16th Dec 2009 11:36
The Income & Growth VCT plc
Annual Financial Results of the Company for the Year ended 30 September 2009
Investment Objective
The objective of The Income & Growth VCT plc ("I&G VCT" or "theCompany") is to provide investors with an attractive return, by maximising thestream of dividend distributions from the income and capital gains generatedby a diverse and carefully selected portfolio of investments.
The Company invests in companies at various stages of development. In some instances this may include investments in new and secondary issues of companies which may already be quoted on the Alternative Investment Market ("AiM") or PLUS.
Financial Highlights - ordinary shares of 1p each (`O' Shares)
- Increase of 24.3% in year in cumulative dividends paid to
Shareholders
- Annual dividends paid to Shareholders maintained at 2008 level
- Decrease of 21.7% in year in shareholder total return (share
price basis)
- Decrease of 8.1% in year in total shareholder return (net asset
value basis)Dividends paidYear ended Dividends paid in Cumulative dividends each year since launch paid since launch (p) per share (p) per share30 September 2009 4.00 20.4530 September 2008 4.00 16.4530 September 2007 3.75 12.4530 September 2006 3.25 8.7030 September 2005 (restated) 1.25 5.45
Dividends paid include distributions from both income and capital.
Dividends proposed
A final dividend of 2 pence per `O Share, comprising 0.5 pence fromincome and 1.5 pence from capital, will be recommended to Shareholders at theAnnual General Meeting of the Company to be held on 3 March 2010 for paymenton 17 March 2010.Performance SummaryYear ended Share NAV total price total Net asset return to return to Net value per shareholders Share shareholders assets ( `O' Share since launch price since launch million) (p) per (p) 1 per `O' Share (p) `O' Share (p)30 September 2009 24.9 71.5 91.9 54.8 75.230 September 2008 29.6 83.6 100.0 79.5 96.030 September 2007 36.8 100.5 2 115.0 87.5 100.030 September 2006 44.2 112.9 121.6 84.5 93.230 September 2005 49.2 122.5 128.0 87.5 93.0(restated)1 Source: London Stock Exchange2 After deducting the dividend of 2p per share paid on 24 October 2007
Financial Highlights - S ordinary shares of 1p each (`S' Shares)
- Initial income dividend of 0.5 pence proposed
- Decrease of 5.5% in year in shareholder total return (share price
basis)
- Decrease of 1.5% in year in total shareholder return (net asset
value basis)
Dividends proposed
A final income dividend of 0.5 pence per `S' Share will be recommended to Shareholders at the Annual General Meeting of the Company to be held on 3 March 2010 for payment on 17 March 2010.
Performance SummaryYear ended NAV total Share Net asset return to price total value per shareholders Share return to Net assets `S' Share since launch price shareholders (p) per since launch ( million) `S' Share (p) (p) 1 per `S' Share (p)
30 September 2009 11.0 93.2 93.2 94.5 94.530 September 2008 11.2 94.6 94.6 100.0 100.0At close of Offer for 11.2 94.5 94.5 100.0 100.0subscription
1 Source: London Stock Exchange
The share prices and net asset value (NAV) total returns for both Fundscomprise the share price and NAV respectively per share assuming the dividendspaid were re-invested on the date on which the shares were quoted ex-dividendin respect of each dividend.Chairman's Statement
I am pleased to present to Shareholders the annual results of the Company for the year ended 30 September 2009.
Performance
`O' Shares
At 30 September 2009, the Net Asset Value (NAV) per `O' Share was71.45 pence (2008: 83.56 pence). Adjusted for the dividends paid toshareholders during the year, this represents a decrease of 9.7% over thetwelve month period. This compares with an increase of 17.45% in the FTSESmallCap CR Index and an increase of 3.96% in the FTSE AIM CR Index during thesame period. The NAV Total Return per `O' Share fell in the year by 8.1% from100.01 pence at 30 September 2008 to 91.90 pence at 30 September 2009.The headline performance figures appear somewhat disappointing andwill be discussed later. In general the underlying performance of theportfolio in the year offers encouragement. The MPEP portfolio achievedrealised gains of 597,637 but these were offset by provisions and lowervaluations giving rise to unrealised losses of 3.2 million, resulting in netlosses of some 2.6 million. The Foresight legacy portfolio suffered a fall invalue with further provisions leading to unrealised net losses of some 311,938.
UK sector price earnings multiples have, in the main, increased over this twelve month period. These do, of course, impact on our portfolio valuation in both the quoted and unquoted sectors. Some sectors have shown increases whilst several have experienced declines. The MPEP portfolio at the year end represented 78.5% of total venture capital investments, whilst the Foresight and Nova legacy portfolios represented the balance.
Falls in the share prices of several of our quoted stocks, particularly Oxonica, have been partially off-set by gains elsewhere in the portfolio. The total dividends paid in the year under review was 4 pence per share which is equal to a total of 4 pence per share paid in the financial year 2008.
Cumulative dividends paid to date have been 20.45 pence per `O' Share.
`S' Shares
At 30 September 2009, the NAV and NAV Total Return per `S' Share both fell marginally to 93.18 pence (2008: 94.59 pence) and 93.18 pence (2008: 94.59 pence), both being a decrease of 1.5%.
Economic background
Investors have moved stock markets up a long way but the real economy is still tough.
After several months of almost consistent gains equity marketsappeared to have consolidated around current levels. Poorer than expected USjobs figures have been held responsible for these recent market conditions.The number of workers on US payrolls during September 2009 fell almost 50%more than was expected and the unemployment rate now stands at a 26 year high.This data released recently together with the impact of events surroundingfinancial problems in Dubai reinforces strongly the argument that the economicrecovery will not be plain sailing.
The portfolio
`O' Shares
Overall, the MPEP portfolio continues to hold-up well given the currenteconomic climate. Good trading performances have been produced by some of theinvestments; notably DiGiCo Europe, which produced an unrealised gain of 511,337 and Amaldis 2008 of 337,767 but Blaze Signs Holdings, Youngman Groupand PXP Holdings, all companies in the broader construction sector, providedunrealised losses of 1.26 million, 914,937 and 454,124 respectively.Despite the Construction & Materials sector price earnings multiple showing astrong rise over the year, this has not evidenced itself yet in the tradingperformances of these three companies and this has had a material adverseeffect on the valuation of the portfolio over the period. There is an oldadage that stock markets anticipate events while trading results lag theevents!Within the MPEP portfolio, in October 2008 an investment of 595,842 was madeinto ATG Media Holdings to support the MBO of Metropress, publisher of theAntiques Trade Gazette and online auction operator. In 2009, a new investmentwas made into MC440 to support the management buy-out of Westway Cooling, acompany based in Greenford, Middlesex, specialising in installing, servicingand maintaining high quality air-conditioning systems and associated buildingservices plant in the refurbishment and maintenance market. The 'O' Share Fundinvested 389,703. Further investments of 129,264 and 47,158 in November2008 and January 2009 respectively were made in the loan stocks of PXPHoldings and Monsal Holdings.
In March 2009 SectorGuard plc acquired Legion Group plc and subsequently changed its name to Legion Group.
In March 2009 DiGiCo Europe also repaid 142,804 of the 'O' Share Fund's loanstock investment. At the beginning of July 2009, the 'O' Share Fund then soldits investment in Tottel Publishing to Bloomsbury Group earning a fourfoldgain on its original investment by returning a total of 2.05 million in termsof income and proceeds to the Fund throughout the life of the investment. The'O' Share Fund's original investment cost of 514,800 had been reduced to 325,182 in March of this year when Tottel Publishing repaid 50% of theCompany's loan stock investment.Following the year-end, in November 2009, the `O' Share Fundinvested a further 90,909 into British International Holdings and sold itsinvestment in PastaKing for initial proceeds of 779k. This realisationcontributed to total returns of 949k to the Fund throughout the life of theinvestment, representing a 3.25 fold return on the Company's originalinvestment of 292,405.
The old Foresight portfolio continues to underperform with Oxonica, mentioned above, producing an unrealised loss for the year of 1.11 million. By contrast, Camwood provided an unrealised gain of 460,789.
`S' Shares
During the year the S Share Fund produced a satisfactory performance given the economic environment.
In October 2008 the `S' Share Fund invested 404,158 into ATG Media Holdingsreferred to above. In June 2009, the 'S' Share Fund also invested 169,483 inthe management buy-out of Westway Cooling, a company specialising ininstalling, servicing and maintaining high quality air-conditioning systemsand associated building services plant in the refurbishment and maintenancemarket.
Cash available for investment
During this economic turmoil, both the Board and the Manager have continued towork to ensure that our cash deposits for both the `O' and `S' Shares remainas secure as possible. We have for some time been spreading our significantcash deposits with a number of the leading global cash funds rather thandepositing direct to individual banks, thereby reducing our exposure to anyone particular bank. However, the current low level of interest rates on cashdeposits means it will continue to be difficult for the Company to paydividends from income for both the `O' and `S' Shares. The Board and Managerboth strongly believe that at this time the security and protection of capitalis more important than striving for a small increase in deposit rates at thecost of much higher risk.Revenue Account
The Revenue return for the Company as a whole has decreased sharply from 717,196 to 193,683 over the year.
Management fees and other running costs at the Company level have remainedconstant between the years. The principal cause for the decline in revenue isthe fall in the Company's income of 523,365. This can be attributed to threemain reasons. First, the significant fall in interest rates has caused incomefrom the liquidity funds to more than halve by 367,447; secondly, dividendsfrom investee companies fell by 106,873 and finally, loan stock interestreceived declined by 45,659.
In 2008, the `O' Share Fund benefited from a non recurring estimated VAT recovery on past management fees of 83,278.
Dividends
`O' Shares
The Company's revenue return per `O' Share was 0.52 pence per share(2008: 1.66 pence per share). Your Board will be recommending a final incomedividend of 0.5 pence and a final capital dividend of 1.5 pence payable to `O'Fund Shareholders in respect of the year ended 30 September 2009 at the AnnualGeneral Meeting to be held on 3 March 2010. Including these dividends,cumulative dividends paid to date amount to 22.45 pence per `O' Share.
`S' Shares
The Company's revenue return per `S' Share was 0.09 pence per share(2008: 1.26 pence per share). Your Board will be recommending a final incomedividend of 0.5 pence per `S' Share in respect of the year ended 30 September2009 at the Annual General Meeting to be held on 3 March 2010.
The dividends will be paid on 17 March 2010 to both `O' and `S' Shareholders on the Register on 19 February 2010.
Dividend investment scheme
The Company's Dividend Investment Scheme ("The Scheme") provides Shareholdersof both classes with the opportunity to re-invest their dividends into newshares of the relevant class. It provides a convenient, easy and costeffective way for Shareholders to build their shareholding in the Company as,instead of receiving cash dividends, they can elect to receive new shares inthe Company.
Board Members have indicated that they will be participating in the Scheme to the extent of their full entitlement. I would encourage all Shareholders to consider participating in the Scheme.
The Scheme currently provides that the issue price of new shares isat net asset value per share. We are proposing that the Scheme be altered soas to allow shares to be issued to Shareholders at the share price at therelevant time. We consider that this proposal provides a more equitable basisto Shareholders for ascertaining the issue price under the Scheme. Aresolution will, therefore, be proposed at the Annual General Meeting of theCompany to be held on 3 March 2010 to authorise the Directors to allot sharesof both classes at their mid market share price even if this less than the netasset value per share of that class.Shareholders are allotted new ordinary shares in the relevant class. Theseshares will then, subject to Shareholders' individual circumstances, attractVCT tax reliefs applicable for the tax year in which the shares are allotted(currently at 30%).Copies of the Scheme Rules are available on the Company's website,www.incomeandgrowthvct.co.uk, and personalised application forms for theScheme are enclosed with Shareholders copies of this Report. Further copies ofthe forms can be obtained from the Scheme Administrator, Capita Registrars bytelephoning: 0871 664 0300 (Calls cost 10p per minute plus network extras.Lines are open 8.30 am - 5.30 pm Mon-Fri. If calling from overseas please ring+44 208 639 2157). Shareholders who hold their shares in uncertificated formin CREST at the relevant record date must complete a CREST Dividend ElectionInput Message in respect of each dividend to elect to receive the dividend inthe form of new shares. Application forms may be submitted at any time andshould be returned to Capita Registrars at the address given on the form andelections via CREST should be made so as to be received no later than 5.00 pmon the date that is at fifteen days before the payment date for a particulardividend to ensure that you qualify to receive the dividend as shares. Pleasenote that in the case of the proposed final dividends payable on 17 March 2010this deadline with be 5.00 pm on 2 March 2010.
Separate application forms do need to be completed in respect of each class of share but you do not need to resubmit an `O' Share application form if you have already joined the Scheme in respect of the `O' Shares.
Merger of `O' and `S' Share Classes
The Board are currently considering proposals which may result in resolutions being put forward to Shareholders in the near future regarding a merger of the `O' and `S' Share Funds.
Valuation policy
For several years now, quoted stocks have been valued at bid prices, ratherthan mid-market prices. It is worth commenting that the Fund does hold anumber of relatively early stage AIM-quoted stocks with limited marketability.In such cases, the price at which a sizeable block of shares could be traded,if at all, may vary significantly from the market price used.
Share buy-backs
During the year ended 30 September 2009, the Company bought back754,444 Ordinary Fund Shares (representing 2.13% of the Ordinary Fund Sharesin issue at the beginning of the period) at a total cost of 350,963 (net
ofexpenses).OutlookIn a recent special report on the world economy entitled `The longclimb', The Economist highlighted various views and projections for the globaleconomy. A variety of economic indicators have been contributing to renewedconfidence but the latest US jobs data was perceived as a `reality check' foreconomists worldwide. The report indicated that certain parts of the globaleconomy have a long road ahead of them and governments around the globe willplay a crucial role in securing recovery and, more importantly, maintaining itonce recovery is assured by playing a greater role, particularly in thefinancial sector, through increased regulation to protect balance sheets andthe tax-payer from further liability.On a positive note, Olivier Blanchard, chief economist at theInternational Monetary Fund, was quoted two months ago in The Sunday Timessaying "The recovery has started. In most countries growth will be positivefor the rest of the year, as well as in 2010". However, the view remains amongmany observers that the strength of stock markets over the last few months maybe highlighting a `false dawn'. Commentators are discussing the possibility ofthe market being `W' shaped or experiencing a `double-bottom'. If such anevent occurs, small, early stage growth businesses will be tested further. Therecent news from Dubai may well be the catalyst for this eventuality.The Company overall retains its significant cash position. Thiscontinues to place the Company in an excellent position to take advantage ofwhat are expected to be increasingly attractive purchase opportunities whichshould become available as this recession continues or as the economy climbsout of recession. Therefore, while short term valuations may be subject tocontinuing pressures, your Board still expects to see attractive investmentopportunities and a recovery in performance and portfolio values over thelonger term.
The current level of interest rates in the United Kingdom mean that it will be difficult for the Company to pay a dividend from revenue in the forthcoming year. Moreover, it is too early to say whether it will be possible for the Company to pay a dividend from capital reserves.
I&G website
May I remind you that the Company has its own website which is available at www.incomeandgrowthvct.co.uk.
Colin HookChairmanInvestment 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 30 September 2008, when it was a multi-manager VCT. This includes investments in early stage and technology companies and in companies quoted on the AiM or PLUS.
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 in the case of the `O' Share Fund and 7 million in the case ofthe `S' Share Fund of gross assets at the time of investment to be classed asa VCT qualifying holding. (This figure varies between the two Funds because ofa change in tax legislation which applies to Funds, including the `S' ShareFund, raised after 6 April 2006).
VCT regulation
The investment policy is designed to ensure that the Companycontinues 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 ofits investments throughout the period in shares or securities comprised in VCTqualifying holdings, of which a minimum overall of 30% by value must beordinary shares which carry no preferential rights. In addition, although theCompany can invest less than 30% of an investment in a specific company inordinary shares it must have at least 10% by value of its total investments ineach VCT qualifying company in ordinary shares which carry no preferentialrights.
Asset mix
The Company initially holds its funds in a portfolio of readilyrealisable interest-bearing investments and deposits. The investment portfolioof qualifying investments is built up over a three year period with the aim ofinvesting and maintaining at least 70% of net funds raised in qualifyinginvestments.
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 1 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
The Company aims to invest in larger, more mature unquotedcompanies through investing alongside the four other VCTs advised by theInvestment Manager with a similar investment policy. This enables the Companyto participate in combined investments advised on by the Investment Manager
ofup to 5 million.Investment Manager's ReviewSummaryIn the face of continued economic deterioration in the UK andworldwide this has been a challenging year for new investment. New dealscoming to the market have been generally unattractive and we have taken theview that vendors' price expectations would prove unsustainable over themedium term. We have therefore been cautious and selective in ourconsideration of potential deals. We have in particular continued to avoidtransactions requiring high levels of bank borrowing, believing that economicconditions were still deteriorating and that this would make over-leveragedcompanies much too vulnerable in a tougher environment. We remain of the viewthat the market has not yet re-established the equilibrium necessary for highquality businesses to be sold at prices acceptable to private equity managers.
The MPEP portfolio at 30 September 2009 comprised 29 investments with a cost of 15.7 million and valued at 16.5 million representing an uplift of 5.1% on cost. Realisations during the year generated cash proceeds of 2 million.
The predominance in the investment portfolio of management buy-outinvestments reflects our strategy of seeking to capitalise companies properlyat the time of investment so that they are well positioned to contend withdifficult times. Only two investments have received very modest additionalfunding during the year and a third since the year-end totalling 267,351across the portfolio. We continue to believe that the portfolio, taken as awhole, is resilient and of high quality and given recent general comment onthe tightening of bank lending, do not consider that the portfolio is exposedto unsustainable levels of third party debt.
The legacy Foresight portfolio which comprises largely technology and early-stage companies shows a rather worse position. This portfolio comprises 11 investments with a cost of 9.3 million and valued at 2.8 million representing 29.6% of cost. There have been no realisations during the year from this portfolio.
MPEP `O' Share Fund investments
A total of 1.2 million was deployed into investments by the `O'Share Fund during the year and since the year-end, two new investments of 787,820 were completed. As reported previously in the Half-Yearly Report,these included a new investment of 595,842 to support the management buy-outof ATG Media Holdings, the London-based publisher of the Antique Trade Gazetteand provider of an online auction platform and two small follow-on loan stockinvestments into PXP of 129,264 and Monsal of 47,158.
A new investment 389,703 was also made in June into MC440 Limited to support the management buy-out of Westway Cooling, a company based in Greenford, Middlesex, which specialises in installing, servicing and maintaining high quality air-conditioning systems and associated building services plant in the refurbishment and maintenance market. The investment comprised loan stock and an equity stake of 3.3%. With a turnover of 9.6 million and a record order book we believe that this company is well placed to grow even in the present challenging market conditions. It has made a good start, in line with our expectations, following the MBO.
After the year-end, a further investment of 90,909 was completed in November 2009 into British International Holdings, while in December, one of the VCT's acquisition vehicles, Calisamo Management Limited changed its name to CB Imports Group Limited and invested 696,911 to acquire Country Baskets, a distributor of floral sundries.
The `O' Share Fund successfully realised its investment in TottelPublishing. The company was sold to Bloomsbury Publishing Group for 10million at the beginning of July earning a fourfold gain on the originalinvestment cost and returning total proceeds to the Fund of 2.05 million. Theinvestment was exited earlier than envisaged at the time of the investment andthe original investment cost of 514,800 had already been reduced to 325,182in March of this year when Tottel repaid 50% of the Fund's loan stockinvestment.Following the year-end, in November 2009, the `O' Share Fundsuccessfully sold its investment in PastaKing, the Newton Abbott basedfoodservice company to NBGI for initial proceeds of 779k. This realisationcontributed to total returns of 949k to the Fund throughout the life of theinvestment, representing a 3.25 fold return on the Company's originalinvestment of 292,405. A number of companies in the portfolio are tradingstrongly and expanding their businesses. DiGiCo Europe has continued to rollout new products and this has led to rising profit growth this year. Thecompany repaid 142,804 of loan stock in May 2009 plus the premium due.Amaldis (2008) too has had a very good year and has successfully completedlaunches of a number of new product lines.
The performance of Monsal during the year has also improved significantly and the outlook is further enhanced by the prospect of new capital contracts as water companies commit to new waste management projects and the company exploits its expertise in anaerobic digestion.
Inevitably, in the current environment, a number of our companiesare re-assessing their market position and streamlining their businesses toadapt to less certain conditions. BG Consulting Consulting Group/Duncary 4 isin the process of reconstructing its business which should strengthen thecompany's position in the marketplace and enhance the value of the VCT'sinvestment. Earlier this year, Letraset underwent a capital reorganisation toaddress its recent decline in revenue and re-align itself for the future.
The `O' Share Fund has received further consideration from Special Mail Services based on performance totalling 19,808 during the year.
As part of a new initiative to generate additional high-quality MBOinvestments, the Fund holds investments of 1 million each alongside otherMPEP advised funds in three acquisition vehicles, Apricot Trading, AustConstruction Investors and Calisamo Management, headed by experienced Chairmenwell known to MPEP. These individuals are working closely with us in seekingto identify and complete investments in specific sectors relevant to theirindustry knowledge and experience. We have established these companies toprovide time for us to identify and invest in suitable target companies atsufficiently attractive prices. Since the year-end, Calisamo has completed aninvestment into Country Baskets and changed its name to CB Imports GroupLimited, while the other two companies have commenced trading, providingmanagement consultancy services in their chosen sector.Unfortunately there are a few companies in the portfolio,particularly those which are more directly exposed to the construction andretail sectors that are suffering from the negative effects of the recession.Youngman, PXP and Plastic Surgeon have all suffered from the significantdownturn in the construction industry as business volumes have shrunk andreduced demand from major customers has impacted on revenue. Youngman inparticular was well-placed to withstand these pressures and remainsprofitable. It is still too early to assess when we are likely to see signs ofrecovery in these areas. Blaze Signs has also continued to experience a fallin activity arising from much reduced levels of new signage rollouts from itsmajor customers.
Foresight and Nova `O' Share Fund investments
With effect from 1 October 2008, MPEP assumed responsibility from Foresight for the eleven investments it managed on behalf of the `O' Share Fund.
Some of these businesses, for example Biomer and NexxtDrive, remain at an early stage in terms of revenue generation and have not yet achieved break-even levels and remain cash negative.
Camwood is the strongest performer in the portfolio and is makinggood progress. The development of its AppDNA application for Microsoft Windowsis now doing well and appears to be gaining traction in its market. DCG Groupremains profitable and is doing particularly well in the US. The performanceof Aquasium has also shown improvement over the last year. Oxonica lost amajor litigation case at the Court of Appeal. The majority of the executiveteam have since left the company which has delisted itself from AiM. Thecompany's future remains uncertain.
`S' Share Fund
The Fund completed investments in ATG Media Holdings ( 404,158 for a 3.6% equity stake) and MC440 (Westway) ( 169,483 representing a 1.4% equity stake) alongside the `O' Share Fund as described above.
Since the year-end, a new investment of 303,089 was made into CB Imports Group Limited, a distributor of floral sundries.
The Fund has retained in cash a high percentage of the funds raised in 2008 and we will apply this to new investments when the market recovers and the right opportunities begin to emerge.
Investment outlook
It is difficult to predict where the economy will go over thecoming year. It shows little sign of improvement and remains fragile. We havehowever worked very hard with investee companies to make sure that they aretaking all the measures they can to cut costs. We expect that follow-onfinance to support portfolio companies may become a focus over the comingmonths. We also anticipate much more attractive buying conditions emerging asthe year progresses. Having retained significant uninvested cash, we believethe Company is well placed to cover both the portfolio needs that may ariseand the new investment opportunities presented.Investment Portfolio Summary - 'O' Share Fundas at 30 September 2009 % of % of Cost at Valuation Additional Valuation Equity Portfolio at investments at held 2 by value 30-Sep-09 30-Sep-08 30-Sep-09 GBP GBP GBP GBPImage Source Group Limited 305,000 2,241,678 - 2,259,232 39.6% 11.72%Royalty free photographycreatorAmaldis (2008) Limited 80,313 1,248,967 - 1,586,734 9.2% 8.22%(Original Additions)Manufacturer and distributorof beauty productsHWA Limited (Holloway White 34,553 2,359,597 - 1,457,407 21.1% 7.55%Allom)High value propertyrestorationand refurbishmentDiGiCo Europe Limited 514,096 763,337 - 1,131,870 4.3% 5.87%Designer and manufacturer ofaudio mixing desksCamwood Limited 3 1,028,181 552,444 - 1,013,233 34.7% 5.25%Provider of softwarerepackagingservicesApricot Trading Limited 1,000,000 1,000,000 - 1,000,000 24.5% 5.18%Company seeking to acquirebusinesses in the marketingservices and media sectorAust Construction Investors 1,000,000 1,000,000 - 1,000,000 16.3% 5.18%Company seeking to acquirebusinesses in theconstructionsectorCalisamo Management Limited 1,000,000 1,000,000 - 1,000,000 16.3% 5.18%Company seeking to acquirebusinesses in the healthcaresectorI-Dox plc 5 872,625 816,667 - 796,250 2.4% 4.13%Provider of document storagesystemsVSI Limited 245,595 675,439 - 794,146 9.2% 4.12%Provider of software for CADand CAM vendorsPastaKing Holdings Limited 292,405 856,250 - 778,913 4.5% 4.04%Manufacturer and supplier offresh pasta mealsYoungman Group Limited 1,000,052 1,615,929 - 700,992 8.5% 3.63%Manufacturer of ladders andaccess towersATG Media Holdings Limited 595,842 - 595,842 595,842 5.3% 3.09%Publisher and online auctionplatform operatorTikit Group plc 4 500,000 899,999 - 595,651 3.0% 3.09%Provider of consultancy,servicesand software solutions forlaw firmsAquasium Technology Limited 3 700,000 311,306 - 564,739 16.7% 2.93%Manufacturing and marketingofbespoke electron beam weldingand vacuum furnace equipmentFocus Pharma Holdings Limited 516,900 516,900 - 525,858 2.1% 2.73%Licensor and distributor ofgeneric pharmaceuticalsMC 440 Limited (Westway 389,703 - 389,703 389,703 3.3% 2.03%Cooling)Installation, service andmaintenanceof air conditioning systemsVectair Holdings Limited 215,914 341,830 - 375,136 4.6% 1.94%Designer and distributor ofwashroom productsBritish International 500,000 375,112 - 359,765 5.0% 1.86%HoldingsLimitedHelicopter service operatorMonsal Holdings Limited 471,605 318,335 47,158 353,704 5.7% 1.83%Supplier of engineeringservicesto water and waste sectorsBrookerpaks Limited 55,000 417,540 - 324,447 17.1% 1.68%Importer and distributor ofgarlicand vacuum-packed vegetablestosupermarkets and thewholesaletradeANT plc3 462,816 196,979 - 275,770 2.7% 1.43%Provider of embedded browser/email software for consumerelectronics and InternetappliancesDCG Group Limited 3 312,074 321,013 - 262,861 6.3% 1.36%Design, supply andintegrationof data storage solutionsBiomer Technology Limited 4 137,170 137,170 - 226,585 4.4% 1.17%Developer of biomaterials formedical devicesNexxtDrive Limited 4 812,014 203,004 - 203,004 8.4% 1.05%Developer and exploiter ofmechanical transmissiontechnologiesSarantel plc 3 1,881,251 68,078 - 153,175 3.6% 0.79%Developer and manufacturerof antennae for mobile phonesand other wireless devicesBlaze Signs Holdings Limited 1,338,500 1,392,644 - 132,589 12.5% 0.69%Manufacturer and installer ofsignsB G Consulting Group Limited/ 1,153,976 256,530 - 115,027 33.2% 0.60%Duncary 4 LimitedTechnical training businessRacoon International Holdings 550,852 13,692 - 79,496 7.7% 0.41%LimitedSupplier of hair extensions,hair care products andtrainingThe Plastic Surgeon Holdings 307,071 153,536 - 76,768 4.6% 0.40%LimitedSupplier of snagging andfinishing services topropertysectorLegion Group plc (formerly 150,000 64,286 - 53,571 0.7% 0.28%SectorGuard plc)Provider of manned guarding,mobile patrols and alarmresponseservicesCampden Media Limited 334,880 65,842 - 44,438 3.6% 0.23%Magazine publisher andconference organiserCorero plc (formerly Mondas 600,000 73,672 - 34,381 6.5% 0.18%plc) 3Provider of e-businesstechnologiesAlaric Systems Limited 3 595,803 30,647 - 30,647 8.1% 0.16%Software developer andproviderof support services in thecredit/debit card authorisation andpayments marketAigis Blast Protection 272,120 68,030 - 0 0.00%Limited 3 3.7%Specialist blast containmentmaterials companyInca Interiors Limited 350,000 0 - 0 0.0% 0.00%Design, supply andinstallationof quality kitchens to housedevelopersLetraset Limited 650,000 0 - 0 5.0% 0.00%Manufacturer and worldwidedistributor of graphic artproductsOxonica plc 3 2,524,527 1,113,991 - 0 10.6% 0.00%Leading internationalnanomaterials groupPXP Holdings Limited 920,176 324,860 129,264 0 6.8% 0.00%(PinewoodStructures)Designer, manufacturer andsupplier of timber frames forbuildingsBloomsbury Professional - - - 1,294,585 0.0% 0.00%Limited(formerly Tottel PublishingLimited) - company sold inJuly 2009Publisher of specialist legalandtaxation titlesOther investments in the 380,436 0 0 0 - 0.00%portfolio 1 ==== ==== ==== ==== ===='O' Share Fund Total 25,051,450 23,089,889 1,161,967 19,291,934 100.00% ==== ==== ==== ==== ====
1 'Other investments in the portfolio' comprises Stortext-FM Limited/Stortext (DO) Limited.
2 The percentage of equity held for these companies may be subject to further dilution of an additional 1% or more if, for example, management of the investee company exercises share options.
3 Investment formerly managed by Foresight Group up to 10 March 2009.
4 Investment formerly managed by Nova Capital Management Limited until 31 August 2007 and by Foresight Group until 10 March 2009
5 Investment formerly managed by Nova Capital Management Limited until 31 August 2007.
Investment Portfolio Summary - 'S' Share Fundas at 30 September 2009 % of % of Cost at Valuation Additional Valuation Equity Portfolio at investments at held 1 by value 30-Sep-09 30-Sep-08 30-Sep-09 GBP GBP GBP GBPATG Media Holdings Limited 404,158 - 404,158 404,158 3.6% 67.54%Publisher and online auctionplatform operatorMC 440 Limited (Westway 169,483 - 169,483 169,483 1.4% 28.32%Cooling)Installation, service andmaintenance of airconditioningsystemsThe Plastic Surgeon Holdings 99,011 49,506 - 24,753 1.5% 4.14%LimitedSupplier of snagging andfinishing services topropertysector. ==== ==== ==== ==== ===='S' Share Fund Total 672,652 49,506 573,641 598,394 100.00% ==== ==== ==== ==== ==== ==== ==== ==== ==== ====Company total 25,724,102 23,139,395 1,735,608
19,890,328 100.00% ==== ==== ==== ==== ====
1 The percentage of equity held for these companies may be subject to further dilution of an additional 1% or more if, for example, management of the investee company exercises share options.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Directors' Report,the Directors' Remuneration Report and the financial statements in accordancewith applicable law and regulations. They are also responsible for ensuringthat the Annual Report includes information required by the Listing Rules ofthe Financial Services Authority.Company law requires the Directors to prepare financial statementsfor each financial year. Under that law the Directors have elected to preparethe financial statements in accordance with United Kingdom Generally AcceptedAccounting Practice (United Kingdom Accounting Standards and applicable law).Under company law the Directors must not approve the financial statementsunless they are satisfied that they give a true and fair view of the state ofaffairs of the Company and of the profit or loss of the Company for thatperiod. In preparing these financial statements the directors are required to: - select suitable accounting policies and then apply them consistently; - make judgments and estimates that are reasonable and prudent; - state whether applicable accounting standards have been followed, 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.
The Directors are responsible for keeping proper 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.
The Directors are responsible for the maintenance and integrity of thecorporate and financial information included on the company's website.Legislation in the United Kingdom governing the preparation and disseminationof the financial statements and other information included in annual reportsmay differ from legislation in other jurisdictions.
The Directors confirm that to the best of their knowledge that:
(a) the financial statements, prepared in accordance with UK GenerallyAccepted Accounting Practice (UK GAAP) and the 2003 Statement of RecommendedPractice, `Financial Statements of Investment Trust Companies and VentureCapital Trusts' (SORP), revised in 2005 and 2009, give a true and fair view ofthe assets, liabilities, financial position and the loss of the Company.
(b) the management report, comprising the Chairman's Statement, Investment Portfolio Summary, Investment Manager's Review and Directors' 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.
For and on behalf of the Board:
Colin HookChairman
Unaudited Non-Statutory Analysis between the 'O' Share and 'S' Share Funds for the year ended 30 September 2009
1. Income statements for the year ended 30 September 2009
'O' Share 'S' Share Fund Fund Revenue Capital Total Revenue Capital Total GBP GBP GBP GBP GBP GBP Unrealised losses on - (3,522,533) (3,522,533) - (24,753) (24,753)investments held atfairvalueRealised gains oninvestments held atfair value - 597,637 597,637 - - -Income 713,044 67,950 780,994 218,315 - 218,315
Investment (138,772) (416,316) (555,088) (54,110) (162,329) (216,439)managementfeesOther expenses (368,365) - (368,365) (143,399) - (143,399) ==== ==== ==== ==== ==== ====Profit/(loss) on 205,907 (3,273,262) (3,067,355) 20,806 (187,082) (166,276)ordinaryactivities beforetaxationTax on profit/(loss)on
ordinary activities (23,356) 23,356 - (9,674) 9,674
- ==== ==== ====Profit/(loss) onordinaryactivities aftertaxation
for the financial 182,551 (3,249,906) (3,067,355) 11,132 (177,408)
(166,276)year ==== ==== ==== ==== ==== ==== Basic and dilutedearnings per share 0.52 p (9.25)p (8.73)p 0.09 p (1.50)p (1.41)p Average number of 11,806,467shares in issue 35,148,192 Total Revenue Capital Total GBP GBP GBP Unrealised losses oninvestments held atfairvalue - (3,547,286) (3,547,286)Realised gains oninvestments held atfair value - 597,637 597,637Income 931,359 67,950 999,309Investmentmanagementfees (192,882) (578,645) (771,527)Other expenses (511,764) - (511,764) ==== ==== ====Profit/(loss) onordinaryactivities beforetaxation 226,713 (3,460,344) (3,233,631)Tax on profit/(loss)onordinary activities (33,030) 33,030 - ==== ==== ====Profit/(loss) onordinaryactivities aftertaxationfor the financial
year 193,683 (3,427,314) (3,233,631) ==== ==== ====
2. Balance sheets as at 30 September 2009
'O' Share 'S' Share Adjustments Total Fund Fund (see note below) GBP GBP GBP GBP GBPFixed assetsAssets held at fairvaluethrough profit andloss -investments 19,291,934 598,394 19,890,328 Current assets Debtors and 285,807 15,937 (115,868) 185,876prepaymentsOther assets 5,440,722 10,521,348 15,962,070Cash at bank 37,925 17,713 55,638 ==== ==== ==== ==== ==== 5,764,454 10,554,998 (115,868) 16,203,584 Creditors: amountsfalling due withinone (174,507) (152,176) 115,868 (210,815)year ==== ==== ==== ==== ====Net currentassets/(liabilities) 5,589,947 10,402,822 15,992,769 ==== ==== ==== ==== ====Net assets 24,881,881 11,001,216 35,883,097 ==== ==== ==== ==== ====Capital and reservesCalled up share 466,309capital 348,244 118,065Share premium 308,614reserve 308,614 -Capital redemption 73,017reserve 73,017 -Capital reserve - (5,279,832)unrealised (5,205,574) (74,258)Special reserve 17,123,088 10,828,918 27,952,006Profit and loss 12,362,983account 12,234,492 128,491 ==== ==== ==== ==== ====Equity shareholders'funds 24,881,881 11,001,216 35,883,097 ==== ==== ==== ==== ==== Number of shares inissue: 34,824,397 11,806,467 Basic net assetvalue per1p share: 71.45p 93.18pDiluted net assetvalueper 1p share: 71.45p 93.18p
Note: The adjustment above nets off the inter-fund debtor and creditor balances, so that the "Total of both Funds" balance sheet agrees to the Statutory Balance Sheet below.
3. Reconciliation of movements in Shareholders' Funds for the year ended 30September 2009 'O' Share 'S' Share Fund Fund Total GBP GBP GBP Opening shareholders' funds 29,624,220 11,167,492 40,791,712 Net share capital bought backin the year (353,751) - (353,751)Net share capital subscribed forin the year 96,826 - 96,826Loss for the year (3,067,355) (166,276) (3,233,631)Dividends paid / payable in year (1,418,059) - (1,418,059) ==== ==== ====Closing shareholders' funds 24,881,881 11,001,216 35,883,097 ==== ==== ====Income Statement
for the year ended 30 September 2009
30 September 30 September 2009 2008 Revenue Capital Total Revenue Capital Total GBP GBP GBP GBP GBP GBP Net unrealisedlosses oninvestments - (3,547,286) (3,547,286) - (7,553,875) (7,553,875)Net gains onrealisation ofinvestments - 597,637 597,637 - 2,053,510 2,053,510
Income 931,359 67,950 999,309 1,454,724 - 1,454,724Recoverable VAT - - - 83,278 249,833 333,111Investmentmanagement fees (192,882) (578,645) (771,527) (197,028) (1,013,810) (1,210,838)Other expenses (511,764) - (511,764) (517,005) - (517,005) ==== ==== ==== ==== ==== ====Profit/(loss) onordinary activitiesbefore taxation 226,713 (3,460,344) (3,233,631) 823,969 (6,264,342) (5,440,373) Tax on profit/(loss)on ordinaryactivities (33,030) 33,030 - (106,773) 106,773 - ==== ==== ==== ==== ==== ====Profit/(loss) onordinary activitiesafter taxation forthe financial year 193,683 (3,427,314) (3,233,631) 717,196
(6,157,569) (5,440,373) ==== ==== ==== ==== ==== ====Basic and dilutedearnings per share -'O' Share Fund 0.52p (9.25)p (8.73)p 1.66p (16.72)p (15.06)pBasic and dilutedearnings per share -'S' Share Fund 0.09p (1.50)p (1.41)p 1.26p (1.30)p (0.04)p
All the items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period. The total column is the Profit and Loss Account of the Company. There were no other recognised gains and losses in the year.
Other than the revaluation movements arising in investments held at fair value through Profit and Loss Account, there were no differences between the profit/(loss) as stated above and at historical cost.
Balance Sheetas at 30 September 2009 as at 30 as at 30 September 2009 September 2008 GBP GBP GBP GBP GBP GBPFixed assetsInvestments at fair value 19,890,328 23,139,395 Current assetsDebtors and prepayments 185,876 1,843,777Current investments 15,962,070 16,336,014Cash at bank 55,638 65,690 ==== ==== 16,203,584 18,245,481 Creditors: amounts fallingdue within one year (210,815) (593,164) ==== ==== ====Net current assets 15,992,769
17,652,317 ==== ==== ==== ==== ==== ====Net assets 35,883,097 40,791,712 ==== ==== ==== ==== ==== ==== Capital and reservesCalled up share capital 466,309 472,580Share premium account 308,614 11,266,282Capital redemption reserve 73,017 65,472Capital reserve - unrealised (5,279,832) (1,252,761)Special reserve 27,952,006 18,169,799Profit and loss account 12,362,983
12,070,340 ==== ==== ==== ==== ==== ==== 35,883,097 40,791,712 ==== ==== ==== ==== ==== ==== Net asset value per share'O' Shares - basic 71.45p 83.56p'O' Shares - diluted 71.45p 82.39p'S' Shares - basic and diluted 93.18p
94.59p
Reconciliation of Movements in Shareholders' Funds
for the year ended 30 September 2009
2009 2008 GBP GBP Opening shareholders' funds 40,791,712 36,778,493
Net share capital bought back in the year (353,751) (1,063,732) Net share capital subscribed for in the year 96,826 11,248,511 Loss for the year
(3,233,631) (5,440,373)Dividends paid/payable in the year (1,418,059) (731,187)
==== ====Closing shareholders' funds 35,883,097 40,791,712 ==== ====Cash Flow Statement
for the year ended 30 September 2009
Year ended Year ended 30 September 2009 30 September 2008 Operating activities GBP GBPInvestment income received 1,081,127 1,435,092
VAT received and interest thereon 408,305 -Investment management fees paid (1,200,016) (782,286)Other cash payments (477,847) (564,901) ==== ====Net cash (outflow)/inflow fromoperating activities (188,431) 87,905 Investing activitiesAcquisition of investments (735,608) (5,735,193)Disposal of investments 2,215,027 7,247,239 ==== ====Net cash inflow from investingactivities 1,479,419 1,512,046 Equity DividendsPayment of equity dividends (1,418,059) (1,385,722) ==== ====
Net cash (outflow)/inflow before financing and liquid resource management (127,071) 214,229
Management of liquid resourcesDecrease/(increase) in monies heldpending investment 373,944 (9,754,517) FinancingIssue of Ordinary shares 96,826 11,171,285Purchase of own shares (353,751) (1,612,169) ==== ====
Net cash (outflow)/inflow from financing (256,925) 9,559,116
====
====
(Decrease)/increase in cash for the year (10,052) 18,828 ==== ====Notes1. Basis of accounting
The accounts have been prepared under UK Generally Accepted Accounting Practice (UK GAAP) and, the Statement of Recommended Practice, `Financial Statements of Investment Trust Companies and Venture Capital Trusts' ("the SORP") issued by the Association of Investment Trust Companies in January 2003 and revised in 2005 and in 2009.
2. Income 2009 2008 GBP GBPIncome from investments- from equities 199,022 305,895- from OEIC funds 291,911 659,358- from loan stock 399,866 445,525- from bank deposits 21,480 43,946- from VAT recoverable 36,050 - ==== ==== 948,329 1,454,724 Other income 50,980 - ==== ====Total income 999,309 1,454,724 Total income comprisesRevenue dividends received 422,983 965,253Capital dividends received 67,950 -Interest 457,396 489,471Other income 50,980 - ==== ==== 999,309 1,454,724 Income from investments comprisesListed overseas securities 291,911 659,358Unlisted UK securities 598,888 751,420 ==== ==== 890,799 1,410,778
Income from VAT recoverable relates to interest received on VAT recoverable recognised in the year ended 30 September 2008.
Loan stock interest above is stated after deducting an amount of nil (2008: 27,067), being a provision made against loan stock interest regarded as collectable in previous years.
Total loan stock interest due but not recognised in the year was 512,386(2008: 568,758).3. Recoverable VAT Revenue Capital Total Revenue Capital Total 2009 2009 2009 2008 2008 2008 GBP GBP GBP GBP GBP GBPRecoverable VAT - - - 83,278 249,833 333,111As at 30 September 2008, the Directors consideredit reasonable certain that the Company would obtain a repayment of VAT of notless than 462,702. This was based upon information supplied by the Company'scurrent and former Investment Managers, and discussions with the Company'sprofessional advisors as a result of the European Court of Justice ruling andsubsequent HMRC briefing that management fees be exempt for VAT purposes.During the year, a total of 408,305 of VAT recoverable and related interesthas been actually received with the amounts disclosed in note 11 still yet
tobe received.4. Net asset value per share 2009 2009 2008 2008 'O' Share 'S' Share 'O' Share 'S' Share Fund Fund Fund Fund GBP GBP GBP GBP Net assets 24,881,881 11,001,216 29,624,220 11,167,492Number of shares inissue 34,824,397 11,806,467 35,451,438 11,806,467 Basic net asset valuepershare 71.45p 93.18p 83.56p 94.59pDiluted net assetvalue pershare 71.45p 93.18p 82.39p -4. Return per `O' ShareThe basic revenue return per `O' Share is based on the net revenuefrom ordinary activities after taxation of 182,551 (2008: 599,837) and on35,148,192 (2008: 36,109,718) `O' Shares, being the weighted average number of`O' Shares in issue during the year.
The basic capital return per `O' Share is based on net realised capital loss of 3,249,906 (2008: 6,036,417) and on 35,148,192 (2008: 36,109,718) `O' Shares, being the weighted average number of `O' Shares in issue during the year.
5. Return per `S' Share
The basic revenue return per `S' Share is based on the net revenuefrom ordinary activities after taxation of 11,132 (2008: 117,359) and on11,806,467 (2008: 9,341,544) `S' Shares, being the weighted average number of`S' Shares in issue during the year.
The basic capital return per `S' Share is based on net realised capital losses of 177,408 (2008: 121,152) and on 11,806,467 (2008: 9,341,544) `S' Shares, being the weighted average number of `S' Shares in issue during the year.
6. Investment Manager's fees
In accordance with the policy statement published under "Management and Administration" in the Company's Prospectus dated 13 October 2000, the Directors have charged 75% of the investment management expenses to capital reserve except for the incentive fee payable, which is charged 100% to capital.
7. Dividends
The Company proposes to pay a final dividend of 2 pence per share, comprising 0.5 pence per share from income and 1.5 pence per share from capital, to `O' Fund Shareholders.
The Company proposes to pay a final dividend of 0.5 pence per share, comprising 0.5 of a penny per share from income to `S' Fund Shareholders.
The dividends will be recommended to members at the Annual General Meeting and, if approved, will be paid on 17 March 2010 to shareholders on the Register on 19 February 2010.
.
8. Post balance sheet events
On 14 November 2009, the `O' Share Fund's entire holding in PastaKing Holdings Limited was sold realising net proceeds of 779k.
On 30 November 2009, the `O' Share Fund invested 91k as a follow on Loan stock investment in British International Holdings Limited.
On 10 December 2009, the `O' Share Fund's acquisition vehicleCalisamo Management Limited changed its name to CB Imports Group Limited andinvested 697k to acquire Country Baskets, in which the `S' Share Fund alsoinvested 303k.9. Financial information
The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 30 September 2009 but is derived from those accounts. Statutory accounts will be delivered to the Registrar of Companies after the Annual General Meeting.
10. Annual Report
A Summary Annual Report will be circulated by post to allShareholders shortly and copies will be available thereafter to members of thepublic from the Company's registered office. Shareholders who wish to receivea copy of the full Annual Report may request a copy by writing to the CompanySecretary, Matrix-Securities Limited, One Vine Street, London W1J 0AH.Alternatively copies may be downloaded via the Company's website atwww.incomeandgrowthvct.co.uk
11. The Annual General Meeting of the Company will be held at 11.00 am on Wednesday, 3 March 2010 at One Vine Street, London W1J 0AH.
THE INCOME & GROWTH VCT PLCRelated Shares:
Inc&gwth Vct