The Lemon Fool

Mobeus have reinstated Dris for "The income and growth VCT " but not MIG4. They have changed the rules so that DRIS share price is at NAV not 10% discount to NAV as was the case previously. This, of course, is fairer for non DRIS participant shareholders. I will continue to participate in every DRIS as it gives a slight benefit in purchase costs and gives me fine control ( ie not £5K + lump sums) over my overall VCT investment as my tax liability beomes clearer as the year progresses. If I have over estimated my tax liability I can always cancel DRIS at short notice at the end of the tax year for those that pay dividend at that time.
Is it only BSC that continues to run DRIS at discount to NAV?

cprof wrote:Mobeus have reinstated Dris for "The income and growth VCT " but not MIG4. They have changed the rules so that DRIS share price is at NAV not 10% discount to NAV as was the case previously. This, of course, is fairer for non DRIS participant shareholders. I will continue to participate in every DRIS as it gives a slight benefit in purchase costs and gives me fine control ( ie not £5K + lump sums) over my overall VCT investment as my tax liability beomes clearer as the year progresses. If I have over estimated my tax liability I can always cancel DRIS at short notice at the end of the tax year for those that pay dividend at that time.
Is it only BSC that continues to run DRIS at discount to NAV?

The paucity of replies, cprof, indicates that no-one can think of any other than the BSC and BSV VCTs that issue DRIS shares at a discount to NAV - certainly I can't.

Your approach to the DRIS is much the same as mine - except that I have pulled out of these two because I don't think the way they are running things is worthy of more investment despite the tax relief. Left only with AMATI, some Albion VCTs and a few NVT because I couldn't find the certificates when I transferred most into a nominee account.

The discounted DRIS was, for me, a plus point for my investments in Mobeus 4 and Income & Growth, so I was disappointed to see these offers disappear. Its replacement in I&G with a NAV DRIS is less attractive, but I suppose it is still cheaper than the NAV +2.5% on new offers. I have three years before I can sell my major holding in I&G (and keep the tax return), but with the uncertainties of returns under the new regulations, I'm not sure if I'll re-invest in I&G (after a further 6 month wait). Maybe better to forget about the DRIS - I'll mull it over

The reinstated I&G DRIS terms are clearly worse than the old deal, but still well worth going for, in my view. Mobeus are still a top performing group of VCTs.

Note that two other Mobeus VCTs have just declared a SD, presumably after - and directly as a result of - the disposal of Red Line. I was surprised that I&G did not make a similar announcement last Friday, especially given the fact that it has been quite tight on dividends this year. In principle, I take the view that portfolio gains should be distributed to current holders, rather than being used as an incentive for new investors. I hope to see a SD announcement for I&G tomorrow or soon after.

james188 wrote:The reinstated I&G DRIS terms are clearly worse than the old deal, but still well worth going for, in my view. Mobeus are still a top performing group of VCTs.

Note that two other Mobeus VCTs have just declared a SD, presumably after - and directly as a result of - the disposal of Red Line. I was surprised that I&G did not make a similar announcement last Friday, especially given the fact that it has been quite tight on dividends this year. In principle, I take the view that portfolio gains should be distributed to current holders, rather than being used as an incentive for new investors. I hope to see a SD announcement for I&G tomorrow or soon after.

I'm puzzled by these new dividend announcements made on 13th December of 4p per share to Mobeus (MIX), and Mobeus 4 (MIG4), but not to Mobeus 2 (MIG) or Income And Growth (IGV). It looks as if there has been a substantial disposal which has happened very recently - since in MIG4 there will now be a planned dividend of 2p on 30th December, followed by the additional 4p on 10th January.
You have suggested that the sale of Redline may be the cause. Looking at the MIG4 half-year report to 30th June, I see that the book cost of Redline is 838,377 but its valuation is only 417,340. It also states that this amounts to 6.7% of Redline's equity.
I see that Redline has been sold for £8M, with an additional £2M to be returned later. Looking at 6.7% of £8M, I get £536,000 - which is a bit more than the valuation, so there has been some gain since June, but still an overall loss - even when the additional £2M is returned. Now assuming that the entire amount of £536,000 is returned to MIG4's 67M shareholders, this amounts to 0.8p per share.
The holdings of Redline in all four of the Mobeus VCTs are of a similar magnitude - so I would have expected a similar amount.
Something doesn't add up - has there been another disposal? Or are my calculations wonky?

Scotia,

I suspect that the answer is that the Mobeus VCTs achieved a price well in excess of the last published valuations (which has often been the case with Mobeus disposals). I have not done the maths, but the press release refers to the disposal realising a return of 1.9x investment cost. I am not aware of any recent disposals.

james188 wrote:Scotia,

I suspect that the answer is that the Mobeus VCTs achieved a price well in excess of the last published valuations (which has often been the case with Mobeus disposals). I have not done the maths, but the press release refers to the disposal realising a return of 1.9x investment cost. I am not aware of any recent disposals.

OK - it looks like the figure of 6.7% in the Mobeus 4 report for the percentage of equity held in Redline is wrong. The percentage appears to be substantially higher.
The 4 Mobeus Groups reported an investment total of 3.7M in Redline on 1/3/2016. This remains the cost held in the books of the VCTs. The valuations amount to about half of this - so it looks like it was substantially undervalued, since Mobeus are now reporting a 1.9 times return on cost.
At 1.9 of 3.7M we have 7.03M out of a sale price of 10M, so it looks like overall Mobeus owned 70% of Redline.
Now using this figure of 1.9 on cost, and returning through the Mobeus reports, this seems to amount to between 1.96p (MIX) to 2.7p (MIG) per share with IGV and MIG4 in between. And these are the figures two years from now when the sale is complete. Currently only 80% of these values will be received as cash. The 4p dividends look suspiciously large!

scotia wrote:OK - it looks like the figure of 6.7% in the Mobeus 4 report for the percentage of equity held in Redline is wrong.

Without having checked the RNS, the report, the history, or google, I can only speculate.

Could the apparent discrepancy you're seeing be due to the 6.7% being voting equity, while the £ sum includes also debt or some other equity class? Or somesuch?

As for 4p looking large? Well, erm, yes, Mobeus - like many VCTs - has been returning capital and eroding NAVs for some years.

UncleEbenezer wrote:Could the apparent discrepancy you're seeing be due to the 6.7% being voting equity, while the £ sum includes also debt or some other equity class? Or somesuch?

Yes - Mobeus 4 was the only one of the Mobeus VCTs which quoted the percentage equity, so I couldn't cross-check. And in Redline there seem to have been different classes of equity, so your supposition on debt or equity class may be correct. Which I suppose indicates how useless the figure was in the Mobeus 4 reports. And yes - it looks like Mobeus (MIX) and Mobeus 4 (MIG4) are handing back capital from other sources as well as Redline. So far Mobeus 2 (MIG) and Inc&Growth (IGV) have made no similar announcements.
The strange feature about MIG4 is that they announced on 27th November that a 2p dividend would be paid (on 30th Dec), then on 13th December they announced a further 4p Dividend to be paid on 10th January. In the first of these announcements, they must have made a calculation of what size of Dividend should be paid - and concluded 2p. But two weeks later they propose a further 4p, yet it seems that the Redline sale will only produce about 2p at the moment - and that is all capital, not gain. So what happened in the two weeks between the announcements that convinced them that another 2p (from a source other than Redline) should also be paid on 10th January? Were they just so happy after a well-oiled Christmas party that they felt the need to increase their generosity? I remain puzzled.

I received my confirmation today for the Mobeus VCT Shareholder Event next Tuesday 4th February. Very much looking forward to it. It's a change of venue - previously Royal Institute of British Architects (RIBA), now The National Gallery. I hope the catering is as good as it was at previous events at RIBA.

Any other Lemon Fools going along?

Gostevie

I attended the evening seminar last night. Excellent venue and more thought provoking commentary from both speakers and audience than at many such events.

Some points of interest:

1. MIG4 board are actively considering reopening the DRIS but no decision announced yet. The suggestion was that if reinstated it would be on similar terms to Income & Growth. The other two VCTs will continue to not offer DRIS.

2. Mobeus agreed the valuations of potential new investments are often stretched and were at pains to say they will walk away from otherwise good propositions.

3.Linked to this was some pointed commentary on valuation in the industry, no names mentioned but the strong suggestion that some VCTs are on racy valuations. The advice was to judge VCTs by comparing valuations against subsequent realisations achieved, and that now more than ever selecting the right VCT to invest in is a key part of the investment decision.

4. Redline was indeed in the books at a provision to cost not long before its sale at 1.6x cost, which was a consequence of an approach from a trade buyer who had previously bid for the business, rather than a planned exit. So good luck or good networking depending on your point of view.

5. A number of vocal members of the audience pushed hard for merger of the VCTs and Mark Wignall undertook to reflect and possibly consult shareholders more widely. The issue has been considered with the boards annually but the cost savings weren’t considered sufficient to trigger a change. I am less concerned about this, I’d rather get the investment right and the structure decision wrong than the other way round.

6. A slide with a league table of VCT performance showed Mobeus in a very favourable light, although I suspect the time periods selected (1 and 10 years) may have presented better than the more common 3 or 5 year figures. The 1 year figures suggested that last year wasn’t a good year for VCT returns at all. Even within the “top ten” of the league table there were VCTs returning 6-7% and most of the favourites of recent years (other than Mobeus!) notable by their absence. Nothing wrong with returns of 6-7% pa of course, but I’d look for more if taking the risk associated with early stage investments.

At 14th February 2020 an RNS was issued for each of the 4 Mobeus VCTs stating the uplifts to NAV due to three disposals.
These disposals are Turner Topco trading as Auction Technology Group, Pattern Analytics trading as Biosite and Redline Worldwide.
The uplifts to NAV are:-
Mobeus Income & Growth +3.92p
Mobeus Income & Growth 2 +4.49p
Mobeus Income & Growth 4 +3.91p
The Income & Growth +3.04p

At 14th February 2020 an RNS was issued for each of the 4 Mobeus VCTs stating the uplifts to NAV due to three disposals.
These disposals are Turner Topco trading as Auction Technology Group, Pattern Analytics trading as Biosite and Redline Worldwide.

Indeed, and this increase in NAV/share does not seem to be reflected in the market prices and there has been no increase in the share price for three of the four VCTs since these announcements (Mobeus I&G2 has since been marked up by 1p/share)

Mobeus will be delivering an investor presentation on Tuesday 15th December 2020 (17:00 - 18:00) , see link below:

Note: you will need to pre-register to attend:

https://www.sharesoc.org/events/shareso ... mber-2020/

In 2020 so far, the Mobeus VCTs have made two new and four follow-on investments, totalling more than £20m, and exited four businesses, generating over £60m of cash profits. The presentation will tell the story of how the Mobeus VCTs have fared over the unprecedented turbulence of the last 12 months.

If you check out the AIC performance tables (last upate 30th Nov), I see that their VCTs now account for four out of the top seven places of the generalist VCTs ranked by ten year performance and all four of the top four places ranked by five year performance

5 year performance: https://i.postimg.cc/28grNxDB/VCT-5-yea ... h-2020.png

AIC VCTs tables: https://www.theaic.co.uk/aic/find-compa ... t&manager=

timbo003 wrote:If you check out the AIC performance tables (last upate 30th Nov), I see that their VCTs now account for four out of the top seven places of the generalist VCTs ranked by ten year performance and all four of the top four places ranked by five year performance

5 year performance: https://i.postimg.cc/28grNxDB/VCT-5-yea ... h-2020.png

AIC VCTs tables: https://www.theaic.co.uk/aic/find-compa ... t&manager=

And Baronsmead just scrape into the top twenty, while Northern doesn't quite make the top twenty.
Changed Times! A few years ago you would (metaphorically) be bowled over in the rush to get new issues from this pair

..................but see this afternoon's Northern results!

127tolmers wrote:..................but see this afternoon's Northern results!

Clearly Northern acted quickly on my derogatory comments. No similar action (yet) from Baronsmead

https://www.investegate.co.uk/baronsmea ... 56165231H/

https://www.investegate.co.uk/baronsmea ... 00085228H/

Some recovery by Baronsmead but not Northern-like.

Today I expected a dividend from Mobeus Income & Growth 4 VCT into my Bank account - where dividends have normally been received since 28/5/19, up to and including the last dividend of 7/5/20. Previous to these dividends, I had signed up for DRIS re-investments, until Mobeus 4 ceased their DRIS scheme. Since I am trying to simplify my investment affairs (at my wife's request - due to our age), I have cancelled all of my DRIS requests, but there was no need to cancel the Mobeus 4 scheme, since Mobeus 4 had ceased it.

So today I was puzzled by the non arrival of the dividend, and I logged into Signal Shares (the old Capita site of less-than-fond memory), and discovered that I was signed up for DRIS, which Mobeus 4 appears to have resurrected. I emailed Signal Shares from the account and informed them that I had not requested my DRIS to be resurrected, and I requested them not to issue the shares, but to send the dividend to my bank. However I then learned that they might look at my email within 5 days - so I have no hope that will happen. So I tried the phone - and after lots of music I finally made contact with a human being. I explained the problem, but before I received any response I was dropped out into a Satisfaction Survey. I tried to go for Selection 4 - extremely unsatisfactory - but it kept repeating it couldn't understand my response. Eventually it dropped the line.

So who is to blame? I started back looking through Mobeus 4 RNS - and found the announcement of the DRIS recommencement in a note of 16th April 2020, to recommence on 2nd June 2020 (after the previous dividend of 7/5/20). The conditions were changed - the shares would be issued at NAV - i.e. the discount of the previous scheme was dropped. And it appears that shareholders in the previous scheme were automatically enrolled in the new scheme. The wording of this is slightly ambiguous:-

Current participants who wish to continue participating in the Scheme do not need to take any action.

I'm not aware that I received any communication which asked if I wanted such a change. But I suppose if I fully read all of the issued RNS I would have known. Yet another reason why my wife wants me to tidy up (i.e. get rid of) all of our VCT investments.

Update - I received an email response yesterday from Link Group stating:-

I can confirm that you have been signed up for dividend reinvestment since June 2015.
Since 2019, the company had suspended the reinvestment scheme, hence the dividends were being paid to your bank account instead of being reinvested.
I have passed your query to our Dividends team for actioning.

and a further email

Please find attached a DRIS revocation form for completion and return by post to the office address below

I suppose that response was to be expected - although I think that re-starting the Mobeus 4 DRIS scheme with significantly poorer conditions should have required an enquiry as to whether or not I wished to take up the new offer.