The Directors present the Annual Report and Accounts of the Company for the year ended
30 September 2015
The Board believes that the Annual Report and Accounts taken as a whole is fair,
balanced and understandable and provides the information necessary for shareholders to
assess the Company's performance, business model and strategy.
The Company is registered in England and Wales as a Public Limited Company
(registration number 4069483).
The Company has satisfied the requirements for full approval as a Venture Capital Trust
under section 274 of the Income Tax Act 2007 ("the ITA"). It is the Directors'
intention to continue to manage the Company's affiairs in such a manner as to comply with
section 274 of the ITA.
To enable capital profits to be distributed by way of dividends, the Company revoked
its status as an investment company as defined in section 833 of the Companies Act 2006
("the Companies Act") on 30 November 2005. The Company does not intend to
re-apply for such status.
Share capital
The Company's ordinary shares of 1 penny each, formerly ‘S' Shares, are listed on
the London Stock Exchange ("LSE"). The shares were first admitted to the
Official List of the UK Listing Authority ("UKLA") and to trading on the LSE on
8 February 2008. Following the merger of the former classes of ‘O' Shares (first
admitted to the Official List of the UKLA and to trading on 15 November 2000) and ‘S'
Shares on 29 March 2010 ("the Merger"), the listing of the ‘S' Shares was
amended to ordinary shares of 1p in the capital of the Company on 30 March 2010 and the
‘O' Share listing was cancelled.
Issue of shares
During the year under review, the Company issued a total of 10,769,867 (2014:
7,989,659) shares. Of this total, 9,043,518 (2014: 7,260,906) shares were issued under the
Mobeus VCTs' Linked Offer for Subscription launched on 10 December 2014; and 1,726,349
(2014: 728,753) shares were issued under the Company's Dividend Investment Scheme.
Buyback of shares
At the Annual General Meeting held on 12 February 2015, shareholders granted the
Company authority, pursuant to section 701 of the Companies Act, to buyback up to
9,065,493 (2014: 7,950,000) of its own shares representing 14.99% of the issued share
capital of the Company on 16 December 2014. This authority has been in place throughout
the year under review. For further details please see Note 14 to the accounts on page 65
of this Annual Report. A resolution to renew this authority will be proposed to
shareholders at the Annual General Meeting of the Company to be held on 10 February 2016.
During the year under review, the Company bought back 553,800 (2014: 600,938) of its
own shares at an average price of 95.28 (2014: 99.28) pence per share and a total cost of
527,637 (2014: 596,599) including expenses. These shares represented 0.9% (2014: 1.1%)
of the issued share capital of the Company at 1 October 2014.
All shares bought back by the Company during the year were subsequently cancelled by
the Company.
Issued share capital
The issued share capital of the Company as at 30 September 2015 was 706,930 (2014:
604,769) and the number of shares in issue at this date was 70,693,007 (2014:
60,476,940), subject to the cancellation from the register of the shares bought back by
the Company which were outstanding at the year-end.
Dividends
The Directors are proposing a final dividend of 6.00 (2014: 4.00) pence per share
comprising 5.00 (2014: 4.00) pence from capital and 1.00 penny (2014: nil) from income in
respect of the year ended 30 September 2015, payable on 15 February 2016 to shareholders
who are on the Register on 15 January 2016. This dividend, if paid, will increase
dividends paid in respect of the year to 12.00 pence per share and the dividends paid in
the last five years to 70.00 pence per share.
Directors
The names of and brief biographical details on each of the Directors are given on page
30 of this Annual Report. Copies of the Directors' appointment letters will be available
for inspection at the place of the Annual General Meeting for at least fifteen minutes
prior to and during the meeting.
Details of each Director's interest in the Company's shares are set out on page 37 of
the Directors' Remuneration Report. The powers of the Directors have been granted by
company law, the Company's articles of association ("the Articles") and
resolutions passed by the Company's members in general meeting. Resolutions are proposed
annually at each annual general meeting of the Company to authorise the Directors to allot
shares, disapply the pre-emption rights of members and buyback the Company's own shares on
behalf of the Company. These authorities are currently in place and resolutions to renew
them will be proposed at the Annual General Meeting of the Company to be held on 10
February 2016.
The Company's Articles and the Companies Act contain provisions relating to the
appointment, election and replacement of Directors.
These are set out in the paragraph headed ‘Directors' terms of appointment' on
page 35 of the Directors' Remuneration Report.
Disclosure of information to the Auditor
So far as the Directors in office at 30 September 2015 are aware, there is no relevant
audit information of which the Auditor is unaware. They have individually taken all the
steps that they ought to have taken as Directors in order to make themselves aware of any
relevant audit information and to establish that the Company's Auditor is aware of that
information.
Directors' and officers' liability insurance
The Company maintains a Directors' and Officers' liability insurance policy. The policy
does not provide cover for fraudulent or dishonest actions by the Directors.
Directors' indemnity
The Company's Articles grant, subject to the provisions of UK legislation, the Board
the power to indemnify Directors of the Company out of the assets of the Company to
whatever extent the Board may determine including the provision of funds to meet any
expenditure incurred by a Director in defending him or herself in any criminal or civil
proceedings.
Fees paid to the Investment Adviser
The fees paid to the Investment Adviser and the performance incentive fees paid are set
out in Notes 3a and 3b to the Accounts on page 56.
In addition, the Investment Adviser received fees totalling 456,297 during the year
ended 30 September 2015, being 205,138 for arrangement fees, and 251,159 for acting as
non-executive directors on a number of investee company boards. These amounts are the
share of such fees attributable to investments made by the Company.
Alternative Investment Fund Manager ("AIFM")
The Board appointed the Company as its own AIFM in compliance with the European
Commission's Alternative Investment Fund Management Directive with effect from 22 July
2014. The Company is registered as a small AIFM, and is therefore exempt from the
principal requirements of the Directive. Mobeus continues to provide investment advisory
and administrative services to the Company. However, in order for the Company to continue
to discharge its safekeeping responsibilities for the documents of title to its
investments, Mobeus company secretarial staff are now directly responsible to the Board,
under its instruction, for accessing and dealing with these documents.
Social and environmental policies
The Board recognises its obligations under Section 414c of the Companies Act to provide
information in this respect about environmental matters (including the impact of the
Company's business on the environment), human rights and social and community issues,
including information about any policies the Company has in relation to these matters and
the effectiveness of these policies.
Environmental and social responsibility
The Board seeks to maintain high standards of conduct in respect of ethical,
environmental, governance and social issues and to conduct the Company's affiairs
responsibly. It considers relevant social and environmental matters when appropriate and
particularly with regard to investment decisions. The Investment Adviser encourages good
practice within the companies in which the VCT invests. The Board seeks to avoid investing
in certain areas which it considers to be unethical and does not invest in companies which
do not operate within relevant ethical, environmental and social legislation or otherwise
fail to comply with appropriate industry standards. Environmental, social and governance
issues are identified by the Investment Adviser prior to each investment and are drawn to
the attention of the Board where appropriate. The Company does not have any employees or
offices and the Board therefore believes that there is limited scope for developing
environmental, social or community policies. The Company has however adopted electronic
communications for shareholders as a means of reducing the volume of paper that the
Company uses to produce its reports. It uses mixed sources paper from well-managed forests
as endorsed by the Forest Stewardship Council for the printing of its circulars and annual
and half-year reports. The Investment Adviser is conscious of the need to reduce its
impact on the environment and has taken a number of initiatives in its offices including
recycling and the reduction of its energy consumption.
Human rights policy
The Board seeks to conduct the Company's affiairs responsibly and gives full
consideration to the human rights implications of its decisions, particularly with regard
to investment decisions.
Anti-bribery policy
The VCT has adopted a zero tolerance approach to bribery. The following is a summary of
the Company's policy:
• It is the Company's policy to conduct all of its business in an honest and
ethical manner. The Company is committed to acting professionally, fairly and with
integrity in all its business dealings and relationships where it operates.
• Directors and service providers must not promise, offer, give, request, agree to
receive or accept a financial or other advantage in return for favourable treatment, to
influence a business outcome or to gain any other business advantage on behalf of
themselves or of the Company or encourage others to do so.
• The Company has communicated its anti-bribery policy to each of its service
providers. It requires each of its service providers to have policies in place which
reflect the key principles of this policy and procedures and which demonstrate that they
have adopted procedures of an equivalent standard to those instituted by the Company.
Global greenhouse gas emissions
The Company has no greenhouse gas emissions to report from its operations, nor does it
have responsibility for any other emissions producing sources under the Companies Act 2006
(Strategic Report and Directors' Reports) Regulations 2013, (including those within the
Company's underlying investment portfolio).
Whistleblowing
The Board has considered the recommendation made in the UK Corporate Governance Code
with regard to a policy on whistleblowing and has reviewed the arrangements at the
Investment Adviser under which its staff may, in confidence, raise concerns. It has
concluded that adequate arrangements are in place at the Investment Adviser for the
proportionate and independent investigation of such matters and, where necessary, for
appropriate follow-up action to be taken by the Investment Adviser. The Board has also
asked each of its service providers to confirm that they have a suitable whistleblowing
policy in place.
Financial risk management
The main risks arising from the Company's financial instruments are due to fluctuations
in the market price and interest rates, credit risk and liquidity risk. The Board
regularly reviews and agrees policies for managing these risks and full details can be
found in Note 18 to the Accounts on pages 67 - 73 of this Annual Report.
Post balance sheet events
For a full list of the post balance sheet events that have occurred since 30 September
2015, please see Note 21 to the accounts on page 73.
Additional disclosures
The following additional disclosures are made in accordance with Part 6 of Schedule 7
of The Large and Medium sized Companies and Groups (Accounts and Reports) Regulations 2008
(as amended 2013).
Articles of association
The Company may amend its Articles by special resolution in accordance with section 21
of the Companies Act.
Substantial interests
As at the date of this report the Company had not been notified of any beneficial
interest exceeding 3% of the issued share capital.
Voting rights of shareholders
At general meetings of the Company, shareholders have one vote on a show of hands and
one vote per share held on a poll. No member shall be entitled to vote or exercise any
rights at a general meeting unless all their shares have been paid up in full. Any
instrument of proxy must be deposited at the place specified by the Directors no later
than 48 hours before the time for holding the meeting. There are no restrictions on voting
rights and no agreements between holders of securities that may prevent or restrict the
transfer of securities or voting rights.
Annual General Meeting
The Notice of the Annual General Meeting of the Company to be held at 11.00 am on 10
February 2016 at 33 St James's Square, London SW1Y 4JS is set out on pages 77 - 80 of this
Annual Report. A proxy form for the meeting is enclosed separately with shareholders'
copies of this Annual Report. Proxy votes may also be submitted electronically via the
Capita Shareholder Portal.
Resolutions 1 – 8 and 11 are being proposed as ordinary resolutions requiring more
than 50% of the votes cast at the meeting to be in favour and Resolutions 9 and 10 will be
proposed as special resolutions requiring the approval of at least 75% of the votes cast
at the meeting. The following is an explanation of Resolutions 8 – 11.
Authorities for the Directors to allot shares in the Company (Resolution 8) and
disapply the pre-emption rights of members (Resolution 9).
These two resolutions grant the Directors the authority to allot shares for cash to a
limited and defined extent otherwise than pro rata to existing shareholders. Resolution 8
will enable the Directors to allot new shares up to an aggregate nominal value of
235,593 representing approximately one-third of the existing issued share capital of the
Company as at the date of the notice convening the Annual General Meeting.
Under section 561(1) of the Companies Act, if the Directors wish to allot new shares or
sell or transfer treasury shares for cash they must first offer such shares to existing
shareholders in proportion to their current holdings. It is proposed by Resolution 9 to
sanction the disapplication of such pre-emption rights in respect of the allotment of
equity securities: (i) with an aggregate nominal value of up to 164,900 in connection
with offer(s) for subscription; (ii) with an aggregate nominal value of up to, but not
exceeding, five per cent of the issued share capital from time to time pursuant to any
dividend investment scheme operated by the Company at a subscription price which is less
than the net asset value per share; and (iii) otherwise than pursuant to (i) or (ii)
above, with an aggregate nominal value of up to five per cent of the issued share capital
from time to time; in each case where the proceeds may be used in whole or part to
purchase the Company's shares in the market.
The Company does not currently hold any shares as treasury shares.
Both of these authorities, unless previously renewed, varied or revoked, will expire on
the date falling fifteen months after the passing of the resolution or, if earlier, on the
conclusion of the annual general meeting of the Company to be held in 2017. However, the
Directors may allot securities after the expiry dates specified above in pursuance of
offers or agreements made prior to the expiration of these authorities. Both resolutions
generally renew previous authorities approved at the Annual General Meeting of the Company
held on 12 February 2015.
The Board intends to allot shares under the Company's Dividend Investment Scheme in
respect of the proposed final dividend to be paid to shareholders on 15 February 2016. The
Directors have no plans at the current time to fundraise for the Company or any other
further immediate intention of exercising the above powers. The Board is however intending
to give consideration to a possible fundraising once the implications for the Company of
the
Finance Act 2015 have been clarified. It is therefore seeking authority to allot shares
and disapply pre-emption rights of members to take account of this contingency.
Authority to purchase the Company's own shares (Resolution 10)
This resolution authorises the Company to purchase its own shares pursuant to section
701 of the Companies Act. The authority is limited to the purchase of an aggregate of
10,596,882 shares representing approximately 14.99 per cent of the issued share capital of
the Company as at the date of the Notice of the Meeting or, if lower, such number of
shares (rounded down to the nearest whole share) as shall equal 14.99 per cent of the
issued share capital at the date the resolution is passed. The maximum price that may be
paid for a share will be the higher of (i) an amount that is not more than five per cent
above the average of the middle market quotations of the shares as derived from the Daily
Official List of the UK Listing Authority for the five business days preceding the date
such shares are contracted to be purchased and (ii) the price stipulated by Article 5(1)
of the Buy-back and Stabilisation Regulation. The minimum price that may be paid for a
share is 1 penny, being the nominal value thereof.
Market liquidity in VCTs is normally very restricted. The passing of this resolution
will enable the Company to purchase its own shares thereby providing a mechanism by which
the Company may enhance the liquidity of its shares and seek to manage the level and
volatility of the discount to NAV at which its shares may trade.
It is the Directors' intention to cancel any shares bought back under this authority.
Shareholders should note that the Directors do not intend to exercise this authority
unless they believe to do so would result in an increase in net assets per share which
would be in the interests of shareholders generally. This resolution will expire on the
date falling fifteen months after the passing of this resolution or, if earlier, on the
conclusion of the Company's annual general meeting to be held in 2017 except that the
Company may purchase its own shares after this date in pursuance of a contract or
contracts made prior to the expiration of this authority.