The Directors present the Annual Report and Accounts of the Company for the year ended30 September 2015
The Board believes that the Annual Report and Accounts taken as a whole is fairbalanced and understandable and provides the information necessary for shareholders toassess 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 Trustunder 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 withsection 274 of the ITA.
To enable capital profits to be distributed by way of dividends the Company revokedits 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 tore-apply for such status.
The Company's ordinary shares of 1 penny each formerly S' Shares are listed onthe London Stock Exchange ("LSE"). The shares were first admitted to theOfficial List of the UK Listing Authority ("UKLA") and to trading on the LSE on8 February 2008. Following the merger of the former classes of O' Shares (firstadmitted 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 wasamended to ordinary shares of 1p in the capital of the Company on 30 March 2010 and theO' Share listing was cancelled.
Issue of shares
During the year under review the Company issued a total of 10769867 (2014:7989659) shares. Of this total 9043518 (2014: 7260906) shares were issued under theMobeus VCTs' Linked Offer for Subscription launched on 10 December 2014; and 1726349(2014: 728753) 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 theCompany authority pursuant to section 701 of the Companies Act to buyback up to9065493 (2014: 7950000) of its own shares representing 14.99% of the issued sharecapital of the Company on 16 December 2014. This authority has been in place throughoutthe year under review. For further details please see Note 14 to the accounts on page 65of this Annual Report. A resolution to renew this authority will be proposed toshareholders at the Annual General Meeting of the Company to be held on 10 February 2016.
During the year under review the Company bought back 553800 (2014: 600938) of itsown shares at an average price of 95.28 (2014: 99.28) pence per share and a total cost of527637 (2014: 596599) 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 bythe Company.
Issued share capital
The issued share capital of the Company as at 30 September 2015 was 706930 (2014:604769) and the number of shares in issue at this date was 70693007 (2014:60476940) subject to the cancellation from the register of the shares bought back bythe Company which were outstanding at the year-end.
The Directors are proposing a final dividend of 6.00 (2014: 4.00) pence per sharecomprising 5.00 (2014: 4.00) pence from capital and 1.00 penny (2014: nil) from income inrespect of the year ended 30 September 2015 payable on 15 February 2016 to shareholderswho are on the Register on 15 January 2016. This dividend if paid will increasedividends paid in respect of the year to 12.00 pence per share and the dividends paid inthe last five years to 70.00 pence per share.
The names of and brief biographical details on each of the Directors are given on page30 of this Annual Report. Copies of the Directors' appointment letters will be availablefor inspection at the place of the Annual General Meeting for at least fifteen minutesprior to and during the meeting.
Details of each Director's interest in the Company's shares are set out on page 37 ofthe Directors' Remuneration Report. The powers of the Directors have been granted bycompany law the Company's articles of association ("the Articles") andresolutions passed by the Company's members in general meeting. Resolutions are proposedannually at each annual general meeting of the Company to authorise the Directors to allotshares disapply the pre-emption rights of members and buyback the Company's own shares onbehalf of the Company. These authorities are currently in place and resolutions to renewthem will be proposed at the Annual General Meeting of the Company to be held on 10February 2016.
The Company's Articles and the Companies Act contain provisions relating to theappointment election and replacement of Directors.
These are set out in the paragraph headed Directors' terms of appointment' onpage 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 relevantaudit information of which the Auditor is unaware. They have individually taken all thesteps that they ought to have taken as Directors in order to make themselves aware of anyrelevant audit information and to establish that the Company's Auditor is aware of thatinformation.
Directors' and officers' liability insurance
The Company maintains a Directors' and Officers' liability insurance policy. The policydoes not provide cover for fraudulent or dishonest actions by the Directors.
The Company's Articles grant subject to the provisions of UK legislation the Boardthe power to indemnify Directors of the Company out of the assets of the Company towhatever extent the Board may determine including the provision of funds to meet anyexpenditure incurred by a Director in defending him or herself in any criminal or civilproceedings.
Fees paid to the Investment Adviser
The fees paid to the Investment Adviser and the performance incentive fees paid are setout in Notes 3a and 3b to the Accounts on page 56.
In addition the Investment Adviser received fees totalling 456297 during the yearended 30 September 2015 being 205138 for arrangement fees and 251159 for acting asnon-executive directors on a number of investee company boards. These amounts are theshare 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 EuropeanCommission's Alternative Investment Fund Management Directive with effect from 22 July2014. The Company is registered as a small AIFM and is therefore exempt from theprincipal requirements of the Directive. Mobeus continues to provide investment advisoryand administrative services to the Company. However in order for the Company to continueto discharge its safekeeping responsibilities for the documents of title to itsinvestments Mobeus company secretarial staff are now directly responsible to the Boardunder 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 provideinformation in this respect about environmental matters (including the impact of theCompany's business on the environment) human rights and social and community issuesincluding information about any policies the Company has in relation to these matters andthe effectiveness of these policies.
Environmental and social responsibility
The Board seeks to maintain high standards of conduct in respect of ethicalenvironmental governance and social issues and to conduct the Company's affiairsresponsibly. It considers relevant social and environmental matters when appropriate andparticularly with regard to investment decisions. The Investment Adviser encourages goodpractice within the companies in which the VCT invests. The Board seeks to avoid investingin certain areas which it considers to be unethical and does not invest in companies whichdo not operate within relevant ethical environmental and social legislation or otherwisefail to comply with appropriate industry standards. Environmental social and governanceissues are identified by the Investment Adviser prior to each investment and are drawn tothe attention of the Board where appropriate. The Company does not have any employees oroffices and the Board therefore believes that there is limited scope for developingenvironmental social or community policies. The Company has however adopted electroniccommunications for shareholders as a means of reducing the volume of paper that theCompany uses to produce its reports. It uses mixed sources paper from well-managed forestsas endorsed by the Forest Stewardship Council for the printing of its circulars and annualand half-year reports. The Investment Adviser is conscious of the need to reduce itsimpact on the environment and has taken a number of initiatives in its offices includingrecycling and the reduction of its energy consumption.
Human rights policy
The Board seeks to conduct the Company's affiairs responsibly and gives fullconsideration to the human rights implications of its decisions particularly with regardto investment decisions.
The VCT has adopted a zero tolerance approach to bribery. The following is a summary ofthe Company's policy:
It is the Company's policy to conduct all of its business in an honest andethical manner. The Company is committed to acting professionally fairly and withintegrity in all its business dealings and relationships where it operates.
Directors and service providers must not promise offer give request agree toreceive or accept a financial or other advantage in return for favourable treatment toinfluence a business outcome or to gain any other business advantage on behalf ofthemselves or of the Company or encourage others to do so.
The Company has communicated its anti-bribery policy to each of its serviceproviders. It requires each of its service providers to have policies in place whichreflect the key principles of this policy and procedures and which demonstrate that theyhave 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 ithave responsibility for any other emissions producing sources under the Companies Act 2006(Strategic Report and Directors' Reports) Regulations 2013 (including those within theCompany's underlying investment portfolio).
The Board has considered the recommendation made in the UK Corporate Governance Codewith regard to a policy on whistleblowing and has reviewed the arrangements at theInvestment Adviser under which its staff may in confidence raise concerns. It hasconcluded that adequate arrangements are in place at the Investment Adviser for theproportionate and independent investigation of such matters and where necessary forappropriate follow-up action to be taken by the Investment Adviser. The Board has alsoasked each of its service providers to confirm that they have a suitable whistleblowingpolicy in place.
Financial risk management
The main risks arising from the Company's financial instruments are due to fluctuationsin the market price and interest rates credit risk and liquidity risk. The Boardregularly reviews and agrees policies for managing these risks and full details can befound 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 September2015 please see Note 21 to the accounts on page 73.
The following additional disclosures are made in accordance with Part 6 of Schedule 7of 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 21of the Companies Act.
As at the date of this report the Company had not been notified of any beneficialinterest 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 andone vote per share held on a poll. No member shall be entitled to vote or exercise anyrights at a general meeting unless all their shares have been paid up in full. Anyinstrument of proxy must be deposited at the place specified by the Directors no laterthan 48 hours before the time for holding the meeting. There are no restrictions on votingrights and no agreements between holders of securities that may prevent or restrict thetransfer 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 10February 2016 at 33 St James's Square London SW1Y 4JS is set out on pages 77 - 80 of thisAnnual 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 theCapita Shareholder Portal.
Resolutions 1 8 and 11 are being proposed as ordinary resolutions requiring morethan 50% of the votes cast at the meeting to be in favour and Resolutions 9 and 10 will beproposed as special resolutions requiring the approval of at least 75% of the votes castat the meeting. The following is an explanation of Resolutions 8 11.
Authorities for the Directors to allot shares in the Company (Resolution 8) anddisapply the pre-emption rights of members (Resolution 9).
These two resolutions grant the Directors the authority to allot shares for cash to alimited and defined extent otherwise than pro rata to existing shareholders. Resolution 8will enable the Directors to allot new shares up to an aggregate nominal value of235593 representing approximately one-third of the existing issued share capital of theCompany 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 orsell or transfer treasury shares for cash they must first offer such shares to existingshareholders in proportion to their current holdings. It is proposed by Resolution 9 tosanction the disapplication of such pre-emption rights in respect of the allotment ofequity securities: (i) with an aggregate nominal value of up to 164900 in connectionwith offer(s) for subscription; (ii) with an aggregate nominal value of up to but notexceeding five per cent of the issued share capital from time to time pursuant to anydividend investment scheme operated by the Company at a subscription price which is lessthan 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 capitalfrom time to time; in each case where the proceeds may be used in whole or part topurchase 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 onthe date falling fifteen months after the passing of the resolution or if earlier on theconclusion of the annual general meeting of the Company to be held in 2017. However theDirectors may allot securities after the expiry dates specified above in pursuance ofoffers or agreements made prior to the expiration of these authorities. Both resolutionsgenerally renew previous authorities approved at the Annual General Meeting of the Companyheld on 12 February 2015.
The Board intends to allot shares under the Company's Dividend Investment Scheme inrespect of the proposed final dividend to be paid to shareholders on 15 February 2016. TheDirectors have no plans at the current time to fundraise for the Company or any otherfurther immediate intention of exercising the above powers. The Board is however intendingto give consideration to a possible fundraising once the implications for the Company ofthe
Finance Act 2015 have been clarified. It is therefore seeking authority to allot sharesand 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 section701 of the Companies Act. The authority is limited to the purchase of an aggregate of10596882 shares representing approximately 14.99 per cent of the issued share capital ofthe Company as at the date of the Notice of the Meeting or if lower such number ofshares (rounded down to the nearest whole share) as shall equal 14.99 per cent of theissued share capital at the date the resolution is passed. The maximum price that may bepaid for a share will be the higher of (i) an amount that is not more than five per centabove the average of the middle market quotations of the shares as derived from the DailyOfficial List of the UK Listing Authority for the five business days preceding the datesuch 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 ashare is 1 penny being the nominal value thereof.
Market liquidity in VCTs is normally very restricted. The passing of this resolutionwill enable the Company to purchase its own shares thereby providing a mechanism by whichthe Company may enhance the liquidity of its shares and seek to manage the level andvolatility 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 authorityunless they believe to do so would result in an increase in net assets per share whichwould be in the interests of shareholders generally. This resolution will expire on thedate falling fifteen months after the passing of this resolution or if earlier on theconclusion of the Company's annual general meeting to be held in 2017 except that theCompany may purchase its own shares after this date in pursuance of a contract orcontracts made prior to the expiration of this authority.