividends remain unclaimed by shareholders and whilst we will endeavour to contact you if this is the case we cannot guarantee that we will be able to do so if the Registrars do not have an up-to-date telephone number and/or email address.
The Scheme is a convenient, easy and cost effective way to build up your shareholding in the Company. Instead of receiving cash dividends, you can elect to receive new shares in the Company. By opting to receive your dividend in this manner, there are three benefits to shareholders:
An application form for the Scheme can be obtained from the Company's Registrars, Capita Asset Services, or by downloading a copy from the Company's website. If shareholders wish to reinvest the recently declared dividend of 6.00 pence per share in further shares, the form must be received by Capita by 22 June 2016.
With effect from 1 January 2016 new tax legislation under the Organisation for Economic Co-operation and Development Common Reporting Standard for Automatic Exchange of Financial Account Information is being introduced. The legislation will require investment trust companies to provide personal information to HMRC on certain investors who purchase their shares. As an affected entity, the Company will have to provide information annually to HMRC on the tax residencies of a number of non-UK based certificated shareholders. All new shareholders, excluding those whose shares are held in CREST, who are entered onto the share register from 1 January 2016 will be asked to provide the relevant information. For further information, please see HMRC's Quick Guide: Automatic Exchange of Information – information for account holders: https://www.gov.uk/government/publications/exchange-ofinformation-account-holders.
| Late May 2016 | Announcement of the Half-Year results and circulation of the Half-Year Report for the six months ended 31 March 2016 |
|---|---|
| 7 July 2016 | Payment of the interim dividend of 6.00 pence per share |
| 30 September 2016 | Year-end |
| Late December 2016 | Annual Report for the year ended 30 September 2016 to be circulated to shareholders |
| 24 January 2017 | Shareholder Event |
| February 2017 | Annual General Meeting |
The Company's shares are listed on the London Stock Exchange and as such they can be sold in the same way as any other quoted company through a stockbroker. If you wish to sell your shares, to ensure that you obtain the best price, you are strongly advised to contact the Company's stockbroker, Panmure Gordon, by telephoning 020 7886 2717 before agreeing a price with your stockbroker. Shareholders are also advised to discuss their individual tax position with their financial advisor before deciding to sell their shares.
We are aware that, from time to time, our shareholders have received unsolicited telephone calls and/or mail which purport to come from the Company or to be authorised by it.
Further information on boiler room scams and who to contact, should you believe that you have been approached in such a manner, is included in the FAQ section of the VCT Investor Area of the Investment Adviser's website. Details of any share dealing facilities that the company endorses will be included in Company mailings. Detailed information on this or similar activity can be found on the FCA website www.fca.org.uk/consumers/scams. For further information, shareholders may also contact Mobeus, the Company Secretary.
| Share price at 31 March 2016 | 94.00p1 |
|---|---|
| NAV per share as at 31 March 2016 | 104.42p |
The following table shows, for all shareholders, how their investments have performed since they were originally allotted shares in each fundraising.
Shareholders from the original fundraising in 2000/01 should note that the funds were managed by three investment advisers, up until 10 March 2009. At that date, Mobeus became the sole adviser, to this and all subsequent fundraisings.
Total return data, which includes cumulative dividends paid to date, is shown on both a share price and a NAV basis as at 31 March 2016. The NAV basis enables shareholders to evaluate more clearly the performance of the Fund, as it reflects the underlying value of the portfolio at the reporting date. This is the most widely used measure of performance in the VCT sector.
| Allotment date(s) | Allotment price |
Net allotment |
Cumulative dividends |
Total return per share to shareholders since allotment |
||
|---|---|---|---|---|---|---|
| price2 | paid per share |
(Share price basis)1 |
(NAV basis) |
% increase since 30 September 2015 |
||
| (p) | (p) | (p) | (p) | (p) | (NAV basis) | |
| Funds raised - 'O' Share Fund3 (launched 18 October 2000) |
||||||
| Between 3 November 2000 and 11 May 2001 | 100.00 | 60.62 | 78.54 | 149.77 | 157.67 | 2.0% |
| Funds raised 2007/8 - Former 'S' Share Fund (launched 14 December 2007) | ||||||
| Between 1 April 2008 and 6 June 2008 | 100.00 | 70.00 | 74.50 | 168.50 | 178.92 | 2.3% |
| Funds raised 2011 (launched 12 November 2010) | ||||||
| 21 January 2011 | 104.80 | 73.36 | 74.00 | 168.00 | 178.42 | 2.3% |
| 28 February 2011 | 107.90 | 75.53 | 72.00 | 166.00 | 176.42 | 2.3% |
| 22 March 2011 | 105.80 | 74.06 | 72.00 | 166.00 | 176.42 | 2.3% |
| 1 April 2011 | 105.80 | 74.06 | 70.00 | 164.00 | 174.42 | 2.4% |
| 5 April 2011 | 105.80 | 74.06 | 70.00 | 164.00 | 174.42 | 2.4% |
| 10 May 2011 | 105.80 | 74.06 | 70.00 | 164.00 | 174.42 | 2.4% |
| 6 July 2011 | 106.00 | 74.20 | 70.00 | 164.00 | 174.42 | 2.4% |
| Funds raised 2012 (launched 20 January 2012) | ||||||
| 8 March 2012 | 106.40 | 74.48 | 46.00 | 140.00 | 150.42 | 2.8% |
| 4 April 2012 | 106.40 | 74.48 | 46.00 | 140.00 | 150.42 | 2.8% |
| 5 April 2012 | 106.40 | 74.48 | 46.00 | 140.00 | 150.42 | 2.8% |
| 10 May 2012 | 106.40 | 74.48 | 46.00 | 140.00 | 150.42 | 2.8% |
| 10 July 2012 | 111.60 | 78.12 | 46.00 | 140.00 | 150.42 | 2.8% |
| Funds raised 2013 (launched 29 November 2012) | ||||||
| 14 January 2013 | 116.00 | 81.20 | 46.00 | 140.00 | 150.42 | 2.8% |
| 28 March 2013 | 112.60 | 78.82 | 40.00 | 134.00 | 144.42 | 2.9% |
| 4 April 2013 | 112.60 | 78.82 | 40.00 | 134.00 | 144.42 | 2.9% |
| 5 April 2013 | 112.60 | 78.82 | 40.00 | 134.00 | 144.42 | 2.9% |
| 10 April 2013 Pre RDR4 | 115.30 | 80.71 | 40.00 | 134.00 | 144.42 | 2.9% |
| 10 April 2013 Post RDR4 | 112.60 | 78.82 | 40.00 | 134.00 | 144.42 | 2.9% |
| 7 May 2013 | 112.60 | 78.82 | 40.00 | 134.00 | 144.42 | 2.9% |
| Funds raised 2014 (launched 28 November 2013) | ||||||
| 09 January 2014 | 117.825 | 82.47 | 34.00 | 128.00 | 138.42 | 3.0% |
| 11 February 2014 | 119.025 | 83.31 | 34.00 | 128.00 | 138.42 | 3.0% |
| 31 March 2014 | 115.645 | 80.95 | 30.00 | 124.00 | 134.42 | 3.1% |
| 03 April 2014 | 116.175 | 81.32 | 30.00 | 124.00 | 134.42 | 3.1% |
| 04 April 2014 | 115.455 | 80.82 | 30.00 | 124.00 | 134.42 | 3.1% |
| 06 June 2014 | 121.555 | 85.09 | 30.00 | 124.00 | 134.42 | 3.1% |
Source: London Stock Exchange (mid-price basis).
Net allotment price is the allotment price less applicable income tax relief. Income tax relief was 20% up until 5 April 2004, 40% from 6 April 2004 to 5 April 2006, and 30% thereafter.
3 - Shareholders who invested in 2000/01 received 0.7578 shares in the current share class for each share previously held on 29 March 2010, when the Company's two share classes merged. The net allotment price, NAV, cumulative dividend, total return, share price and percentage return data per share have been adjusted to reflect this conversion ratio.
4 - RDR means the date of implementation of the Retail Distribution Review on 31 December 2012, which affected the level of charges in the allotment price for applications received before and after that date.
| Allotment date(s) | Allotment price |
Net allotment |
Cumulative dividends |
Total return per share to shareholders since allotment |
|||
|---|---|---|---|---|---|---|---|
| (p) | price1 (p) |
paid per share (p) |
(Share price basis)1 (p) |
(NAV basis) (p) |
% increase since 30 September 2015 (NAV basis) |
||
| Funds raised 2015 (launched 10 December 2014) | |||||||
| 14 January 2015 | 108.332 | 75.83 | 16.00 | 110.00 | 120.42 | 3.5% | |
| 17 February 2015 | 113.172 | 79.22 | 16.00 | 110.00 | 120.42 | 3.5% | |
| 10 March 2015 | 109.882 | 76.92 | 12.00 | 106.00 | 116.42 | 3.6% |
Net allotment price is the allotment price less applicable income tax relief. Income tax relief was 20% up until 5 April 2004, 40% from 6 April 2004 to 5 April 2006, and 30% thereafter.
Average effective offer price
| Funds raised 2000/01 'O' Share Fund |
Funds raised 2007/08 'S' Share Fund |
Funds raised 2011 |
Funds raised 2012 |
Funds raised 2013 |
Funds raised 2014 |
Funds raised 2015 |
|
|---|---|---|---|---|---|---|---|
| (p) | (p) | (p) | (p) | (p) | (p) | (p) | |
| 15 February 2016 | 4.551 | 6.00 | 6.00 | 6.00 | 6.00 | 6.00 | 6.00 |
| 30 June 2015 | 4.551 | 6.00 | 6.00 | 6.00 | 6.00 | 6.00 | 6.00 |
| 20 March 2015 | 3.031 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 |
| 30 October 2014 | 6.061 | 8.00 | 8.00 | 8.00 | 8.00 | 8.00 | |
| 3 July 2014 | 4.551 | 6.00 | 6.00 | 6.00 | 6.00 | 6.00 | |
| 12 March 2014 | 3.031 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 | |
| 27 June 2013 | 4.551 | 6.00 | 6.00 | 6.00 | 6.00 | ||
| 8 February 2013 | 4.551 | 6.00 | 6.00 | 6.00 | 6.00 | ||
| 15 February 2012 | 3.021 | 4.00 | 4.00 | ||||
| 27 January 2012 | 15.161 | 20.00 | 20.00 | ||||
| 28 March 2011 | 1.521 | 2.00 | 2.00 | ||||
| 22 February 2011 | 1.521 | 2.00 | 2.00 | ||||
| 29 March 2010 Merger of the 'O' and 'S' Share Funds | |||||||
| 17 March 2010 | 2.00 | 0.50 | |||||
| 16 February 2009 | 4.00 | ||||||
| 15 February 2008 | 2.00 | ||||||
| 24 October 2007 | 2.00 | ||||||
| 15 February 2007 | 3.75 | ||||||
| 14 February 2006 | 3.25 | ||||||
| 4 February 2005 | 1.25 | ||||||
| 11 February 2004 | 1.25 | ||||||
| 12 February 2003 | 1.75 | ||||||
| 18 February 2002 | 1.20 | ||||||
| Total dividends paid2 | 78.54 | 74.50 | 74.00 | 46.00 | 46.00 | 34.00 | 16.00 |
1 - The dividends paid after the merger, on the former 'O' Share Fund shareholdings have been restated to take account of the merger conversion ratio.
2 - The above data relates to an investor in the first allotment of each fundraising. The precise amount of dividends paid to shareholders by date of allotment is shown in the table on page 26 and above.
The Company is launched as TriVest VCT plc advised by three managers, Foresight Group, GLE Development Capital and LICA Development Capital.
The Company's first fundraising of its "O Share Fund" is completed.
Nova Capital Management succeeds LICA Development Capital as adviser to that section of the portfolio
The team from GLE Development Capital join Matrix Group to form Matrix Private Equity Partners and continue the management of its share of the Company's portfolio.
The Company implements a change in its management arrangements with the funds now being jointly managed by Matrix Private Equity Partners and Foresight Group.
The Company changes its name to The Income & Growth VCT plc following the change to becoming a dual-managed VCT.
The 'S' Share Fund is launched.
The Company becomes a VCT solely advised by Matrix Private Equity Partners. The Company changes its Investment Policy to focus on more mature businesses.
The 'O' Share Fund (launched in 2000) merges with the 'S' Share Fund (launched in 2007) to create the current class of shares.
The Company sells its stake in App-DNA for 32 times cost and pays a special interim capital dividend of 20p per share in the following January.
Matrix Private Equity Partners LLP becomes a fully independent firm owned by its partners and renames itself Mobeus Equity Partners LLP.
The Company participates in four linked fundraisings with other Mobeus advised VCTs.
The Company closes a successful fundraising with the other Mobeus advised VCTs in which £10 million was raised for the Company.
Colin Hook Jonathan Cartwright Helen Sinclair
30 Haymarket London SW1Y 4EX
Mobeus Equity Partners LLP 30 Haymarket London SW1Y 4EX Tel: 020 7024 7600 www.mobeusequity.co.uk
Company Registration Number: 4069483
BDO LLP 55 Baker Street London W1U 7EU
National Westminster Bank plc City of London Office PO Box 12258 1 Princes Street London EC2R 8PA
No 1 Colmore Square Birmingham B4 6AA
Capita Asset Services Limited The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Tel: 0371 664 0324
Panmure Gordon (UK) 1 New Change London EC4M 9AF
Philip Hare & Associates LLP 4-6 Staple Inn High Holborn London WC1V 7QH
Mobeus Equity Partners LLP 30 Haymarket London SW1Y 4EX
020 7024 7600 www.incomeandgrowthvct.co.uk
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