REG - Mobeus Inc&Gwth 2 - Annual Financial Report
29/06/2022 17:00
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RNS Number : 7000Q Mobeus Income & Growth 2 VCT PLC 29 June 2022
MOBEUS INCOME & GROWTH 2 VCT PLC
LEI: 213800LY62XLI1B4VX35
ANNUAL FINANCIAL RESULTS OF THE COMPANY
FOR THE YEAR ENDED 31 MARCH 2022
Mobeus Income & Growth 2 VCT plc (the "Company") announces the final
results for the year ended 31 March 2022. These results were approved by the
Board of Directors on 29 June 2022.
You may, in due course, view the Annual Report & Financial Statements,
comprising the statutory accounts of the Company by visiting
www.mig2vct.co.uk.
FINANCIAL HIGHLIGHTS
As at 31 March 2022:
Net assets: £77.51 million
Net asset value ("NAV") per share: 96.37 pence
- Net Asset Value ("NAV") total return(1) per share was 13.3%.
- Share Price total return(1) per share was 23.4%.
- Dividends paid and declared in respect of the year amounted to
12.00 pence per share. Cumulative dividends paid(1) amount to 134.00 pence per
share.
- £4.61 million was invested into three new growth capital
investments and seven existing portfolio companies during the year.
- Strong portfolio performance generated £9.55 million of
unrealised gains.
- The Company realised investments totalling £6.37 million of
cash proceeds and generated net realised gains of £2.54 million
(1) Definitions of key terms and alternative performance measures("APMs") Key
Performance Indicators ("KPIs") shown above and throughout are provided in the
Glossary of terms within the Annual Report & Financial Statements.
PERFORMANCE SUMMARY
The table below shows the recent past performance of the current share class,
first raised in 2005/06 at an original subscription price of 100 pence per
share, before the benefit of income tax relief. Performance data for all
fundraising rounds are shown in the Annual Report & Financial Statements.
Reporting date Net Assets Net Asset Value Share price2 (mid-market price) Cumulative dividends Cumulative total return Dividends paid and declared in respect of each year
as at (£m) (NAV) per share (p) paid per share per share since launch(1) (p)
(p) (p)
(NAV Basis) (Share price basis)
(p) (p)
31 March 2022 77.51 96.37 87.50 134.00 230.37 221.50 12.00
31 March 2021 73.90 100.91 85.50 116.00 216.91 201.50 13.00
31 March 2020 43.57 72.99 70.50 109.00 181.99 179.50 26.00
31 March 2019 48.73 99.60 85.50 83.00 182.60 168.50 5.00
31 March 2018 47.60 96.54 86.50 78.00 174.54 164.50 16.00
(1) - Definitions of key terms and alternative performance measures ("APMs")
Key Performance Indicators ("KPIs") shown above and throughout are provided in
the Glossary of Terms within the Annual Report & Financial Statements.
(2) - Source: Panmure Gordon & Co (mid-market price).
CHAIRMAN'S STATEMENT
I am pleased to present the annual results of Mobeus Income & Growth 2 VCT
plc for the year ended 31 March 2022.
Overview
Following on from last year's record performance, your Company has experienced
another year of strong trading and growth in the value of its portfolio at 31
March 2022. The Company achieved an NAV total return per share of 13.3% for
the year (2021: 47.8%).
Although the year under review was marked by many challenges, the portfolio
proved to be resilient and adaptive in facing them. The threat from global
supply issues in logistics, materials and labour resulting from COVID-19
disruption is expected to remain for some months and the unfolding
geopolitical events relating to the war in Ukraine has added to the
uncertainty. We are starting to see the impact of inflationary pressures on
consumer confidence although, for the most part, trading for your Company's
largely service and software- based portfolio remains robust.
Despite Brexit concerns and considerable COVID-19 related restrictions across
the year, M&A activity remained buoyant and the Investment Adviser
continues to see healthy deal flow. The Company deployed £4.61 million of
investment capital and generated £6.37 million in realisation proceeds as in
that time, it realised two of its investments and added three new and seven
follow-on investments to the portfolio.
Shareholders should note that following the listing on AIM of two portfolio
companies shortly before the previous year-end 7.8% of the portfolio value is
in AIM listed entities. This increases the potential volatility in the value
of the Company's portfolio and subsequent NAV returns. The initial uplift in
value following their IPOs in March 2021 has been eroded after a number of
unfavourable trading statements led to a significant reduction in their share
prices. The remainder of the portfolio largely demonstrated strong performance
and growth over the same period.
We are witnessing a clear demonstration of the benefits of what is now a
diverse and maturing portfolio. Following the 2015 VCT rule change, the
revised investment strategy is bearing fruit as more of these young growth
investments start to achieve
significant scale and value. Several third-party investments have validated
this view, resulting in significant positive re-ratings in values of portfolio
businesses, such as MPB, MyTutor and Bella & Duke. The Company has also
provided support for the scaling of investments such as Preservica, with
significant further funding in November 2021. Additional information on value
movements is given in the Investment Adviser's Review.
The Company launched an Offer for Subscription on 20 January 2022 alongside
the three other Mobeus VCTs ("Offers") and the Board was very pleased to see
that unprecedented demand meant that the target of £7.5 million was reached
in less than 24 hours, at which point no further applications were accepted.
It was gratifying that approximately half of the applications received were
from existing Shareholders in the Company. The subsequent allotment of shares
has now bolstered the Company's capital to deploy in new and exciting
investment opportunities.
The Board acknowledges that not all of our existing Shareholders were able to
subscribe to the Offer due to the unexpectedly rapid response and were
disappointed. Consequently, the Board will explore several options in order to
give all Shareholders the same opportunity to invest whether electronically,
by email or by post for any future fundraise.
Performance
NAV total return, expressed on a pence per share basis, was derived as
follows:
2022 2021
Year ended 31 March (pence per share) (pence per share)
Net realised and unrealised gains on the investment portfolio 15.04 34.63
Income from the investment portfolio and liquid assets 1.34 2.32
Share buybacks and adjustments 0.89 0.07
Gross return 17.27 37.02
Less: Investment Adviser's fees and other expenses (3.81) (2.10)
Net return 13.46 34.92
NAV total return per share 13.3% 47.8%
The Company's NAV total return per share was 13.3% for the year to 31 March
2022 (2021: 47.8%) being the closing NAV per share of 96.37 pence plus
18.00 pence of dividends paid in the year (this includes 6.00p interim
dividend for the year ended 31 March 2021), divided by the opening NAV per
share of 100.91 pence. The share price total return was 23.4% (2021: 31.2%).
The difference between the share price and NAV total returns arises
principally due to the timing of NAV announcements, which are usually made on
a date following the date to which they relate and is explained more fully
under Performance in the Strategic Report. The positive NAV total return for
the year was principally the result of unrealised gains in the value of
investments still held, as well as realised gains achieved via exits and
partial realisations of several portfolio companies. The continued strong NAV
performance, in addition to dividends paid in excess of the agreed target rate
has resulted in a performance incentive fee amounting to £1,014,703 payable
to the Investment Adviser for the year (for further details please refer to
Note 4b in the Annual Report).
At the year-end, the Company was ranked 7th out of 41 Generalist VCTs over
five years and 1st out of 31 Generalist VCTs over ten years, in the
Association of Investment Companies' ("AIC") analysis of Cumulative NAV Total
Return. Shareholders should note that the AIC's rankings are based on the
latest available published NAVs and therefore did not reflect the NAV per
share of the Company at 31 March 2022. For further details on the performance
of the Company, please refer to the Strategic Report.
Target Return
The Board's current target is to achieve an average NAV total return of 8.0%
per annum. This year's 13.3% (2021: 47.8%) has contributed to an average over
five years of 14.9% per annum, in excess of the target.
The Board reminds Shareholders that investment portfolio returns and dividend
payments should always be viewed over the longer term.
Dividends
The Board continues to be committed to providing an attractive dividend stream
to Shareholders. In respect of the year ended 31 March 2022, the Company has
declared and paid a dividend of 12.00 pence per share to Shareholders. This
dividend was paid on 7 January 2022 to Shareholders on the register on 10
December 2021. To date, cumulative dividends paid since inception total 134.00
pence per share.
The Company has now met or exceeded the Board's annual dividend target of
paying at least 5.00 pence per share, of the last twelve financial years.
As Shareholders have been advised previously, the gradual move of the
portfolio to younger growth capital investments as well as the realisations of
older, more mature companies that have provided a good income yield, are
likely to make dividends harder to achieve from income and capital returns
alone in any given year. The Board aims to distribute realised profits (such
as income and gains from realisations) achieved in a year as dividends but
notes that a reduction in income received by the Company was seen during the
year. The Board, therefore, continues to monitor the sustainability of the
annual dividend target. Shareholders should also note that there may continue
to be circumstances where the Company is required to pay dividends in order to
maintain its regulatory status as a VCT, for example, to stay above the
minimum percentage of assets required to be held in qualifying investments.
Such dividends paid in excess of net income and capital gains achieved will
cause the Company's NAV per share to reduce by a corresponding amount.
Investment and portfolio performance
The portfolio valuation movements for the year were as follows:
2022 2021
£mn £mn
Opening Portfolio value 41.83 21.99
New and further investments 4.61 5.39
Disposal proceeds (6.37) (10.91)
Net realised gains 2.54 4.77
Valuation movements 9.55 20.59
Portfolio value at 31 March 2022 52.16 41.83
During the year, the Company invested a total of £4.61 million into three new
and seven existing portfolio companies (2021: £5.39 million; five new, eight
existing). New investments totalling £1.73 million were made into Legatics (a
SaaS LegalTech software business), Vet's Klinic (a veterinary clinic roll out)
and Proximity Insight (a retail platform). This investment into Proximity
Insight is the first investment made since the acquisition of the Mobeus VCT
investment advisory business by Gresham House and the Company's investment was
made alongside the other VCTs advised and managed by Gresham House (the three
other Mobeus
VCTs and the two Baronsmead VCTs). In accordance, with the agreed allocation
policy, the Company contributed £0.56 million towards a total Gresham House
supported investment of £5.00 million.
Additional funding of £2.88 million was provided across seven existing
portfolio companies: Bella & Duke (a frozen raw dog food provider),
Caledonian Leisure (a UK Leisure Breaks provider), Tapas Revolution (a Spanish
restaurant chain), MyTutor (an online tutoring marketplace), Andersen EV (a
producer of premium EV chargers), ActiveNav (a provider of enterprise-level
file analysis software), and Preservica (a proprietary digital archiving
software provider).
The Company generated £5.06 million in proceeds from the realisation of its
investments in Proactive Group (£1.60 million) and Red Paddle (£3.46
million) during the year. In addition to proceeds received from the partial
realisation of MyTutor (£0.52 million), together with loan repayments and
deferred proceeds totalling £0.79 million, the Company generated total
proceeds of £6.37 million in the year to 31 March 2022.
The portfolio has performed well over the Company's financial year. The
portfolio achieved £12.09 million (2021:
£25.36 million) in realised and unrealised gains in the year, being 28.9%
(2021: 115.3%) of the opening portfolio value. The portfolio was valued at
£52.16 million at the year-end (2021: £41.83 million).
Within net realised gains, the principal contributors were the full realised
gains of Proactive Group and Red Paddle (total of £2.21 million). Total
proceeds received over the life of investments in Proactive Group (£1.63
million) and Red Paddle (£3.86 million) generated multiples of cost of 2.6x
(IRR: 33.0%) and 5.4x (33.2%) respectively. Further realised gains were also
generated from the partial realisation of MyTutor (£0.26 million).
The portfolio's valuation at the year-end demonstrates the continued
beneficial impact of changes in UK consumer and business behaviour brought on
by the pandemic and lockdown restrictions, particularly for those businesses
operating direct-to-consumer models. However, it also underscores the success
of portfolio companies in adapting to a rapidly changing environment, becoming
more efficient and diversifying their product offering in order to take
advantage of opportunities that have arisen. This level of resilience has
enabled the portfolio to continue to trade well in what have been challenging
global market conditions in the second half of the Company's financial year.
As anticipated, the Company's quoted stocks such as Virgin Wines and Parsley
Box are subject to stock market movements and have brought an additional level
of volatility to a portion of the portfolio. In the second half of the year,
these investments saw a significant value decline in the face of changing
market sentiment and announcement of results which were below market
expectations. Your Board remains confident in the future prospects of both
these AIM quoted businesses.
In contrast, there have been pleasing unquoted valuation increases, supported
by a sizeable further investment from the Mobeus VCTs in the case of
Preservica, and by third-party investment transactions in the cases of
MyTutor, MPB and Bella & Duke.
The portfolio achieved a net increase in unrealised valuations of £9.55
million for the year in investments still held, with the biggest value
increases in Preservica, Bella & Duke and Media Business Insight partially
offset by valuation falls at Virgin Wines and Parsley Box, as well as modest
falls at Bleach London and ActiveNav. For further information on portfolio
valuation movements, see the Investment Adviser's Review. Further details of
the Company's investment activity (including transactions that have occurred
after the year-end) and the performance of the portfolio are contained in the
Investment Adviser's Review and the Investment Portfolio Summary.
Liquidity and Fundraising
Cash and cash equivalents held by the Company as at 31 March 2022 amounted to
£26.26 million, or 33.9% of net assets.
On 20 January 2022, the Company launched an Offer for Subscription of £7.50
million, alongside Offers from the other Mobeus VCTs. As previously stated in
my Overview, the Offers experienced unprecedented demand such that the Company
received subscriptions amounting to the full amount sought within 24 hours of
launching and was subsequently then closed to further applications. In
accordance with the Offers' prospectus, the allotment of all shares under the
offer took place on 9 March 2022, and generated net funds (after costs) of
£7.26 million. In consideration of environmental factors and cost savings,
the Company elected to release the Prospectus digitally, with hard copies
available on request, and invite applications to be submitted online via a
digital portal. This method provided increased security and efficiency in the
application process and the Board strongly recommends that Shareholders
wishing to subscribe to any future offers opt to submit their applications via
the online facility.
Share Buybacks
During the year, the Company bought back and cancelled 697,498 of its own
shares (2021: 387,471), representing 1.0% of the shares in issue at the
beginning of the year (2021: 0.7%), at a total cost of £0.64 million,
inclusive of expenses (2021: £0.29 million). It is the Company's policy to
cancel all shares bought back in this way. The Board regularly reviews its
buyback policy and currently seeks to maintain the discount at which the
Company's shares trade at no more than 5% below the latest published NAV.
Shareholder Communications and Annual General Meeting
May I remind you that the Company has its own website containing useful
information for Shareholders at:
www.mig2vct.co.uk (http://www.mig2vct.co.uk) .
The Investment Adviser held a virtual Shareholder Event on the morning of 25
February 2022. A presentation was provided by representatives of each of the
Mobeus VCT Boards as well as the Investment Adviser and the key executives of
two portfolio companies, Virgin Wines and Media Business Insight. A recording
of the event is available here: https://mvcts.connectid.cloud/
(https://mvcts.connectid.cloud/) .
Your Board is pleased to be able to hold the next Annual General Meeting
("AGM") of the Company in person at
11.00 am on Wednesday, 21 September 2022 at the offices of Shakespeare
Martineau LLP, 6th Floor, 60 Gracechurch Street, London, EC3V 0HR. A webcast
will also be available at the same time for those Shareholders who cannot
attend in person. However, please note that you will not be able to vote via
this method and so are encouraged to return your proxy form before the
deadline of 11:00 am on Monday, 19 September 2022. Information setting out how
to join the meeting by virtual means will be shown on the Company's website.
For further details, please see the Notice of the Meeting which can be found
at the end of the Annual Report & Financial Statements.
Board Composition & Succession
The Board comprised three directors throughout the year. After considering and
reviewing its composition, the Board agreed that the directors have the
breadth and depth of relevant knowledge and experience plus the appropriate
skill sets. The Board consists of two male and one female directors.
Adam Kingdon has advised of his wish to retire as a director of the Company
immediately following the AGM in September 2022. Adam has provided an
invaluable contribution to the Board whilst a director of the Company, for
which we are very grateful. The Board will be considering its composition and
succession in light of this.
Fraud Warning
We are aware that Shareholders are being contacted in connection with
sophisticated but fraudulent financial scams which purport to come from the
Company or to be authorised by it. This is often by a phone call or an
email usually originating from outside of the UK, claiming or appearing to be
from a corporate finance firm offering to buy your shares at an inflated
price.
The Board strongly recommends Shareholders take time to read the Company's
Fraud Warning section, including details of who to contact, contained within
the Information for Shareholders section of the Annual Report.
Environmental, Social and Governance ("ESG")
The Board and the Investment Adviser believe that the consideration of
environmental, social and corporate governance ("ESG") factors throughout the
investment cycle will contribute towards enhanced shareholder value.
Following the novation of the investment advisory agreement to Gresham House,
who have a dedicated team which is focused on sustainability, the Board views
this as an opportunity to enhance the Company's existing protocols and
procedures through the adoption of the highest industry standards. Under the
new enlarged investment team, each investment executive is responsible for
their own individual ESG objectives in support of the wider overarching ESG
goals of the Investment Adviser. For further details, Gresham House published
its inaugural Sustainable Investment Report in 2022, which can be found on its
website at: www. (http://www/) greshamhouse.com.
Your Board would like to assure Shareholders that ESG matters form a key
consideration in investment decisions. The FCA reporting requirements
consistent with the Task Force on Climate-related Financial Disclosures
commencing from 1 January 2021 do not currently apply to the Company but will
be kept under review, the Board being mindful of any recommended changes.
Outlook
The year under review can be characterised as a continuation of the
challenging environment created for businesses by COVID-19 pandemic and
Brexit. However, much in the same way that we were able to report on its
remarkable recovery one year ago, the Company has continued to achieve success
in creating opportunities and building on them. This has been exemplified by
strong trading performances and value growth across the portfolio and
continued strong levels of investment activity.
However, we anticipate that the indirect effects of the COVID-19 pandemic and
Brexit will continue to impact the UK economy and bring an element of
uncertainty for some time to come, most notably in the form of supply chain
and inflationary pressures. More recently, the distressing invasion of Ukraine
has sent shockwaves through global financial markets. Whilst the portfolio
has limited direct exposure to Eastern Europe, Russia's action has introduced
a disruptive factor which cannot yet be fully measured. This combination of
factors is causing a shortage of many resources and supply chain disruption.
Furthermore, confidence is being eroded as inflation and interest rates
increase. Nonetheless, despite its caution your Board considers that your
Company is well positioned to adapt as necessary.
The Board was very pleased to have witnessed such a positive response to the
launch of the Company's Offer for subscription in January and would like to
thank all Shareholders for their interest in applying for the Company's
shares. The Board has been satisfied with the Company's ability to maintain
a high rate of investment in quality opportunities over the year. It believes
that the additional fundraising will provide the necessary capital to continue
to create value growth for Shareholders in what has, to date, proven to be a
successful investment strategy.
I would like to take this opportunity once again to thank all Shareholders for
your continued support and to extend a warm welcome to new Shareholders.
Ian Blackburn
Chairman
29 June 2022
INVESTMENT POLICY
The Company's policy is designed to meet the Company's Objective to provide
investors with a regular income stream, arising both from the income generated
by the companies selected for the portfolio and from realising any growth in
capital, while continuing to qualify as a VCT.
Investments
The Company invests primarily in a diverse portfolio of UK unquoted companies.
Investments are made selectively across a number of sectors, principally in
established companies. Investments are generally structured as part loan and
part equity in order to produce a regular income stream and to generate
capital gain from realisations.
There are a number of conditions within the VCT legislation which need to be
met by the Company and which may change from time to time. The Company will
seek to make investments in accordance with the requirements of prevailing VCT
legislation.
Asset allocation and risk diversification policies, including the size and
type of investments the Company makes, are determined in part by the
requirements of prevailing VCT legislation. No single investment may represent
more than 15% (by VCT tax value) of the Company's total investments at the
date of investment.
The Company will seek to make investments in accordance with the requirements
of prevailing VCT legislation. A summary of this is set out in the table
"Summary of VCT Regulation" in the Annual Report.
Liquidity
The Company's cash and liquid funds are held in a portfolio of readily
realisable interest-bearing investments, deposit and current accounts, of
varying maturities, subject to the overriding criterion that the risk of loss
of capital be minimised.
Borrowing
The Company's Articles of Association permit borrowings of amounts up to 10%
of the adjusted capital and reserves (as defined therein).
However, the Company has never borrowed and the Board would only consider
doing so in exceptional circumstances.
INVESTMENT ADVISER'S REVIEW
Portfolio Review
Having recovered from the COVID-19 related decline in value by the start of
the Company's financial year, the portfolio continues on a positive
trajectory.
Widespread volatility of global markets and negative sentiment have hampered
the ability of businesses to sustain the exceptional performance of the
previous financial year. Nevertheless, a continuation of steady underlying
trading by the majority of investee companies bolstered by a small number of
significant re-ratings has ensured that the portfolio has nonetheless been
able to record portfolio value growth of 28.9% over the year, with combined
net unrealised and realised gains of £12.09 million.
A limited number of portfolio companies experienced disruption as a result of
the UK lockdowns, but it is pleasing to report that a significant proportion
have benefited from what appears to be a structural change in consumer
purchasing habits. Indeed, the majority of the portfolio companies is now
trading above their pre COVID-19 levels.
Overall, the majority of the portfolio has demonstrated a high degree of
resilience, with the vast majority of companies by number showing revenue
and/or earnings progression over the previous two years. Investments
classified as Retailers now comprise over 44% of the portfolio by value, all
of which are demonstrating the success of the direct-to-consumer business
model.
Significant positive re-ratings in the unquoted portfolio have been a
consistent feature across the year, with third-party investment driving value
uplifts in MPB (£0.63 million) and Bella & Duke (£3.00 million), and a
sizeable further investment from the Mobeus VCTs doing the same in the case of
Preservica (£5.02 million). Whilst the portfolio has limited exposure to more
challenging sectors such as hospitality and overseas travel, software and
other technology-enabled businesses have performed strongly. A small number of
companies have struggled, though they are in the minority and their impact on
overall shareholder return is minimal.
Furthermore, some of these companies, such as Media Business Insight and RDL,
have fundamentally re-engineered their businesses, which should provide a more
positive outlook.
It is noted that Preservica and Bella & Duke currently account for a
significant proportion of the invested portfolio's value (27.9% of the
portfolio value, 18.8% of net assets), with 7.8% of the portfolio now held in
AIM-listed investments (which equates to 5.2% of net assets).
The AIM market has witnessed some volatility in the second half of the
Company's financial year, with negative market sentiment compounding a period
of challenging customer recruitment to result in value reductions for both
Virgin Wines and Parsley Box. In line with market practice, in both cases the
Company's shareholdings are subject to lock-up arrangements for a period
post-flotation.
Strong trading activity levels have created investment opportunities for the
Company as portfolio companies sought to enhance their positions by building
capability in light of demand. A number of further investments were therefore
made into the portfolio during the year. Gresham House continues to review the
opportunities for follow-on investments. M&A sentiment also remained
buoyant with a continuing stream of attractive realisations throughout the
year. The outlook for both follow-on investment and realisations continues to
be positive.
The Company made investments totalling £4.61 million (2021: £5.39 million),
comprising £1.73 million (2021:
£2.37 million) into three new investments and £2.88 million (2021: £3.02
million) into seven existing investments. This level of new and follow-on
investment is pleasing given the continued uncertainty and lockdown
restrictions during the year under review.
A strong track record for the growth investments has emerged which validates
the strategic change arising from the amendment to VCT rules in 2015. Overall,
it is reassuring to see that the more traditional investments, as well as the
growth investments, are continuing to make good progress.
The portfolio's valuation changes in the year are summarised as follows:
Investment Portfolio Capital Movement 2022 2021
£mn £mn
Increase in the value of unrealised investments
Decrease in the value of unrealised investments
14.91 21.42
(5.36) (0.83)
Net increase in the value of unrealised investments 9.55 20.59
Realised gains 2.54 4.81
Realised losses - (0.04)
Net realised gains in the year 2.54 4.77
Net investment portfolio movement in the year 12.09 25.36
New investments during the year
A total of £1.73 million was invested into three new investments during the
year, as detailed below:
Company Business Date of Investment Amount of new investment (£mn)
Legatics SaaS LegalTech software June 2021 0.61
business
Legatics (legatics.com) transforms legal transactions by enabling deal teams
to collaborate and close deals in an interactive online environment. Designed
by lawyers to improve legacy working methods and solve practical transactional
issues, the legal transaction management platform increases collaboration,
efficiency and transparency. As a result, Legatics has been used by around
1,500 companies, and has been procured by more than half of the top global
banking and finance law firms, with collaborations having been hosted in
approximately 50 countries. With this new funding round, Legatics will be
looking to double the size of its team over the next 18 months and further
develop its technology to deliver new features and use cases for a wider range
of practice areas within new and existing customers.
Vet's Klinic Veterinary clinics June 2021 0.56
Pets' Kitchen (trading as Vet's Klinic) is an established and profitable
veterinary clinic providing veterinary services (vetsklinic.co.uk) as well as
apremium pet food provider (vetskitchen.co.uk). Its primary Swindon 'super
clinic' is a first opinion veterinary practice where pet owners can schedule
consultations online and obtain real time feedback on in-patient care through
its own technology platform. Without compromising on quality of care, this
model enables a significantly higher transaction per vet compared to the
industry average. This new investment will be used to roll out its unique
clinic model to other sites along the M4 corridor.
Proximity Insight Retail Software February 2022 0.56
Proximity Insight (proximityinsight.com) is a retail technology business that
offers a 'Super-App' that is used by the customer facing teams of brands and
retailers to engage, inspire and transact with customers. Headquartered in
London with offices in New York and Sydney, Proximity Insight has a global
client base that includes over 20 brands, boutiques and department stores in
fashion, beauty, jewellery, electronics and homewares. These clients use
Proximity Insight's platform to blur the lines between physical and digital
retail, enhancing the customer experience and improving the lifetime value of
their customers by upwards of 35%. The business grew annual recurring revenue
by 117% to £2.2m in 2021, and the investment will support Proximity Insight's
continued product development and international growth. The investment was
made across all six VCTs advised and managed by Gresham House, including the
two Baronsmead VCTs.
Further investments during the year
A total of £2.88 million was invested into seven existing portfolio companies
during the year, as detailed below:
Company Business Date of Investment Amount of further investment (£mn)
Bella & Duke Frozen raw dog food provider May 2021 0.61
Bella & Duke (bellaandduke.com) is a direct-to-consumer subscription
service, providing premium frozen raw dog food to pet owners in the UK.
Founded in 2016, the business provides an alternative to standard meal options
for dog owners by focusing on the well documented health benefits of a raw
food diet. This area is a growing niche in the large and established pet food
market and is being driven by the premiumisation of dog food. This follow-on
investment from the Company, alongside a co-investment by the British Growth
Fund and existing shareholders, will provide additional working capital
enabling Bella & Duke to continue to scale.
0.39
Caledonian Leisure UK leisure and April 2021 - February 2022
experience breaks
Caledonian Leisure works with accommodation providers, coach businesses and
other experienced providers (such as entertainment destinations and theme
parks) to deliver UK-based leisure and experience breaks to its customers. It
comprises two brands, Caledonian Travel (caledoniantravel.com) and UK
Breakaways (ukbreakaways.com). The domestic leisure and experience travel
market has been devastated by the COVID-19 pandemic, but the company is
well-placed to expand as lockdown and travel restrictions have eased. A series
of planned investment tranches has helped the company prepare for and
capitalise on the strong demand for UK staycation holidays.
Tapas Revolution Spanish restaurant chain June 2021 0.05
Spanish Restaurant Group (trading as Tapas Revolution) (tapasrevolution.com)
is a leading Spanish restaurant chain in the casual dining sector. At initial
investment in January 2017, it was operating five sites and, subsequent to a
further investment round in March 2018, had grown to 12 sites. Tapas was
trading well and had a strong outlook up until the onset of COVID-19 which
mandated the closure of much of its estate during the course of 2020 in
response to the varying patterns of government restrictions. Costs were
controlled well under the circumstances and this further investment provided
financial headroom whilst the business re-opened its estate.
Digital marketplace for online tutoring 0.52
MyTutor August 2021
MyTutorweb (trading as MyTutor) (mytutor.co.uk) is a digital marketplace that
connects school pupils who are seeking private one-to-one tutoring with
university students. The business is satisfying a growing demand from both
schools and parents to improve pupils' exam results. This further investment,
alongside other existing shareholders and Australian strategic co-investor,
SEEK, who invested £30 million, aims to build and reinforce its position as a
UK category leader in the online education market as well as to begin to
develop a broader, personalised learning product. The company has been chosen
as a Tutoring Partner for the National Tuition Programme where they will
directly support 30,000 students in catching up on lost learning because of
the COVID-19 pandemic.
Provider of premium 0.16
Andersen EV electric vehicle (EV) chargers September 2021
Muller EV Limited (trading as Andersen EV) (andersen-ev.com) is a design-led
manufacturer of premium electric vehicle chargers. Incorporated in 2016, this
business has secured high profile partnerships with Porsche and Jaguar Land
Rover, establishing an attractive niche position in charging points for the
high end EV market. This follow-on funding is to further support its premium
brand and product positioning whilst ensuring all new and existing products
meet the most recent and highest safety and compliance standards. Andersen has
continued its strong trading performance with revenue up over 300% year on
year.
Seller of proprietary digital archiving software 0.89
Preservica October/November 2021
Preservica is a SaaS software business with blue chip customers and strong
recurring revenues. It has developed market leading software for the long-term
preservation of digital records, ensuring that digital content can remain
accessible, irrespective of future changes in technology. This latest
investment is to provide additional growth capital to finance the further
development of the business. The business has seen annual recurring revenues
nearly double over the last two financial years.
ActiveNav File analysis Software December 2021 0.26
Data Discovery Solutions (trading as ActiveNav) (activenav.com) is a file
analysis software solution which makes it easier for companies to clean up
network drives, respond to new data protection laws and dispose of redundant
and out dated documents. ActiveNav's solution is used by significant blue chip
customers, particularly those in highly regulated industries such as energy
and professional services, as well as government entities in the USA, Canada,
Australia and the UK. This further funding is to market its nascent SaaS-based
Hubble platform in order to generate company value.
Portfolio valuation movements
The portfolio generated net unrealised gains of £9.55 million in the year.
The scale of the valuation increases was underpinned by the Company's growth
portfolio, many of which have direct-to- consumer business models which have
grown significantly since the onset of the COVID-19 pandemic. Despite ongoing
uncertainties relating to COVID-19, Gresham House believes that the pandemic
has accelerated existing trends in consumer behaviour and, in many cases,
companies have experienced strong growth in demand. Over this period, some
older style MBO portfolio companies with similar business practices have also
benefited. However, the volatility of markets and fall in consumer confidence
towards the end of the Company's financial year have had an impact on
valuations of quoted assets as well as sector PE multiples, making this a more
challenging environment for the portfolio. The portfolio has nevertheless
proven to be resilient.
Total valuation increases were £14.91 million. The main valuation increases
were:
Preservica - £5.02 million
Bella & Duke - £3.00 million
Media Business Insight - £1.83 million
MyTutor - £1.08 million
Master Removers Group - £1.05 million
Preservica, Bella & Duke and MyTutor have benefitted from significant
re-rating as part of a further funding rounds and increased scale. Media
Business Insight has continued to reap the rewards of the success of its
diversification to online income streams and a more flexible cost base, whilst
Master Removers Group has been effective in taking advantage of strong
property markets and a structural shift in demand for storage and logistics.
Total valuation decreases were £(5.36) million. The main valuation decreases
were:
Virgin Wines - £(3.02) million
Parsley Box - £(1.72) million
Bleach London - £(0.20) million
ActiveNav - £(0.16) million
Virgin Wines and Parsley Box have been impacted by negative market sentiment
compounded by more challenging customer recruitment over the year.
Bleach has had a challenging year
having had to delay its US launch and having experienced normalised D2C
revenues post UK lockdown. Active Nav has had slower revenue growth than
anticipated, but other avenues for sales growth are in the process of being
established.
Portfolio Realisations during the year
The Company realised two investments during the year, as detailed below.
Company Business Period of investment Total cash proceeds over the life of the investment / Multiple over cost
Proactive Group Provider of media services and investor conferences January 2018 to September 2021
£1.63 million
2.6x cost
On 29 September 2021, the Company sold its investment in Proactive Group
Holdings Inc ("Proactive"). The Company received £1.60 million in cash
following the disposal of its equity and loan notes, contributing to a
realised gain over cost over the life of the investment of £0.99 million.
Total proceeds received over the nearly four-year life of the investment were
£1.63 million, compared to an original cost of £0.64 million, which is a
multiple on cost of 2.6x and an IRR of 33.0%.
Design and manufacturer of Stand up paddleboards £3.86 million
Red Paddle July 2015 to 5.4x cost
November 2021
The Company sold its investment in Vian Marketing (trading as Red Paddle) to
Myers Family Office for £3.28 million (realised gain in the year: £2.22
million). Total proceeds received to date over the six-year life of the
investment were £3.86 million compared to an original investment cost of
£0.72 million, which is a multiple on cost of 5.4x and an IRR of 33.2%.
Loan stock repayments and other gains in the year
During the year, the Company received loan repayments from MPB (£0.27
million), Red Paddle (£0.18 million), and Media Business Insight (£0.50
million; realised gain of £0.04 million). There was also further partial
realisation of MyTutor which generated £0.52 million proceeds for the Company
and a realised gain in the year of £0.26 million. In addition to the above,
the Company received further deferred proceeds of £0.02 million bringing the
total proceeds received in the year to £6.37 million.
Portfolio income and yield
In the year under review, the Company received the following amounts in loan
interest and dividend income:
Investment Portfolio Yield 2022 2021
£mn £mn
Interest received in the year 0.79 0.84
Dividends received in the year 0.29 0.83
Total portfolio income in the year(1) 1.08 1.67
Portfolio value at 31 March 52.16 41.83
Portfolio Income Yield (Income as a % of Portfolio value at 31 March) 2.1% 4.0%
(1 ) Total portfolio income for the year is generated solely
from investee companies within the portfolio.
New investment made after the year-end
The Company made one new investment of £0.43 million after the year-end, as
detailed below:
Company Business Date of investment Amount of new investment (£mn)
0.43
Bidnamic Retail Software May 2022
Lads Store Limited (trading as Bidnamic) (www.bidnamic.com
(http://www.bidnamic.com) ) is a marketing technology business that offers a
SaaS platform for online retailers to optimize their search engine marketing
("SEM") spend. The technology was all developed internally, and uses bespoke
machine learning algorithms to automate the management and optimisation of
online retailers' Google shopping spend. The ARR of the business has grown
substantially over the last two years and this is projected to continue. The
investment round will be used to further enhance the product's capabilities,
and drive continued ARR growth through expanding the sales & marketing
team and building a presence in North America.
Further investments made after the year-end
The Company made further investments totalling £0.57 million into three
existing portfolio companies after the year-end as detailed below:
Company Business Date of investment Amount of further investment (£m)
Northern Bloc Vegan and dairy-free ice cream producer April 2022 0.12
Northern Bloc Ice Cream (northern-bloc.com) is an established food brand in
the emerging and rapidly growing vegan market. By focusing on chef quality
and natural ingredients, Northern Bloc has carved out an early mover position
in the vegan ice cream sector. The company's focus on plant-based
alternatives has strong environmental credentials as well as it being the
first ice cream brand to move wholly in sustainable packaging. The investment
is aimed at capitalising on the company's market position and accelerating
growth. It has obtained key listings across several large supermarkets and is
well placed to benefit from the food service recovery as it continues to
secure menu placings. Northern Bloc has doubled its retail store facings in
2020 and saw a 60% increase in retail sales over the year. Current facings now
stand at 1,800 across the UK.
0.27
Andersen EV Provider of premium May 2022
electric vehicle (EV) chargers
Muller EV Limited (trading as Andersen EV) is a design-led manufacturer of
premium electric vehicle chargers. Incorporated in 2016, this business has
secured high profile partnerships with well-known car brands, establishing an
attractive niche position in charging points for the high end EV market. This
follow-on funding is to further support its premium brand and product
positioning whilst ensuring all new and existing products meet the most recent
and highest safety and compliance standards. Andersen has continued its strong
trading performance with revenue up over 300% year on year.
0.18
RotaGeek Workforce management software June 2022
RotaGeek is a provider of cloud-based enterprise software to help larger
retail, leisure and healthcare organisations predict and meet demand to
schedule staff effectively. Covid-19 resulted in some temporary disruption
to its markets but also provided opportunities and the company is well placed
to emerge stronger and has made significant commercial progress. The total
further funding, along with additional funds from external parties, will
enable RotaGeek to deliver on its growth plans and profitability.
Realisation after the year-end
The Company realised one of its investments after the year end, generating
proceeds of £2.77 million, as detailed below:
Company Business Period of investment Total cash proceeds over the life of the investment / Multiple over cost
Media Business Insight Publishing and events business January 2015 to £4.47 million
June 2022
2.2x cost
The Company sold its investment in Media Business Insight Holdings Limited to
GlobalData plc for £2.77 million. Total proceeds received to date over the
seven-year of the investment were £4.47 million compared to an original
investment cost of £2.01 million, which is a multiple on cost of 2.2x and an
IRR of 13.7%. Further proceeds held in escrow may be payable in due course.
Environmental, Social, Governance considerations
Following the novation of the advisory agreement to Gresham House on 30
September 2021, a market leader that is well-resourced with knowledge and
expertise in sustainability, the Investment Advisor has moved to establish ESG
procedures and protocols of the highest standards as set out and informed by
Gresham House plc. The first tangible example of this revised approach is that
that the individual members of the investment team now have their own
individual ESG objectives set which align with the wider ESG goals of the
Investment Adviser.
Gresham House is committed to sustainable investment as an integral part of
its business strategy. During 2021, the Investment Adviser has taken further
steps to formalise its approach to sustainability and has put in place several
processes to ensure environmental, social and governance ("ESG") factors and
stewardship responsibilities are built into asset management across all funds
and strategies, including venture capital trusts.
Gresham House believes the "G" (Governance) of ESG is the most important
factor in its investment processes. Board composition, governance, control,
company culture, alignment of interests, shareholder ownership structure and
remuneration policy are important elements that will feed into the analysis
and the valuation of portfolio companies.
The "E" and "S" (Environmental and Social) will be assessed as risk factors
during due diligence to screen companies that face environmental and social
risks that cannot be mitigated through engagement and governance changes.
Where material ESG risks are identified, these will be reviewed by the Adviser
and a decision on how to proceed will be documented. The Adviser will then
proactively follow up with the investee company management team and ensure
appropriate corrective and preventative action is taken and any material
issues or incidents are recorded by the Adviser.
Gresham House published its second Sustainable Investment Report in April 2022
that, along with existing asset specific policies, including the Public Equity
Policy, can be found on its website (www.greshamhouse.com).
These reports and policies cover the Investment Adviser's sustainable
investment commitments, how the investment processes meet these commitments
and the application of the sustainable investment framework. The Gresham House
Board and General Management Committee assess the adherence to the commitments
in the Sustainable Investment Policies on an annual basis.
In a changing world, the Investment Adviser believes that this approach will
contribute towards the enhancement of shareholder value going forward.
Outlook
Whilst the year under review has been marked with volatility and uncertainty
as a result of a number of factors affecting both the global and UK economy,
the portfolio has continued to trade well. Even so, negative market
sentiment has impacted valuations towards the end of the year, particularly
those of the AIM-listed stocks, and we are now for the first time starting to
see a noticeable impact on consumer confidence. The tragic events unfolding in
Ukraine have amplified the uncertainty and shocked financial markets around
the world however there had been no material impact on the valuation of the
portfolio at the year-end. In spite of these challenges, the Company has
achieved a positive net return for the year and investment activity has
remained buoyant. The Investment Adviser therefore remains cautiously
optimistic that the portfolio is well positioned
Gresham House Asset Management Limited
Investment Adviser
29 June 2022
Investment Portfolio Summary as at 31 March 2022
Total Book cost at Valuation at 31 March 2021 Change in valuation for year Valuation at 31 March 2022 % of net assets by value
31 March 2022
Qualifying investments £ £ £ £
Preservica Limited 2,428,743 2,689,711 5,022,119 8,602,347 11.1%
Seller of proprietary digital archiving software
Bella & Duke Limited 2,062,146 2,334,829 2,995,533 5,941,407 7.7%
Apremium frozen raw dog food provider
MPB Group Limited 869,871 4,025,448 633,981 4,392,111 5.7%
Online marketplace for photographic and video equipment
Virgin Wines UK Plc (AIM quoted) 30,541 6,864,072 (3,016,498) 3,847,574 5.0%
Online wine retailer
EOTH Limited (trading as Equip Outdoor Technologies) 817,185 3,142,002 631,862 3,773,864 4.9%
Branded outdoor equipment and clothing (Rab and Lowe Alpine)
My Tutorweb Limited (trading as MyTutor) 1,846,886 2,033,227 1,078,424 3,376,630 4.4%
Digital marketplace connecting school pupils seeking one-to-one online
tutoring
End Ordinary Group Limited (trading as Buster and Punch) 1,231,510 2,386,154 331,863 2,718,017 3.5%
Industrial inspired lighting and interiors retailer
Media Business Insight Holdings Limited 1,447,188 760,342 1,823,213 2,583,555 3.3%
Apublishing and events business focused on the creative production industries
Master Removers Group 2019 Limited (trading as Anthony Ward Thomas, 251,763 1,105,897 1,047,722 2,153,619 2.8%
Bishopsgate and Aussie Man & Van)
Aspecialist logistics, storage and removals business
Data Discovery Solutions Limited (trading as ActiveNav) 1,207,040 1,886,000 (161,945) 1,988,095 2.6%
Provider of global market leading file analysis software for information
governance, security and compliance
Manufacturing Services Investment Limited (trading as Wetsuit Outlet) 1,412,992 1,411,876 (363) 1,411,513 1.8%
Online retailer in the water sports market
Arkk Consulting Limited (trading as Arkk Solutions) 1,299,865 1,355,617 29,088 1,384,705 1.8%
Provider of services and software to enable organisations to remain compliant
with regulatory reporting requirements
Tharstern Group Limited 789,815 812,315 379,593 1,191,908 1.5%
Software based management Information systems
Connect Childcare Group Limited 828,419 1,004,302 (49,420) 954,882 1.2%
Nursery management software provider
Vivacity Labs Limited 876,541 876,541 - 876,541 1.1%
Provider of artificial intelligence & urban traffic control systems
Caledonian Leisure Limited 522,509 135,852 236,820 759,329 1.0%
Provider of UK leisure and experience breaks
Rota Geek Limited 733,200 553,833 82,430 636,263 0.8%
Workforce management software
Legatics Holdings Limited 605,374 - - 605,374 0.8%
SaaS LegalTech software provider
Bleach London Holdings Limited 539,682 789,520 (196,346) 593,174 0.8%
Hair colourants brand
Spanish Restaurant Group Limited (trading as Tapas Revolution) 947,645 198,550 331,196 574,893 0.7%
Spanish restaurant chain
Pets' Kitchen Limited (trading as Vet's Klinic) 561,680 - - 561,680 0.7%
Veterinary clinics
Northern Bloc Ice Cream Limited 303,000 317,369 241,482 558,851 0.7%
Supplier of premium vegan ice cream
Proximity Insight Holdings Limited 555,000 - - 555,000 0.7%
Super-App used by customer-facing teams of brands and retailers to engage,
inspire and transact with customers
IPV Limited 535,459 535,459 - 535,459 0.7%
Provider of media asset software
Muller EV Limited (trading as Andersen EV) 381,500 181,191 36,809 381,500 0.5%
Provider of premium electric vehicle (EV) chargers
CGI Creative Graphics International Limited 999,568 336,016 (73,856) 262,160 0.3%
Vinyl graphics to global automotive, recreation vehicle and aerospace markets
RDL Corporation Limited 1,000,000 367,499 (112,280) 255,219 0.3%
Recruitment consultants for the pharmaceutical, business intelligence and IT
industries
Parsley Box Group Plc (AIM quoted) 520,549 1,937,524 (1,722,244) 215,280 0.3%
Supplier of home delivered, ambient ready meals targeting the over 60s
Kudos Innovations Limited 277,950 82,823 (16,600) 66,223 0.1%
Online platform that provides and promotes academic research dissemination
Jablite Holdings Limited (in members' voluntary liquidation) 281,398 37,110 - 37,110 0.0%
Manufacturer of expanded polystyrene products
Veritek Global Holdings Limited 967,780 - - - 0.0%
Maintenance of imaging equipment
Racoon International Group Limited 906,935 - - - 0.0%
Supplier of hair extensions, hair care products and training
BookingTek Limited 450,283 - - - 0.0%
Software for hotel groups
Oakheath Limited (in members' voluntary liquidation) 384,720 - - - 0.0%
Online platform that connects people seeking home care from experienced
independent carers
Realised in year
Proactive Group Holdings Inc - 1,598,518 - - 0.0%
Provider of media services and investor conferences for companies primarily
listed on secondary public markets
Vian Marketing Limited (trading as Red Paddle Co) - 1,250,675 - - 0.0%
Design, manufacture and sale of stand-up paddleboards and windsurfing sails
Total qualifying investments 28,874,737 41,010,272 9,552,583 51,794,283 66.8%
Non-qualifying investments
Manufacturing Services Investment Limited (trading as Wetsuit Outlet) 304,000 304,000 - 304,000 0.4%
Online retailer in the water sports market
Media Business Insight Limited 62,839 517,789 4,931 62,839 0.1%
Apublishing and events business focused on the creative production industries
365 Agile Group plc (formerly Iafyds plc) 254,586 - - - 0.0%
Development of energy saving devices for domestic use
Racoon International Group Limited 139,050 - - - 0.0%
Supplier of hair extensions, hair care products and training
Total non-qualifying investments 760,475 821,789 4,931 366,839 0.5%
Total investment portfolio per Note 8 29,635,212 41,832,061 9,557,514 52,161,122 67.3%
Cash and current asset investments² 30,019,758 26,259,504 33.9%
Total investments including cash and current asset investments 29,635,212 71,851,819 9,557,514 78,420,626 101.2%
Other current assets 2,218,906 260,786 0.3%
Current liabilities (171,857) (1,175,430) (1.5)%
Totals 29,635,212
Net assets at the year-end 73,898,868 77,505,982 100.0%
Total Investment Portfolio split by type
Growth focused portfolio³ 22,755,512 32,136,918 10,552,411 43,920,757 84.2%
MBO focused portfolio³ 6,879,700 9,695,143 (994,897) 8,240,365 15.8%
Investment Adviser's Total 29,635,212 41,832,061 9,557,514 52,161,122 100.0%
¹ As at 31 March 2022, the Company held more than 80% of its total
investments in qualifying holdings, and therefore complied with the VCT
Qualifying Investment test. For the purposes of the VCT qualifying test, the
Company is permitted to disregard disposals of investments for twelve months
from the date of disposal. It also has up to three years to bring in new funds
raised, before these need to be included in the qualifying investment test.
² Disclosed as Current asset investments and Cash at bank within Current
assets in the Balance Sheet.
³ The growth focused portfolio contains all investments made after the change
in the VCT regulations in 2015 plus some investments that are growth in nature
made before this date. The MBO focused portfolio contains investments made
prior to 2015 as part of the previous MBO strategy.
PRINCIPAL RISKS
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 and emerging risks faced
by the Company. This includes a key risk management review which takes place
at each quarterly Board meeting. Further details of these are contained in the
Corporate Governance section of the Directors' Report in the Annual Report.
The principal risks and the emerging risk identified by the Board are set out
below:
Risk Possible consequence How the Board manages risk
Political and Economic Events such as the war in Ukraine, the COVID-19 pandemic, the impact of · The Board monitors the portfolio as a whole to:
Brexit, an economic recession, supply shortages or a movement in sterling or
in interest rates, could affect trading conditions for smaller companies and (1) Ensure that the Company invests in a diversified portfolio of companies;
consequently the value of the Company's qualifying investments.
Movements in the UK Stock Market indices may affect the valuation of the
Company's investments, as well as affecting the Company's own share price and (2) Ensure that developments in the macro-economic environment such as
its discount to net asset value. movements in interest rates are monitored; and
(3) The Investment Adviser holds ongoing discussions with all the portfolio
companies to ascertaining where support is required. Cash comprises a
significant proportion of the net assets of the Company, further to the
successful realisations and the fund-raise earlier in the year giving the
Company a strong liquidity position. The portfolio has minimal exposure to
sectors such as leisure, hospitality, retail and travel which are currently
more at risk.
Investment and Strategic Investment in VCT qualifying earlier stage unquoted small companies involves a · The Board regularly reviews the Company's investment strategy.
higher degree of risk than investment in fully listed companies. Smaller
companies often have limited product lines, markets or financial resources, · Careful selection and review of the of the Investment portfolio on a
may not be profitable at the point of investment and be dependent for their regular basis.
management on a smaller number of key individuals. This may lead to variable
investment returns and the use of more subjective valuation methodologies. · The Investment Adviser has provided a growing pipeline of compliant
investment opportunities and continues to strengthen its investment team.
· The valuation of the investment portfolio and valuation methodologies are
reviewed by the Board each quarter.
Loss of approval as a venture capital trust The Company must comply with section 274 of the Income Tax Act 2007 ("ITA") · The Company's VCT qualifying status is continually reviewed by the
which allows it to be exempted from capital gains tax on investment gains. Any Investment Adviser.
breach of these rules may lead to the Company losing approval as a VCT,
qualifying Shareholders who have not held their shares for the designated · The Board receives regular reports from its VCT Status Adviser who has
holding period having to repay the income tax relief they obtained and future been retained by the Board to monitor the Company's ongoing compliance with
dividends paid by the Company becoming subject to tax. The Company would also the VCT Rules.
lose its exemption from corporation tax on capital gains.
VCT Regulatory Changes The Company is required to comply with the VCT specific regulations relating · The Board receives advice from PHA in respect of these requirements,
to European State Aid regulations as enacted by the UK Government which still including those that may arise from the withdrawal from the EU, and conducts
apply. Non-compliance would result in a loss of VCT status. its affairs in order to comply with these requirements.
Regulatory Changes The Company is required to comply with the Companies Act, the Listing Rules of · Regulatory and legislative developments are kept under review by the
the UK Listing Authority and United Kingdom Accounting Standards. Changes to Company's solicitors and the Board.
and breaches of any of these might lead to suspension of the Company's Stock
Exchange listing, financial penalties or a qualified audit report.
Financial and operating Failure of systems (including breaches of cyber security) at any of the · The Board carries out a bi-annual review of the internal controls in
third-party service providers that the Company has contracted with could lead place and reviews the risks facing the Company at Board meetings and receives
to inaccurate reporting or monitoring. Inadequate controls could lead to the control reports by exception.
misappropriation or insecurity of assets. Outsourcing and the increase in
remote working could give risk to cyber and data security risk and internal · The Board reviews the performance of the service providers annually and
control risk. has obtained assurance that such providers have controls in place to reduce
the risk of breaches of their cyber security.
Market Movements in the valuations of the Company's investments will, inter alia, be · The Board receives quarterly valuation reports from the Investment
connected to movements in UK Stock Market indices as well as affecting the Adviser and remains focused on the investments being at fair value, after
Company's own share price and its discount to net asset value. considering many factors, including the impact of market movements.
· The Investment Adviser alerts the Board of any adverse movements.
Asset Liquidity The Company's investments may be difficult to realise. · The Board receives reports from the Investment Adviser and reviews the
portfolio at each quarterly Board meeting. It carefully monitors investments
where a particular risk has been identified.
Market Liquidity Shareholders may find it difficult to sell their shares at a price which is · The Board has a share buyback policy which seeks to mitigate market
close to the net asset value given the limited secondary market in VCT shares. liquidity risk.
Cyber and Data Security The Company and its Shareholders may suffer losses in the event of the IT · The Board monitors and seeks assurance from the Company's principal
systems at principal suppliers being compromised by cyber attack. suppliers in respect of the systems and processes they have adopted to counter
these risks.
Emerging Risk: Non-compliance with current and future reporting requirements could lead to a · ESG and climate change impacts are also taken into account when
fall in demand from investors. That may affect the level of capital the considering new investment proposals. The Investment Adviser monitors the
Environmental, Social and Governance Company has available to meet its investment objectives. potential impact on investee companies of any proposed new legislation
regarding environmental, social and governance matters and advises and adapts
accordingly.
· The Board recognises that climate change is an important emerging risk
which the Company is taking into account in their strategic planning although
the Company itself has little direct impact on environmental issues. Measures
had been introduced to decrease the amount of travel undertaken prior to the
pandemic and working from home and to reduce the cost and environmental impact
of providing paper copies of Shareholder correspondence, as mentioned
elsewhere in the Annual Report.
The risk profile of the Company changed as a result of changes to VCT
legislation 2015. As the Company is required to focus its new investment
activity on growth capital investments in younger companies it is anticipated
that investment returns will be more volatile and have a higher risk profile.
The Board also discusses emerging risks as and when they arise, such as the
war in Ukraine and COVID-19 pandemic, and puts in place mitigating actions to
manage the risk. In an environment of low interest rates, returns on liquidity
may impact overall performance. This factor is monitored by the Board with the
objective of optimising returns on liquid funds whilst minimising capital
risk.
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. Under that law the directors are required to prepare the
financial statements and have elected to prepare the company financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising Financial Reporting
Standard 102, the Financial Reporting Standard applicable in the UK and
Republic of Ireland ('FRS 102') and applicable law). Under company law the
directors must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the company and
of the profit or loss for the company for that period.
In preparing these Financial Statements, the Directors are required to:
● select suitable accounting policies and then apply them
consistently;
● make judgements and accounting estimates that are
reasonable and prudent;
● state whether the Financial Statements have been
prepared in accordance with 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; and
b) the Annual Report includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties that it faces.
Having taken advice from the Audit Committee, the Board considers the Annual
Report and Financial Statements, taken as a whole, is fair, balanced and
understandable and that it provides the information necessary for shareholders
to assess the Company's position, performance, business model and strategy.
Neither the Company nor the Directors accept any liability to any person in
relation to the Annual Report except to the extent that such liability could
arise under English law. Accordingly, any liability to a person who has
demonstrated reliance on any untrue or misleading statement or omission shall
be determined in accordance with section 90A and schedule 10A of the Financial
Services and Markets Act 2000.
The names and functions of the Directors are stated in the Annual Report.
For and on behalf of the Board
Ian Blackburn
Chairman
29 June 2022
FINANCIAL STATEMENTS
Income Statement for the year ended 31 March 2022
Year ended 31 March 2022 Year ended 31 March 2021
Notes Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Net investment portfolio gains 8 - 1 12,095,784 12,095,784 - 25,356,908 25,356,908
Income 3 1,080,796 - 1,080,796 1,698,434 - 1,698,434
Investment Adviser's fees 4a (412,075) (1,236,223) (1,648,298) (299,284) (897,853) (1,197,137)
Investment Adviser's performance fees 4b - (1,014,703) (1,014,703) - - -
Other expenses 4d (403,366) - (403,366) (339,113) - (339,113)
Profit on ordinary activities before taxation 265,355 9,844,858 10,110,213 1,060,037 24,459,055 25,519,092
5
Taxation on profit/(loss) on ordinary activities - - - (43,540) 43,540 -
Profit for the year and total comprehensive income 265,355 9,844,858 10,110,213 1,016,497 24,502,595 25,519,092
Basic and diluted earnings per ordinary share: 7
0.36p 13.42p 13.78p 1.38p 33.37p 34.75p
The revenue column of the Income Statement includes all income and expenses.
The capital column accounts for the net investment portfolio gains (unrealised
gains/(losses) and realised gains on investments) and the proportion of the
Investment Adviser's fee and performance fee charged to capital.
The total column is the Statement of Total Comprehensive Income of the Company
prepared in accordance with Financial Reporting Standards ("FRS"). In order to
better reflect the activities of a VCT and in accordance with the 2014
Statement of Recommended Practice ("SORP") (updated in April 2021) 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.
Balance Sheet as at 31 March 2021 Company No. 03946235
31 March 2022 31 March 2021
Notes £ £
Fixed assets
41,832,061
Investments at fair value 8 52,161,122
Current assets
Debtors and prepayments 260,786 2,218,906
Current investments 9 23,458,496 27,633,496
Cash at bank 9 2,801,008 2,386,262
26,520,290 32,238,664
Creditors: amounts falling due within one year (171,857)
(1,175,430)
Net current assets 25,344,860 32,066,807
Net assets 77,505,982 73,898,868
Capital and reserves 732,303
Called up share capital 10 804,263
Share premium reserve 28,258,001 21,025,160
Capital redemption reserve 16,006 9,031
Revaluation reserve 24,455,488 16,598,524
Special distributable reserve 12,033,364 19,524,067
Realised capital reserve 10,521,719 13,397,234
Revenue reserve 1,417,141 2,612,549
Equity Shareholders' funds 77,505,982 73,898,868
Basic and diluted net asset value per ordinary 14 96.37p 100.91p
share
Statement of Changes in Equity for the year ended 31 March 2022
Non-distributable reserves Distributable reserves
Called up Share Capital Special Realised Revenue
share premium redemption Revaluation distributable capital Reserve
Capital Reserve Reserve Reserve Reserve Reserve (Note b) Total
(Note a) (Note b)
Notes £ £ £ £ £ £ £ £
At 1 April 2021 732,303 21,025,160 9,031 16,598,524 19,524,067 13,397,234 2,612,549 73,898,868
Comprehensive income for the year
Profit for the year - - - 9,557,514 - 287,344 265,355 10,110,213
Total comprehensive income for the year - - - 9,557,514 - 10,110,213
287,344 265,355
Contributions by and distributions to owners
Shares issued via Offer for Subscription (Note c) 10 - - - - - 7,500,000
78,935 7,421,065
Issue costs and facilitation fees on Offer for Subscription (Note c) 10 - - - (51,097) - - (239,321)
(188,224)
Shares bought back (Note d) 10 (6,975) - 6,975 - (643,810) - - (643,810)
Dividends paid 6 - - - - (4,544,870) (7,114,335) (1,460,763) (13,119,968)
Total contributions by and distributions to owners
71,960 7,232,841 6,975 - (5,239,777) (7,114,335) (1,460,763) (6,503,099)
Other movements
Realised losses transferred to special reserve (Note a) - - - - - -
(2,250,926) 2,250,926
Realisation of previously unrealised gains - - - (1,700,550) - 1,700,550 - -
Total other movements - - - (1,700,550) - -
(2,250,926) 3,951,476
At 31 March 2022 804,263 28,258,001 16,006 24,455,488 77,505,982
12,033,364 10,521,719 1,417,141
Notes
a) The Company's special reserve is available to fund buybacks of
shares as and when it is considered by the Board to be in the interests of
Shareholders, and to absorb any existing and future realised losses and for
other corporate purposes. At 31 March 2022, the Company has a special reserve
of £12,033,364, all of which arises from shares issued more than three years
ago. Reserves originating from share issues are not distributable under VCT
rules if they arise from share issues that are within three years of the end
of an accounting period in which shares were issued. The total transfer of
£2,250,926 from the realised capital reserve to the special distributable
reserve above is the total of realised losses incurred by the Company in the
year.
b) The realised capital reserve and the revenue reserve together
comprise the Profit and Loss Account of the Company.
c) Under an Offer for Subscription launched on 20 January 2022,
7,893,544 ordinary shares were allotted on 9 March 2022, raising net funds of
£7,260,679 for the Company. This figure is net of issue costs of £188,224
and facilitation fees of £51,097.
d) During the year, the Company purchased 697,498 of its own shares at
the prevailing market price for a total cost of £643,810, which were
subsequently cancelled.
The composition of each of these reserves is explained below:
Called up share capital
The nominal value of shares originally issued, increased for subsequent share
issues either via an Offer for Subscription or 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.
Statement of Changes in Equity for the year ended 31 March 2021
Non-distributable reserves Distributable reserves
Called up Share Capital Revaluation Special Realised Revenue
share premium redemption distributable capital Reserve
capital reserve reserve reserve reserve reserve Total
Notes £ £ £ £ £ £ £ £
At 1 April 2020 596,893 10,673,405 5,157 (3,206,720) 24,090,692 9,809,815 1,596,052 43,565,294
Comprehensive income for the year
Profit for the year - - - 20,590,071 - 3,912,524 1,016,497 25,519,092
Total comprehensive income for the year - - - 20,590,071 - 3,912,524 1,016,497 25,519,092
Contributions by and distributions to owners
Shares issued under Offer for Subscription (Note c) 10 139,284 10,622,489 - - - - - 10,761,773
Issue costs and facilitation fees on Offer for Subscription (Note c) 10 - (270,734) - - (230,746) - - (501,480)
Shares bought back (Note d) 10 (3,874) - 3,874 - (292,568) - - (292,568)
Dividends paid 6 - - - - (2,944,710) (2,208,533) - (5,153,243)
Total contributions by and distributions to owners 135,410 10,351,755 3,874 - (3,468,024) (2,208,533) - 4,814,482
Other movements
Realised losses transferred to special reserve (Note a) - - - - (1,098,601) 1,098,601 - -
Realisation of previously unrealised gains - - - (784,827) - 784,827 - -
Total other movements - - - (784,827) (1,098,601) 1,883,428 - -
At 31 March 2021 732,303 21,025,160 9,031 16,598,524 19,524,067 13,397,234 2,612,549 73,898,868
Notes continued
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.
Special distributable reserve
This reserve is created from cancellations of the balances upon the Share
premium reserve, which are transferred to this reserve from time to time. The
cost of share buybacks and any realised losses on the sale or impairment of
investments (excluding transaction costs) are charged to this reserve. 75% of
the Investment Adviser fee expense, and the related tax effect, that are
charged to the realised capital reserve are transferred 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's fee (subsequently transferred
to the Special distributable reserve along with the related tax effect) 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.
Revenue reserve
Income and expenses that are revenue in nature are accounted for in this
reserve as well as 25% of the Investment Advisor fee 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 March 2022
Year ended Year ended
31 March 2022 31 March 2021
Notes
£ £
Cash flows from operating activities
Profit for the financial year 10,110,213 25,519,092
Adjustments for:
Net investment portfolio (gains) (12,095,784) (25,356,908)
Tax charge for the current year - -
Decrease in debtors 5,191 7,025
Increase/(decrease) in creditors and accruals 1,003,986 (18,957)
Net cash (outflow)/inflow from operations (976,394) 150,252
Corporation tax paid - (134,947)
Net cash (outflow)/inflow from operating activities (976,394) 15,305
Cash flows from investing activities
Purchase of investments 8 (4,728,594) (5,394,087)
Disposal of investments 8 8,447,833 8,838,927
Net cash inflow from investing activities 3,719,239 3,444,840
Cash flows from financing activities
Net proceeds as part of Offer for Subscription 7,500,000 10,761,773
Issue costs (239,321) (501,480)
Equity dividends paid 6 (13,119,968) (5,153,243)
Purchase of own shares 10 (643,810) (353,488)
Net cash (outflow)/inflow from financing activities (6,503,099) 4,753,562
Net (decrease)/increase in cash and cash equivalents (3,760,254) 8,213,707
Cash and cash equivalents at start of year 30,019,758 21,806,051
26,259,504 30,019,758
Cash and cash equivalents at end of year
Cash and cash equivalents comprise:
Cash equivalents 19 23,458,496 27,633,496
Cash at bank and in hand 19 2,801,008 2,386,262
Notes to the Financial Statements for the year ended 31 March 2022
1 Company information
Mobeus Income and Growth 2 VCT plc is a public limited company incorporated in
England, registration number 03946235. The registered office is 5 New Street
Square, London, EC4A 3TW.
2 Basis of preparation
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') (updated in April 2021) issued by the
Association of Investment Companies ("AIC"). The Company has a number of
financial instruments which are disclosed under FRS102 s 11/12 as shown in
Note 15 of the Annual Report.
After performing the necessary enquiries, the Directors have undertaken an
assessment of the Company's ability to meet its liabilities as they fall due.
The Company has significant cash and liquid resources and no external debt or
capital commitments. The Company's cash flow forecasts, which consider levels
of anticipated new and follow-on investment, as well as investment income and
annual running cost projections, are discussed at each quarterly Board meeting
and, in particular, have been considered in light of the ongoing impact of the
COVID-19 pandemic, the war in Ukraine and rising inflationary pressures. The
Directors have also received assurances that the Company's key suppliers'
ability to continue to service the Company has not been materially impacted by
the COVID-19 pandemic. Following this assessment, the Directors have a
reasonable expectation that the Company will have adequate resources to
continue to meet its liabilities for at least 12 months from the date of these
Financial Statements. The Directors therefore consider the preparation of
these financial statements on a going concern basis to be appropriate.
3 Income
Dividends receivable on quoted equity shares are brought into account on the
ex-dividend date. Dividends receivable on unquoted equity shares are brought
into account when the Company's right to receive payment is established and
there is no reasonable doubt that payment will be received.
Interest income on loan stock is accrued on a daily basis. Provision is made
against this income where recovery is doubtful or where it will not be
received in the foreseeable future. Where the loan stocks only require
interest or a redemption premium to be paid on redemption, the interest and
redemption premium is recognised as income or capital as appropriate once
redemption is reasonably certain. When a redemption premium is designed to
protect the value of the instrument holder's investment rather than reflect a
commercial rate of revenue return, the redemption premium is recognised as
capital. The treatment of redemption premiums is analysed to consider if
they are revenue or capital in nature on a company-by-company basis.
Accordingly, the redemption premium recognised in the year ended 31 March 2022
has been classified as capital and has been included within gains on
investments.
2022 2021
£ £
Income from bank deposits 1,306 1,477
Income from investments
- from equities 279,501 830,882
- from overseas based OEICs 10,492 13,522
- from UK based OEICs 1,167 9,281
- from loan stock 788,330 795,761
- from interest on preference share dividend arrears - 41,533
1,079,490 1,690,979
Other income - 5,978
Total income 1,080,796 1,698,434
Total income comprises
Dividends 291,160 853,685
Interest 789,636 838,771
Other - 5,978
1,080,796 1,698,434
Total loan stock interest due but not recognised in the year was £336,436
(2021: £481,136). This decrease is due to the removal of a number of
investee company provisions that were considered appropriate in the previous
year in light of the COVID-19 pandemic.
4 Investment Adviser's fees and performance fees
All expenses are accounted for on an accruals basis.
a) Investment Adviser's fees
25% of the Investment Adviser's fees are charged to the revenue column of the
Income Statement, while 75% is charged against the capital column of the
Income Statement. This is in line with the Board's expected long-term split
of returns from the investment portfolio of the Company.
100% of any performance incentive fee payable for the year is charged against
the capital column of the Income Statement. This is because although the
incentive fee is linked to an annual dividend target, it is ultimately based
upon the achievement of capital growth.
Revenue Capital 2022 Total Revenue Capital 2021
Total
£ £ £ £ £ £
Gresham House Asset Management Limited (1)
412,075 1,236,223 1,648,298 299,284 897,853 1,197,137
Investment Adviser's fees
412,075 1,236,223 1,648,298 299,284 897,853 1,197,137
¹ On 30 September 2021, Mobeus sold its VCT fund and Investment management
business to Gresham House. As a result, the Company's Investment advisory
arrangements have been novated from Mobeus to Gresham House. The entire core
management, investment and operational teams involved with the Company all
transferred to Gresham House in connection with this transaction.
Under the terms of a revised investment management agreement dated 10
September 2010, (as amended and restated on 15 September 2016) Mobeus (from 1
October 2021, Gresham House) provides investment advisory, administrative and
company secretarial services to the Company, for a fee of 2% per annum
calculated on a quarterly basis by reference to the net assets at the end of
the preceding quarter, plus a fee of £113,589 per annum, the latter being
subject to changes in the retail prices index each year. In 2013, Mobeus has
agreed to waive such further increases due to indexation, until otherwise
agreed with the Board. In accordance with the policy statement published under
"Management and Administration" in the Company's prospectus dated 10 May 2000,
the Directors have charged 75% of the investment management expenses to the
capital account. This is in line with the Board's expectation of the long-term
split of returns from the investment portfolio of the Company.
Under the terms of the management agreement the total Investment Adviser and
administration expenses of the Company excluding any irrecoverable VAT,
exceptional costs and any performance incentive fee, are linked to a maximum
of 3.6% of the value of the Company's closing net assets. For the year ended
31 March 2022, the expense cap has not been breached (2021: £nil).
In accordance with general market practice, the Investment Adviser earned
arrangement fees and fees for supplying Directors and/or monitoring services
from investee companies. The share of such fees attributable to the
investments made by the Company were £98,172 (2021: £137,298) and £190,095
(2021: £177,839) respectively. The fees for supplying directors and/or
monitoring services were from 33 (2021: 36) investee companies during the
year.
b) Performance Fees
2022 2021
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Gresham House Asset
Management Limited - 1,014,703 1,014,703 - - -
Performance incentive agreement
The following performance incentive fee arrangement dated 20 September 2005
continues to be in place, and operated as detailed below:
New Ordinary and former C share fund shares
Basis of Calculation
The performance incentive fee payable is calculated as an amount equivalent to
20 per cent of the excess of a "Target rate" comprising:-
i) an annual dividend target (indexed each year for
RPI) and
ii) a requirement that any cumulative shortfalls below
the annual dividend target must be made up in later years. Any excess is not
carried forward, whether a fee is payable for that year or not.
Payment of a fee is also conditional upon the average Net Asset Value ("NAV")
per share for each such year equalling or exceeding the average "Base NAV" per
share for the same year. Base NAV commenced at £1 per share when C fund
shares were first issued in 2005, which is adjusted for subsequent shares
issued and bought back.
Any performance fee will be payable annually. It will be reduced to the
proportion which the number of "Incentive Fee Shares" represent of the total
number of shares in issue at any calculation date. Incentive Fees Shares are
the only shares upon which an incentive fee is payable. They will be the
number of C fund shares in issue just before the Merger of the two former
share classes on 10 September 2010, (which subsequently became Ordinary
shares) plus Ordinary shares issued under new fundraisings since the Merger.
This total is then reduced by an estimated proportion of the shares bought
back by the Company since the Merger, that are attributable to the Incentive
Fee Shares.
Clarifications to the agreement
During the year ended 31 March 2016, the Board and the Investment Adviser
agreed to confirm and clarify in more detail a number of principles and
interpretations applied to the agreement. The principal ones are reflected
in the paragraphs above and explained below:-
First, the incentive fee is paid upon dividends paid in a year, not declared
and paid in a year, as the original agreement stated. Secondly, the average
NAV referred to above is calculated on a daily weighted average basis
throughout the year. In turn, this average NAV is compared to a Base NAV
that is also calculated on a daily weighted average basis throughout the
year. Thirdly, the methodologies to account for new shares issued and
buybacks of shares, their inclusion in the incentive fee calculations and to
identify the proportion of all shares upon which an incentive fee is payable
have been clarified.
Finally, it has been agreed that any excess of cumulative dividends paid over
the cumulative annual dividend target is not carried forward, whether a fee is
paid for that year or not.
These clarifications have been incorporated in to the performance incentive
agreement. The Board has been advised that, as these and a number of more
minor clarifications, are clarifications of the Incentive Agreement, rather
than changes to it, there was no need to seek Shareholder approval for them.
Position at 31 March 2022
The cumulative dividends paid fell short of the annual cumulative dividend
target at 31 March 2022 by 7.62 pence per share (£5,034,803 in aggregate
being 91.5% of the total shortfall) at the year-end, (where 91.5% is the
proportion of Incentive Fee Shares to the total number of shares in issue at
the year-end date) and taking into account the target rate of dividends and
the dividends paid to Shareholders.
The 6.00 pence annual dividend hurdle was 9.07 pence per share at the year-end
after adjustment for RPI. The Base NAV was 98.26 pence per share at the year
end, compared to an average NAV for the year of 102.25 pence per share.
Therefore there is an Incentive fee is payable for the year of £1,014,703
(2021: £Nil).
c) Offer for Subscription fees
2022 2022
£mn £mn
Funds raised by the Company 7,26 10.76
Offer costs payable to Gresham House at 3.00% of funds raised by the Company 0.22 0.32
Under the terms of an Offer for Subscription, with the other Mobeus VCTs,
launched on 20 January 2022, Mobeus was entitled to fees of 3.00% of the
investment amount received from investors. This amount totalled £1.05 million
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.
d) Other expenses
Expenses are charged wholly to revenue, with the exception of expenses
incidental to the acquisition or disposal of an investment, which are written
off to the capital column of the Income Statement or deducted from the
disposal proceeds as appropriate.
2022 2021
£ £
Directors' remuneration (including NIC of £6,278 (2020: (£5,610)) (Note a) 107,278 101,610
IFA trail commission 67,648 66,663
Broker's fees 12,000 6,000
Auditors' fees - Audit of Company (Note b) (excluding VAT) 38,080 36,952
Registrar's fees 42,671 31,076
Printing 56,969 41,232
Legal & professional fees 22,768 4,074
VCT monitoring fees 8,400 8,400
Directors' insurance 9,659 7,378
Listing and regulatory fees 29,177 27,151
Sundry 8,716 8,577
Other expenses 403,366 339,113
a) Directors' remuneration is a related party transaction, see
analysis of Directors' fees payable and their interests in the shares of the
Company in the Directors' Remuneration Report, which excludes NIC above. The
key management personnel are the three non-executive Directors. The Company
has no employees. There were no amounts outstanding and due to the Directors
at 31 March 2022 (2021: £nil).
b) Included within this figure is £7,073 (2021: £6,868) relating to
advanced audit procedures in respect of the Financial Statements carried out
at the Half-Year. The Audit Committee reviews the nature and extent of these
services to ensure that auditor independence is maintained.
5 Taxation 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 Investment 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.
2022 2021
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
a) Analysis of tax charge:
UK Corporation tax on profits for the year - - - 43,540 (43,540) -
Total current tax charge -- - - 43,540 (43,540) -
Corporation tax is based on a rate of 19% (2021: 19%)
b) Profit on ordinary activities before tax 1,060,037 24,459,055 25,519,092
265,355 9,844,858 10,110,213
Profit on ordinary activities multiplied by small company rate of corporation 201,407 4,647,220 4,848,627
tax in the UK of 19% (2021: 19%)
50,417 1,870,523 1,920,940
Effect of:
UK dividends (53,105)) - (53,105)) (157,867) - (157,867)
Net investment portfolio gains not taxable/ - - (4,817,813) (4,817,813)
deductible
(2,298,199) (2,298,199)
Unrelieved expenditure 2,688 427,676 430,364 - 127,053 127,053
Actual tax charge - - - 43,540 (43,540) -
Tax relief relating to Investment Adviser fees is allocated between revenue
and capital where such relief can be utilised.
No asset or liability has been recognised for deferred tax in relation to
capital gains or losses on revaluing investments as the Company is exempt from
corporation tax in relation to capital gains or losses as a result of
qualifying as a Venture Capital Trust.
There is no potential liability to deferred tax (2021: £nil). There is an
unrecognised deferred tax asset of £733,172 (2021 (restated): £127,053). The
deferred tax asset relates to unrelieved management expenses and is not
recognised because the Company may not generate sufficient taxable income in
the foreseeable future to utilise these expenses.
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 income dividend to be paid in respect of a year. The
Company's status as a VCT means it has to comply with Section 274 of the
Income Tax Act 2007, which requires that no more than 15% of the income from
shares and securities in a year can be retained from the revenue available for
distribution for the year.
Amounts recognised as distributions to equity Shareholders in the year:
Dividend Type For year ended 31 March Pence per share Date Paid 2022 £ 2021 £
Interim Capital 2021 3.00p 19/06/2020 - 2,208,533
Interim Capital* 2021 4.00p 19/06/2020 - 2,944,710
Interim Income 2021 1.25p 30/07/2021 915,378 -
Interim Capital 2021 4.75p 30/07/2021 3,478,438 -
Interim Income 2022 0.75p 07/01/2022 545,385
Interim Capital 2022 5.00p 07/01/2022 3,635,897 -
Interim Capital 2022 6.25p 07/01/2022 4,544,870 -
13,119,968 5,153,243
* These dividends were 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 274 of
the Income Tax Act 2007 are considered.
Recognised income distributions in the Financial Statements for the year:
Dividend Type For year ended 31 March Pence per share Date payable 2022 £ 2021 £
265,355 1,016,497
Revenue available for distribution by way of dividends for the year
Income 2021 1.25p 30/07/2021 - 915,379
Interim
Interim Income 2022 0.75p 07/01/2022 545,385 -
545,385 915,379
7 Basic and diluted earnings per share
2022 2021
£ £
Total earnings after taxation: 10,110,213 25,519,092
Basic and diluted earnings per share (Note a) 13.78p 34.75p
Net revenue earnings from ordinary activities after taxation 265,355 1,016,497
Basic and diluted revenue earnings per share (Note b) 0.36p 1.38p
Net investment portfolio gains 12,095,784 25,356,908
Capital Investment Adviser fees (net of taxation) (1,236,223) (854,313)
Investment Adviser's performance fee (1,014,703) -
24,502,595
Total capital earnings 9,844,858
Basic and diluted capital earnings per share (Note c) 13.42p 33.37p
Weighted average number of shares in issue in the year 73,353,491 73,424,532
Notes:
a) Basic earnings per share is total earnings after taxation divided
by the weighted average number of shares in issue.
b) Basic revenue earnings per share is the revenue return after
taxation divided by the weighted average number of shares in issue.
c) Basic capital earnings per share is the total capital return 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 returns.
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 2018.
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 recognised once the right to receive payment
is established and there is no reasonable doubt that payment will be received.
Unquoted investments are stated at fair value by the Directors at each
measurement date in accordance with appropriate valuation techniques, which
are consistent with the IPEV guidelines:-
i. Each investment is considered as a whole on a 'unit of account'
basis, i.e. that the value of each portfolio company is considered as a whole,
alongside consideration of:-
The price of new or follow-on investments made, if deemed to be made as part
of an orderly transaction, are considered to be at fair value at the date of
the transaction. The inputs that derived the investment price are calibrated
within individual valuation models and at every subsequent quarterly
measurement date, are reconsidered for any changes in light of more recent
events or changes in the market performance of the investee company. The
valuation bases used are the following:
- a multiple basis. The enterprise value of the investment may be
determined 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, depreciation 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, scale and
liquidity).
or:-
- where a company's underperformance against plan indicates a
diminution in the value of the investment, provision against the price of a
new investment is made, as appropriate.
ii. 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.
iii. Where a multiple or the price of recent investment less impairment
basis is not appropriate and overriding factors apply, a discounted cash flow,
net asset valuation, realisation proceeds, or a weighted average of these
bases 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 figures are shown net of any
applicable transaction costs incurred by the Company.
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 the price of recent investment, 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.
Accounting standards classify methods of fair value measurement as Levels 1, 2
and 3. This hierarchy is based upon the reliability of information used to
determine the valuation. All of the unquoted investments are Level 3, i.e.
fair value is measured using techniques using inputs that are not based on
observable market data.
Movements in investments during the year are summarised as follows:
Traded on AIM Unquoted equity shares Unquoted preference shares Unquoted loan Stock Total
Level 1 Level 3 Level 3 Level 3
£ £ £ £ £
Cost at 31 March 2021 551,090 16,826,218 691,155 9,094,652 27,163,115
Permanent impairment at 31 March 2021 - (1,790,358) (170) (139,050) (1,929,578)
Unrealised gains/(losses) at 31 March 2021 8,250,506 9,983,516 63,770 (1,699,268) 16,598,524
Valuation at 31 March 2021 8,801,596 25,019,376 754,755 7,256,334 41,832,061
Purchases at cost (Note b) - 2,875,970 957,890 773,534 4,607,394
Sale proceeds (Note b) - (4,864,601) - (1,509,516) (6,374,117)
Reclassification at value (Note d) - 453,891 - (453,891) -
Net realised gains on investments (Note a)
- 2,499,113 - 39,157 2,538,270
Net unrealised gains on investments (Note c) (4,738,742) 13,990,136 64,594 241,526 9,557,514
Valuation at 31 March 2022 4,062,854 39,973,885 1,777,239 6,347,144 52,161,122
Cost at 31 March 2022 551,090 19,279,388 1,649,045 8,155,689 29,635,212
Permanent impairment at 31 March 2022 - (1,790,358) (170) (139,050) (1,929,578)
Unrealised gains/(losses) at 3,511,764 22,484,855 128,364 (1,669,495) 24,455,488
31 March 2022
Valuation at 31 March 2022 4,062,854 39,973,885 1,777,239 6,347,144 52,161,122
Net realised gains on investments of £2,538,270 together with net unrealised
gains on investments of £9,557,514 equal net investment portfolio gains of
£12,095,784 shown on the Income Statement.
A breakdown of the increases and the decreases in unrealised valuations of the
portfolio is shown in the Investment Portfolio Summary.
Major movements in investments
Note a) Disposals of investment portfolio companies during the year were:
Company Type Investment Cost Disposal Proceeds Opening Valuation Net realised gain/(loss) in year
£ £ £ £
Vian Marketing Limited (trading as Red Paddle Co) Realisation
629,255 3,467,752 1,250,675 2,217,077
MyTutorweb Limited Partial realisation
193,439 524,434 259,455 264,979
Media Business Insight Limited Loan repayment 499,045 499,045 459,881 39,164
MPB Group Limited Loan repayment 178,212 267,318 267,318 -
Proactive Holdings Inc. Realisation 635,346 1,593,315 1,598,518 (5,203)
Other capital proceeds Various - 22,253 - 22,253
2,135,297 6,374,117 3,835,847 2,538,270
Note b) The sale proceeds shown above of £6,374,117 is £2,073,716 less than
that shown on the Statement of Cash Flows of £8,447,833 due to proceeds
received from the partial realisations of MPB Group Limited and Parsley Box
Group Plc (formerly Parsley Box Limited), as well as additional proceeds due
from Vectair Holdings Limited at the beginning of this year.
The difference between the purchases at cost above of £4,607,394 and the cash
flow statement of £4,728,594 is the follow-on investment in Northern Bloc Ice
Cream Limited which completed shortly after the year-end.
Note c) The major components of the net increase in unrealised valuations of
£9,557,514 in the year were increases of
£5,022,119 in Preservica Limited, £2,995,533 in Bella & Duke Limited,
£1,828,144 in Media Business Insight Holdings Limited,
£1,078,424 in MyTutorWeb Limited (trading as MyTutor) and £1,047,722 in
Master Removers Group 2019 Limited (trading as Anthony Ward Thomas,
Bishopsgate and Aussie Man & Van). These increases were partly offset by
falls of £3,016,498 in Virgin Wines UK Plc, £1,722,244 in Parsley Box Group
plc and £196,346 in Bleach London Holdings Limited.
Note d) The amount of £453,891 transferred from unquoted loan stock to
unquoted equity shares represents the conversion of the loans held in two
portfolio companies into equity shares during the year.
9 Current asset investments and Cash at bank
Cash equivalents, for the purposes of the Statement of Cash Flows, comprise
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
of up to one year's 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.
2022 2021
£ £
OEIC Money market funds (Cash equivalents per Statement of Cash Flows) 23,458,496 27,633,496
Current asset investments 23,458,496 27,633,496
Cash at bank 2,801,008 2,386,262
10 Called up share capital
2022 2021
£ £
Allotted, called-up and fully paid:
Ordinary shares of 1p each: 80,426,321 (2021: 73,230,275) 804,263 732,303
Purchased Date of purchase Nominal value
£
299,932 09 July 2021 2,999
212,438 27 September 2021 2,124
79,304 15 December 2021 793
64,157 09 March 2022 642
41,667 29 March 2022 417
697,498 6,975
Under the Offer for Subscription launched on 20 January 2022 7,893,544
ordinary shares were allotted on 9 March 2022 at an average effective offer
price of 95.01 pence per share, raising net funds of £7,260,679.
During the year the Company repurchased 697,498 (2021: 387,471) of its own
ordinary shares (representing 1.0% (2021: 0.7%) of the ordinary shares in
issue at the start of the year) at the prevailing market price for a total
cost of £643,810 (2021: £292,568). These shares were subsequently cancelled
by the Company.
11 Basic and diluted net asset value per share
As at 31 March 2022 As at 31 March 2021
Net assets £77,505,982 £73,898,868
Number of ordinary shares in issue 80,426,321 73,230,275
Net asset value per share (pence) 96.37p 100.91p
12 Post balance sheet events
On 6 April 2022, a further investment of £0.12 million was made into Northern
Bloc Ice Cream Limited, an existing portfolio company.
On 5 May 2022, a new investment of £0.43 million was made into Lads Store
Limited (trading as Bidnamic).
On 23 May 2022, a further investment of £0.27 million was made into Muller EV
Limited (trading as Andersen EV), an existing portfolio company.
On 9 June 2022, the Company realised its investment in Media Business Insight
Holdings Limited, generating proceeds of £2.77 million.
On 15 June 2022, a further investment of £0.18 million was made into Rota
Geek Limited, an existing portfolio company.
13 Statutory information
The financial information set out in these statements does not constitute the
Company's statutory accounts for the year ended 31 March 2022 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.
14 Annual Report & Financial Statements
The Annual Report & Financial Statements will be published on the
Company's website at www.mig2vct.co.uk shortly and will be posted to those
Shareholders who have requested a copy. Following the adoption of electronic
communications by the Company, those Shareholders who have elected to receive
e-communications 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, Gresham House Asset Management
Limited by email at mobeusvcts@greshamhouse.com
(mailto:mobeusvcts@greshamhouse.com) .
15 Annual General Meeting
The Company's next Annual General Meeting will be held on Wednesday, 21
September 2022 at the offices of Shakespeare Martineau LLP, 6(th) Floor, 60
Gracechurch Street, London EC3R OHR and by webcast, the link is available on
the Company's website at: www.mig2vct.co.uk (http://www.mig2vct.co.uk) .
However, please note that Shareholders will not be able to vote via the
webcast and so are encouraged to return their proxy form before the deadline
of 19 September 2022.
Contact details for further enquiries
Gresham House Asset Management Limited (the Company Secretary) on 020 7382
0999 or by email to: info (mailto:info@greshamhouse.com) @greshamhouse.com
(mailto:info@greshamhouse.com) .
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.
(1) - Definitions of key terms and alternative performance measures ("APMs")
Key Performance Indicators ("KPIs") shown above and throughout are provided in
the Glossary of Terms within the Annual Report & Financial Statements.
(2) - Source: Panmure Gordon & Co (mid-market price).
CHAIRMAN'S STATEMENT
I am pleased to present the annual results of Mobeus Income & Growth 2 VCT
plc for the year ended 31 March 2022.
Overview
Following on from last year's record performance, your Company has experienced
another year of strong trading and growth in the value of its portfolio at 31
March 2022. The Company achieved an NAV total return per share of 13.3% for
the year (2021: 47.8%).
Although the year under review was marked by many challenges, the portfolio
proved to be resilient and adaptive in facing them. The threat from global
supply issues in logistics, materials and labour resulting from COVID-19
disruption is expected to remain for some months and the unfolding
geopolitical events relating to the war in Ukraine has added to the
uncertainty. We are starting to see the impact of inflationary pressures on
consumer confidence although, for the most part, trading for your Company's
largely service and software- based portfolio remains robust.
Despite Brexit concerns and considerable COVID-19 related restrictions across
the year, M&A activity remained buoyant and the Investment Adviser
continues to see healthy deal flow. The Company deployed £4.61 million of
investment capital and generated £6.37 million in realisation proceeds as in
that time, it realised two of its investments and added three new and seven
follow-on investments to the portfolio.
Shareholders should note that following the listing on AIM of two portfolio
companies shortly before the previous year-end 7.8% of the portfolio value is
in AIM listed entities. This increases the potential volatility in the value
of the Company's portfolio and subsequent NAV returns. The initial uplift in
value following their IPOs in March 2021 has been eroded after a number of
unfavourable trading statements led to a significant reduction in their share
prices. The remainder of the portfolio largely demonstrated strong performance
and growth over the same period.
We are witnessing a clear demonstration of the benefits of what is now a
diverse and maturing portfolio. Following the 2015 VCT rule change, the
revised investment strategy is bearing fruit as more of these young growth
investments start to achieve
significant scale and value. Several third-party investments have validated
this view, resulting in significant positive re-ratings in values of portfolio
businesses, such as MPB, MyTutor and Bella & Duke. The Company has also
provided support for the scaling of investments such as Preservica, with
significant further funding in November 2021. Additional information on value
movements is given in the Investment Adviser's Review.
The Company launched an Offer for Subscription on 20 January 2022 alongside
the three other Mobeus VCTs ("Offers") and the Board was very pleased to see
that unprecedented demand meant that the target of £7.5 million was reached
in less than 24 hours, at which point no further applications were accepted.
It was gratifying that approximately half of the applications received were
from existing Shareholders in the Company. The subsequent allotment of shares
has now bolstered the Company's capital to deploy in new and exciting
investment opportunities.
The Board acknowledges that not all of our existing Shareholders were able to
subscribe to the Offer due to the unexpectedly rapid response and were
disappointed. Consequently, the Board will explore several options in order to
give all Shareholders the same opportunity to invest whether electronically,
by email or by post for any future fundraise.
Performance
NAV total return, expressed on a pence per share basis, was derived as
follows:
2022 2021
Year ended 31 March (pence per share) (pence per share)
Net realised and unrealised gains on the investment portfolio 15.04 34.63
Income from the investment portfolio and liquid assets 1.34 2.32
Share buybacks and adjustments 0.89 0.07
Gross return 17.27 37.02
Less: Investment Adviser's fees and other expenses (3.81) (2.10)
Net return 13.46 34.92
NAV total return per share 13.3% 47.8%
The Company's NAV total return per share was 13.3% for the year to 31 March
2022 (2021: 47.8%) being the closing NAV per share of 96.37 pence plus
18.00 pence of dividends paid in the year (this includes 6.00p interim
dividend for the year ended 31 March 2021), divided by the opening NAV per
share of 100.91 pence. The share price total return was 23.4% (2021: 31.2%).
The difference between the share price and NAV total returns arises
principally due to the timing of NAV announcements, which are usually made on
a date following the date to which they relate and is explained more fully
under Performance in the Strategic Report. The positive NAV total return for
the year was principally the result of unrealised gains in the value of
investments still held, as well as realised gains achieved via exits and
partial realisations of several portfolio companies. The continued strong NAV
performance, in addition to dividends paid in excess of the agreed target rate
has resulted in a performance incentive fee amounting to £1,014,703 payable
to the Investment Adviser for the year (for further details please refer to
Note 4b in the Annual Report).
At the year-end, the Company was ranked 7th out of 41 Generalist VCTs over
five years and 1st out of 31 Generalist VCTs over ten years, in the
Association of Investment Companies' ("AIC") analysis of Cumulative NAV Total
Return. Shareholders should note that the AIC's rankings are based on the
latest available published NAVs and therefore did not reflect the NAV per
share of the Company at 31 March 2022. For further details on the performance
of the Company, please refer to the Strategic Report.
Target Return
The Board's current target is to achieve an average NAV total return of 8.0%
per annum. This year's 13.3% (2021: 47.8%) has contributed to an average over
five years of 14.9% per annum, in excess of the target.
The Board reminds Shareholders that investment portfolio returns and dividend
payments should always be viewed over the longer term.
Dividends
The Board continues to be committed to providing an attractive dividend stream
to Shareholders. In respect of the year ended 31 March 2022, the Company has
declared and paid a dividend of 12.00 pence per share to Shareholders. This
dividend was paid on 7 January 2022 to Shareholders on the register on 10
December 2021. To date, cumulative dividends paid since inception total 134.00
pence per share.
The Company has now met or exceeded the Board's annual dividend target of
paying at least 5.00 pence per share, of the last twelve financial years.
As Shareholders have been advised previously, the gradual move of the
portfolio to younger growth capital investments as well as the realisations of
older, more mature companies that have provided a good income yield, are
likely to make dividends harder to achieve from income and capital returns
alone in any given year. The Board aims to distribute realised profits (such
as income and gains from realisations) achieved in a year as dividends but
notes that a reduction in income received by the Company was seen during the
year. The Board, therefore, continues to monitor the sustainability of the
annual dividend target. Shareholders should also note that there may continue
to be circumstances where the Company is required to pay dividends in order to
maintain its regulatory status as a VCT, for example, to stay above the
minimum percentage of assets required to be held in qualifying investments.
Such dividends paid in excess of net income and capital gains achieved will
cause the Company's NAV per share to reduce by a corresponding amount.
Investment and portfolio performance
The portfolio valuation movements for the year were as follows:
2022 2021
£mn £mn
Opening Portfolio value 41.83 21.99
New and further investments 4.61 5.39
Disposal proceeds (6.37) (10.91)
Net realised gains 2.54 4.77
Valuation movements 9.55 20.59
Portfolio value at 31 March 2022 52.16 41.83
During the year, the Company invested a total of £4.61 million into three new
and seven existing portfolio companies (2021: £5.39 million; five new, eight
existing). New investments totalling £1.73 million were made into Legatics (a
SaaS LegalTech software business), Vet's Klinic (a veterinary clinic roll out)
and Proximity Insight (a retail platform). This investment into Proximity
Insight is the first investment made since the acquisition of the Mobeus VCT
investment advisory business by Gresham House and the Company's investment was
made alongside the other VCTs advised and managed by Gresham House (the three
other Mobeus
VCTs and the two Baronsmead VCTs). In accordance, with the agreed allocation
policy, the Company contributed £0.56 million towards a total Gresham House
supported investment of £5.00 million.
Additional funding of £2.88 million was provided across seven existing
portfolio companies: Bella & Duke (a frozen raw dog food provider),
Caledonian Leisure (a UK Leisure Breaks provider), Tapas Revolution (a Spanish
restaurant chain), MyTutor (an online tutoring marketplace), Andersen EV (a
producer of premium EV chargers), ActiveNav (a provider of enterprise-level
file analysis software), and Preservica (a proprietary digital archiving
software provider).
The Company generated £5.06 million in proceeds from the realisation of its
investments in Proactive Group (£1.60 million) and Red Paddle (£3.46
million) during the year. In addition to proceeds received from the partial
realisation of MyTutor (£0.52 million), together with loan repayments and
deferred proceeds totalling £0.79 million, the Company generated total
proceeds of £6.37 million in the year to 31 March 2022.
The portfolio has performed well over the Company's financial year. The
portfolio achieved £12.09 million (2021:
£25.36 million) in realised and unrealised gains in the year, being 28.9%
(2021: 115.3%) of the opening portfolio value. The portfolio was valued at
£52.16 million at the year-end (2021: £41.83 million).
Within net realised gains, the principal contributors were the full realised
gains of Proactive Group and Red Paddle (total of £2.21 million). Total
proceeds received over the life of investments in Proactive Group (£1.63
million) and Red Paddle (£3.86 million) generated multiples of cost of 2.6x
(IRR: 33.0%) and 5.4x (33.2%) respectively. Further realised gains were also
generated from the partial realisation of MyTutor (£0.26 million).
The portfolio's valuation at the year-end demonstrates the continued
beneficial impact of changes in UK consumer and business behaviour brought on
by the pandemic and lockdown restrictions, particularly for those businesses
operating direct-to-consumer models. However, it also underscores the success
of portfolio companies in adapting to a rapidly changing environment, becoming
more efficient and diversifying their product offering in order to take
advantage of opportunities that have arisen. This level of resilience has
enabled the portfolio to continue to trade well in what have been challenging
global market conditions in the second half of the Company's financial year.
As anticipated, the Company's quoted stocks such as Virgin Wines and Parsley
Box are subject to stock market movements and have brought an additional level
of volatility to a portion of the portfolio. In the second half of the year,
these investments saw a significant value decline in the face of changing
market sentiment and announcement of results which were below market
expectations. Your Board remains confident in the future prospects of both
these AIM quoted businesses.
In contrast, there have been pleasing unquoted valuation increases, supported
by a sizeable further investment from the Mobeus VCTs in the case of
Preservica, and by third-party investment transactions in the cases of
MyTutor, MPB and Bella & Duke.
The portfolio achieved a net increase in unrealised valuations of £9.55
million for the year in investments still held, with the biggest value
increases in Preservica, Bella & Duke and Media Business Insight partially
offset by valuation falls at Virgin Wines and Parsley Box, as well as modest
falls at Bleach London and ActiveNav. For further information on portfolio
valuation movements, see the Investment Adviser's Review. Further details of
the Company's investment activity (including transactions that have occurred
after the year-end) and the performance of the portfolio are contained in the
Investment Adviser's Review and the Investment Portfolio Summary.
Liquidity and Fundraising
Cash and cash equivalents held by the Company as at 31 March 2022 amounted to
£26.26 million, or 33.9% of net assets.
On 20 January 2022, the Company launched an Offer for Subscription of £7.50
million, alongside Offers from the other Mobeus VCTs. As previously stated in
my Overview, the Offers experienced unprecedented demand such that the Company
received subscriptions amounting to the full amount sought within 24 hours of
launching and was subsequently then closed to further applications. In
accordance with the Offers' prospectus, the allotment of all shares under the
offer took place on 9 March 2022, and generated net funds (after costs) of
£7.26 million. In consideration of environmental factors and cost savings,
the Company elected to release the Prospectus digitally, with hard copies
available on request, and invite applications to be submitted online via a
digital portal. This method provided increased security and efficiency in the
application process and the Board strongly recommends that Shareholders
wishing to subscribe to any future offers opt to submit their applications via
the online facility.
Share Buybacks
During the year, the Company bought back and cancelled 697,498 of its own
shares (2021: 387,471), representing 1.0% of the shares in issue at the
beginning of the year (2021: 0.7%), at a total cost of £0.64 million,
inclusive of expenses (2021: £0.29 million). It is the Company's policy to
cancel all shares bought back in this way. The Board regularly reviews its
buyback policy and currently seeks to maintain the discount at which the
Company's shares trade at no more than 5% below the latest published NAV.
Shareholder Communications and Annual General Meeting
May I remind you that the Company has its own website containing useful
information for Shareholders at:
www.mig2vct.co.uk (http://www.mig2vct.co.uk) .
The Investment Adviser held a virtual Shareholder Event on the morning of 25
February 2022. A presentation was provided by representatives of each of the
Mobeus VCT Boards as well as the Investment Adviser and the key executives of
two portfolio companies, Virgin Wines and Media Business Insight. A recording
of the event is available here: https://mvcts.connectid.cloud/
(https://mvcts.connectid.cloud/) .
Your Board is pleased to be able to hold the next Annual General Meeting
("AGM") of the Company in person at
11.00 am on Wednesday, 21 September 2022 at the offices of Shakespeare
Martineau LLP, 6th Floor, 60 Gracechurch Street, London, EC3V 0HR. A webcast
will also be available at the same time for those Shareholders who cannot
attend in person. However, please note that you will not be able to vote via
this method and so are encouraged to return your proxy form before the
deadline of 11:00 am on Monday, 19 September 2022. Information setting out how
to join the meeting by virtual means will be shown on the Company's website.
For further details, please see the Notice of the Meeting which can be found
at the end of the Annual Report & Financial Statements.
Board Composition & Succession
The Board comprised three directors throughout the year. After considering and
reviewing its composition, the Board agreed that the directors have the
breadth and depth of relevant knowledge and experience plus the appropriate
skill sets. The Board consists of two male and one female directors.
Adam Kingdon has advised of his wish to retire as a director of the Company
immediately following the AGM in September 2022. Adam has provided an
invaluable contribution to the Board whilst a director of the Company, for
which we are very grateful. The Board will be considering its composition and
succession in light of this.
Fraud Warning
We are aware that Shareholders are being contacted in connection with
sophisticated but fraudulent financial scams which purport to come from the
Company or to be authorised by it. This is often by a phone call or an
email usually originating from outside of the UK, claiming or appearing to be
from a corporate finance firm offering to buy your shares at an inflated
price.
The Board strongly recommends Shareholders take time to read the Company's
Fraud Warning section, including details of who to contact, contained within
the Information for Shareholders section of the Annual Report.
Environmental, Social and Governance ("ESG")
The Board and the Investment Adviser believe that the consideration of
environmental, social and corporate governance ("ESG") factors throughout the
investment cycle will contribute towards enhanced shareholder value.
Following the novation of the investment advisory agreement to Gresham House,
who have a dedicated team which is focused on sustainability, the Board views
this as an opportunity to enhance the Company's existing protocols and
procedures through the adoption of the highest industry standards. Under the
new enlarged investment team, each investment executive is responsible for
their own individual ESG objectives in support of the wider overarching ESG
goals of the Investment Adviser. For further details, Gresham House published
its inaugural Sustainable Investment Report in 2022, which can be found on its
website at: www. (http://www/) greshamhouse.com.
Your Board would like to assure Shareholders that ESG matters form a key
consideration in investment decisions. The FCA reporting requirements
consistent with the Task Force on Climate-related Financial Disclosures
commencing from 1 January 2021 do not currently apply to the Company but will
be kept under review, the Board being mindful of any recommended changes.
Outlook
The year under review can be characterised as a continuation of the
challenging environment created for businesses by COVID-19 pandemic and
Brexit. However, much in the same way that we were able to report on its
remarkable recovery one year ago, the Company has continued to achieve success
in creating opportunities and building on them. This has been exemplified by
strong trading performances and value growth across the portfolio and
continued strong levels of investment activity.
However, we anticipate that the indirect effects of the COVID-19 pandemic and
Brexit will continue to impact the UK economy and bring an element of
uncertainty for some time to come, most notably in the form of supply chain
and inflationary pressures. More recently, the distressing invasion of Ukraine
has sent shockwaves through global financial markets. Whilst the portfolio
has limited direct exposure to Eastern Europe, Russia's action has introduced
a disruptive factor which cannot yet be fully measured. This combination of
factors is causing a shortage of many resources and supply chain disruption.
Furthermore, confidence is being eroded as inflation and interest rates
increase. Nonetheless, despite its caution your Board considers that your
Company is well positioned to adapt as necessary.
The Board was very pleased to have witnessed such a positive response to the
launch of the Company's Offer for subscription in January and would like to
thank all Shareholders for their interest in applying for the Company's
shares. The Board has been satisfied with the Company's ability to maintain
a high rate of investment in quality opportunities over the year. It believes
that the additional fundraising will provide the necessary capital to continue
to create value growth for Shareholders in what has, to date, proven to be a
successful investment strategy.
I would like to take this opportunity once again to thank all Shareholders for
your continued support and to extend a warm welcome to new Shareholders.
Ian Blackburn
Chairman
29 June 2022
INVESTMENT POLICY
The Company's policy is designed to meet the Company's Objective to provide
investors with a regular income stream, arising both from the income generated
by the companies selected for the portfolio and from realising any growth in
capital, while continuing to qualify as a VCT.
Investments
The Company invests primarily in a diverse portfolio of UK unquoted companies.
Investments are made selectively across a number of sectors, principally in
established companies. Investments are generally structured as part loan and
part equity in order to produce a regular income stream and to generate
capital gain from realisations.
There are a number of conditions within the VCT legislation which need to be
met by the Company and which may change from time to time. The Company will
seek to make investments in accordance with the requirements of prevailing VCT
legislation.
Asset allocation and risk diversification policies, including the size and
type of investments the Company makes, are determined in part by the
requirements of prevailing VCT legislation. No single investment may represent
more than 15% (by VCT tax value) of the Company's total investments at the
date of investment.
The Company will seek to make investments in accordance with the requirements
of prevailing VCT legislation. A summary of this is set out in the table
"Summary of VCT Regulation" in the Annual Report.
Liquidity
The Company's cash and liquid funds are held in a portfolio of readily
realisable interest-bearing investments, deposit and current accounts, of
varying maturities, subject to the overriding criterion that the risk of loss
of capital be minimised.
Borrowing
The Company's Articles of Association permit borrowings of amounts up to 10%
of the adjusted capital and reserves (as defined therein).
However, the Company has never borrowed and the Board would only consider
doing so in exceptional circumstances.
INVESTMENT ADVISER'S REVIEW
Portfolio Review
Having recovered from the COVID-19 related decline in value by the start of
the Company's financial year, the portfolio continues on a positive
trajectory.
Widespread volatility of global markets and negative sentiment have hampered
the ability of businesses to sustain the exceptional performance of the
previous financial year. Nevertheless, a continuation of steady underlying
trading by the majority of investee companies bolstered by a small number of
significant re-ratings has ensured that the portfolio has nonetheless been
able to record portfolio value growth of 28.9% over the year, with combined
net unrealised and realised gains of £12.09 million.
A limited number of portfolio companies experienced disruption as a result of
the UK lockdowns, but it is pleasing to report that a significant proportion
have benefited from what appears to be a structural change in consumer
purchasing habits. Indeed, the majority of the portfolio companies is now
trading above their pre COVID-19 levels.
Overall, the majority of the portfolio has demonstrated a high degree of
resilience, with the vast majority of companies by number showing revenue
and/or earnings progression over the previous two years. Investments
classified as Retailers now comprise over 44% of the portfolio by value, all
of which are demonstrating the success of the direct-to-consumer business
model.
Significant positive re-ratings in the unquoted portfolio have been a
consistent feature across the year, with third-party investment driving value
uplifts in MPB (£0.63 million) and Bella & Duke (£3.00 million), and a
sizeable further investment from the Mobeus VCTs doing the same in the case of
Preservica (£5.02 million). Whilst the portfolio has limited exposure to more
challenging sectors such as hospitality and overseas travel, software and
other technology-enabled businesses have performed strongly. A small number of
companies have struggled, though they are in the minority and their impact on
overall shareholder return is minimal.
Furthermore, some of these companies, such as Media Business Insight and RDL,
have fundamentally re-engineered their businesses, which should provide a more
positive outlook.
It is noted that Preservica and Bella & Duke currently account for a
significant proportion of the invested portfolio's value (27.9% of the
portfolio value, 18.8% of net assets), with 7.8% of the portfolio now held in
AIM-listed investments (which equates to 5.2% of net assets).
The AIM market has witnessed some volatility in the second half of the
Company's financial year, with negative market sentiment compounding a period
of challenging customer recruitment to result in value reductions for both
Virgin Wines and Parsley Box. In line with market practice, in both cases the
Company's shareholdings are subject to lock-up arrangements for a period
post-flotation.
Strong trading activity levels have created investment opportunities for the
Company as portfolio companies sought to enhance their positions by building
capability in light of demand. A number of further investments were therefore
made into the portfolio during the year. Gresham House continues to review the
opportunities for follow-on investments. M&A sentiment also remained
buoyant with a continuing stream of attractive realisations throughout the
year. The outlook for both follow-on investment and realisations continues to
be positive.
The Company made investments totalling £4.61 million (2021: £5.39 million),
comprising £1.73 million (2021:
£2.37 million) into three new investments and £2.88 million (2021: £3.02
million) into seven existing investments. This level of new and follow-on
investment is pleasing given the continued uncertainty and lockdown
restrictions during the year under review.
A strong track record for the growth investments has emerged which validates
the strategic change arising from the amendment to VCT rules in 2015. Overall,
it is reassuring to see that the more traditional investments, as well as the
growth investments, are continuing to make good progress.
The portfolio's valuation changes in the year are summarised as follows:
Investment Portfolio Capital Movement 2022 2021
£mn £mn
Increase in the value of unrealised investments
Decrease in the value of unrealised investments
14.91 21.42
(5.36) (0.83)
Net increase in the value of unrealised investments 9.55 20.59
Realised gains 2.54 4.81
Realised losses - (0.04)
Net realised gains in the year 2.54 4.77
Net investment portfolio movement in the year 12.09 25.36
New investments during the year
A total of £1.73 million was invested into three new investments during the
year, as detailed below:
Company Business Date of Investment Amount of new investment (£mn)
Legatics SaaS LegalTech software June 2021 0.61
business
Legatics (legatics.com) transforms legal transactions by enabling deal teams
to collaborate and close deals in an interactive online environment. Designed
by lawyers to improve legacy working methods and solve practical transactional
issues, the legal transaction management platform increases collaboration,
efficiency and transparency. As a result, Legatics has been used by around
1,500 companies, and has been procured by more than half of the top global
banking and finance law firms, with collaborations having been hosted in
approximately 50 countries. With this new funding round, Legatics will be
looking to double the size of its team over the next 18 months and further
develop its technology to deliver new features and use cases for a wider range
of practice areas within new and existing customers.
Vet's Klinic Veterinary clinics June 2021 0.56
Pets' Kitchen (trading as Vet's Klinic) is an established and profitable
veterinary clinic providing veterinary services (vetsklinic.co.uk) as well as
a premium pet food provider (vetskitchen.co.uk). Its primary Swindon 'super
clinic' is a first opinion veterinary practice where pet owners can schedule
consultations online and obtain real time feedback on in-patient care through
its own technology platform. Without compromising on quality of care, this
model enables a significantly higher transaction per vet compared to the
industry average. This new investment will be used to roll out its unique
clinic model to other sites along the M4 corridor.
Proximity Insight Retail Software February 2022 0.56
Proximity Insight (proximityinsight.com) is a retail technology business that
offers a 'Super-App' that is used by the customer facing teams of brands and
retailers to engage, inspire and transact with customers. Headquartered in
London with offices in New York and Sydney, Proximity Insight has a global
client base that includes over 20 brands, boutiques and department stores in
fashion, beauty, jewellery, electronics and homewares. These clients use
Proximity Insight's platform to blur the lines between physical and digital
retail, enhancing the customer experience and improving the lifetime value of
their customers by upwards of 35%. The business grew annual recurring revenue
by 117% to £2.2m in 2021, and the investment will support Proximity Insight's
continued product development and international growth. The investment was
made across all six VCTs advised and managed by Gresham House, including the
two Baronsmead VCTs.
Further investments during the year
A total of £2.88 million was invested into seven existing portfolio companies
during the year, as detailed below:
Company Business Date of Investment Amount of further investment (£mn)
Bella & Duke Frozen raw dog food provider May 2021 0.61
Bella & Duke (bellaandduke.com) is a direct-to-consumer subscription
service, providing premium frozen raw dog food to pet owners in the UK.
Founded in 2016, the business provides an alternative to standard meal options
for dog owners by focusing on the well documented health benefits of a raw
food diet. This area is a growing niche in the large and established pet food
market and is being driven by the premiumisation of dog food. This follow-on
investment from the Company, alongside a co-investment by the British Growth
Fund and existing shareholders, will provide additional working capital
enabling Bella & Duke to continue to scale.
0.39
Caledonian Leisure UK leisure and April 2021 - February 2022
experience breaks
Caledonian Leisure works with accommodation providers, coach businesses and
other experienced providers (such as entertainment destinations and theme
parks) to deliver UK-based leisure and experience breaks to its customers. It
comprises two brands, Caledonian Travel (caledoniantravel.com) and UK
Breakaways (ukbreakaways.com). The domestic leisure and experience travel
market has been devastated by the COVID-19 pandemic, but the company is
well-placed to expand as lockdown and travel restrictions have eased. A series
of planned investment tranches has helped the company prepare for and
capitalise on the strong demand for UK staycation holidays.
Tapas Revolution Spanish restaurant chain June 2021 0.05
Spanish Restaurant Group (trading as Tapas Revolution) (tapasrevolution.com)
is a leading Spanish restaurant chain in the casual dining sector. At initial
investment in January 2017, it was operating five sites and, subsequent to a
further investment round in March 2018, had grown to 12 sites. Tapas was
trading well and had a strong outlook up until the onset of COVID-19 which
mandated the closure of much of its estate during the course of 2020 in
response to the varying patterns of government restrictions. Costs were
controlled well under the circumstances and this further investment provided
financial headroom whilst the business re-opened its estate.
Digital marketplace for online tutoring 0.52
MyTutor August 2021
MyTutorweb (trading as MyTutor) (mytutor.co.uk) is a digital marketplace that
connects school pupils who are seeking private one-to-one tutoring with
university students. The business is satisfying a growing demand from both
schools and parents to improve pupils' exam results. This further investment,
alongside other existing shareholders and Australian strategic co-investor,
SEEK, who invested £30 million, aims to build and reinforce its position as a
UK category leader in the online education market as well as to begin to
develop a broader, personalised learning product. The company has been chosen
as a Tutoring Partner for the National Tuition Programme where they will
directly support 30,000 students in catching up on lost learning because of
the COVID-19 pandemic.
Provider of premium 0.16
Andersen EV electric vehicle (EV) chargers September 2021
Muller EV Limited (trading as Andersen EV) (andersen-ev.com) is a design-led
manufacturer of premium electric vehicle chargers. Incorporated in 2016, this
business has secured high profile partnerships with Porsche and Jaguar Land
Rover, establishing an attractive niche position in charging points for the
high end EV market. This follow-on funding is to further support its premium
brand and product positioning whilst ensuring all new and existing products
meet the most recent and highest safety and compliance standards. Andersen has
continued its strong trading performance with revenue up over 300% year on
year.
Seller of proprietary digital archiving software 0.89
Preservica October/November 2021
Preservica is a SaaS software business with blue chip customers and strong
recurring revenues. It has developed market leading software for the long-term
preservation of digital records, ensuring that digital content can remain
accessible, irrespective of future changes in technology. This latest
investment is to provide additional growth capital to finance the further
development of the business. The business has seen annual recurring revenues
nearly double over the last two financial years.
ActiveNav File analysis Software December 2021 0.26
Data Discovery Solutions (trading as ActiveNav) (activenav.com) is a file
analysis software solution which makes it easier for companies to clean up
network drives, respond to new data protection laws and dispose of redundant
and out dated documents. ActiveNav's solution is used by significant blue chip
customers, particularly those in highly regulated industries such as energy
and professional services, as well as government entities in the USA, Canada,
Australia and the UK. This further funding is to market its nascent SaaS-based
Hubble platform in order to generate company value.
Portfolio valuation movements
The portfolio generated net unrealised gains of £9.55 million in the year.
The scale of the valuation increases was underpinned by the Company's growth
portfolio, many of which have direct-to- consumer business models which have
grown significantly since the onset of the COVID-19 pandemic. Despite ongoing
uncertainties relating to COVID-19, Gresham House believes that the pandemic
has accelerated existing trends in consumer behaviour and, in many cases,
companies have experienced strong growth in demand. Over this period, some
older style MBO portfolio companies with similar business practices have also
benefited. However, the volatility of markets and fall in consumer confidence
towards the end of the Company's financial year have had an impact on
valuations of quoted assets as well as sector PE multiples, making this a more
challenging environment for the portfolio. The portfolio has nevertheless
proven to be resilient.
Total valuation increases were £14.91 million. The main valuation increases
were:
Preservica - £5.02 million
Bella & Duke - £3.00 million
Media Business Insight - £1.83 million
MyTutor - £1.08 million
Master Removers Group - £1.05 million
Preservica, Bella & Duke and MyTutor have benefitted from significant
re-rating as part of a further funding rounds and increased scale. Media
Business Insight has continued to reap the rewards of the success of its
diversification to online income streams and a more flexible cost base, whilst
Master Removers Group has been effective in taking advantage of strong
property markets and a structural shift in demand for storage and logistics.
Total valuation decreases were £(5.36) million. The main valuation decreases
were:
Virgin Wines - £(3.02) million
Parsley Box - £(1.72) million
Bleach London - £(0.20) million
ActiveNav - £(0.16) million
Virgin Wines and Parsley Box have been impacted by negative market sentiment
compounded by more challenging customer recruitment over the year.
Bleach has had a challenging year
having had to delay its US launch and having experienced normalised D2C
revenues post UK lockdown. Active Nav has had slower revenue growth than
anticipated, but other avenues for sales growth are in the process of being
established.
Portfolio Realisations during the year
The Company realised two investments during the year, as detailed below.
Company Business Period of investment Total cash proceeds over the life of the investment / Multiple over cost
Proactive Group Provider of media services and investor conferences January 2018 to September 2021
£1.63 million
2.6x cost
On 29 September 2021, the Company sold its investment in Proactive Group
Holdings Inc ("Proactive"). The Company received £1.60 million in cash
following the disposal of its equity and loan notes, contributing to a
realised gain over cost over the life of the investment of £0.99 million.
Total proceeds received over the nearly four-year life of the investment were
£1.63 million, compared to an original cost of £0.64 million, which is a
multiple on cost of 2.6x and an IRR of 33.0%.
Design and manufacturer of Stand up paddleboards £3.86 million
Red Paddle July 2015 to 5.4x cost
November 2021
The Company sold its investment in Vian Marketing (trading as Red Paddle) to
Myers Family Office for £3.28 million (realised gain in the year: £2.22
million). Total proceeds received to date over the six-year life of the
investment were £3.86 million compared to an original investment cost of
£0.72 million, which is a multiple on cost of 5.4x and an IRR of 33.2%.
Loan stock repayments and other gains in the year
During the year, the Company received loan repayments from MPB (£0.27
million), Red Paddle (£0.18 million), and Media Business Insight (£0.50
million; realised gain of £0.04 million). There was also further partial
realisation of MyTutor which generated £0.52 million proceeds for the Company
and a realised gain in the year of £0.26 million. In addition to the above,
the Company received further deferred proceeds of £0.02 million bringing the
total proceeds received in the year to £6.37 million.
Portfolio income and yield
In the year under review, the Company received the following amounts in loan
interest and dividend income:
Investment Portfolio Yield 2022 2021
£mn £mn
Interest received in the year 0.79 0.84
Dividends received in the year 0.29 0.83
Total portfolio income in the year(1) 1.08 1.67
Portfolio value at 31 March 52.16 41.83
Portfolio Income Yield (Income as a % of Portfolio value at 31 March) 2.1% 4.0%
(1 ) Total portfolio income for the year is generated solely
from investee companies within the portfolio.
New investment made after the year-end
The Company made one new investment of £0.43 million after the year-end, as
detailed below:
Company Business Date of investment Amount of new investment (£mn)
0.43
Bidnamic Retail Software May 2022
Lads Store Limited (trading as Bidnamic) (www.bidnamic.com
(http://www.bidnamic.com) ) is a marketing technology business that offers a
SaaS platform for online retailers to optimize their search engine marketing
("SEM") spend. The technology was all developed internally, and uses bespoke
machine learning algorithms to automate the management and optimisation of
online retailers' Google shopping spend. The ARR of the business has grown
substantially over the last two years and this is projected to continue. The
investment round will be used to further enhance the product's capabilities,
and drive continued ARR growth through expanding the sales & marketing
team and building a presence in North America.
Further investments made after the year-end
The Company made further investments totalling £0.57 million into three
existing portfolio companies after the year-end as detailed below:
Company Business Date of investment Amount of further investment (£m)
Northern Bloc Vegan and dairy-free ice cream producer April 2022 0.12
Northern Bloc Ice Cream (northern-bloc.com) is an established food brand in
the emerging and rapidly growing vegan market. By focusing on chef quality
and natural ingredients, Northern Bloc has carved out an early mover position
in the vegan ice cream sector. The company's focus on plant-based
alternatives has strong environmental credentials as well as it being the
first ice cream brand to move wholly in sustainable packaging. The investment
is aimed at capitalising on the company's market position and accelerating
growth. It has obtained key listings across several large supermarkets and is
well placed to benefit from the food service recovery as it continues to
secure menu placings. Northern Bloc has doubled its retail store facings in
2020 and saw a 60% increase in retail sales over the year. Current facings now
stand at 1,800 across the UK.
0.27
Andersen EV Provider of premium May 2022
electric vehicle (EV) chargers
Muller EV Limited (trading as Andersen EV) is a design-led manufacturer of
premium electric vehicle chargers. Incorporated in 2016, this business has
secured high profile partnerships with well-known car brands, establishing an
attractive niche position in charging points for the high end EV market. This
follow-on funding is to further support its premium brand and product
positioning whilst ensuring all new and existing products meet the most recent
and highest safety and compliance standards. Andersen has continued its strong
trading performance with revenue up over 300% year on year.
0.18
RotaGeek Workforce management software June 2022
RotaGeek is a provider of cloud-based enterprise software to help larger
retail, leisure and healthcare organisations predict and meet demand to
schedule staff effectively. Covid-19 resulted in some temporary disruption
to its markets but also provided opportunities and the company is well placed
to emerge stronger and has made significant commercial progress. The total
further funding, along with additional funds from external parties, will
enable RotaGeek to deliver on its growth plans and profitability.
Realisation after the year-end
The Company realised one of its investments after the year end, generating
proceeds of £2.77 million, as detailed below:
Company Business Period of investment Total cash proceeds over the life of the investment / Multiple over cost
Media Business Insight Publishing and events business January 2015 to £4.47 million
June 2022
2.2x cost
The Company sold its investment in Media Business Insight Holdings Limited to
GlobalData plc for £2.77 million. Total proceeds received to date over the
seven-year of the investment were £4.47 million compared to an original
investment cost of £2.01 million, which is a multiple on cost of 2.2x and an
IRR of 13.7%. Further proceeds held in escrow may be payable in due course.
Environmental, Social, Governance considerations
Following the novation of the advisory agreement to Gresham House on 30
September 2021, a market leader that is well-resourced with knowledge and
expertise in sustainability, the Investment Advisor has moved to establish ESG
procedures and protocols of the highest standards as set out and informed by
Gresham House plc. The first tangible example of this revised approach is that
that the individual members of the investment team now have their own
individual ESG objectives set which align with the wider ESG goals of the
Investment Adviser.
Gresham House is committed to sustainable investment as an integral part of
its business strategy. During 2021, the Investment Adviser has taken further
steps to formalise its approach to sustainability and has put in place several
processes to ensure environmental, social and governance ("ESG") factors and
stewardship responsibilities are built into asset management across all funds
and strategies, including venture capital trusts.
Gresham House believes the "G" (Governance) of ESG is the most important
factor in its investment processes. Board composition, governance, control,
company culture, alignment of interests, shareholder ownership structure and
remuneration policy are important elements that will feed into the analysis
and the valuation of portfolio companies.
The "E" and "S" (Environmental and Social) will be assessed as risk factors
during due diligence to screen companies that face environmental and social
risks that cannot be mitigated through engagement and governance changes.
Where material ESG risks are identified, these will be reviewed by the Adviser
and a decision on how to proceed will be documented. The Adviser will then
proactively follow up with the investee company management team and ensure
appropriate corrective and preventative action is taken and any material
issues or incidents are recorded by the Adviser.
Gresham House published its second Sustainable Investment Report in April 2022
that, along with existing asset specific policies, including the Public Equity
Policy, can be found on its website (www.greshamhouse.com).
These reports and policies cover the Investment Adviser's sustainable
investment commitments, how the investment processes meet these commitments
and the application of the sustainable investment framework. The Gresham House
Board and General Management Committee assess the adherence to the commitments
in the Sustainable Investment Policies on an annual basis.
In a changing world, the Investment Adviser believes that this approach will
contribute towards the enhancement of shareholder value going forward.
Outlook
Whilst the year under review has been marked with volatility and uncertainty
as a result of a number of factors affecting both the global and UK economy,
the portfolio has continued to trade well. Even so, negative market
sentiment has impacted valuations towards the end of the year, particularly
those of the AIM-listed stocks, and we are now for the first time starting to
see a noticeable impact on consumer confidence. The tragic events unfolding in
Ukraine have amplified the uncertainty and shocked financial markets around
the world however there had been no material impact on the valuation of the
portfolio at the year-end. In spite of these challenges, the Company has
achieved a positive net return for the year and investment activity has
remained buoyant. The Investment Adviser therefore remains cautiously
optimistic that the portfolio is well positioned
Gresham House Asset Management Limited
Investment Adviser
29 June 2022
Investment Portfolio Summary as at 31 March 2022
Total Book cost at Valuation at 31 March 2021 Change in valuation for year Valuation at 31 March 2022 % of net assets by value
31 March 2022
Qualifying investments £ £ £ £
Preservica Limited 2,428,743 2,689,711 5,022,119 8,602,347 11.1%
Seller of proprietary digital archiving software
Bella & Duke Limited 2,062,146 2,334,829 2,995,533 5,941,407 7.7%
A premium frozen raw dog food provider
MPB Group Limited 869,871 4,025,448 633,981 4,392,111 5.7%
Online marketplace for photographic and video equipment
Virgin Wines UK Plc (AIM quoted) 30,541 6,864,072 (3,016,498) 3,847,574 5.0%
Online wine retailer
EOTH Limited (trading as Equip Outdoor Technologies) 817,185 3,142,002 631,862 3,773,864 4.9%
Branded outdoor equipment and clothing (Rab and Lowe Alpine)
My Tutorweb Limited (trading as MyTutor) 1,846,886 2,033,227 1,078,424 3,376,630 4.4%
Digital marketplace connecting school pupils seeking one-to-one online
tutoring
End Ordinary Group Limited (trading as Buster and Punch) 1,231,510 2,386,154 331,863 2,718,017 3.5%
Industrial inspired lighting and interiors retailer
Media Business Insight Holdings Limited 1,447,188 760,342 1,823,213 2,583,555 3.3%
A publishing and events business focused on the creative production industries
Master Removers Group 2019 Limited (trading as Anthony Ward Thomas, 251,763 1,105,897 1,047,722 2,153,619 2.8%
Bishopsgate and Aussie Man & Van)
A specialist logistics, storage and removals business
Data Discovery Solutions Limited (trading as ActiveNav) 1,207,040 1,886,000 (161,945) 1,988,095 2.6%
Provider of global market leading file analysis software for information
governance, security and compliance
Manufacturing Services Investment Limited (trading as Wetsuit Outlet) 1,412,992 1,411,876 (363) 1,411,513 1.8%
Online retailer in the water sports market
Arkk Consulting Limited (trading as Arkk Solutions) 1,299,865 1,355,617 29,088 1,384,705 1.8%
Provider of services and software to enable organisations to remain compliant
with regulatory reporting requirements
Tharstern Group Limited 789,815 812,315 379,593 1,191,908 1.5%
Software based management Information systems
Connect Childcare Group Limited 828,419 1,004,302 (49,420) 954,882 1.2%
Nursery management software provider
Vivacity Labs Limited 876,541 876,541 - 876,541 1.1%
Provider of artificial intelligence & urban traffic control systems
Caledonian Leisure Limited 522,509 135,852 236,820 759,329 1.0%
Provider of UK leisure and experience breaks
Rota Geek Limited 733,200 553,833 82,430 636,263 0.8%
Workforce management software
Legatics Holdings Limited 605,374 - - 605,374 0.8%
SaaS LegalTech software provider
Bleach London Holdings Limited 539,682 789,520 (196,346) 593,174 0.8%
Hair colourants brand
Spanish Restaurant Group Limited (trading as Tapas Revolution) 947,645 198,550 331,196 574,893 0.7%
Spanish restaurant chain
Pets' Kitchen Limited (trading as Vet's Klinic) 561,680 - - 561,680 0.7%
Veterinary clinics
Northern Bloc Ice Cream Limited 303,000 317,369 241,482 558,851 0.7%
Supplier of premium vegan ice cream
Proximity Insight Holdings Limited 555,000 - - 555,000 0.7%
Super-App used by customer-facing teams of brands and retailers to engage,
inspire and transact with customers
IPV Limited 535,459 535,459 - 535,459 0.7%
Provider of media asset software
Muller EV Limited (trading as Andersen EV) 381,500 181,191 36,809 381,500 0.5%
Provider of premium electric vehicle (EV) chargers
CGI Creative Graphics International Limited 999,568 336,016 (73,856) 262,160 0.3%
Vinyl graphics to global automotive, recreation vehicle and aerospace markets
RDL Corporation Limited 1,000,000 367,499 (112,280) 255,219 0.3%
Recruitment consultants for the pharmaceutical, business intelligence and IT
industries
Parsley Box Group Plc (AIM quoted) 520,549 1,937,524 (1,722,244) 215,280 0.3%
Supplier of home delivered, ambient ready meals targeting the over 60s
Kudos Innovations Limited 277,950 82,823 (16,600) 66,223 0.1%
Online platform that provides and promotes academic research dissemination
Jablite Holdings Limited (in members' voluntary liquidation) 281,398 37,110 - 37,110 0.0%
Manufacturer of expanded polystyrene products
Veritek Global Holdings Limited 967,780 - - - 0.0%
Maintenance of imaging equipment
Racoon International Group Limited 906,935 - - - 0.0%
Supplier of hair extensions, hair care products and training
BookingTek Limited 450,283 - - - 0.0%
Software for hotel groups
Oakheath Limited (in members' voluntary liquidation) 384,720 - - - 0.0%
Online platform that connects people seeking home care from experienced
independent carers
Realised in year
Proactive Group Holdings Inc - 1,598,518 - - 0.0%
Provider of media services and investor conferences for companies primarily
listed on secondary public markets
Vian Marketing Limited (trading as Red Paddle Co) - 1,250,675 - - 0.0%
Design, manufacture and sale of stand-up paddleboards and windsurfing sails
Total qualifying investments 28,874,737 41,010,272 9,552,583 51,794,283 66.8%
Non-qualifying investments
Manufacturing Services Investment Limited (trading as Wetsuit Outlet) 304,000 304,000 - 304,000 0.4%
Online retailer in the water sports market
Media Business Insight Limited 62,839 517,789 4,931 62,839 0.1%
A publishing and events business focused on the creative production industries
365 Agile Group plc (formerly Iafyds plc) 254,586 - - - 0.0%
Development of energy saving devices for domestic use
Racoon International Group Limited 139,050 - - - 0.0%
Supplier of hair extensions, hair care products and training
Total non-qualifying investments 760,475 821,789 4,931 366,839 0.5%
Total investment portfolio per Note 8 29,635,212 41,832,061 9,557,514 52,161,122 67.3%
Cash and current asset investments² 30,019,758 26,259,504 33.9%
Total investments including cash and current asset investments 29,635,212 71,851,819 9,557,514 78,420,626 101.2%
Other current assets 2,218,906 260,786 0.3%
Current liabilities (171,857) (1,175,430) (1.5)%
Totals 29,635,212
Net assets at the year-end 73,898,868 77,505,982 100.0%
Total Investment Portfolio split by type
Growth focused portfolio³ 22,755,512 32,136,918 10,552,411 43,920,757 84.2%
MBO focused portfolio³ 6,879,700 9,695,143 (994,897) 8,240,365 15.8%
Investment Adviser's Total 29,635,212 41,832,061 9,557,514 52,161,122 100.0%
¹ As at 31 March 2022, the Company held more than 80% of its total
investments in qualifying holdings, and therefore complied with the VCT
Qualifying Investment test. For the purposes of the VCT qualifying test, the
Company is permitted to disregard disposals of investments for twelve months
from the date of disposal. It also has up to three years to bring in new funds
raised, before these need to be included in the qualifying investment test.
² Disclosed as Current asset investments and Cash at bank within Current
assets in the Balance Sheet.
³ The growth focused portfolio contains all investments made after the change
in the VCT regulations in 2015 plus some investments that are growth in nature
made before this date. The MBO focused portfolio contains investments made
prior to 2015 as part of the previous MBO strategy.
PRINCIPAL RISKS
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 and emerging risks faced
by the Company. This includes a key risk management review which takes place
at each quarterly Board meeting. Further details of these are contained in the
Corporate Governance section of the Directors' Report in the Annual Report.
The principal risks and the emerging risk identified by the Board are set out
below:
Risk Possible consequence How the Board manages risk
Political and Economic Events such as the war in Ukraine, the COVID-19 pandemic, the impact of · The Board monitors the portfolio as a whole to:
Brexit, an economic recession, supply shortages or a movement in sterling or
in interest rates, could affect trading conditions for smaller companies and (1) Ensure that the Company invests in a diversified portfolio of companies;
consequently the value of the Company's qualifying investments.
Movements in the UK Stock Market indices may affect the valuation of the
Company's investments, as well as affecting the Company's own share price and (2) Ensure that developments in the macro-economic environment such as
its discount to net asset value. movements in interest rates are monitored; and
(3) The Investment Adviser holds ongoing discussions with all the portfolio
companies to ascertaining where support is required. Cash comprises a
significant proportion of the net assets of the Company, further to the
successful realisations and the fund-raise earlier in the year giving the
Company a strong liquidity position. The portfolio has minimal exposure to
sectors such as leisure, hospitality, retail and travel which are currently
more at risk.
Investment and Strategic Investment in VCT qualifying earlier stage unquoted small companies involves a · The Board regularly reviews the Company's investment strategy.
higher degree of risk than investment in fully listed companies. Smaller
companies often have limited product lines, markets or financial resources, · Careful selection and review of the of the Investment portfolio on a
may not be profitable at the point of investment and be dependent for their regular basis.
management on a smaller number of key individuals. This may lead to variable
investment returns and the use of more subjective valuation methodologies. · The Investment Adviser has provided a growing pipeline of compliant
investment opportunities and continues to strengthen its investment team.
· The valuation of the investment portfolio and valuation methodologies are
reviewed by the Board each quarter.
Loss of approval as a venture capital trust The Company must comply with section 274 of the Income Tax Act 2007 ("ITA") · The Company's VCT qualifying status is continually reviewed by the
which allows it to be exempted from capital gains tax on investment gains. Any Investment Adviser.
breach of these rules may lead to the Company losing approval as a VCT,
qualifying Shareholders who have not held their shares for the designated · The Board receives regular reports from its VCT Status Adviser who has
holding period having to repay the income tax relief they obtained and future been retained by the Board to monitor the Company's ongoing compliance with
dividends paid by the Company becoming subject to tax. The Company would also the VCT Rules.
lose its exemption from corporation tax on capital gains.
VCT Regulatory Changes The Company is required to comply with the VCT specific regulations relating · The Board receives advice from PHA in respect of these requirements,
to European State Aid regulations as enacted by the UK Government which still including those that may arise from the withdrawal from the EU, and conducts
apply. Non-compliance would result in a loss of VCT status. its affairs in order to comply with these requirements.
Regulatory Changes The Company is required to comply with the Companies Act, the Listing Rules of · Regulatory and legislative developments are kept under review by the
the UK Listing Authority and United Kingdom Accounting Standards. Changes to Company's solicitors and the Board.
and breaches of any of these might lead to suspension of the Company's Stock
Exchange listing, financial penalties or a qualified audit report.
Financial and operating Failure of systems (including breaches of cyber security) at any of the · The Board carries out a bi-annual review of the internal controls in
third-party service providers that the Company has contracted with could lead place and reviews the risks facing the Company at Board meetings and receives
to inaccurate reporting or monitoring. Inadequate controls could lead to the control reports by exception.
misappropriation or insecurity of assets. Outsourcing and the increase in
remote working could give risk to cyber and data security risk and internal · The Board reviews the performance of the service providers annually and
control risk. has obtained assurance that such providers have controls in place to reduce
the risk of breaches of their cyber security.
Market Movements in the valuations of the Company's investments will, inter alia, be · The Board receives quarterly valuation reports from the Investment
connected to movements in UK Stock Market indices as well as affecting the Adviser and remains focused on the investments being at fair value, after
Company's own share price and its discount to net asset value. considering many factors, including the impact of market movements.
· The Investment Adviser alerts the Board of any adverse movements.
Asset Liquidity The Company's investments may be difficult to realise. · The Board receives reports from the Investment Adviser and reviews the
portfolio at each quarterly Board meeting. It carefully monitors investments
where a particular risk has been identified.
Market Liquidity Shareholders may find it difficult to sell their shares at a price which is · The Board has a share buyback policy which seeks to mitigate market
close to the net asset value given the limited secondary market in VCT shares. liquidity risk.
Cyber and Data Security The Company and its Shareholders may suffer losses in the event of the IT · The Board monitors and seeks assurance from the Company's principal
systems at principal suppliers being compromised by cyber attack. suppliers in respect of the systems and processes they have adopted to counter
these risks.
Emerging Risk: Non-compliance with current and future reporting requirements could lead to a · ESG and climate change impacts are also taken into account when
fall in demand from investors. That may affect the level of capital the considering new investment proposals. The Investment Adviser monitors the
Environmental, Social and Governance Company has available to meet its investment objectives. potential impact on investee companies of any proposed new legislation
regarding environmental, social and governance matters and advises and adapts
accordingly.
· The Board recognises that climate change is an important emerging risk
which the Company is taking into account in their strategic planning although
the Company itself has little direct impact on environmental issues. Measures
had been introduced to decrease the amount of travel undertaken prior to the
pandemic and working from home and to reduce the cost and environmental impact
of providing paper copies of Shareholder correspondence, as mentioned
elsewhere in the Annual Report.
The risk profile of the Company changed as a result of changes to VCT
legislation 2015. As the Company is required to focus its new investment
activity on growth capital investments in younger companies it is anticipated
that investment returns will be more volatile and have a higher risk profile.
The Board also discusses emerging risks as and when they arise, such as the
war in Ukraine and COVID-19 pandemic, and puts in place mitigating actions to
manage the risk. In an environment of low interest rates, returns on liquidity
may impact overall performance. This factor is monitored by the Board with the
objective of optimising returns on liquid funds whilst minimising capital
risk.
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. Under that law the directors are required to prepare the
financial statements and have elected to prepare the company financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising Financial Reporting
Standard 102, the Financial Reporting Standard applicable in the UK and
Republic of Ireland ('FRS 102') and applicable law). Under company law the
directors must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the company and
of the profit or loss for the company for that period.
In preparing these Financial Statements, the Directors are required to:
● select suitable accounting policies and then apply them
consistently;
● make judgements and accounting estimates that are
reasonable and prudent;
● state whether the Financial Statements have been
prepared in accordance with 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; and
b) the Annual Report includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties that it faces.
Having taken advice from the Audit Committee, the Board considers the Annual
Report and Financial Statements, taken as a whole, is fair, balanced and
understandable and that it provides the information necessary for shareholders
to assess the Company's position, performance, business model and strategy.
Neither the Company nor the Directors accept any liability to any person in
relation to the Annual Report except to the extent that such liability could
arise under English law. Accordingly, any liability to a person who has
demonstrated reliance on any untrue or misleading statement or omission shall
be determined in accordance with section 90A and schedule 10A of the Financial
Services and Markets Act 2000.
The names and functions of the Directors are stated in the Annual Report.
For and on behalf of the Board
Ian Blackburn
Chairman
29 June 2022
FINANCIAL STATEMENTS
Income Statement for the year ended 31 March 2022
Year ended 31 March 2022 Year ended 31 March 2021
Notes Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Net investment portfolio gains 8 - 1 12,095,784 12,095,784 - 25,356,908 25,356,908
Income 3 1,080,796 - 1,080,796 1,698,434 - 1,698,434
Investment Adviser's fees 4a (412,075) (1,236,223) (1,648,298) (299,284) (897,853) (1,197,137)
Investment Adviser's performance fees 4b - (1,014,703) (1,014,703) - - -
Other expenses 4d (403,366) - (403,366) (339,113) - (339,113)
Profit on ordinary activities before taxation 265,355 9,844,858 10,110,213 1,060,037 24,459,055 25,519,092
5
Taxation on profit/(loss) on ordinary activities - - - (43,540) 43,540 -
Profit for the year and total comprehensive income 265,355 9,844,858 10,110,213 1,016,497 24,502,595 25,519,092
Basic and diluted earnings per ordinary share: 7
0.36p 13.42p 13.78p 1.38p 33.37p 34.75p
The revenue column of the Income Statement includes all income and expenses.
The capital column accounts for the net investment portfolio gains (unrealised
gains/(losses) and realised gains on investments) and the proportion of the
Investment Adviser's fee and performance fee charged to capital.
The total column is the Statement of Total Comprehensive Income of the Company
prepared in accordance with Financial Reporting Standards ("FRS"). In order to
better reflect the activities of a VCT and in accordance with the 2014
Statement of Recommended Practice ("SORP") (updated in April 2021) 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.
Balance Sheet as at 31 March 2021 Company No. 03946235
31 March 2022 31 March 2021
Notes £ £
Fixed assets
41,832,061
Investments at fair value 8 52,161,122
Current assets
Debtors and prepayments 260,786 2,218,906
Current investments 9 23,458,496 27,633,496
Cash at bank 9 2,801,008 2,386,262
26,520,290 32,238,664
Creditors: amounts falling due within one year (171,857)
(1,175,430)
Net current assets 25,344,860 32,066,807
Net assets 77,505,982 73,898,868
Capital and reserves 732,303
Called up share capital 10 804,263
Share premium reserve 28,258,001 21,025,160
Capital redemption reserve 16,006 9,031
Revaluation reserve 24,455,488 16,598,524
Special distributable reserve 12,033,364 19,524,067
Realised capital reserve 10,521,719 13,397,234
Revenue reserve 1,417,141 2,612,549
Equity Shareholders' funds 77,505,982 73,898,868
Basic and diluted net asset value per ordinary 14 96.37p 100.91p
share
Statement of Changes in Equity for the year ended 31 March 2022
Non-distributable reserves Distributable reserves
Called up Share Capital Special Realised Revenue
share premium redemption Revaluation distributable capital Reserve
Capital Reserve Reserve Reserve Reserve Reserve (Note b) Total
(Note a) (Note b)
Notes £ £ £ £ £ £ £ £
At 1 April 2021 732,303 21,025,160 9,031 16,598,524 19,524,067 13,397,234 2,612,549 73,898,868
Comprehensive income for the year
Profit for the year - - - 9,557,514 - 287,344 265,355 10,110,213
Total comprehensive income for the year - - - 9,557,514 - 10,110,213
287,344 265,355
Contributions by and distributions to owners
Shares issued via Offer for Subscription (Note c) 10 - - - - - 7,500,000
78,935 7,421,065
Issue costs and facilitation fees on Offer for Subscription (Note c) 10 - - - (51,097) - - (239,321)
(188,224)
Shares bought back (Note d) 10 (6,975) - 6,975 - (643,810) - - (643,810)
Dividends paid 6 - - - - (4,544,870) (7,114,335) (1,460,763) (13,119,968)
Total contributions by and distributions to owners
71,960 7,232,841 6,975 - (5,239,777) (7,114,335) (1,460,763) (6,503,099)
Other movements
Realised losses transferred to special reserve (Note a) - - - - - -
(2,250,926) 2,250,926
Realisation of previously unrealised gains - - - (1,700,550) - 1,700,550 - -
Total other movements - - - (1,700,550) - -
(2,250,926) 3,951,476
At 31 March 2022 804,263 28,258,001 16,006 24,455,488 77,505,982
12,033,364 10,521,719 1,417,141
Notes
a) The Company's special reserve is available to fund buybacks of
shares as and when it is considered by the Board to be in the interests of
Shareholders, and to absorb any existing and future realised losses and for
other corporate purposes. At 31 March 2022, the Company has a special reserve
of £12,033,364, all of which arises from shares issued more than three years
ago. Reserves originating from share issues are not distributable under VCT
rules if they arise from share issues that are within three years of the end
of an accounting period in which shares were issued. The total transfer of
£2,250,926 from the realised capital reserve to the special distributable
reserve above is the total of realised losses incurred by the Company in the
year.
b) The realised capital reserve and the revenue reserve together
comprise the Profit and Loss Account of the Company.
c) Under an Offer for Subscription launched on 20 January 2022,
7,893,544 ordinary shares were allotted on 9 March 2022, raising net funds of
£7,260,679 for the Company. This figure is net of issue costs of £188,224
and facilitation fees of £51,097.
d) During the year, the Company purchased 697,498 of its own shares at
the prevailing market price for a total cost of £643,810, which were
subsequently cancelled.
The composition of each of these reserves is explained below:
Called up share capital
The nominal value of shares originally issued, increased for subsequent share
issues either via an Offer for Subscription or 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.
Statement of Changes in Equity for the year ended 31 March 2021
Non-distributable reserves Distributable reserves
Called up Share Capital Revaluation Special Realised Revenue
share premium redemption distributable capital Reserve
capital reserve reserve reserve reserve reserve Total
Notes £ £ £ £ £ £ £ £
At 1 April 2020 596,893 10,673,405 5,157 (3,206,720) 24,090,692 9,809,815 1,596,052 43,565,294
Comprehensive income for the year
Profit for the year - - - 20,590,071 - 3,912,524 1,016,497 25,519,092
Total comprehensive income for the year - - - 20,590,071 - 3,912,524 1,016,497 25,519,092
Contributions by and distributions to owners
Shares issued under Offer for Subscription (Note c) 10 139,284 10,622,489 - - - - - 10,761,773
Issue costs and facilitation fees on Offer for Subscription (Note c) 10 - (270,734) - - (230,746) - - (501,480)
Shares bought back (Note d) 10 (3,874) - 3,874 - (292,568) - - (292,568)
Dividends paid 6 - - - - (2,944,710) (2,208,533) - (5,153,243)
Total contributions by and distributions to owners 135,410 10,351,755 3,874 - (3,468,024) (2,208,533) - 4,814,482
Other movements
Realised losses transferred to special reserve (Note a) - - - - (1,098,601) 1,098,601 - -
Realisation of previously unrealised gains - - - (784,827) - 784,827 - -
Total other movements - - - (784,827) (1,098,601) 1,883,428 - -
At 31 March 2021 732,303 21,025,160 9,031 16,598,524 19,524,067 13,397,234 2,612,549 73,898,868
Notes continued
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.
Special distributable reserve
This reserve is created from cancellations of the balances upon the Share
premium reserve, which are transferred to this reserve from time to time. The
cost of share buybacks and any realised losses on the sale or impairment of
investments (excluding transaction costs) are charged to this reserve. 75% of
the Investment Adviser fee expense, and the related tax effect, that are
charged to the realised capital reserve are transferred 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's fee (subsequently transferred
to the Special distributable reserve along with the related tax effect) 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.
Revenue reserve
Income and expenses that are revenue in nature are accounted for in this
reserve as well as 25% of the Investment Advisor fee 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 March 2022
Year ended Year ended
31 March 2022 31 March 2021
Notes
£ £
Cash flows from operating activities
Profit for the financial year 10,110,213 25,519,092
Adjustments for:
Net investment portfolio (gains) (12,095,784) (25,356,908)
Tax charge for the current year - -
Decrease in debtors 5,191 7,025
Increase/(decrease) in creditors and accruals 1,003,986 (18,957)
Net cash (outflow)/inflow from operations (976,394) 150,252
Corporation tax paid - (134,947)
Net cash (outflow)/inflow from operating activities (976,394) 15,305
Cash flows from investing activities
Purchase of investments 8 (4,728,594) (5,394,087)
Disposal of investments 8 8,447,833 8,838,927
Net cash inflow from investing activities 3,719,239 3,444,840
Cash flows from financing activities
Net proceeds as part of Offer for Subscription 7,500,000 10,761,773
Issue costs (239,321) (501,480)
Equity dividends paid 6 (13,119,968) (5,153,243)
Purchase of own shares 10 (643,810) (353,488)
Net cash (outflow)/inflow from financing activities (6,503,099) 4,753,562
Net (decrease)/increase in cash and cash equivalents (3,760,254) 8,213,707
Cash and cash equivalents at start of year 30,019,758 21,806,051
26,259,504 30,019,758
Cash and cash equivalents at end of year
Cash and cash equivalents comprise:
Cash equivalents 19 23,458,496 27,633,496
Cash at bank and in hand 19 2,801,008 2,386,262
Notes to the Financial Statements for the year ended 31 March 2022
1
Company information
Mobeus Income and Growth 2 VCT plc is a public limited company incorporated in
England, registration number 03946235. The registered office is 5 New Street
Square, London, EC4A 3TW.
2
Basis of preparation
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') (updated in April 2021) issued by the
Association of Investment Companies ("AIC"). The Company has a number of
financial instruments which are disclosed under FRS102 s 11/12 as shown in
Note 15 of the Annual Report.
After performing the necessary enquiries, the Directors have undertaken an
assessment of the Company's ability to meet its liabilities as they fall due.
The Company has significant cash and liquid resources and no external debt or
capital commitments. The Company's cash flow forecasts, which consider levels
of anticipated new and follow-on investment, as well as investment income and
annual running cost projections, are discussed at each quarterly Board meeting
and, in particular, have been considered in light of the ongoing impact of the
COVID-19 pandemic, the war in Ukraine and rising inflationary pressures. The
Directors have also received assurances that the Company's key suppliers'
ability to continue to service the Company has not been materially impacted by
the COVID-19 pandemic. Following this assessment, the Directors have a
reasonable expectation that the Company will have adequate resources to
continue to meet its liabilities for at least 12 months from the date of these
Financial Statements. The Directors therefore consider the preparation of
these financial statements on a going concern basis to be appropriate.
3
Income
Dividends receivable on quoted equity shares are brought into account on the
ex-dividend date. Dividends receivable on unquoted equity shares are brought
into account when the Company's right to receive payment is established and
there is no reasonable doubt that payment will be received.
Interest income on loan stock is accrued on a daily basis. Provision is made
against this income where recovery is doubtful or where it will not be
received in the foreseeable future. Where the loan stocks only require
interest or a redemption premium to be paid on redemption, the interest and
redemption premium is recognised as income or capital as appropriate once
redemption is reasonably certain. When a redemption premium is designed to
protect the value of the instrument holder's investment rather than reflect a
commercial rate of revenue return, the redemption premium is recognised as
capital. The treatment of redemption premiums is analysed to consider if
they are revenue or capital in nature on a company-by-company basis.
Accordingly, the redemption premium recognised in the year ended 31 March 2022
has been classified as capital and has been included within gains on
investments.
2022 2021
£ £
Income from bank deposits 1,306 1,477
Income from investments
- from equities 279,501 830,882
- from overseas based OEICs 10,492 13,522
- from UK based OEICs 1,167 9,281
- from loan stock 788,330 795,761
- from interest on preference share dividend arrears - 41,533
1,079,490 1,690,979
Other income - 5,978
Total income 1,080,796 1,698,434
Total income comprises
Dividends 291,160 853,685
Interest 789,636 838,771
Other - 5,978
1,080,796 1,698,434
Total loan stock interest due but not recognised in the year was £336,436
(2021: £481,136). This decrease is due to the removal of a number of
investee company provisions that were considered appropriate in the previous
year in light of the COVID-19 pandemic.
4
Investment Adviser's fees and performance fees
All expenses are accounted for on an accruals basis.
a) Investment Adviser's fees
25% of the Investment Adviser's fees are charged to the revenue column of the
Income Statement, while 75% is charged against the capital column of the
Income Statement. This is in line with the Board's expected long-term split
of returns from the investment portfolio of the Company.
100% of any performance incentive fee payable for the year is charged against
the capital column of the Income Statement. This is because although the
incentive fee is linked to an annual dividend target, it is ultimately based
upon the achievement of capital growth.
Revenue Capital 2022 Total Revenue Capital 2021
Total
£ £ £ £ £ £
Gresham House Asset Management Limited (1)
412,075 1,236,223 1,648,298 299,284 897,853 1,197,137
Investment Adviser's fees
412,075 1,236,223 1,648,298 299,284 897,853 1,197,137
¹ On 30 September 2021, Mobeus sold its VCT fund and Investment management
business to Gresham House. As a result, the Company's Investment advisory
arrangements have been novated from Mobeus to Gresham House. The entire core
management, investment and operational teams involved with the Company all
transferred to Gresham House in connection with this transaction.
Under the terms of a revised investment management agreement dated 10
September 2010, (as amended and restated on 15 September 2016) Mobeus (from 1
October 2021, Gresham House) provides investment advisory, administrative and
company secretarial services to the Company, for a fee of 2% per annum
calculated on a quarterly basis by reference to the net assets at the end of
the preceding quarter, plus a fee of £113,589 per annum, the latter being
subject to changes in the retail prices index each year. In 2013, Mobeus has
agreed to waive such further increases due to indexation, until otherwise
agreed with the Board. In accordance with the policy statement published under
"Management and Administration" in the Company's prospectus dated 10 May 2000,
the Directors have charged 75% of the investment management expenses to the
capital account. This is in line with the Board's expectation of the long-term
split of returns from the investment portfolio of the Company.
Under the terms of the management agreement the total Investment Adviser and
administration expenses of the Company excluding any irrecoverable VAT,
exceptional costs and any performance incentive fee, are linked to a maximum
of 3.6% of the value of the Company's closing net assets. For the year ended
31 March 2022, the expense cap has not been breached (2021: £nil).
In accordance with general market practice, the Investment Adviser earned
arrangement fees and fees for supplying Directors and/or monitoring services
from investee companies. The share of such fees attributable to the
investments made by the Company were £98,172 (2021: £137,298) and £190,095
(2021: £177,839) respectively. The fees for supplying directors and/or
monitoring services were from 33 (2021: 36) investee companies during the
year.
b) Performance Fees
2022 2021
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Gresham House Asset
Management Limited - 1,014,703 1,014,703 - - -
Performance incentive agreement
The following performance incentive fee arrangement dated 20 September 2005
continues to be in place, and operated as detailed below:
New Ordinary and former C share fund shares
Basis of Calculation
The performance incentive fee payable is calculated as an amount equivalent to
20 per cent of the excess of a "Target rate" comprising:-
i) an annual dividend target (indexed each year for
RPI) and
ii) a requirement that any cumulative shortfalls below
the annual dividend target must be made up in later years. Any excess is not
carried forward, whether a fee is payable for that year or not.
Payment of a fee is also conditional upon the average Net Asset Value ("NAV")
per share for each such year equalling or exceeding the average "Base NAV" per
share for the same year. Base NAV commenced at £1 per share when C fund
shares were first issued in 2005, which is adjusted for subsequent shares
issued and bought back.
Any performance fee will be payable annually. It will be reduced to the
proportion which the number of "Incentive Fee Shares" represent of the total
number of shares in issue at any calculation date. Incentive Fees Shares are
the only shares upon which an incentive fee is payable. They will be the
number of C fund shares in issue just before the Merger of the two former
share classes on 10 September 2010, (which subsequently became Ordinary
shares) plus Ordinary shares issued under new fundraisings since the Merger.
This total is then reduced by an estimated proportion of the shares bought
back by the Company since the Merger, that are attributable to the Incentive
Fee Shares.
Clarifications to the agreement
During the year ended 31 March 2016, the Board and the Investment Adviser
agreed to confirm and clarify in more detail a number of principles and
interpretations applied to the agreement. The principal ones are reflected
in the paragraphs above and explained below:-
First, the incentive fee is paid upon dividends paid in a year, not declared
and paid in a year, as the original agreement stated. Secondly, the average
NAV referred to above is calculated on a daily weighted average basis
throughout the year. In turn, this average NAV is compared to a Base NAV
that is also calculated on a daily weighted average basis throughout the
year. Thirdly, the methodologies to account for new shares issued and
buybacks of shares, their inclusion in the incentive fee calculations and to
identify the proportion of all shares upon which an incentive fee is payable
have been clarified.
Finally, it has been agreed that any excess of cumulative dividends paid over
the cumulative annual dividend target is not carried forward, whether a fee is
paid for that year or not.
These clarifications have been incorporated in to the performance incentive
agreement. The Board has been advised that, as these and a number of more
minor clarifications, are clarifications of the Incentive Agreement, rather
than changes to it, there was no need to seek Shareholder approval for them.
Position at 31 March 2022
The cumulative dividends paid fell short of the annual cumulative dividend
target at 31 March 2022 by 7.62 pence per share (£5,034,803 in aggregate
being 91.5% of the total shortfall) at the year-end, (where 91.5% is the
proportion of Incentive Fee Shares to the total number of shares in issue at
the year-end date) and taking into account the target rate of dividends and
the dividends paid to Shareholders.
The 6.00 pence annual dividend hurdle was 9.07 pence per share at the year-end
after adjustment for RPI. The Base NAV was 98.26 pence per share at the year
end, compared to an average NAV for the year of 102.25 pence per share.
Therefore there is an Incentive fee is payable for the year of £1,014,703
(2021: £Nil).
c) Offer for Subscription fees
2022 2022
£mn £mn
Funds raised by the Company 7,26 10.76
Offer costs payable to Gresham House at 3.00% of funds raised by the Company 0.22 0.32
Under the terms of an Offer for Subscription, with the other Mobeus VCTs,
launched on 20 January 2022, Mobeus was entitled to fees of 3.00% of the
investment amount received from investors. This amount totalled £1.05 million
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.
d) Other expenses
Expenses are charged wholly to revenue, with the exception of expenses
incidental to the acquisition or disposal of an investment, which are written
off to the capital column of the Income Statement or deducted from the
disposal proceeds as appropriate.
2022 2021
£ £
Directors' remuneration (including NIC of £6,278 (2020: (£5,610)) (Note a) 107,278 101,610
IFA trail commission 67,648 66,663
Broker's fees 12,000 6,000
Auditors' fees - Audit of Company (Note b) (excluding VAT) 38,080 36,952
Registrar's fees 42,671 31,076
Printing 56,969 41,232
Legal & professional fees 22,768 4,074
VCT monitoring fees 8,400 8,400
Directors' insurance 9,659 7,378
Listing and regulatory fees 29,177 27,151
Sundry 8,716 8,577
Other expenses 403,366 339,113
a) Directors' remuneration is a related party transaction, see
analysis of Directors' fees payable and their interests in the shares of the
Company in the Directors' Remuneration Report, which excludes NIC above. The
key management personnel are the three non-executive Directors. The Company
has no employees. There were no amounts outstanding and due to the Directors
at 31 March 2022 (2021: £nil).
b) Included within this figure is £7,073 (2021: £6,868) relating to
advanced audit procedures in respect of the Financial Statements carried out
at the Half-Year. The Audit Committee reviews the nature and extent of these
services to ensure that auditor independence is maintained.
5
Taxation 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 Investment 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.
2022 2021
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
a) Analysis of tax charge:
UK Corporation tax on profits for the year - - - 43,540 (43,540) -
Total current tax charge -- - - 43,540 (43,540) -
Corporation tax is based on a rate of 19% (2021: 19%)
b) Profit on ordinary activities before tax 1,060,037 24,459,055 25,519,092
265,355 9,844,858 10,110,213
Profit on ordinary activities multiplied by small company rate of corporation 201,407 4,647,220 4,848,627
tax in the UK of 19% (2021: 19%)
50,417 1,870,523 1,920,940
Effect of:
UK dividends (53,105)) - (53,105)) (157,867) - (157,867)
Net investment portfolio gains not taxable/ - - (4,817,813) (4,817,813)
deductible
(2,298,199) (2,298,199)
Unrelieved expenditure 2,688 427,676 430,364 - 127,053 127,053
Actual tax charge - - - 43,540 (43,540) -
Tax relief relating to Investment Adviser fees is allocated between revenue
and capital where such relief can be utilised.
No asset or liability has been recognised for deferred tax in relation to
capital gains or losses on revaluing investments as the Company is exempt from
corporation tax in relation to capital gains or losses as a result of
qualifying as a Venture Capital Trust.
There is no potential liability to deferred tax (2021: £nil). There is an
unrecognised deferred tax asset of £733,172 (2021 (restated): £127,053). The
deferred tax asset relates to unrelieved management expenses and is not
recognised because the Company may not generate sufficient taxable income in
the foreseeable future to utilise these expenses.
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 income dividend to be paid in respect of a year. The
Company's status as a VCT means it has to comply with Section 274 of the
Income Tax Act 2007, which requires that no more than 15% of the income from
shares and securities in a year can be retained from the revenue available for
distribution for the year.
Amounts recognised as distributions to equity Shareholders in the year:
Dividend Type For year ended 31 March Pence per share Date Paid 2022 £ 2021 £
Interim Capital 2021 3.00p 19/06/2020 - 2,208,533
Interim Capital* 2021 4.00p 19/06/2020 - 2,944,710
Interim Income 2021 1.25p 30/07/2021 915,378 -
Interim Capital 2021 4.75p 30/07/2021 3,478,438 -
Interim Income 2022 0.75p 07/01/2022 545,385
Interim Capital 2022 5.00p 07/01/2022 3,635,897 -
Interim Capital 2022 6.25p 07/01/2022 4,544,870 -
13,119,968 5,153,243
* These dividends were 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 274 of
the Income Tax Act 2007 are considered.
Recognised income distributions in the Financial Statements for the year:
Dividend Type For year ended 31 March Pence per share Date payable 2022 £ 2021 £
265,355 1,016,497
Revenue available for distribution by way of dividends for the year
Income 2021 1.25p 30/07/2021 - 915,379
Interim
Interim Income 2022 0.75p 07/01/2022 545,385 -
545,385 915,379
7
Basic and diluted earnings per share
2022 2021
£ £
Total earnings after taxation: 10,110,213 25,519,092
Basic and diluted earnings per share (Note a) 13.78p 34.75p
Net revenue earnings from ordinary activities after taxation 265,355 1,016,497
Basic and diluted revenue earnings per share (Note b) 0.36p 1.38p
Net investment portfolio gains 12,095,784 25,356,908
Capital Investment Adviser fees (net of taxation) (1,236,223) (854,313)
Investment Adviser's performance fee (1,014,703) -
24,502,595
Total capital earnings 9,844,858
Basic and diluted capital earnings per share (Note c) 13.42p 33.37p
Weighted average number of shares in issue in the year 73,353,491 73,424,532
Notes:
a) Basic earnings per share is total earnings after taxation divided
by the weighted average number of shares in issue.
b) Basic revenue earnings per share is the revenue return after
taxation divided by the weighted average number of shares in issue.
c) Basic capital earnings per share is the total capital return 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 returns.
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 2018.
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 recognised once the right to receive payment
is established and there is no reasonable doubt that payment will be received.
Unquoted investments are stated at fair value by the Directors at each
measurement date in accordance with appropriate valuation techniques, which
are consistent with the IPEV guidelines:-
i. Each investment is considered as a whole on a 'unit of account'
basis, i.e. that the value of each portfolio company is considered as a whole,
alongside consideration of:-
The price of new or follow-on investments made, if deemed to be made as part
of an orderly transaction, are considered to be at fair value at the date of
the transaction. The inputs that derived the investment price are calibrated
within individual valuation models and at every subsequent quarterly
measurement date, are reconsidered for any changes in light of more recent
events or changes in the market performance of the investee company. The
valuation bases used are the following:
- a multiple basis. The enterprise value of the investment may be
determined 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, depreciation 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, scale and
liquidity).
or:-
- where a company's underperformance against plan indicates a
diminution in the value of the investment, provision against the price of a
new investment is made, as appropriate.
ii. 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.
iii. Where a multiple or the price of recent investment less impairment
basis is not appropriate and overriding factors apply, a discounted cash flow,
net asset valuation, realisation proceeds, or a weighted average of these
bases 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 figures are shown net of any
applicable transaction costs incurred by the Company.
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 the price of recent investment, 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.
Accounting standards classify methods of fair value measurement as Levels 1, 2
and 3. This hierarchy is based upon the reliability of information used to
determine the valuation. All of the unquoted investments are Level 3, i.e.
fair value is measured using techniques using inputs that are not based on
observable market data.
Movements in investments during the year are summarised as follows:
Traded on AIM Unquoted equity shares Unquoted preference shares Unquoted loan Stock Total
Level 1 Level 3 Level 3 Level 3
£ £ £ £ £
Cost at 31 March 2021 551,090 16,826,218 691,155 9,094,652 27,163,115
Permanent impairment at 31 March 2021 - (1,790,358) (170) (139,050) (1,929,578)
Unrealised gains/(losses) at 31 March 2021 8,250,506 9,983,516 63,770 (1,699,268) 16,598,524
Valuation at 31 March 2021 8,801,596 25,019,376 754,755 7,256,334 41,832,061
Purchases at cost (Note b) - 2,875,970 957,890 773,534 4,607,394
Sale proceeds (Note b) - (4,864,601) - (1,509,516) (6,374,117)
Reclassification at value (Note d) - 453,891 - (453,891) -
Net realised gains on investments (Note a)
- 2,499,113 - 39,157 2,538,270
Net unrealised gains on investments (Note c) (4,738,742) 13,990,136 64,594 241,526 9,557,514
Valuation at 31 March 2022 4,062,854 39,973,885 1,777,239 6,347,144 52,161,122
Cost at 31 March 2022 551,090 19,279,388 1,649,045 8,155,689 29,635,212
Permanent impairment at 31 March 2022 - (1,790,358) (170) (139,050) (1,929,578)
Unrealised gains/(losses) at 3,511,764 22,484,855 128,364 (1,669,495) 24,455,488
31 March 2022
Valuation at 31 March 2022 4,062,854 39,973,885 1,777,239 6,347,144 52,161,122
Net realised gains on investments of £2,538,270 together with net unrealised
gains on investments of £9,557,514 equal net investment portfolio gains of
£12,095,784 shown on the Income Statement.
A breakdown of the increases and the decreases in unrealised valuations of the
portfolio is shown in the Investment Portfolio Summary.
Major movements in investments
Note a) Disposals of investment portfolio companies during the year were:
Company Type Investment Cost Disposal Proceeds Opening Valuation Net realised gain/(loss) in year
£ £ £ £
Vian Marketing Limited (trading as Red Paddle Co) Realisation
629,255 3,467,752 1,250,675 2,217,077
MyTutorweb Limited Partial realisation
193,439 524,434 259,455 264,979
Media Business Insight Limited Loan repayment 499,045 499,045 459,881 39,164
MPB Group Limited Loan repayment 178,212 267,318 267,318 -
Proactive Holdings Inc. Realisation 635,346 1,593,315 1,598,518 (5,203)
Other capital proceeds Various - 22,253 - 22,253
2,135,297 6,374,117 3,835,847 2,538,270
Note b) The sale proceeds shown above of £6,374,117 is £2,073,716 less than
that shown on the Statement of Cash Flows of £8,447,833 due to proceeds
received from the partial realisations of MPB Group Limited and Parsley Box
Group Plc (formerly Parsley Box Limited), as well as additional proceeds due
from Vectair Holdings Limited at the beginning of this year.
The difference between the purchases at cost above of £4,607,394 and the cash
flow statement of £4,728,594 is the follow-on investment in Northern Bloc Ice
Cream Limited which completed shortly after the year-end.
Note c) The major components of the net increase in unrealised valuations of
£9,557,514 in the year were increases of
£5,022,119 in Preservica Limited, £2,995,533 in Bella & Duke Limited,
£1,828,144 in Media Business Insight Holdings Limited,
£1,078,424 in MyTutorWeb Limited (trading as MyTutor) and £1,047,722 in
Master Removers Group 2019 Limited (trading as Anthony Ward Thomas,
Bishopsgate and Aussie Man & Van). These increases were partly offset by
falls of £3,016,498 in Virgin Wines UK Plc, £1,722,244 in Parsley Box Group
plc and £196,346 in Bleach London Holdings Limited.
Note d) The amount of £453,891 transferred from unquoted loan stock to
unquoted equity shares represents the conversion of the loans held in two
portfolio companies into equity shares during the year.
9
Current asset investments and Cash at bank
Cash equivalents, for the purposes of the Statement of Cash Flows, comprise
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
of up to one year's 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.
2022 2021
£ £
OEIC Money market funds (Cash equivalents per Statement of Cash Flows) 23,458,496 27,633,496
Current asset investments 23,458,496 27,633,496
Cash at bank 2,801,008 2,386,262
10
Called up share capital
2022 2021
£ £
Allotted, called-up and fully paid:
Ordinary shares of 1p each: 80,426,321 (2021: 73,230,275) 804,263 732,303
Purchased Date of purchase Nominal value
£
299,932 09 July 2021 2,999
212,438 27 September 2021 2,124
79,304 15 December 2021 793
64,157 09 March 2022 642
41,667 29 March 2022 417
697,498 6,975
Under the Offer for Subscription launched on 20 January 2022 7,893,544
ordinary shares were allotted on 9 March 2022 at an average effective offer
price of 95.01 pence per share, raising net funds of £7,260,679.
During the year the Company repurchased 697,498 (2021: 387,471) of its own
ordinary shares (representing 1.0% (2021: 0.7%) of the ordinary shares in
issue at the start of the year) at the prevailing market price for a total
cost of £643,810 (2021: £292,568). These shares were subsequently cancelled
by the Company.
11
Basic and diluted net asset value per share
As at 31 March 2022 As at 31 March 2021
Net assets £77,505,982 £73,898,868
Number of ordinary shares in issue 80,426,321 73,230,275
Net asset value per share (pence) 96.37p 100.91p
12
Post balance sheet events
On 6 April 2022, a further investment of £0.12 million was made into Northern
Bloc Ice Cream Limited, an existing portfolio company.
On 5 May 2022, a new investment of £0.43 million was made into Lads Store
Limited (trading as Bidnamic).
On 23 May 2022, a further investment of £0.27 million was made into Muller EV
Limited (trading as Andersen EV), an existing portfolio company.
On 9 June 2022, the Company realised its investment in Media Business Insight
Holdings Limited, generating proceeds of £2.77 million.
On 15 June 2022, a further investment of £0.18 million was made into Rota
Geek Limited, an existing portfolio company.
13 Statutory information
The financial information set out in these statements does not constitute the
Company's statutory accounts for the year ended 31 March 2022 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.
14 Annual Report & Financial Statements
The Annual Report & Financial Statements will be published on the
Company's website at www.mig2vct.co.uk shortly and will be posted to those
Shareholders who have requested a copy. Following the adoption of electronic
communications by the Company, those Shareholders who have elected to receive
e-communications 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, Gresham House Asset Management
Limited by email at mobeusvcts@greshamhouse.com
(mailto:mobeusvcts@greshamhouse.com) .
15 Annual General Meeting
The Company's next Annual General Meeting will be held on Wednesday, 21
September 2022 at the offices of Shakespeare Martineau LLP, 6(th) Floor, 60
Gracechurch Street, London EC3R OHR and by webcast, the link is available on
the Company's website at: www.mig2vct.co.uk (http://www.mig2vct.co.uk) .
However, please note that Shareholders will not be able to vote via the
webcast and so are encouraged to return their proxy form before the deadline
of 19 September 2022.
Contact details for further enquiries
Gresham House Asset Management Limited (the Company Secretary) on 020 7382
0999 or by email to: info (mailto:info@greshamhouse.com) @greshamhouse.com
(mailto:info@greshamhouse.com) .
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