REG - Mobeus Inc&Gwth 4 - Annual Financial Report

Mobeus Income & Growth 4 VCTAnnouncement

06/04/2023 07:00

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RNS Number : 5592V  Mobeus Income & Growth 4 VCT PLC  06 April 2023

MOBEUS INCOME & GROWTH 4 VCT PLC

LEI:  213800IFNJ65R8AQW943

 

Annual Report & Financial Statements for the Year Ended 31 December 2022

Results Announcement

The Company has today published on its website Mobeus Income & Growth 4
VCT plc
(https://www.mobeusvcts.co.uk/investor-area/vct-investors/mobeus-income-growth-4-vct-plc)
the Annual Report and Financial Statements for the year ended 31 December
2022.  The highlights Include:

As at 31 December 2022:

Net assets: £83.54 million

Net asset value ("NAV") per share: 80.05 pence

 

➤         Net asset value ("NAV") total return(1) per share was
(15.5)%.

➤         Share price total return(1) per share was (8.4)%.

➤         Dividends paid and declared in respect of the financial
year totalled 10.00 pence per share. Cumulative dividends paid to date since
inception in 2004 stand at 153.20 pence per share.

➤         £3.78 million was invested into four new growth capital
investments and six existing portfolio companies during the year.

➤         Net unrealised losses were £(15.45) million in the year.

➤         The Company realised investments totalling £8.70 million
of cash proceeds and generated net realised gains in the year of £0.74
million.

(1) Definitions of key terms and alternative performance measures shown above
and throughout the report are shown in the Glossary of Terms in the Annual
Report

CHAIR'S STATEMENT

I present the Annual Report of Mobeus Income & Growth 4 VCT plc for the
year ended 31 December 2022.

Overview

The high point for many technology and growth markets was seen towards the end
of 2021 - after which they were impacted by global events such as the Russian
invasion of Ukraine, the highest rates of inflation for over a decade and
accompanying interest rate increases, political turmoil in the UK and across
Europe and the increasing cost of living.  The recent UK Budget sought to
stimulate the economy, but we can expect continuing challenges for portfolio
companies particularly with respect to increased costs and subdued consumer
demand.

The Mobeus VCTs' joint fundraise which was launched in January 2022 and
reached its application capacity in less than 24 hours. Given the level of
investor demand, and a continuing pipeline of investment opportunities, your
Board agreed later in that year, that a further fundraise would be
appropriate. This was issued across all four Mobeus VCTs in October 2022 and
also reached its capacity in a short timeframe, securing £16 million for the
Company (including the £5 million over-allotment facility) early in November
2022.  This outstanding level of support is a very encouraging demonstration
of the confidence that investors have in the Company and your Board is
delighted to welcome an equal mix of further investment from our valued
existing Shareholders and also from new investors in the Company. These
additional cash resources will enable the Company to take advantage of new and
follow-on investment opportunities as previous experience has shown that
investing through the cycle can create excellent returns over time.

It appears that higher inflation and the Russian war in Ukraine have now
become daily news events.  Post the year-end, inflation remained stubbornly
high although, against almost all predictions, the UK economy has so far
avoided going into recession.

Challenges for portfolio companies are expected to continue during 2023, with
a combination of inflationary pressures and lower customer demand. Your
Company is well prepared for most scenarios with its strong liquidity
available to support the portfolio and from the extensive planning and
preparation with each of the portfolio company's management teams by Gresham
House. The Company has continued to provide finance to new and existing
investee companies with two notable exit events during the year under review
in the form of Media Business insight (MBI) and Equip Outdoor Technologies
(EOTH). The recent equity disposal of EOTH in November contributing to a 6.9x
return to date was a particular high point as we anticipate a quieter exit
environment in 2023 than in previous years.

The Board was pleased to hear of the UK Government's commitment to extend the
VCT 'sunset clause' beyond the end date of 5 April 2025. Without an extension,
investor income tax relief on new VCT share subscriptions will expire after
that date. Shareholders should note however that, to date, the VCT industry
has seen no further detail on this subject and any extension of the date will
probably require parliamentary approval.

Performance

For the year ended 31 December 2022, the Company experienced a negative NAV
total return per share of (15.5)% (2021: +42.7%) and a negative share price
total return of (8.4)% (2021: +50.4%).  The difference between the share
price and NAV total returns arises principally due to the timing of NAV
announcements which are usually made on a date later than the date to which
they relate and is explained more fully under Performance in the Strategic
Report of the Annual Report. The negative NAV total return for the year was
principally a result of the unrealised loss in the value of investments still
held, partially offset by realised gains achieved above previous carrying
values.

The reduction in net asset value resulted from falls in the valuation of the
portfolio over the financial year. This has primarily been driven by lower
benchmark market comparables and, more recently, by softening investee company
trading performance.  As is usually the case, markets quickly factored in the
expected impact of inflation and higher interest rates on consumer spending
and business investment. The full extent of the impact of these on portfolio
company trading will emerge over time.

At the end of the year under review the Company was ranked 4th over five years
and 9th over ten years periods (out of 37 and 31 Generalist VCTs respectively)
in the Association of Investment Companies' analysis of NAV Cumulative Total
Return.  Shareholders should note that the AIC's rankings are based on the
latest available published NAVs and therefore do not fully reflect the NAV per
share decrease reported by the Company up to 31 December 2022. Nevertheless,
it is pleasing that your Company has shown resilience over the medium and
longer terms when measured against other sector participants. For further
details on the performance of the Company, please refer to the Strategic
Report of the Annual Report.

Dividends

The Board continues to be committed to providing an attractive dividend stream
to Shareholders and was pleased to announce an interim dividend of 4.00 pence
per share which was paid on 8 July 2022 to Shareholders on the register on 6
June 2022.  A second interim dividend of 6.00 pence per share, was paid on
7 November 2022 to Shareholders on the register on 23 September 2022 and
together, this brings the total dividends paid in respect of the financial
year ended 31 December 2022 to 10.00 pence per share. To date, cumulative
dividends paid since inception total 153.20 pence per share.  The Company has
now met or exceeded the Board's dividend target of paying at least 4.00 pence
per share in respect of each financial year over the last ten years.

As Shareholders have been advised previously, the reorientation of the
portfolio under the VCT rules to younger growth capital investments as well as
the realisations of older, more mature companies that have formerly provided a
good income yield, are likely to make dividends harder to achieve from
income  alone in any given year. The Board aims to distribute realised
profits (such as income and gains from realisations) achieved in a year as
dividends but notes that a reduction in contracted loan interest income was
seen during the year by the Company. The Board, therefore, continues to
monitor the sustainability of the annual dividend target. Shareholders should
also note that there may continue to be circumstances where the Company is
required to pay dividends in order to maintain its regulatory status as a VCT,
for example, to stay above the minimum percentage of assets required to be
held in qualifying investments. Such dividends paid in excess of net income
and capital gains achieved will cause the Company's NAV per share to reduce by
a corresponding amount.

Dividend Investment Scheme

The Company's Dividend Investment Scheme ("DIS") provides Shareholders with
the opportunity to reinvest their cash dividends into new shares in the
Company at the latest published NAV per share. New VCT shares attract the same
tax reliefs as shares purchased through an Offer for Subscription. As part of
the 4.00 pence per share dividend paid on 8 July 2022, 586,156 Ordinary shares
were allotted to participants of the DIS at a price of 98.96 pence per share.
For the further 6.00 pence per share dividend paid on 7 November 2022,
1,129,699 Ordinary shares were allotted at a price of 80.50 pence per share to
DIS members.

Shareholders wishing to take advantage of the scheme for any future dividends
can join the DIS by completing a mandate form available on the Company's
website, under the 'Dividends' heading, at: www.mig4vct.co.uk., or
alternatively, existing DIS members can opt-out by contacting Link Group,
using their details provided under Corporate Information of the Annual Report.

Investment portfolio

The portfolio movements across the year were as follows:

 

                                          2022     2021
                                          £m       £m
 Opening portfolio value                  65.58    41.68
 New and further investments              3.78     6.23
 Disposal proceeds                        (8.70)   (12.23)
 Net realised gains                       0.74     4.19
 Valuation movements                      (15.45)  25.71
 Net investment portfolio (losses)/gains  (14.71)  29.90

 Portfolio value at 31 December           45.95    65.58

A number of investee companies have experienced a decline in consumer
confidence with the resultant impact on trading during the recent challenging
environment. There was a fall of £14.71 million in the overall value of the
portfolio across the year to 31 December 2022 (2021: increase of £29.90
million), or a fall of 22.4% on a like-for-like basis compared to the value of
the portfolio at the start of the year.

Notably, a significant amount of the fall of £14.71 million relates to Virgin
Wines which declined by £6.89 million. Virgin Wines is an AIM-listed
investment, which has suffered from the negative sentiment of its sector,
despite positive news flows and the relative outperformance versus its peers
by the company itself. It is worth noting that in addition to the unrealised
equity holding, the Company has received over 1.7x its original investment in
realised returns to date.

The negative NAV total return for the year principally comprised unrealised
falls in the value of investments still held of £15.45 million, (primarily
Virgin Wines, Buster and Punch and MyTutor) which were partially mitigated by
an uplift in Tharstern together with the exit proceeds received from EOTH and
MBI, which contributed to net realised gains of £0.74 million.

During the year, the Company invested a total of £3.78 million into four new
and six existing portfolio companies (2021: £6.23 million; four new, nine
existing).  New investments totalling £2.03 million were made into:

 Proximity Insight:  retail technology software;
 Bidnamic:           a marketing technology business;
 FocalPoint:         a GPS enhancement software supplier; and
 Orri:               an intensive day care provider for adults with eating disorders

 

Additional portfolio funding totalling £1.75 million was provided to six
existing portfolio companies:

 Caledonian Leisure:  a provider of UK leisure and experience breaks
 Northern Bloc:       a dairy and allergen-free ice cream brand
 Rotageek:            a workforce management software system
 Andersen EV:         a provider of premium EV chargers
 Vivacity:            an AI and Urban Traffic Control busines
 Bleach London:       a hair colourants brand

 

The Company generated total proceeds of £8.70 million in the year to 31
December 2022 comprising £8.25 million from full or partial realisations as
well as other capital receipts of £0.45 million. Further details are provided
below:

In June 2022, the Company realised its investment in MBI generating proceeds
of £3.98 million from the sale (including deferred proceeds and loan
repayments made earlier in the year) resulting in a realised gain in the year
of £0.42 million. This exit contributed to returns received over the life of
the investment amounting to £6.11 million, which is a 2.2x multiple of cost
and an IRR of 13.8%.

In October 2022, Andersen EV, the electric vehicle charger provider, entered
into administration as a result of a substantial deterioration in its trading
conditions which resulted in a realised loss of £0.44 million being
recognised during the year. This was particularly disappointing as the Company
made a follow-on investment into the company in May 2022 alongside the other
Mobeus VCTs. The company had secured some impressive clients and funding was
provided to drive product development in a premium brand which operated in the
emerging electric car charging market. Over the summer months however, a
combination of global supply issues, inflationary cost increases and the
removal of Government consumer support for the purchase of EV chargers swiftly
impacted the company's ability to continue trading and so necessitated the
appointment of administrators.

In a similarly disappointing development, in December 2022, following repeated
and substantial falls in its share price, Parsley Box Group PLC delisted from
the AIM market and the shares were cancelled. It has subsequently
re-registered as a private company.

More positively, the end of the year brought an equity realisation of EOTH,
trading as both RAB and Lowe Alpine, with amounts received on completion of
£5.05 million including preference share dividends, generating a realised
gain in the year of £0.36 million. Total proceeds received over the life of
this investment are £6.56 million to date, a 6.9x multiple of cost and an IRR
of 23.2%.  The Company has retained its interest yielding loan stock to
continue to generate income in the future.

Also received in the year were deferred proceeds from Red Paddle and Vectair,
both investments realised in a previous year generating further realised gains
totalling £0.40 million.

During these challenging times, the management of the portfolio is undeniably
critical, and the Investment Adviser has been, and is, focused on deploying
its Talent Management team to support the investments.  Follow-on investments
are expected to remain a significant feature of growth capital investee
companies as they seek to achieve scale and move to profitability. Follow-on
investment requests are always subject to the same scrutiny as new deals and
both rely on certain criteria being met, including the HMRC Financial Health
Test.

In respect of the Financial Health Test, Shareholders should be advised that a
tightening by HMRC of policy and practice in a technical aspect of the VCT
financing rules is now resulting in the restriction of potential follow-on
investments to support certain portfolio companies, where more than half their
subscribed share capital has been lost. In respect of some portfolio companies
this may result in the Company not being able to make follow-on investments
even where a compelling business case exists, which in turn could impact the
prospects of these businesses.  The Board continues to monitor developments
in the interpretation of this area of legislation carefully.

Further details of the Company's investment activity and the performance of
the portfolio are contained in the Investment Adviser's Review and the
Investment Portfolio Summary in the Annual Report.

Since the year-end, the Company has invested a total of £0.75 million into
two new investment companies, Connect Earth and Cognassist in March 2023. Also
following the year-end, again in March 2023, the sale of the Company's
investment in Tharstern Group Limited was completed achieving a 2.6x return
against cost over the life of the investment.

Liquidity & Fundraising

Cash and cash equivalents held by the Company as at 31 December 2022 amounted
to £37.71 million, or 45.1% of net assets.  The Board continues to
prioritise the security and protection of the Company's capital by monitoring
credit risk in respect of its cash and near cash resources.

In January 2022, the Company completed a fundraise of £7.5 million for the
2021/2022 tax year which was fully subscribed in less than 24 hours. This
level of demand was very pleasing although the Board became aware that a
number of investors were not able to subscribe before the fundraise closed and
were therefore disappointed. Later in the year, on considering the future cash
requirements of the Company and the potential demand for the Company's shares,
the Board approved a fundraise for the 2022/23 tax year. Having provided a
period of time between the launch of the prospectus and acceptance of
applications, the Board was pleased that the initial amount of £11 million
(including an over-allotment facility of a further £5 million), launched on 5
October 2022, was fully subscribed by 8 November 2022.   Shares were
allotted on 16 November 2022 and on 6 February 2023 and your Company extends a
warm welcome to both existing and new Shareholders.

The fundraising that was launched in October 2022 was to ensure that the
Company retained adequate levels of liquidity to continue to take advantage of
new investment opportunities, support the existing portfolio, and fund further
expansion of the businesses in its investment portfolio where required. The
funds will also assist the delivery of attractive returns for its
Shareholders, including the payment of dividends over the medium term as well
as to help facilitate share buybacks from those Shareholders who wished to
sell shares.

Further details of the Company's investment activity and the performance of
the portfolio are contained in the Investment Adviser's Review and the
Investment Portfolio Summary in the Annual Report.

Share buy-backs

During the year, the Company bought back and cancelled 1,796,536 of its own
shares (2021: 1,303,349), representing 2.2% of the shares in issue at the
beginning of the year (2021: 1.6%), at a total cost of £1.46 million,
inclusive of expenses (2021: £1.23 million). It is the Company's policy to
cancel all shares bought back in this way. The Board reviews its buyback
policy quarterly and currently seeks to maintain the discount at which the
Company's shares trade at no more than 5% below the latest published NAV.

Shareholder Communications & Annual General Meeting

May I remind you that the Company has its own website which is available at:
www.mig4vct.co.uk (http://www.mig4vct.co.uk) .

Following the well-received virtual Shareholder Event held on 25 February
2022, the Investment Adviser held another successful virtual Shareholder Event
with a live Q&A session on 23 March 2023. Numbers either viewing or
participating online were close to totals attending such events in person
before the Covid pandemic, and a recording is available on the Company's
website for those who were not able to see the event live.

Your Board is pleased to be able to hold the next Annual General Meeting
("AGM") of the Company at 2.30  pm on Wednesday, 24 May 2023 at the offices
of Shoosmiths LLP, 1 Bow Churchyard, London EC4M 9DQ.  The Board is aware
that a number of Shareholders hold shares in the Company and another Mobeus
VCT, Mobeus Income & Growth VCT plc (MIG VCT). To aid Shareholder
attendance at the AGMs of both companies, given the common financial year
ends, the Boards of the companies have decided to hold both AGMs on the same
day with a presentation from the companies' Investment Adviser taking place in
between the two meetings, during which a light lunch will be available. The
MIG VCT AGM will take place earlier on 24 May 2023, commencing at 1.00pm and
will be followed by the joint Investment Adviser presentation at 1.30 pm.
Shareholders are welcome to join us for the Investment Adviser presentation if
not already attending the earlier MIG VCT AGM.

A webcast will also be available from 1.30 pm for those Shareholders who
cannot attend in person. However, please note that you will not be able to
vote at the AGM via this method and you are encouraged to return your proxy
form before the deadline of 22 May 2023. Information setting out how to join
the meeting by virtual means will be shown on the Company's website. For
further details, please see the Notice of the Meeting which can be found at
the end of the Annual Report & Financial Statements.

Votes Against Dis-application of Pre-emption Rights

At the General Meeting of the Company held on 12 October 2022, over 20% of the
votes received were lodged against the composite resolution to approve the
allotment of shares and disapply pre-emption rights to support the 2022/2023
fundraise. It appears that we did not make it sufficiently clear that the
proposed dis-application of the pre-emption rights was in respect of the
fundraise only. The resulting feedback received will be taken into
consideration for future fundraises and communications.

 

The General Meeting resolution was in addition to the already approved
dis-application of pre-emption rights given at the AGM held on 17 May 2022
because the funds being raised under the 2022/23 offer exceeded the previous
authorities obtained and therefore additional shareholder authority was
required as well as providing authority to allot the greater number of shares.

 

As required under the AIC Code of Corporate Governance Code, those
Shareholders that voted against the resolution were contacted to ascertain
their reasons. I thank those Shareholders who responded to my request for
their reasons for voting against the resolution. It became clear that the key
factor was Shareholders' concern about new shareholders being added to the
Register of Members thereby diluting their holding and potential dividend
income. By the issuance of shares to new investors, this:

·    maximises the pool of potential VCT investors thereby increasing the
probability that the full offer amount is raised allowing the Company:

·    to continue to take advantage of new investment opportunities and to
support existing portfolio companies as deemed appropriate; and

·    seeks the delivery of attractive returns for its Shareholders,
including the payment of dividends over the medium-term.

The Board is of the opinion that the benefit to the Company's Shareholders in
having sufficient liquidity to meet its investment objectives and the
potential to generate enhanced returns in the future, as well as the ability
to make dividend payments, greatly outweighs any potential short-term dilutive
impact of individual shareholder returns.

The allotments in November 2022 and February 2023 saw a roughly equal balance
of existing and new investors and all existing Shareholders were able to
subscribe for shares as the Offer remained open for applications from 17
October to 8 November 2022 when it became fully subscribed. A small number of
applicants who applied thereafter were unable to be accommodated in the final
allotment on 6 February 2023.

We will once again, at the Annual General Meeting of the Company, propose a
resolution to dis-apply pre-emption rights although this authority is not
expected to be utilised except in respect of the Dividend Investment Scheme.

 

Fraud Warning

Shareholders continue to be contacted in connection with sophisticated but
fraudulent financial scams which purport to come from or to be authorised by
the Company. This is often by a phone call or an email usually originating
from outside the UK, claiming or appearing to be from a corporate finance firm
offering to buy your shares at an inflated price.

The Board strongly recommends Shareholders take time to read the Company's
Fraud warning section, including details of who to contact, contained within
the Information for Shareholders section of the Annual Report.

Board Composition

At the start of the year under review, the Board comprised four directors
prior to Helen Sinclair's retirement after the AGM in February 2023.  On 1
March 2022, Chris Burke was appointed as a member of both the Audit & Risk
Committee and the Nomination & Remuneration Committees, he was also
appointed as Chair of the Investment Committee. After considering and
reviewing its composition at that time, the Board agreed that the recruitment
of another Non-Executive Director was not necessary.

In the Half-Year Report dated 13 September 2022, I stated my intention to
retire as a director and Chair of the Company following the conclusion of the
Company's Annual General Meeting in May 2023. The Board intends to appoint
Graham Paterson as Chair of the Company to succeed me.  An in-depth third
party led recruitment process commenced at the latter end of the year to
secure a Non-Executive Director to succeed Graham as Chair of the Audit &
Risk and Nomination and Remuneration Committees following the AGM. Having
given careful consideration to the diversity of skills, experience, gender and
background of the wider Board, we were delighted that Lindsay Dodsworth agreed
to join as a director and she was appointed on 1 January 2023.  Lindsay will
stand for election at the forthcoming AGM.

The directors remain committed to increasing diversity of representation and
will take this fully into account alongside the skills required to serve
Shareholders well in the specialist VCT sector for any future appointments.

Environmental, Social and Governance ("ESG")

The Board and the Investment Adviser believe that the consideration of
environmental, social and corporate governance ("ESG") factors throughout the
investment cycle will contribute towards enhanced Shareholder value.

Gresham House has a team which is focused on sustainability and the Board
views this as an opportunity to enhance the Company's existing protocols and
procedures through the adoption of the highest industry standards.

The future FCA reporting requirements consistent with the Task Force on
Climate-related Financial Disclosures, which commenced on 1 January 2021
currently do not apply to the Company but will be kept under review, the Board
being mindful of any recommended changes.

Consumer Duty

The Directors are cognisant of the Investment Adviser's obligations to comply
with the FCA's Consumer Duty rules and principles introduced in 2022 and
coming into force in 2023.

 Companies that are subject to Consumer Duty must ensure they are acting to
deliver good outcomes and that this is reflected in their strategies,
governance, leadership and policies. The Investment Adviser is currently
undergoing a review of its existing practices in order to ensure these fulfil
the Consumer Duty principles. The Company is not directly captured by Consumer
Duty, however we are working together with the Investment Adviser to achieve
the forthcoming obligations.

Outlook

Significant uncertainties lie ahead due to multiple geopolitical and economic
factors, and this was exemplified by the recent rescue of Silicon Valley Bank
(SVB") based in California which had a UK subsidiary. One of the VCT's
portfolio companies had funds deposited with SVB in the UK but these were
unaffected following SVB UK's acquisition by HSBC. The quantum of the
investee's deposit was not material to the overall value of the portfolio.
Nevertheless, across the whole VCT sector and beyond, the event has
underpinned the importance of spreading liquidity risk. Notwithstanding the
foregoing, challenging and uncertain times can give rise to opportunities for
efficient investment into businesses with significant potential for the
future. Further to the successful realisation of EOTH in November, and
Tharstern in March of this year, the exit environment is likely to become more
restrained. This is not seen as a significant issue given that the Company is
not time-limited. The combined impact of high inflation, high interest rates
and Government spending restrictions can be expected to impact both consumer
and business confidence.  We therefore anticipate that further stresses will
become evident across UK-based businesses over the forthcoming year. Your
Company is invested in a diverse portfolio of businesses managed by a
resourceful and professional investment team. Notwithstanding the challenges
already described, the Company is well positioned to take advantage of
investment opportunities to deliver attractive returns over the medium and
longer term.

I would like to once again thank all our Shareholders for their continued
support.

 

Jonathan Cartwright

 

Chair

5 April 2023

 

Investment Adviser's Review

Portfolio Review

In the year to 31 December 2022 many quoted market values have declined
significantly and the current economic conditions continue to create
challenging circumstances. UK business has seen both demand and operating
margins come under pressure in the face of widely reported increases in
inflation, interest rates and the associated threat of recession. The impact
of this is now being seen on consumer confidence and business investment.

In the early half of 2022 portfolio value change was therefore characterised
by declining market multiples with relatively stable company level trading
performance carried over in part by the momentum gained during 2021.
However, in the latter part of 2022 and into 2023, the situation has
reversed.  Markets and multiples appear to be stabilising while value change
has been driven by the challenging economic conditions which have started to
feed through to portfolio company trading performance. The Company's
investment values have been insulated partially from market movements by the
defensive investment structures employed in many of the portfolio companies.
These act to moderate valuation swings and the net result is a more modest
decline in portfolio value.

Whilst inflation is moderating following the rises in base rates, it is still
at a very high level and therefore a recession risk remains in the UK during
2023 - albeit recent comment suggests this may be shallower and shorter than
originally feared.  There are also early signs that supply chains are
returning to normality, that the labour market is easing and that there are
pockets of positive market sentiment. In February 2023, the FTSE 100 index
reached an all-time high, although this should be viewed with caution as many
large companies included in that index generate substantial earnings overseas.
The outlook is therefore mixed, and the emphasis is therefore on robust
funding structures and on being prepared for all foreseeable eventualities.
The Gresham House non-executive directors who sit on each portfolio company
board have responded by working with their boards to ensure that appropriate
scenario planning has been done to achieve the best results during these
uncertain times. There is also now a greater focus on cash management and
capital efficiency. With ample liquidity following the recent fundraise, the
Company is also well placed to support portfolio companies with follow-on
funding where it is appropriate and can be done on attractive terms.

There are some specific highs in the portfolio such as Preservica which
continues to see strong trading and is out-performing budget.  The partial
exit from EOTH was also an excellent result after a long running process which
had to negotiate numerous economic and geo-political hurdles. By contrast,
there were also some significant falls. The largest was at Virgin Wines, where
market sentiment shifted heavily against the whole sector despite Virgin Wines
itself outperforming its peers. MyTutor was also impacted by declining sector
multiples combined with slower than anticipated growth over the year.

During the year, the Company made four new growth capital investments
totalling £2.03 million and made follow-on investments into six portfolio
companies totalling £1.75 million, a breakdown of these is included later in
this Review.  The £2.03 million of new investments represent the Company's
allocated investment share across all six VCTs managed or advised by Gresham
House, including the two Baronsmead VCTs.

Two strong exits were achieved during the year from MBI and EOTH. On MBI, the
Company received a total of £3.98 million in proceeds during the year
generating a realised gain of £0.42 million. For EOTH the Company received a
total of £4.27 million in proceeds during the year producing a realised gain
of £0.36 million and the interest yielding loan stock was also retained.
These were both extremely successful investments which, over their lifetime,
produced returns of 2.2x and 6.9x as a multiple of the original investment
cost.

As well as these successes, it was disappointing that Andersen EV went into
administration towards the end of the year despite securing some large clients
such as Porsche and JLR.  Andersen encountered very difficult trading
conditions with substantially reduced demand, supply chain issues, cost
pressures and the removal of government consumer support for the purchase of
EV chargers. A realised loss of £0.42 million was recognised during the
financial year as a result.

The investment and divestment activity during the year has further increased
the proportion of the portfolio comprised of investments made since the 2015
VCT rule change to 80.0% by value at the year-end (31 December 2021: 63.8%).

The portfolio valuation changes in the year are summarised as follows:

 Investment Portfolio Capital Movement                           2022     2021
                                                                 £m       £m
 Increase in the value of unrealised investments                 1.08     27.19
 Decrease in the value of unrealised investments                 (16.53)  (1.48)
 Net (decrease)/increase in the value of unrealised investments  (15.45)  25.71
 Realised gains                                                  1.18     4.26
 Realised losses                                                 (0.44)   (0.07)
 Net realised gains in the year                                  0.74     4.19
 Net investment portfolio movement in the year                   (14.71)  29.90

The portfolio movements in the year are summarised below:

                                                2022     2021

                                                £m       £m
 Opening portfolio value                        65.58    41.68

 New and follow-on investments                  3.78     6.23

 Disposal proceeds                              (8.70)   (12.23)

 Net investment portfolio movement in the year  (14.71)  29.90

 Portfolio value at 31 December                 45.95    65.58

 

New Investments during the year

The Company made four new investments totalling £2.03 million during the
year, as detailed below:

    Company            Business         Date of        Amount of new

                                        investment     Investment (£m)
    Proximity Insight  Retail software  February 2022  0.61

 

Proximity Insight (proximityinsight.com) is a retail technology business that
offers a 'Super-App' that is used by the customer-facing teams of brands and
retailers to engage, inspire and transact with customers. Headquartered in
London with offices in New York and Sydney, Proximity Insight has a global
client base that includes over 20 brands, boutiques and department stores in
fashion, beauty, jewellery, electronics and homewares. These clients use
Proximity Insight's platform to integrate the lines between physical and
digital retail, enhancing the customer experience and improving the lifetime
value of their customers by upwards of 35%. The business grew annual recurring
revenue by 117% to £2.2 million in 2021, and the investment will support
Proximity Insight's continued product development and international growth.

    Bidnamic  Marketing technology  May 2022  0.48

              business

 

Lads Store Limited, trading as "Bidnamic" (bidnamic.com) is a marketing
technology business that offers a Software-as-a-Service platform for online
retailers to manage their search engine marketing spend. The technology was
all developed internally and uses bespoke machine learning algorithms to
automate the management and optimisation of online retail customers' Google
shopping spend. The ARR of the business has grown substantially over the last
two years and this is projected to continue. The investment round will be used
to further enhance the product's capabilities and drive continued ARR growth
through expanding the sales & marketing team and building a presence in
North America.

    FocalPoint  GPS enhancement     September  0.50

                software provider   2022

 

Focal Point Positioning Limited (focalpointpositioning.com) is a deep tech
business with a growing IP and software portfolio. Its proprietary technology
applies advanced physics and machine learning to dramatically improve the
satellite-based location sensitivity, accuracy, and security of devices such
as smartphones, wearables and vehicles and reduce costs.

   Orri  Specialists in eating disorder support  September 2022  0.44

 

Orri Limited (orri-uk.com) is an intensive day care provider for adults with
eating disorders. Orri provides an alternative to expensive residential
in-patient treatment and lighter-touch outpatient services by providing highly
structured day and half day sessions either online or in-person at its clinic
on Hallam Street, London. Orri opened its current clinic on Hallam Street,
London in February 2019 which provides a homely environment in a converted
4-storey house but which is operating at capacity. The plan sees a larger site
being leased nearby with Hallam Street being used to provide a step-down
outpatient service.

Further investments during the year

A total of £1.75 million was invested into six existing portfolio companies
during the year, as detailed below:

   Company             Business                          Date of                  Amount of further investment (£m)

                                                         investment
   Caledonian Leisure  UK Leisure and experience breaks  January / February 2022  0.22

 

Caledonian Leisure works with accommodation providers, coach businesses and
other experienced providers (such as entertainment destinations and theme
parks) to deliver UK-based leisure and experience breaks to its customers. It
comprises two brands, Caledonian Travel (caledoniantravel.com) and UK
Breakaways (ukbreakaways.com). The domestic leisure and experience travel
market was devastated by the COVID-19 pandemic, but the company was
well-placed to expand as lockdown and travel restrictions eased. A series of
planned investment tranches has helped the company prepare for and capitalise
on the strong demand for UK staycation holidays.

   Northern Bloc  Dairy and allergen-free  April 2022  0.12

                  ice cream producer

 

Northern Bloc Ice Cream (northern-bloc.com) is an established food brand in
the emerging and rapidly growing vegan market. By focusing on chef quality and
natural ingredients, Northern Bloc has carved out an early mover position in
the dairy and allergen-free ice cream sector. The company's focus on
plant-based alternatives has strong environmental credentials as well as it
being the first ice cream brand to move wholly into sustainable packaging.
Following the initial investment in December 2020, Northern Bloc has grown and
strengthened its prospects against a challenging market backdrop. This further
investment provides additional working capital and funds a new production
facility to increase its resilience, flexibility and margins in the future.

   Andersen EV  Premium EV chargers  May 2022  0.24

Muller EV Limited (trading as Andersen EV) (andersen-ev.com) was a design-led
manufacturer of premium electric vehicle (EV) chargers. Incorporated in 2016,
this business secured high profile partnerships with household brands,
establishing an attractive niche position in charging points for the high-end
EV market. This follow-on funding was to further support its premium brand and
product positioning whilst ensuring all new and existing products met the most
recent and highest safety and compliance standards. Unfortunately, external
factors caused its market and trading prospects to worsen rapidly, including
substantially reduced demand, global supply chain issues, inflation and the
removal of government consumer support for the purchase of EV chargers. The
company therefore entered administration before the year-end.

 

   RotaGeek  Workforce management software  June 2022  0.22

 

RotaGeek (rotageek.com) is a provider of cloud-based enterprise software to
help larger retail, leisure and healthcare organisations to schedule staff
effectively. RotaGeek has proven its ability to solve the scheduling issue for
large retail clients effectively competing due to the strength of its
technologically advanced proposition. The company has made significant
commercial progress since the VCTs first investment nearly doubling Annual
Recurring Revenues (ARR). This investment aims to boost ARR and enable the
company to take advantage of further large client opportunities.

   Vivacity  Provider of artificial intelligence & urban traffic control systems      July 2022

                                                                                                                 0.62

 

Vivacity (vivacitylabs.com) develops camera sensors with on-board video
analytics software that enables real-time anonymised data gathering of road
transport system usage. It offers city transport authorities the ability to
manage their road infrastructure more effectively, enabling more efficient
monitoring of congestion and pollution levels as well as planning for other
issues, such as the changing nature of road usage (e.g. the increasing number
of cyclists). The technology and software represent a significant leap forward
for local planning authorities which have traditionally relied upon manual
data collection methods. This new investment will help boost the company's
revenues through development of new functionality to enhance its product suite
which can also be installed into the existing asset base.

 

   Bleach  Hair Colourants brand  August 2022  0.33

 

Bleach London Holdings ("Bleach") (bleachlondon.com) is an established brand
which develops and markets a range of innovative haircare and colouring
products. Bleach is regarded as a leading authority in the hair colourant
market having opened one of the world's first salons focused on colouring and
subsequently launched its first range of products in 2013. This further
investment was part of a wider £5.5 million investment round alongside
existing Shareholders and a strategic partner. The funds will be used to drive
further expansion into the strategically important North American market and
to consolidate the brand's position in the UK.

 

Portfolio valuation movements

Across the portfolio, comparable market multiples that are used as the basis
of valuation have declined over the year, some by over 30%, but the levels at
the year-end reflect a degree of stabilisation over the final quarter of 2022.
Together with several downward revisions to trading forecasts in the latter
half of the year, this has driven a general decline in investee company
values.  As noted, the defensive investment structures used in many of the
portfolio companies serve to moderate the impact of such company value
movements on VCT value. The need to protect and develop value going forwards
in such an uncertain environment underlines the need for portfolio readiness
and planning, robust funding and close monitoring by the Gresham House team.

The main reductions within total valuation decreases of £(16.53) million,
were:

 ·    Virgin Wines           - £(6.89) million
 ·    MyTutor                - £(1.73) million
 ·    Buster and Punch       - £(1.30) million
 ·    Wetsuit Outlet         - £(1.15) million
 ·    Active Navigation      - £(1.01) million

 

Virgin Wines has suffered its sector's negative sentiment notwithstanding the
outperformance of its peers. More recently, it also experienced some short
term operational difficulties particularly in the last quarter of the 2022.
MyTutor's growth has slowed post COVID coupled with a decline in market
multiples. Buster and Punch and Wetsuit Outlet are both consumer facing
businesses that have experienced challenging trading conditions which resulted
in profit downgrades.  ActiveNav has developed a new business line which has
gained significant traction and offers potential but the core business has
grown more slowly than planned which has led to an overall reduction in its
valuation.

The uplifts within the total valuation increase of £1.08 million were:

 

 ·    Tharstern             - £0.44 million
 ·    Bella & Duke          - £0.30 million
 ·    Orri                  - £0.22 million
 ·    Preservica            - £0.12 million

 

Tharstern has continued to deliver strong trading performance. Bella &
Duke has seen improvements in revenues, Preservica continues to build its high
retention, long contract SaaS business, improving recurring revenues year on
year. Orri is performing as planned and the valuation uplift simply reflects
the first time recognition of the preferential investment structure.

 

Portfolio Realisations during the year

 

The Company realised two investments, one of which was a partial realisation,
as detailed below:

 

   Company  Business          Period of investment                         Total cash proceeds over the life of the investment/ Multiple over cost
   MBI      Publishing and events business      January 2015 to June 2022  £6.11 million

                                                                           2.2x cost

 

The Company realised its whole investment in MBI for £3.98 million (realised
gain in the year: £0.42 million) including deferred proceeds received since
completion. Total proceeds received over the life of the investment were
£6.11 million compared to an original investment cost of £2.72 million,
representing a multiple on cost of 2.2x and an IRR of 13.8%.

   Company  Business              Period of investment                                 Total cash proceeds over the life of the investment/ Multiple over cost
   EOTH     Branded clothing (Rab and Lowe Alpine)      October 2011 to November 2022  £6.56 million

                                                                                       6.9x cost

 

The Company realised its equity investment in EOTH for £5.05 million
(realised gain in the year: £0.36 million) including preference dividends.
Total proceeds received to date over the life of the investment were £6.56
million compared to an original investment cost of £0.95 million,
representing a multiple on cost of 6.9x and an IRR of 23.2%. The Company has
retained its interest yielding loan stock investment. Once repaid, this should
increase the multiple on cost to 7.9x.

Loan stock repayments and other gains/(losses) during the year

The Company also received loan repayments totalling £0.05 million from
Jablite Holdings Limited.

In addition, deferred consideration totalling £0.40 million in realised gains
was received in respect of investments realised in a previous year.
Conversely, as discussed earlier, Muller EV (trading as Andersen EV) generated
a realised loss in the year of £(0.44) million.

Portfolio income and yield

In the year under review, the Company received the following amounts in loan
interest and dividend income:

 Investment Portfolio Yield                                                2022   2021
                                                                           £m     £m
 Interest received in the year                                             0.71   0.98
 Dividends received in the year                                            0.93   0.35
 Total portfolio income in the year(1)                                     1.64   1.33
 Portfolio Value at 31 December                                            45.95  65.58
 Portfolio Income Yield (Income as a % of Portfolio value at 31 December)  3.6%   2.0%

 

(1                     ) Total portfolio income in the
year is generated solely from investee companies within the portfolio.

 

New investment made after the year-end

£0.75 million was invested into a new investment after the year-end, as
detailed below:

   Company        Business                     Date of investment  Amount of new investment (£m)
   Connect Earth  Environmental data provider  March 2023          0.25

 

Founded in 2021, Connect Earth (connect.earth) is a London-based environmental
data company that democratises easy access to sustainability data. With its
carbon tracking API technology, Connect Earth supports financial institutions
in offering their customers transparent insights into the climate impact of
their daily spending and investment decisions. Connect Earth's defensible and
scalable product platform suite has the potential to be a future market winner
in the nascent but rapidly growing carbon emission data market, for example,
by enabling banks to provide end retail and business customers with carbon
footprint insights of their spending. This funding round is designed to
facilitate the delivery of the technology and product roadmap to broaden the
commercial reach of a proven product.

   Company     Business                                Date of investment  Amount of new investment (£m)
   Cognassist  Education and neuro-inclusion software  March 2023          0.50

 

Cognassist (cognassist.com) is an education and neuro-inclusion solutions
company that provides a Software-as-a-Service (SaaS) platform focused on
identifying and supporting individuals with hidden learning needs. The
business is underpinned by extensive scientific research and a vast cognitive
dataset. Founded in 2019 by Chris Quickfall, Cognassist has scaled its
underlying business within the education market, enabling apprentices to
unlock government funding and helping diverse minds to thrive. This investment
will empower Cognassist to continue its growth within the education market and
penetrate the enterprise market, where demand for neuro-inclusive solutions to
adequately support employees is rapidly emerging.

Realisations after the year-end

   Company    Business                                       Period of investment     Total cash proceeds over the life of the investment/Multiple over cost:
   Tharstern  Software based management information systems  July 2014 to March 2023  £3.01 million / 2.6x cost

 

The Company realised its investment in Tharstern Group for £2.14 million.
Total proceeds received over the life of the investment were £3.01 million
compared to an original cost of £1.16 million, representing a multiple on
cost of 2.6x and an IRR of 15.0%.

 

Environmental, Social and Governance considerations

The Board and the Investment Adviser believe that the consideration of
environmental, social and corporate governance ("ESG") factors throughout the
investment cycle should contribute towards enhanced Shareholder value.

The Investment Adviser has a team which is focused on sustainability as well
as the Investment Adviser's Sustainability Committee who provide oversight and
accountability for the Investment Adviser's approach to sustainability across
its operations and investment practices.  This is viewed as an opportunity to
enhance the Company's existing protocols and procedures through the adoption
of the highest industry standards. Each investment executive is responsible
for setting and achieving their own individual ESG objectives in support of
the wider overarching ESG goals of the Investment Adviser.  The Investment
Adviser's Private Equity division has its own Sustainable Investment Policy,
in which it commits to:

•             Ensuring its team understands the imperative for
effective ESG management and is equipped to carry this out through management
support and training.

•             Conduct regular monitoring of ESG risks,
opportunities and performance in its investments.

•             Incorporate ESG into its monitoring processes.

Outlook

With inflation, political uncertainty and the threat of recession impacting
consumer confidence and business investment, the number of UK businesses
experiencing financial stress is set to increase. This will impact all sectors
and businesses to varying degrees and may present attractive opportunities for
a selective investor with the advantage of being able to take a longer-term
view such as your Company.  However, the economic backdrop will also impact
our existing portfolio companies and would present a challenge to less
experienced management teams and their advisers.  Markets are volatile and
uncertain and business planning is acutely difficult.  As such, the
experience of seasoned investment managers will be increasingly important in
the coming year as they seek to support their portfolio management teams in
navigating through some particularly challenging short-term trading
conditions. In this respect, Gresham House feels well placed in having one of
the largest and most experienced portfolio teams in the industry with an
average of over  18  years relevant industry experience. The Company has ample
liquidity to provide further support to its portfolio businesses through this
period and is keen to make such investments where there is a commercial case
to do so over the medium to long-term.

 

Gresham House Asset Management Limited

 

Investment Adviser

5 April 2023

 

Annual General Meeting

The AGM will be held on Wednesday, 24 May 2023 at the offices of Shoosmiths
LLP, 1 Bow Churchyard, London EC4M 9DQ and will also be webcast for those
Shareholders who are unable to attend in person. Details of how to join the
meeting by virtual means will be shown on the Company's website. Shareholders
joining virtually should note you will not be able to vote at the meeting and
therefore you are encouraged to lodge your proxy form.  For further details,
please see the Notice of the Meeting which can be found at the end of the
Annual Report & Financial Statements.

 

Further Information

The Annual Report and Accounts for the year ended 31 December 2022 will be
available shortly on Mobeus Income & Growth 4 VCT plc
(https://www.mobeusvcts.co.uk/investor-area/vct-investors/mobeus-income-growth-4-vct-plc)
.

It will also be submitted shortly in full unedited text to the Financial
Conduct Authority's National Storage Mechanism and will be available for
inspection at data.fca.org.uk/#/nsm/nationalstoragemechanism
(file:///C%3A/Users/b.onanuga/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/7ZS900ED/data.fca.org.uk/#/nsm/nationalstoragemechanism)
in accordance with DTR 6.3.5(1A) of the Financial Conduct Authority's
Disclosure Guidance and Transparency Rules.

 

Contact

Gresham House Asset Management Limited

Company Secretary

mobeusvcts@greshamhouse.com

+44 20 7382 0999

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