Half-yearly Report
Mobeus Income & Growth 4 VCT plc
Half-Yearly Report for the six months ended 30 June 2013
Investment Objective
Mobeus Income & Growth 4 VCT plc, ("MIG4" or the "Company") is a
Venture Capital Trust ("VCT") managed by Mobeus Equity Partners LLP ("Mobeus")
investing primarily in established, profitable, unquoted companies.
The objective of the Company is to provide investors with a regular
income stream by way of tax free dividends and to generate capital growth
through portfolio realisations which can be distributed by way of additional
tax free dividends.
The portfolio comprises a number of diverse investments over a wide
range of different business sectors, thus spreading risk by avoiding
over-concentration in any one sector.
Financial Highlights
As at 30 June 2013
- Net asset value (NAV) Total Return per Share for the period was 5.54%.
- Shareholders received a dividend in respect of the period ended 31 December
2012 of 5.5 pence per Share in May 2013, bringing total cumulative
dividends paid to Shareholders to 32.2 pence per Share.
- The Company has declared an interim dividend of 2.0 pence per Share,
payable on 20 September 2013 to Shareholders on the register as at 23
August 2013.
- Strong liquidity has been enhanced by a successful fundraising in 2013 in
which new funds of £8.28 million were raised by the Company.
- A total of £3.21 million was invested in the period, which included the MBO
of Gro-Group and two acquisitions by ATG Media and Fullfield (Motorclean).
Performance Summary
The net asset value (NAV) per Share at 30 June 2013 was 118.3 pence.
The table below shows the recent past performance of the original funds raised
in 1999.
Period Net assets Net asset Share Cumulative Cumulative total return
value price dividends per Share to
(NAV) per (mid- paid per Shareholders
Share market Share since launch2
price)1
(NAV basis) (Share price basis)
(£m) (p) (p) (p) (p)2 (p)2
As at 30 June 20133 41.7 118.3 103.3 32.2 150.5 135.5
As at 31 December 2012 33.5 117.3 102.5 26.7 144.0 129.2
As at 31 July 20123 32.9 113.9 100.9 26.7 140.6 127.6
1 Source: London Stock Exchange
2 Total returns to Shareholders include dividends paid
3 In the previous accounting period, the Company changed its financial year
from 31 January to 31 December. Consequently, comparative figures have been
included throughout the Report for the six month periods ending 30 June 2013
and 31 July 2012.
Chairman's Statement
This Half-Yearly Report covers the six month period ended 30 June 2013.
Net asset value (NAV) and total return to shareholders
The net asset value per Share as at 30 June 2013 was 118.3 pence
compared with the previously reported NAV per Share of 117.3 pence as at the
beginning of the period.
The Company's total return for the half-year (NAV basis) was 5.54%
(2012: 2.15%), after allowing for the dividend of 5.5 pence per Share paid in
the period. The cumulative NAV total return per Share (being the closing net
asset value plus total dividends paid to date) rose by 4.49% during the six
month period from 144.0 pence to 150.5 pence. This encouraging rise in NAV
return over the period was largely due to unrealised gains across the
portfolio, notably increases in the valuations of Tessella, Westway, Fullfield
(Motorclean) and ATG Media.
Interim Dividend
The Company has declared an interim dividend totalling 2.0 pence
per Share, of which 0.75 pence is capital and 1.25 pence is income.
Investment portfolio
Overall the portfolio recorded realised and unrealised gains of
£2.1 million (9.60% of the opening value) during the first half of the year
and the portfolio was valued at £23.5 million at the period-end.
During the period, the VCT invested a total of £3.21 million
(including funds from the acquisition vehicles Almsworthy, Fosse and Peddars).
Shortly after the period-end, in July 2013, the VCT completed a
further new investment of £1.62 million (including the VCT's existing
investment of £1 million in the seed company, Madacombe Trading) to support
the MBO of Veritek Global Limited, a Europe-wide provider of installation,
maintenance and support services for large corporate owners of printing
equipment.
Net cash proceeds received during the period from portfolio
realisations amounted to £0.97 million, from 6 separate disposals. This figure
includes the partial divestment of Faversham House, and loan stock repayments
received from Newquay Helicopters (previously British International),
Tessella, Westway, Almsworthy and DiGiCo.
Details of all these transactions and a summary of the performance
highlights in the portfolio can be found in the Manager's Review below.
Revenue account and dividends
The net revenue return for the period has achieved a good result,
rising by £211,242 from £167,976 at the last half-year, to £379,218 for this
half-year. This was mainly because income has risen by £280,372, primarily due
to a high level of loan interest of £107,412 from Newquay Helicopters,
contributing to a total rise in loan stock interest of £206,887 for the half
year, as the impact of new loan investments outweighed that of loan
repayments. Dividend income rose by £25,900 to £69,023 and income from cash
balances rose by a net amount of £47,585k, as more cash had been retained in
bank deposits that paid higher rates last year.
Running costs rose slightly as fund management fees charged to
revenue rose by £14,736 due to rising net assets. Other costs reduced by
£1,610, due to a reduction in printing costs, countered by a rise in
directors' fees, professional fees and trail commission costs.
Cancellation of the share premium account
Further to a special resolution passed on 22 February 2013, the
Company applied to the High Court to cancel the amount standing to the credit
of its share premium account on 13 March 2013 of £13,858,090. The cancellation
of the share premium account was confirmed by an Order of the Court on 13
March 2013.
Linked VCT fundraising
The Company participated with Mobeus Income & Growth VCT plc and
The Income & Growth VCT plc in a successful linked fundraising that closed on
30 April 2013. A total of £24.85 million (in excess of the original target of
£21 million) was subscribed for under the Offer across the three VCTs, of
which £8.28 million was raised by the Company. Periodic fundraisings by the
Company enable it to maintain a consistent level of new cash to meet its
running costs, fund dividend payments and support the Company's share buy-back
policy which helps to provide a degree of liquidity in the Company's Shares.
Liquidity
The Company has diversified its portfolio of cash investments
during the year as it is no longer adding to its investment in liquidity funds
in response to a change in VCT regulations. It continues to hold £6.52 million
in a selection of liquidity funds with AAA credit ratings at 30 June 2013. The
balance of cash and current asset investments of £11.56 million is held on
deposit across a range of well-known financial institutions with a range of
maturities. However, whilst UK banks are at a recovery stage, systemic risk
remains. In addition, the £3 million invested in the Operating Partner
acquisition vehicles was also held in liquidity funds (reduced to £2 million
following the use of Madacombe to support the MBO of Veritek after the
period-end). The Company is therefore well-positioned both to take advantage
of favourable investment opportunities as they arise and, if required, to make
investments to support the existing portfolio.
Investment in qualifying holdings
The Company is required to meet the target set by HM Revenue &
Customs ("HMRC") of investing at least 70% of the funds raised in qualifying
unquoted and AIM quoted companies. The Company exceeded this limit (based on
VCT cost as defined in tax legislation which differs from the actual cost
given in the Investment Portfolio Summary below) throughout the period. The
balance of the portfolio was invested in non-qualifying investments and cash.
Enhanced buyback facility (EBF)
The Company offered an EBF to Shareholders in January 2013 which
took place during the period. A total of 5,902,280 Shares were bought-back in
respect of the tax years 2012/13 and 2013/14 (representing 19.52% of the
Shares in issue at the date of launch of the EBF) and 5,721,589 million new
Shares were allotted by the Company under the EBF.
Share buy-backs
During the six months ended 30 June 2013, the Company bought back a
further 363,951 of its own Shares, representing 1.27% of the issued share
capital at the beginning of the period, at an average price, including costs,
of £1.03 per Share. These Shares were purchased at an average discount of
12.04% to NAV per Share.
All of the Shares bought back in the period were subsequently
cancelled by the Company. Continuing Shareholders benefit from the difference
between the NAV per Share and the price per Share at which the Shares are
bought back and cancelled.
Industry Developments
The European Union's Alternative Investment Fund Managers Directive
("AIFMD") came into force in the UK on 22 July 2013, with the effect that
investment companies will be subject to further regulatory oversight. Under
the Directive, the Company will be required to appoint an AIFM by 22 July
2014. The Board is currently considering its options and will provide
Shareholders with any update on this matter in the Annual Report for the year
ending 31 December 2013.
Selling your Shares
The Company's Shares are listed on the London Stock Exchange and as
such they can be sold in the same way as any other quoted company through a
stockbroker. However, to ensure that you obtain the best price, if you wish to
sell your Shares you are strongly advised to contact the Company's
stockbroker, Panmure Gordon, by telephoning 020 7886 2716/7 before agreeing a
price with your stockbroker. Shareholders are also advised to discuss their
individual tax position with their financial advisor before deciding to sell
their Shares.
Auditor
With effect from 28 March 2013, the Company's auditor, PKF (UK) LLP
merged with BDO LLP to become part of BDO LLP ("BDO"). The Board has
subsequently appointed BDO as the Company's auditor to fill the casual vacancy
arising as a result of the merger. The Company wrote to Shareholders on 20
June 2013 informing them of this change. The expense of this correspondence
was met by BDO.
Communicating with shareholders
May I remind you that the Company has its own website which is
available at www.mig4vct.co.uk.
The Company maintains a programme of regular communication with
Shareholders through newsletters and a dedicated website in addition to the
Company's Half-Yearly and Annual Reports. The Manager has established a Mobeus
website, www.mobeusequity.co.uk which is regularly updated with information on
your investments including case studies of portfolio companies and profiles of
the investment team. The Company has its own dedicated section on the website
which includes performance tables, details of dividends paid and copies of
past reports to Shareholders.
The Company has adopted electronic communications which enables
Shareholders to choose between electing to receive communications by email or
as hard copies through the post.
If you have not already done so, you are encouraged to register
with Capita Registrar's Share Portal, on www.capitashareportal.com. The Share
Portal provides the most efficient way of checking information on your
accounts, making changes to your instructions and allows you to manage your
options for receiving communications from the Company including submitting
proxy votes for general meetings.
The Board welcomes the opportunity to meet Shareholders at the
Company's Annual General Meetings during which representatives of the Manager
are present to discuss the progress of the portfolio. The next AGM of the
Company will be held in May 2014.
Shareholder workshop - 21 January 2014
The Manager holds an annual VCT workshop for
Shareholders in central London. Each workshop includes a presentation on the
Mobeus VCTs' investment activity and performance. The Board and the Manager
welcome feedback from Shareholders and we have been pleased to receive
positive comments from those attending in previous years. The Manager has
taken many of the comments received on board as part of a process of
continuous improvement. The next workshop will be held on Tuesday, 21 January
2014 at the Royal College of Surgeons in central London and Shareholders will
receive an invitation to this event nearer to the date.
Industry awards for the Manager
I reported in the Annual Report that the Manager
had been awarded VCT house of the year in 2012 at both the Investor Allstars
and unquote" British Private Equity Awards. Mobeus also was recently voted
Private Equity House of the Year at the South West Insider Dealmakers Awards
2013 by the corporate finance community.
Outlook
Whilst global quoted stock markets remain volatile and failure to
address the UK government debt situation is still an issue, recent data on the
UK economy appears to indicate that a degree of recovery is underway. Business
surveys reveal cautious optimism in the corporate sector.
The Manager is reporting a significant increase in the number of
quality opportunities being evaluated. The VCT has maintained strong liquidity
over the period and it is therefore well-placed to take advantage of this
increased dealflow. The Manager will nevertheless continue to adopt a rigorous
approach to selecting well-run profitable companies operating in niche markets
and specifically structuring the terms of deals so as to minimise the downside
risk to Shareholders. We believe that this strategy underpins the quality of
the investment portfolio currently held within the VCT.
Finally, I would like to thank Shareholders for their continuing
support.
Christopher Moore
Chairman
9 August 2013
Responsibility Statement
In accordance with Disclosure and Transparency Rule (DTR) 4.2.10,
Christopher Moore (Chairman), Andrew Robson (Chairman of the Audit Committee
and Remuneration and Nomination Committee) and Helen Sinclair (Chairman of the
Investment Committee), being the Directors of the Company confirm that to the
best of their knowledge:
(a) the condensed set of financial statements, which has been
prepared in accordance with the statement, "Half-Yearly Reports", issued by
the Accounting Standards Board, gives a true and fair view of the assets,
liabilities, financial position and profit of the Company, as required by DTR
4.2.4;
(b) the interim management report, included within the Chairman's
Statement, Investment Policy, Investment Manager's Review and the Investment
Portfolio Summary includes a fair review of the information required by DTR
4.2.7 being an indication of the important events that have occurred during
the first six months of the financial year and their impact on the condensed
set of financial statements;
(c) a description of the principal risks and uncertainties facing
the Company for the remaining six months is set out below, in accordance with
DTR 4.2.7; and
(d) there were no related party transactions in the first six
months of the current financial year that are required to be reported, in
accordance with DTR 4.2.8.
Principal risks and uncertainties
In accordance with DTR 4.2.7, the Board confirms that the principal
risks and uncertainties facing the Company have not materially changed since
the publication of the Annual Report and Accounts for the period ended 31
December 2012. The Board acknowledges that there is regulatory risk and
continues to manage the Company's affairs in such a manner as to comply with
section 274 Income Tax Act 2007.
The principal risks faced by the Company are:
- economic risk;
- loss of approval as a Venture Capital Trust;
- investment and strategic risk;
- regulatory risk;
- financial and operating risk;
- market risk;
- asset liquidity risk;
- market liquidity risk;
- credit/counterparty risk; and
- fraud and dishonesty risk.
A more detailed explanation of these risks can be found in the
Directors' Report on pages 19 - 23 and in Note 19 on pages 48 - 55 of the
Annual Report and Accounts for the period ended 31 December 2012, copies of
which are available on the Manager's website, www.mobeusequity.co.uk or by
going to the VCT's website, www.mig4vct.co.uk.
Going concern
The Board has assessed the Company's operation as a going concern.
The Company's business activities, together with the factors likely to affect
its future development, performance and position are set out in the interim
management report which is included within the Chairman's Statement,
Investment Policy, Investment Manager's Review and Investment Portfolio
Summary. The Directors have satisfied themselves that the Company continues to
maintain a significant cash position, the majority of companies in the
portfolio continue to trade profitably and the portfolio taken as a whole
remains resilient and well-diversified. The major cash outflows of the Company
(namely investments, buy-backs and dividends) are within the Company's
control.
The Board's assessment of liquidity risk and details of the
Company's policies for managing its capital and financial risks are shown in
Note 19 on pages 48 - 55 of the Annual Report and Accounts for the period
ended 31 December 2012. Accordingly, the Directors continue to adopt the going
concern basis of accounting in preparing the half-yearly report and annual
financial statements.
Related Party Transactions
There were no related party transactions in the first six months of
the current financial year that are required to be reported.
Cautionary Statement
This report may contain forward looking statements with regards to
the financial condition and results of the Company, which are made in the
light of current economic and business circumstances. Nothing in this report
should be construed as a profit forecast.
On behalf of the Board
Christopher Moore
Chairman
9 August 2013
Investment Policy
The Company's policy is to invest primarily in a diverse portfolio
of UK unquoted companies. Investments are structured as part loan and part
equity in order to receive regular income and to generate capital gains from
trade sales and flotations of investee companies.
Investments are made selectively across a number of sectors,
primarily in management buyout transactions (MBOs) i.e. to support incumbent
management teams in acquiring the business they manage but do not yet own.
Investments are primarily made in companies that are established and
profitable.
The Company has a small legacy portfolio of investments in
companies from its period prior to 1 August 2006, when it was a multi-manager
Venture Capital Trust ("VCT"). This includes investments in early stage and
technology companies.
Uninvested funds are held in cash and lower risk money market
funds.
UK companies
The companies in which investments are made must have no more than
£15 million of gross assets at the time of investment and £16 million
immediately following the investment to be classed as a VCT qualifying
holding.
VCT regulation
The investment policy is designed to ensure that the Company
continues to qualify and is approved as a VCT by HM Revenue & Customs
("HMRC"). Amongst other conditions, the Company may not invest more than 15%
of its investments in a single company and must have at least 70% by value of
its investments throughout the year in shares or securities comprised in VCT
qualifying holdings, of which a minimum overall of 30% by value must be
ordinary shares which carry no preferential rights. In addition, although the
Company can invest less than 30% of an investment in a specific company in
ordinary shares, it must have at least 10% by value of its total investments
in each VCT qualifying company in ordinary shares which carry no preferential
rights (save as may be permitted under VCT rules).
The VCT regulations in respect of funds raised after 6 April 2011
have changed such that 70% of qualifying holdings invested with such funds
must be held in equity.
Asset mix
The Company initially holds its funds in a portfolio of readily
realisable interest bearing investments and deposits. The investment portfolio
of qualifying investments is built up over a three year period with the aim of
investing and maintaining at least 80% of net funds raised in qualifying
investments.
Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses
across different industry sectors. To reduce the risk of high exposure to
equities, each qualifying investment is structured using a significant
proportion of loan stock (up to 70% of the total investment in each VCT
qualifying company). Initial investments in VCT qualifying companies are
generally made in amounts ranging from £200,000 to £2 million at cost. No
holding in any one company will represent more than 10% of the value of the
Company's investments at the time of investment. Ongoing monitoring of each
investment is carried out by the Investment Manager, generally through taking
a seat on the board of each VCT qualifying company.
Co-investment
Whilst the Board operates independently, in general the Company
aims to invest alongside the three other VCTs advised by the Investment
Manager with a similar investment policy. This enables the Company to
participate in combined investments advised on by the Investment Manager of up
to £5 million.
Borrowing
The Company has never borrowed and has no current plans to
undertake any borrowing.
Management
The Board has overall responsibility for the Company's affairs
including the determination of its investment policy. Investment and
divestment proposals are originated, negotiated and recommended by the
Investment Manager and are then subject to formal approval by the Board of
Directors. Mobeus Equity Partners LLP also provides Company Secretarial and
Accountancy services to the VCT.
Manager's Review
Overview
The six month period to 30 June 2013 has been a period of strong
performance for many of the companies in the portfolio.
We believe that this is a result of focussing on selecting
well-run, profitable companies operating in niche markets and structuring
deals to minimise downside risk to Shareholders.
Portfolio review
At 30 June 2013 the portfolio comprised 34 investments with a cost
of £21.8 million valued at £23.5 million. Overall, the portfolio has performed
well, achieving gains of £2.1 million over the last six months.
Fullfield, ATG and Westway have contributed strongly to this
increase in the overall value of the portfolio over the six month period. All
three are trading well; in the cases of ATG and Fullfield the valuations have
benefitted from attractively-priced acquisitions made during the period and we
are confident that these acquisitions will help in driving values up further.
Westway has recovered well from a dip in trading in the prior year.
Tessella, having made an encouraging start since the MBO in July
2012, has now been valued on an earnings basis for the first time, which has
resulted in a significant uplift from cost.
Blaze Signs has continued its impressive recovery having benefited
from some high profile contract gains, including work on the Olympics site in
2012. DiGiCo has continued to grow, and has recently launched a new range of
products. Focus has begun to benefit from the high level of new product
development expenditure over the past year. The valuation of EMaC has
increased further above cost, reflecting this company's pleasing performance
since investment. Against these positive performances, CB Imports, while
trading satisfactorily, is performing slightly below expectations. The
building and construction sector remains weak, causing Youngman and PXP to
find it difficult to establish a solid path to recovery, although the
valuation of Plastic Surgeon is beginning to reflect signs of a recovery.
RDL's performance remains disappointing.
Taken as a whole, the portfolio is performing well and we are
encouraged by the strong and resilient performances of those companies that
are outperforming expectations.
Investment activity
In March 2013, the Company completed a new investment of £1.48
million, to support the MBO of Gro-Group Holdings Limited. The amount invested
included £1 million from the Company's existing investment in the acquisition
vehicle Fosse Management. Devon based Gro-Group created the original, and now
internationally renowned, Gro-bag, which has become the number one baby sleep
bag brand in the UK and Australia. Market penetration of the product has
increased from zero to around 90% since the company was founded in 2000 and
turnover has grown to £12 million.
Shortly after the period-end in July 2013, the VCT completed a
further new investment of £1.62 million (including the VCT's existing
investment of £1 million in the seed company, Madacombe Trading) to support
the MBO of Veritek Global Limited, a Europe-wide provider of installation,
maintenance and support services for blue-chip owners of printing equipment.
As mentioned earlier, the VCT has funded strategic acquisitions by
Fullfield and ATG Media in the period. Both transactions have improved the
trading position of these companies and offer good potential for further
growth.
In February 2013, the VCT provided an additional £0.68 million, via
the acquisition vehicle Almsworthy Trading, to finance Fullfield's (trading as
Motorclean) acquisition of Forward Valeting Services. The transaction created
the UK's largest provider of car valeting services and brought the VCT's total
investment in this company to £1.79 million.
In April 2013, a further £1 million was invested into ATG Media,
using the VCT's existing investment of £1 million in the acquisition vehicle
Peddars Management, to enable it to acquire Bidspotter Inc., a US business
engaged in providing live bidding and auction software to industrial and
commercial liquidation auctioneers, bringing the VCT's total investment in
this company to £1.9 million.
These transactions were specifically structured to enhance the
value of existing successful investments. We are conscious that a materially
lower investment risk is likely to be involved when we back what we know are
successful management teams within the portfolio, compared to a first
investment into a new portfolio company.
A further loan of £41,912 was advanced to support the working
capital requirements of Newquay Helicopters (2013) Limited (formerly British
International Holdings Limited). This was used to provide working capital
pending the disposal of the company's major trading subsidiary which has now
occurred. The company has now repaid the principal and premium of the first
two loan stocks, together with all premia and interest arrears for total cash
proceeds of £429,997. The capital proceeds of £323,110 compare with an
investment cost of £238,955. This is a pleasing outcome and there is the
prospect of further returns of capital as the company realises its remaining
assets and activities.
In March 2013, the VCT sold part of its loan stock and its entire
equity investment in Faversham House for net proceeds of £136,132. Faversham's
progress has fallen short of expectations and we took the opportunity to agree
with management a phased realisation of our holding. The Company continues to
hold a loan stock investment in this company, valued at 30 June 2013 at
£102,906. The total of these figures, £239,038, when compared with the total
original cost of £346,488, shows a loss. However, this partial disposal was in
excess of the valuation of Faversham House at the beginning of the period and
has contributed to the increase in the portfolio's value at the period end.
The Company has continued to benefit from the profitability and
strong cash position of a number of investee companies and has received
partial loan stock repayments totalling £638,558 in the six months covered by
this report, from DiGiCo, Tessella and Westway, and the partial realisations
of Newquay Helicopters and Faversham House mentioned above.
Outlook
The outlook for the UK economy appears to have improved recently,
with a greater sense of optimism starting to assert itself. The overall
environment still holds uncertainties, but we are experiencing many more good
quality opportunities for new investment. We are much more confident of
deploying higher levels of capital into new investments in 2013 than in
previous years. The majority of our existing portfolio companies, which are
well-financed and have competitive advantages in their market niches, should
continue to make good progress.
We are encouraged by the portfolio's performance over the six month
period to 30 June 2013. Combined with a higher level of investment in new
opportunities, we are optimistic that performance should be able to be
sustained and that the portfolio will yield good returns over the medium term.
Mobeus Equity Partners LLP
9 August 2013
Investment Portfolio Summary
at 30 June 2013
Total Total Total % of % of
cost valuation valuation equity portfolio
at 30-Jun-13 at 31-Dec-12 at 30-Jun-13 held by value
Mobeus Equity
Partners LLP £ £ £
ATG Media Holdings
Limited 1,889,006 2,321,815 3,714,081 8.53% 15.81%
Publisher and
online auction
platform operator
Fullfield Limited,
trading as Motorclean
Limited 1,793,231 1,246,959 2,247,325 9.82% 9.56%
Vehicle cleaning
and valet services
Ingleby (1879)
Limited, trading
as EMaC Limited 1,263,817 1,608,925 1,758,090 6.32% 7.48%
Provider of service
plans for the
motor trade
Tessella Holdings
Limited 1,214,005 1,250,433 1,622,913 5.44% 6.91%
Consultancy
DiGiCo Global
Limited 1,250,206 1,698,883 1,586,249 2.39% 6.75%
Design and
manufacture of
audio mixing desks
Gro-Group Holdings
Limited 1,484,302 - 1,484,302 8.39% 6.32%
Manufacturer of
safer sleep solutions
for babies and
young children
CB Imports Group
Limited 1,000,000 1,215,002 1,159,355 5.79% 4.93%
Importer and distributor
of artificial flowers,
floral sundries and
home decor products
Focus Pharma Holdings Limited 605,837 942,787 1,053,293 3.14% 4.48%
Licensor and
distributor of generic
pharmaceuticals
EOTH Limited 951,471 974,934 1,010,222 1.71% 4.30%
Branded outdoor
equipment and
clothing
Ackling Management
Limited 1,000,000 1,000,000 1,000,000 12.50% 4.26%
Company looking
to acquire businesses
in the food
manufacturing,
distribution and
brand management
sectors
Culbone Trading Limited 1,000,000 1,000,000 1,000,000 12.50% 4.26%
Company looking to
acquire businesses
in the outsourced
services sectors
Madacombe Trading
Limited 1,000,000 1,000,000 1,000,000 12.50% 4.26%
Company looking to
acquire businesses
in the engineering
services sectors
Westway Services
Holdings (2010)
Limited 190,335 519,434 741,801 3.15% 3.16%
Installation,
maintenance and
servicing of air-
conditioning systems
RDL Corporation
Limited 1,000,000 723,122 620,136 9.05% 2.64%
Recruitment
consultants for
the pharmaceutical,
business intelligence
and IT industries
ASL Technology
Holdings Limited 1,257,133 495,469 535,052 6.78% 2.28%
Printer and
photocopier
services
Blaze Signs
Holdings Limited 283,252 432,861 514,736 5.72% 2.19%
Manufacturer and
installer of signs
Plastic Surgeon
Holdings Limited 458,837 331,325 438,209 6.88% 1.86%
Snagging and finishing
of domestic and
commercial properties
Youngman Group
Limited 500,026 349,983 349,983 4.24% 1.49%
Manufacturer of
ladders and access
towers
Omega Diagnostics
plc 199,998 266,664 274,997 1.53% 1.17%
In-vitro diagnostics
for food intolerance,
autoimmune diseases
and infectious diseases
Machineworks
Software Limited 9,329 239,052 273,477 4.20% 1.16%
Software for CAM
and machine tool
vendors
Higher Nature
Limited 500,127 174,101 168,915 10.34% 0.72%
Supplier of mineral,
vitamin and food
supplements
Duncary 8 Limited
(formerly Duncary
4/BG Consulting
Limited) 101,995 130,307 118,150 5.10% 0.50%
Technical training
business
Faversham House
Holdings Limited 102,906 79,560 102,906 0.00% 0.44%
Publisher, exhibition
organiser and operator
of web sites for the
environmental, visual
communications and
building services
sectors
Newquay Helicopters
(2013) Limited
(formerly British
International
Holdings Limited) 98,412 295,455 98,412 2.50% 0.42%
Operator of helicopter
services
Racoon International
Holdings Limited 406,805 94,890 93,947 5.70% 0.40%
Supplier of hair
extensions, hair care
products and training
Vectair Holdings
Limited 24,732 81,966 85,930 2.14% 0.37%
Designer and distributor
of washroom products
Monsal Holdings
Limited 699,444 63,431 63,431 8.47% 0.27%
Supplier of engineering
services to water and
waste sectors
Lightworks Software
Limited 9,329 36,530 53,390 4.20% 0.23%
Software for CAD
vendors
PXP Holdings Limited
(Pinewood
Structures) 712,925 15,687 15,687 4.39% 0.07%
Designer, manufacturer
and supplier of timber
frames for buildings
Watchgate Limited 1,000 - - 33.33% 0.00%
Holding company
Legion Group plc -
in administration 150,102 - - - 0.00%
Provider of manned
guarding, patrolling
and alarm response
services
Almsworthy Trading
Limited - 1,000,000 - - 0.00%
Company looking to
acquire businesses in
the specialist
construction, building
support, building
products and related
services sectors
Fosse Management
Limited - 1,000,000 - - 0.00%
Company looking to
acquire businesses in
the brand management,
consumer products and
retail sectors
Peddars Management
Limited - 1,000,000 - - 0.00%
Company looking to
acquire businesses in
the database
management, mapping,
data mapping and
management services
to legal and building
industry sectors
Total 21,158,562 21,589,575 23,184,989 - 98.69%
Former Elderstreet
Private Equity
Limited Portfolio
Cashfac Limited 260,101 184,074 243,006 2.91% 1.03%
Provider of virtual
banking application
software
Sparesfinder Limited 250,854 60,054 68,800 1.71% 0.28%
Supplier of industrial
spare parts on-line
Sift Limited 135,391 4,464 - 1.28% 0.00%
Developer of business
to business internet
communities
Total 646,346 248,592 311,806 1.31%
Investment Manager's
totals 21,804,908 21,838,167 23,496,795 100.00%
Unaudited Income Statement
for the six months ended 30 June 2013
Six months ended Six months ended 11 months ended
30 June 2013 31 July 2012 31 December 2012
(unaudited) (unaudited) (audited)
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £ £ £ £
Unrealised
gains on
investments
held at fair
value 8 - 1,916,779 1,916,779 - 395,733 395,733 - 1,300,844 1,300,844
Realised
gains on
investments
held at fair
value 8 - 178,802 178,802 - 241,163 241,163 - 278,802 278,802
Income 2 774,873 - 774,873 494,501 - 494,501 973,259 - 973,259
Investment
management
expense 3 (110,079) (330,236) (440,315) (95,343) (286,029) (381,372) (175,825) (527,475) (703,300)
Other
expenses (198,359) - (198,359) (199,969) - (199,969) (362,512) - (362,512)
Profit on
ordinary
activities
before
taxation 466,435 1,765,345 2,231,780 199,189 350,867 550,056 434,922 1,052,171 1,487,093
Tax on profit
on ordinary
activities 4 (87,217) 87,217 - (31,213) 31,213 - (75,182) 75,182 -
Profit
attributable
to equity
Shareholders 379,218 1,852,562 2,231,780 167,976 382,080 550,056 359,740 1,127,353 1,487,093
Basic and
diluted
earnings per
Ordinary
Share 5 1.17p 5.69p 6.86p 0.60p 1.38p 1.98p 1.27p 3.99p 5.26p
The total column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations.
There were no other recognised gains or losses in the period.
Other than revaluation movements arising on investments held at fair value
through profit and loss there were no differences between the profit as stated
above and at historical cost.
Unaudited Balance Sheet
as at 30 June 2013
30 June 2013 31 July 2012 31 December 2012
(unaudited) (unaudited) (audited)
Notes £ £ £
Fixed assets
Investments at fair
value 8 23,496,795 21,290,791 21,838,167
Current assets
Debtors and
prepayments 411,679 143,343 214,166
Current Investments 9 14,271,540 9,032,105 9,020,144
Cash at bank 3,812,235 2,852,298 2,645,938
18,495,454 12,027,746 11,880,248
Creditors: amounts
falling due within
one year (313,327) (381,349) (181,144)
Net current assets 18,182,127 11,646,397 11,699,104
Net assets 41,678,922 32,937,188 33,537,271
Capital and reserves 10
Called up share capital 352,387 289,188 285,895
Share premium
reserve 13,279,574 12,004,600 12,004,600
Capital redemption
reserve 967,721 901,765 905,059
Revaluation reserve 3,543,394 696,873 1,529,402
Special distributable
reserve 18,587,976 13,017,890 12,501,764
Profit and loss account 4,947,870 6,026,872 6,310,551
Equity Shareholders'
funds 41,678,922 32,937,188 33,537,271
Net asset value
per Ordinary Share 7 118.28p 113.90p 117.31p
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 June 2013
11 months
Six months Six months ended 31
ended 30 June ended 31 July December
Notes 2013 2012 2012
(unaudited) (unaudited) (audited)
£ £ £
Opening Shareholders' Funds 33,537,271 29,418,665 29,418,665
Net share capital
subscribed 15,262,218 5,201,859 5,201,860
Net share capital bought
back (7,428,019) (780,873) (1,117,828)
Profit for the period 2,231,780 550,056 1,487,093
Dividends paid in period 6 (1,924,328) (1,452,519) (1,452,519)
Closing Shareholders' funds 41,678,922 32,937,188 33,537,271
Unaudited Summarised Cash Flow Statement
for the six months ended 30 June 2013
Six months ended Six months ended 11 months ended
30 June 2013 31 July 2012 31 December 2012
(unaudited) (unaudited) (audited)
£ £ £
Interest income received 617,145 497,491 865,212
Dividend income 59,152 64,965 136,504
Other income - - 7,264
Investment management
fees paid (375,235) (381,371) (768,379)
Cash payments for
other expenses (112,750) (231,812) (321,248)
Net cash inflow/(outflow)
from operating activities 188,312 (50,727) (80,647)
Investing activities
Sale of investments 963,180 1,632,865 2,028,239
Purchase of investments (526,227) (4,307,298) (4,307,298)
Net cash inflow/(outflow)
from investing activities 436,953 (2,674,433) (2,279,059)
Dividends
Equity dividends paid (1,924,328) (1,452,519) (1,452,519)
Cash outflow before
financing and liquid
resource management (1,299,063) (4,177,679) (3,812,225)
Management of liquid
resources
Increase in monies held
in money market funds (5,251,396) (148,840) (136,879)
Financing
Share capital subscribed 8,168,986 5,201,859 5,201,860
Purchase of own Shares (348,483) (534,052) (1,117,828)
Shares issued as part
of Enhanced Buyback
Facility 6,923,372 - -
Shares bought back as
part of Enhanced Buyback
Facility (including expenses) (7,027,119) - -
Cash inflow from financing 7,716,756 4,667,807 4,084,032
Increase in cash 1,166,297 341,288 134,928
Increase in cash for
the period 1,166,297 341,288 134,928
Net funds at the start
of the period 2,645,938 2,511,010 2,511,010
Net funds at the end
of the period 3,812,235 2,852,298 2,645,938
Reconciliation of profit on ordinary activities before taxation to net cash
inflow/(outflow) from operating activities
for the six months ended 30 June 2013
Six months ended Six months ended 11 months ended
30 June 2013 31 July 2012 31 December 2012
(unaudited) (unaudited) (audited)
£ £ £
Profit on ordinary
activities before taxation 2,231,780 550,056 1,487,093
Net unrealised gains
on investments (1,916,779) (395,733) (278,802)
Net gains on realisations
of investments (178,802) (241,163) (1,300,844)
(Increase)/decrease in
debtors (27,654) 48,632 (22,191)
Increase/(decrease) in
creditors 79,767 (12,519) 34,097
Net cash inflow/(outflow)
from operating activities 188,312 (50,727) (80,647)
Notes to the Unaudited Financial Statements
1. Principal accounting policies
The following accounting policies have been applied consistently throughout
the period. Full details of principal accounting policies will be disclosed in
the Annual Report.
a) Basis of accounting
The unaudited results cover the six months to 30 June 2013 and have been
prepared under UK Generally Accepted Accounting Practice (UK GAAP), consistent
with the accounting policies set out in the statutory accounts for the 11
months ended 31 December 2012 and the 2009 Statement of Recommended Practice,
`Financial Statements of Investment Trust Companies and Venture Capital
Trusts' ('the SORP') issued by the Association of Investment Companies.
b) Comparatives
In the previous accounting period, the Company changed its financial year end
to 31 December, and therefore the comparatives to these financial statements
and notes to the accounts relate to the eleven month period to 31 December
2012. The comparatives for the six months ended 31 July 2012 have not been
re-stated.
c) Presentation of the Income Statement
In order to better reflect the activities of a VCT and in accordance with the
SORP, 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.
d) Investments
All investments held by the Company are classified as "fair value through
profit and loss", and measured in accordance with the International Private
Equity and Venture Capital Valuation ("IPEVCV") guidelines, as updated in
September 2009. This classification is followed as the Company's business is
to invest in financial assets with a view to profiting from their total return
in the form of capital growth and income.
For investments actively traded in organised financial markets, fair value is
generally determined by reference to Stock Exchange market quoted bid prices
at the close of business on the balance sheet date. Purchases and sales of
quoted investments are recognised on the trade date where a contract of sale
exists whose terms require delivery within a time frame determined by the
relevant market. Purchase and sales of unlisted investments are recognised
when the contract for acquisition or sale becomes unconditional.
Unquoted investments are stated at fair value by the Directors in accordance
with the following rules, which are consistent with the IPEVCV guidelines:
All investments are held at the price of a recent investment for an
appropriate period where there is considered to have been no change in fair
value. Where such a basis is no longer considered appropriate, the following
factors will be considered:
(i) Where a value is indicated by a material arms-length transaction by an
independent third party in the Shares of a company, this value will be used.
(ii) In the absence of i), and depending upon both the subsequent trading
performance and investment structure of an investee company, the valuation
basis will usually move to either:-
a) an earnings multiple basis. The Shares may be valued by applying a suitable
price-earnings ratio to that company's historic, current or forecast post-tax
earnings before interest and amortisation (the ratio used being based on a
comparable sector but the resulting value being adjusted to reflect points of
difference identified by the Investment Manager compared to the sector
including, inter alia, a lack of marketability).
or:-
b) where a company's underperformance against plan indicates a diminution in
the value of the investment, provision against cost is made, as appropriate.
Where the value of an investment has fallen permanently below cost, the loss
is treated as a permanent impairment and as a realised loss, even though the
investment is still held. The Board assesses the portfolio for such
investments and, after agreement with the Investment Manager, 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.
(iii) Premiums on loan stock investments are accrued at fair value when the
Company receives the right to the premium and when considered recoverable.
(iv) Where an earnings multiple or cost less impairment basis is not
appropriate and overriding factors apply, discounted cash flow or net asset
valuation 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.
2. Income
Six months ended Six months ended 11 months ended
30 June 2013 31 July 2012 31 December 2012
(unaudited) (unaudited) (audited)
Income from investments £ £ £
Dividends 69,023 43,123 93,274
Money-market funds 12,493 21,917 37,099
Loan stock interest 616,071 409,184 783,053
Bank deposit interest 77,286 20,277 52,568
Other Income - - 7,265
Total Income 774,873 494,501 973,259
3. Investment management expense
In accordance with the policy statement published under "Management and
Administration" in the Company's prospectus dated 8 February 1999, 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.
4. Taxation
There is no tax charge for the period as the Company has tax losses from the
current year and from previous periods, both of which can be offset between
revenue and capital.
5. Basic and diluted earnings per Share
The basic earnings, revenue return and capital return per Share shown below
for each period are respectively based on numerators i)-iii), each divided by
the weighted average number of Shares in issue in the period - see iv) below
Six months ended Six months ended 11 months ended
30 June 2013 31 July 2012 31 December 2012
(unaudited) (unaudited) (audited)
£ £ £
i) Total earnings after 2,231,780 550,056 1,487,093
taxation
Basic and diluted 6.86p 1.98p 5.26p
earnings per Ordinary
Share (pence)
ii) Revenue earnings 379,218 167,976 359,740
from ordinary
activities
after taxation
Basic and diluted 1.17p 0.60p 1.27p
revenue earnings
per Ordinary Share
(pence)
Net unrealised 1,916,779 395,733 1,300,844
capital gains
Net realised 178,802 241,163 278,802
capital gains
Capital expenses (243,019) (254,816) (452,293)
net of taxation
iii) Capital return 1,852,562 382,080 1,127,353
Basic and diluted 5.69p 1.38p 3.99p
capital earnings
per Ordinary
Share (pence)
iv) Weighted average 32,541,370 27,809,710 28,266,790
number of Shares in
issue in the period
6. Dividends paid
Six months ended Six months ended 11 months ended
30 June 2013 31 July 2012 31 December 2012
(unaudited) (unaudited) (audited)
£ £ £
Interim income dividend for the
year
ended 31 January 2012 of 1.5
pence
per Ordinary Share paid 6 June
2012 - 435,756 435,756
Interim capital dividend for
the year
ended 31 January 2012 of 3.5
pence
per Ordinary Share paid 6 June
2012 - 1,016,763 1,016,763
Interim income dividend for the
period ended 31 December 2012
of
1 pence per Ordinary Share paid
10
May 2013 349,877 - -
Interim capital dividend for
the period
ended 31 December 2012 of 4.5
pence per Ordinary Share paid
10
May 2013 1,574,451 - -
1,924,328* 1,452,519* 1,452,519*
* - Of these amounts £246,310 (31 July 2012: £164,418; 31 December 2012:
£164,418) were issued in new Shares, issued as part of the Dividend
Re-Investment Scheme.
7. Net asset value per Ordinary Share
As at As at As at
30 June 2013 31 July 2012 31 December 2012
(unaudited) (unaudited) (audited)
£ £ £
Net assets 41,678,922 32,937,188 33,537,271
Number of Shares in issue 35,238,721 28,918,840 28,589,452
Net asset value per
Share (pence) 118.28p 113.90p 117.31p
8. Summary of fixed asset investments at fair value during the period
Traded Unquoted Unquoted Loan Stock Total
on AIM equity preference
shares shares
£ £ £ £ £
Valuation at 31
December 2012 266,664 7,295,599 14,162 14,261,742 21,838,167
Purchases at cost - - - 526,227 526,227
Reclassification
at value - (993,496) 669 992,827 -
Sales - proceeds - (14,368) - (955,422) (969,790)
- realised gains - 14,368 - 171,044 185,412
Unrealised gains 8,333 1,570,259 - 338,187 1,916,779
Valuation at 30 June 2013 274,997 7,872,362 14,831 15,334,605 23,496,795
Book cost at 30 June 2013 199,998 6,564,234 23,782 15,016,894 21,804,908
Unrealised gains/(losses) at
30 June 2013 74,999 1,627,447 (7,883) 601,016 2,295,579
Permanent impairment of
investments - (319,319) (1,068) (283,305) (603,692)
Valuation at 30 June 2013 274,997 7,872,362 14,831 15,334,605 23,496,795
(Losses)/gains on
investments - (117,097) - 205,296 88,199
Less amounts recognised as
unrealised (losses)/gains in
previous years - (131,465) - 34,252 (97,213)
Realised gains based
on carrying value at
31 December 2012 - 14,368 - 171,044 185,412
Net movement in unrealised
appreciation in the period 8,333 1,570,259 - 338,187 1,916,779
Gains on investments for
the six months ended 30
June 2013 8,333 1,584,627 - 509,231 2,102,191
Transaction costs of £6,610 were incurred in the period and are deducted in
arriving at realised gains on investments in the Income Statement. Deducting
these from realised gains above gives £178,802 of gains as shown in the Income
Statement. These transaction costs also explain the difference between
proceeds above of £969,790 and that shown in the Cash Flow Statement of
£963,180.
Unrealised gains/(losses) at 30 June 2013 of £2,295,579 differ to that shown
in the Revaluation Reserve of £3,543,394. The difference of £1,247,815 is loan
stock received (net of £84,087 repayment made during the period) as part of
the disposal of DiGiCo Europe Limited in December 2011 which was not
recognised as a realised gain in that year.
9. Current investments at fair value
These comprise investments of £6,521,540 in six OEIC money market funds (five
Dublin based and one London based) subject to immediate access, and £7,750,000
in four bank deposit or money market accounts, repayable within one year.
10. Capital and Reserves
Called up Share Capital Special Profit and
share Premium redemption Revaluation distributable loss
capital account reserve reserve reserve reserve Total
£ £ £ £ £ £ £
At 1 January
2013 285,895 12,004,600 905,059 1,529,402 12,501,764 6,310,551 33,537,271
Shares issued via
Linked Offer
for Subscription 69,513 8,023,023 - - - - 8,092,536
Dividends re-
invested into
new shares 2,425 243,885 - - - - 246,310
Shares
issued under
Enhanced
Buyback
Facility
(note a) 57,216 6,866,156 - - - - 6,923,372
Shares
bought back
under
Enhanced
Buyback
Facility (note
a) (59,023) - 59,023 - (7,054,296) - (7,054,296)
Shares
bought back (3,639) - 3,639 - (373,723) - (373,723)
Cancellation
of the share
premium
account
(note b) - (13,858,090) - - 13,858,090 - -
Profit for
the period - - - 1,916,779 - 315,001 2,231,780
Realised
losses
transferred to
special
reserve - - - - (343,859) 343,859 -
Realisation of
previously
unrealised
appreciation - - - 97,213 - (97,213) -
Dividends
paid - - - - - (1,924,328) (1,924,328)
At 30 June
2013 352,387 13,279,574 967,721 3,543,394 18,587,976 4,947,870 41,678,922
Note a: Within this figure are the expenses of the Enhanced Buyback Facility
('EBF') of £130,924. These costs are borne by those Shareholders who
participated in the EBF. No fees were charged by the Manager.
As part of the EBF transaction on 4 April 2013, 4,366,277 Ordinary Shares were
bought back at a price of 117.3 pence per Share and immediately following this
4,232,601 Ordinary shares were allotted at 121.0 pence per Share.
On 8 April 2013, again as part of the EBF transaction, 1,536,003 Ordinary
Shares were bought back at a price of 117.3 pence per Share and immediately
following this, 1,488,988 new Ordinary shares were allotted at 121.0 pence per
Share.
Note b: The cancellation of £13,858,090 from the share premium account (as
approved at the General Meeting held on 22 February 2013 and by order of the
Court dated 13 March 2013) has increased the Company's special distributable
reserve. The purpose of this reserve is to fund market purchases of the
Company's own Shares, and to write off existing and future losses.
As part of the 2013 Linked Offer for Subscription, a total of 6,951,240
Ordinary Shares were allotted at prices ranging from 115.6 pence to 124.2
pence per Share, raising net funds of £8,092,536.
11. Post balance sheet events
On 26 July 2013, the Company made an investment of £1,620,086 to support the
management buy out of Veritek Global Limited, using the Company's existing
investment of £1m in the acquisition vehicle Madacombe Trading Limited and an
additional £620,086 from its cash reserves.
12. Statutory Information
The financial information for the period ended 30 June 2013 does not comprise
full financial statements within the meaning of Section 435 of the Companies
Act 2006. The financial statements for the 11 months ended 31 December 2012
have been filed with the Registrar of Companies. The auditor has reported on
these financial statements and that report was unqualified and did not contain
a statement under section 498(2) of the Companies Act 2006.
13. Half-Yearly Report
This Half-Yearly Report will shortly be made available on our website:
www.mig4vct.co.uk and will be circulated by post to those Shareholders who
have requested copies of the Report. Further copies are available free of
charge from the Company's registered office, 30 Haymarket, London SW1Y 4EX or
can be downloaded via the website.
Contact details for further enquiries:
Robert Brittain or Elizabeth Birch at Mobeus Equity Partners LLP
(the Company Secretary) on 020 7024 7600 or by e-mail on
mig4@mobeusequity.co.uk
Mark Wignall or Mike Walker at Mobeus Equity Partners LLP (the
Investment Manager), on 020 7024 7600 or by e-mail on info@mobeusequity.co.uk.
DISCLAIMER
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
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