Interim / Quarterly Report • Jul 31, 2010
Interim / Quarterly Report
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Unaudited Half-Yearly Report for the six months ended 31 July 2010
The objective of Matrix Income & Growth 4 VCT plc ("the Company" or "MIG4") is to provide shareholders with an attractive investment return, principally by maximising the stream of dividend distributions from the income and capital gains generated by a portfolio of investments in a wide variety of unquoted companies in the UK.
The portfolio comprises a number of diverse investments over a wide range of different business sectors, thus spreading risk by avoiding overconcentration in any one sector.
As at 31 July 2010
Increase of 4.3% in net asset value (NAV) over the six month period
Increase of 4.8% in total shareholder return (share price basis) over the six month period
Increase of 5.4% in total shareholder return (net asset value basis) over the six month period
| Net assets (£million) |
Net assets value (NAV) per share (p) |
NAV total return to Shareholders since launch (p)2 |
Share price (p)1 |
Share price total return to Shareholders since launch per share (p)2 |
|
|---|---|---|---|---|---|
| Six months ended 31 July 2010 |
23.3 | 110.9 | 128.6 | 95.5 | 113.2 |
| Six months ended 31 July 2009 |
21.1 | 105.1 | 119.8 | 82.0 | 96.7 |
| Year ended 31 January 2010 |
21.2 | 106.3 | 122.0 | 92.3 | 108.0 |
| 31 January 2009 | 21.0 | 104.6 | 118.3 | 92.0 | 105.7 |
| 31 January 2008 | 24.1 | 117.4 | 128.9 | 109.0 | 120.5 |
| 31 January 2007 | 9.8 | 116.3 | 125.2 | 91.0 | 101.7 |
| 31 January 2006 | 9.3 | 106.6 | 115.0 | 85.0 | 93.9 |
1 Source: London Stock Exchange
2 Total returns to Shareholders include dividends paid
In the graph below, the NAV and share price total returns to Shareholders comprise the NAV and share price respectively assuming the dividends paid were re-invested on the date on which the shares were quoted ex-dividend in respect of each dividend. The figures have been rebased to 100 at 31 July 2005.
Source: Matrix Corporate Capital LLP
The tables below show the NAV total returns at 31 July 2010 for a Shareholder that invested £10,000 in the different fundraisings undertaken by the Company:
| Tax year ended 5 April |
Issue price per share (p) |
Number of shares held |
Net asset value (NAV) at 31 July 2010 (£) |
Dividends paid to Shareholder since subscription (£) |
NAV total return to Shareholder since subscription (£) |
Profit/ (loss) before income tax relief (£)3 |
|---|---|---|---|---|---|---|
| 1999 & 2000 |
200.01 | 5,000 | 5,545 | 885 | 6,430 | (3,570) |
| 2007 | 119.92 | 8,340 | 9,249 | 584 | 9,833 | (167) |
| 2010 & 2011 |
112.4 | 8,896 | 9,866 | 178 | 10,044 | 44 |
Original investment at 100p per ordinary share of 5p each, converted on a 2 for 1 basis to ordinary shares of 1p each in October 2006. 2 Average issue price of shares.
3 NAV total return minus initial investment cost (before tax relief).
| Tax year ended 5 April |
Income tax relief |
Cost net of income tax relief (£) |
Net asset value (NAV) at 31 July 2010 (£) |
Dividends paid to Shareholder since subscription (£) |
NAV total return to Shareholder since subscription (£) |
Profit/ (loss) after income tax relief (£)2 |
|---|---|---|---|---|---|---|
| 1999 & 2000 |
20%1 | 8,000 | 5,545 | 885 | 6,430 | (1,570) |
| 2007 | 30% | 7,000 | 9,249 | 584 | 9,833 | 2,833 |
| 2010 & 2011 |
30% | 7,000 | 9,866 | 178 | 10,044 | 3,044 |
1 Additional capital gains tax deferral relief of up to £4,000 available to qualifying shareholders.
2 NAV total return minus cost net of income tax relief.
The data for the initial fundraising above includes the period up to1 August 2006, when the Company used three investment advisers. The two subsequent fundraisings have been solely managed by Matrix Private Equity Partners LLP.
I am pleased to present the Company's Half-Yearly Report for the six months ended 31 July 2010.
As at 31 July 2010 the Company's NAV per Ordinary Share was 110.9 pence (31 January 2010: 106.3 pence) an increase of 4.3% over the six month period. This compares with a decline of 0.9% in the FTSE SmallCap capital return (CR) Index and a rise of 2.7% in the FTSE All-Share AiM CR Index.
This result combines an element of recovery leading to increased value in some of the portfolio companies, together with the tendency for unquoted asset portfolios to lag the trends seen in the main quoted indices.
Cumulative dividends paid to date amount to 17.7 pence per Ordinary Share.
Quoted markets have remained volatile during the six months under review with sector price earnings multiples (by reference to which unquoted investments are often valued) varying accordingly.
Overall, the portfolio showed a net increase of £1.4 million over the six month period. The significant contributors to this increase were Monsal, ATG Media, Focus Pharma, British International and Racoon.
Monsal's current valuation is based on the price paid in July for an equity stake of 26% for an investment of £4 million by Four Winds Capital Management. Four Winds specialises in providing funding for the global commodities and natural resources sectors. ATG Media and Focus Pharma are reporting better results than budgeted whilst British International has benefited from an oil exploration contract in the Falklands. Racoon has improved its profitability through more focused marketing expenditure.
Stortext FM was disposed of for cash proceeds of £465,079, a loss of £96,741. DiGiCo Europe made a partial loan repayment of £74,745 in June, as well as paying a dividend of 18p per share received shortly after the period end. Two very small follow-on investments were made in sparesFinder and Monsal.
Cash and liquidity fund balances as at 31 July 2010 amounted to £7.4 million.
The Board has declared an interim capital dividend of one penny per share for the year ending 31 January 2011, payable on 5 November 2010 to Shareholders on the register on15 October 2010.
The revenue return for the six months to 31 July 2010 was £37,186 (after tax) or 0.18p per share. This compares to a loss of £14,420 in the six months to 31 July 2009. Income has been improved by the receipt of loan stock interest from Westway, CB Imports and Iglu.com. This is against the backdrop of six investee companies being unable to service their loan stock interest due to bank covenant breaches. As a result, £401,422 of loan interest is not being recognised at this time. The Investment Manager expects servicing of these loans to resume in some cases while in others value may not be recovered or received only on realisation.
DiGiCo declared a maiden dividend, which resulted in a payment of £69,574 to the Company, received shortly after the period end. VSI also paid a small preference share dividend during the period.
Interest received from money market funds continues to be low, at an average of around 0.5%.
Investment Management expenses have increased by approximately £26,000 in total compared to 2009, due to the increase in net assets and as a result of funds raised under the Top-up Offer earlier this year. Other expenses have increased by around £41,000, following an adjustment to the accounting treatment of trail commission and fees relating to the recruitment of a new director.
During the six months ended 31 July 2010 the Company continued to implement its buy-back policy and bought back 436,053 Ordinary Shares, representing 2.18% of the shares in issue as at 1 February 2010 at a total cost of £405,046. These shares were subsequently cancelled by the Company.
The Board regularly reviews its buyback policy and, given the less volatile outlook for valuation bases, has undertaken to reduce the discount to NAV at which the Company Shares trade. At 24 September 2010, the mid market price for the Company's shares was 96.0 pence, representing a discount of 13.4% to the NAV prevailing at 31 July 2010.
1,479,320 new Ordinary Shares were allotted under the top-up offer which closed on 3 April 2010. A total of £1.60m before expenses was raised.
Much debate is currently taking place over whether the UK economy will enter a double dip recession. What is certainly clear is that the imprudent stewardship of the nation's finances by the previous government means that putting the UK economy back on a sound basis will be a painful, and probably long, exercise. Although this Fund invests in profitable companies, and is not investing in technology high risk start-ups, companies which are in most cases at a relatively early stage in their growth will be challenged by the anticipated testing economic environment over the coming winter. On the other hand, it is very encouraging to be able to report that the majority of companies in the portfolio continue to trade profitably and a number are reporting results ahead of budget.
The Company continues to retain a significant cash position, having correctly limited investment during the downturn. The unquoted sector is beginning to see a return to more active levels, and it is hoped that a number of attractive investment opportunities will be identified in the short term.
In summary, your Board is encouraged by the Portfolio showing resilience, and promise in difficult conditions.
For the reasons outlined above, the Company will be participating in a blanket fundraising with Matrix Income & Growth VCT plc and The Income & Growth VCT plc which will be launching later this year. The funds raised will bolster the Company's strong cash position to capitalise on new investment opportunities and spread running costs on a larger asset base. Details of the offer will be posted to Shareholders shortly.
As advised in the last annual report, the new provisions of the AIC Code and the revised listing rules for VCTs come into effect this month. As a result I am resigning as Chairman on 27 September 2010 and Christopher Moore will be appointed as my successor. I am pleased to report that on 1 August 2010 Andrew Robson was appointed to the Board and will take over the role of Chairman of the Audit Committee at the end of this month. Andrew is a qualified Chartered Accountant who has wide City experience which includes private equity investment. He is also a director of British Empire Securities & General Trust plc, Shires Income plc, M&G Equity Investment Trust plc and J P Morgan Smaller Companies Investment Trust plc.
May I remind you that the Company has its own website which is available at www.mig4vct.co.uk.
On conclusion of my tenure as Chairman may I once more thank Shareholders for their continued support which has always made my task, and indeed that of the other members of the Board, so much easier. I would also like to thank the partners and members of Matrix Private Equity Partners, together with the Fund's accounting and legal advisers, for their advice, guidance and support during the period of my Chairmanship. MIG 4 is currently in a healthy position and I am very confident that the new Board, under Christopher Moore's leadership, will successfully guide the Company through the difficult economic times we currently face.
Chairman 24 September 2010
In accordance with Disclosure and Transparency Rule (DTR) 4.2.7, the Board confirms that the principal risks and uncertainties facing the Company have not materially changed since the publication of the Annual Report and Accounts for the year ended 31 January 2010. The Board acknowledges that there is regulatory risk and continues to manage the Company's affairs in such a manner as to comply with section 274 Income Tax Act 2007.
The principal risks faced by the Company are:
A more detailed explanation of these can be found in the Directors' Report on pages 23 – 24 and in Note 20 on pages 63 – 70 of the Annual Report and Accounts for the year ended 31 January 2010 copies of which are available on the VCT's website, www.mig4vct.co.uk.
In accordance with DTR 4.2.10 the Directors confirm that to the best of their knowledge:
Policy, Investment Manager's Review and the Investment Portfolio Summary includes a fair review of the information required by DTR 4.2.7 being an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements.
This report may contain forward looking statements with regards to the financial condition and results of the Company, which are made in the light of current economic and business circumstances. Nothing in this report should be construed as a profit forecast.
On behalf of the Board
Chairman 24 September 2010
The Company's policy is to invest primarily in a diverse portfolio of UK unquoted companies. Investments are structured as part loan and part equity in order to receive regular income and to generate capital gains from trade sales and flotations of investee companies.
Investments are made selectively across a number of sectors, primarily in management buyout transactions (MBOs) i.e. to support incumbent management teams in acquiring the business they manage but do not yet own. Investments are primarily made in companies that are established and profitable.
The Company has a small legacy portfolio of investments in companies from its period prior to 1 August 2006, when it was a multi-manager VCT. This includes investments in early stage and technology companies.
The Company's cash and liquid resources may be invested to maximise income returns in a range of instruments of varying maturity, subject to the overriding criterion that the risk of loss of capital be minimised.
The companies in which investments are made must have no more than £15 million of gross assets at the time of investment to be classed as a VCT qualifying holding. The £14.9 million of Funds raised by the Company after 6 April 2006 are subject to a £7 million gross assets test for an investment to be VCT qualifying.
The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HMRC. Amongst other conditions, the Company may not invest more than 15% of its investments in a single company and must have at least 70% by value of its investments throughout the year in shares or securities comprised in VCT qualifying holdings, of which a minimum overall of 30% by value must be ordinary shares which carry no preferential rights. In addition, although the Company can invest less than 30% of an investment in a specific company in ordinary shares it must have at least 10% by value of its total investments in each VCT qualifying company in ordinary shares which carry no preferential rights.
The Company initially holds its funds in a portfolio of readily realisable interest bearing investments and deposits. The investment portfolio of qualifying investments is built up over a three year period with the aim of investing and maintaining at least 80% of net funds raised in qualifying investments.
Risk is spread by investing in a number of different businesses across different industry sectors. To reduce the risk of high exposure to equities, each qualifying investment is structured using a significant proportion of loan stock (up to 70% of the total investment in each VCT qualifying company). Initial investments in VCT qualifying companies are generally made in amounts ranging from £200,000 to £1 million at cost. Normally, no holding in any one company will represent more than 10% (but in any event will not be greater than 15%) of the value of the Company's investments, based on cost, at the time of investment. Ongoing monitoring of each investment is carried out by the Investment Manager, generally through taking a seat on the board of each VCT qualifying company.
The Company aims to invest in larger, more mature unquoted companies through investing alongside the three other VCTs advised by the Investment Manager with a similar investment policy. This enables the Company to participate in combined investments advised on by the Investment Manager of up to £5 million.
The Company has no current plans to undertake any borrowing.
The Board has overall responsibility for the Company's affairs including the determination of its investment policy. Investment and divestment proposals are originated, negotiated and recommended by the Investment Manager and are then subject to formal approval by the Board of Directors. Matrix-Securities Limited provides Company Secretarial and Accountancy services to the Company.
The six months to 31 July 2010 have continued to be challenging, both for new investment and achieving exits. The recent political uncertainty and slow recovery from recession have meant that companies have been reluctant to market their businesses for sale or raise new capital. However, now that the coalition Government has set out its plans for reducing the budget deficit, business owners should now have the clarity they need to plan for the future. We are hopeful, therefore, that a greater number of more attractively priced opportunities will come forward.
Those deals that we have found sufficiently attractive have been difficult to complete. We have remained cautious and continue to be highly selective in the companies that we consider.
The MPEP-invested portfolio at 31 July 2010 comprised twenty-eight investments with a cost of £15.7 million and a valuation of £16.1 million. On a like-for-like basis the value of the portfolio has increased by 10.2% in the first six months of the year.
The uplift in value principally derives from the improved performance of four companies; ATG Media, Focus Pharma, British International and Racoon; and a third party investment in Monsal.
ATG Media has seen its core magazine business perform ahead of budget, partly due to increased sales and also an increase in advertising revenues. Its online auction technology continues to grow and is also performing ahead of budget. Focus Pharma is also seeing increased success and expects to be materially ahead of its budget for the year. British International has returned to historic levels of profitability after a disappointing year in 2009. It continues to supply helicopter support to the drilling rig stationed in Falkland Islands' waters. Racoon has improved its profitability through a more focussed marketing expenditure.
Monsal successfully completed a second fundraising that brought in a new investor, FourWinds Capital, which has invested £4 million at a valuation significantly above our original cost and previous valuation. Matrix VCTs received a repayment of their recent loan stock investment and made small purchases of shares, MIG 4 receiving back £70,475 and investing £1,717 for further shares. FourWinds Capital has also committed a further £10 million to finance other business opportunities for Monsal.
DiGiCo continues to grow its business and generate strong profits. This has been driven by a strong product offering and development of new innovative products. In June, DiGiCo repaid £69,565 of loan stock plus a premium of £5,180 and paid a dividend of 18p per share to its shareholders.
CB Imports, Iglu.com and Westway have all made strong starts since investment and are all performing ahead of their investment plans. CB Imports and Iglu continue to be held at cost, having been completed in December 2009, although we expect to see increased valuations going forward.
The six acquisition companies continue to seek investments in their chosen sectors but have not yet found sufficiently attractive investments at the right price.
In June, BG Consulting and Duncary 4 completed a restructuring, with your Company's investment transferring to a new holding company, Duncary 8 Limited. Despite challenging trading conditions, BG Consulting has been trading ahead of its budget. This, and the restructuring, have resulted in an increase in value although the investment still remains below cost.
As reported in the Annual Report, Stortext FM was successfully sold in February for cash proceeds of £465,079 plus loan notes in Box-It Data Management Limited of £25,759. Box-It continues to trade satisfactorily although no value has as yet been attributed to the loan notes.
Whilst the building and construction sector has continued to suffer from sluggish demand, those portfolio companies with direct exposure to this sector, Blaze Signs, Plastic Surgeon, PXP and Youngman, are all performing steadily. We have worked with these and other portfolio businesses and encouraged them to make the changes necessary to ensure they are in the best possible position to withstand this period of economic uncertainty. It is a measure of this effort that hardly any additional funding has been required during the past two years.
Despite a recent trading update which was only slightly behind market expectations, Legion Group requested a suspension of its shares pending clarification of its working capital position in July. Unfortunately, it was unable to agree a repayment plan with a major creditor and the business was placed into administration shortly after the period-end.
The investments previously made by Elderstreet are trading behind their budgets and their valuations have reduced accordingly. Cashfac has, however, increased its headcount in anticipation of a strong increase in sales in the financial sector. Sift has experienced a weakening in advertising revenues although management anticipates a partial recovery in the second half of its financial year. In February, your Company acquired further shares in sparesFinder for a total cost of £854. sparesFinder has been trading behind its budget for the year but remains ahead of its previous financial year.
Although the UK economic environment remains uncertain, there appear to be no signs of further threats to the financial health of our portfolio companies. The more stable political and economic environment should allow smaller companies to plan for the future and we expect to see increasingly attractive opportunities coming forward. With significant cash reserves, your Company is well placed to take advantage of this point in the cycle.
as at 31 July 2010
| Total cost at 31 July 2010 £ |
Total valuation at 31 January 2010 £ |
Total valuation at 31 July 2010 £ |
% of equity held |
% of portfolio by value |
|
|---|---|---|---|---|---|
| Matrix Private Equity Partners LLP | |||||
| DiGiCo Europe Limited Design and manufacture of audio mixing desks |
495,652 | 1,697,193 | 1,688,891 | 6.52% | 10.43% |
| ATG Media Holdings Limited Publisher and online auction platform operator |
1,000,000 | 905,295 | 1,225,512 | 8.50% | 7.57% |
| Monsal Holdings Limited Supplier of engineering services to water and waste sectors |
636,013 | 675,928 | 1,147,620 | 6.37% | 7.09% |
| Focus Pharma Holdings Limited Licensor and distributor of generic pharmaceuticals |
772,451 | 885,606 | 1,033,277 | 3.14% | 6.38% |
| CB Imports Group Limited Importer and distributor of artificial flowers, floral sundries and home decor products |
1,000,000 | 1,000,000 | 1,000,000 | 6.00% | 6.18% |
| Backbarrow Limited Food manufacturing, distribution and brand management |
1,000,000 | 1,000,000 | 1,000,000 | 25.00% | 6.18% |
| Bladon Castle Management Limited Brand management, consumer products and retail |
1,000,000 | 1,000,000 | 1,000,000 | 25.00% | 6.18% |
| Fullfield Limited Food manufacturing, distribution and brand management |
1,000,000 | 1,000,000 | 1,000,000 | 25.00% | 6.18% |
| Rusland Management Limited Brand management, consumer products and retail |
1,000,000 | 1,000,000 | 1,000,000 | 49.00% | 6.18% |
| Torvar Limited Database management, mapping, data mapping and management services to legal and building industries |
1,000,000 | 1,000,000 | 1,000,000 | 49.00% | 6.18% |
| Vanir Consultants Limited Database management, mapping, data mapping and management services to legal and building industries |
1,000,000 | 1,000,000 | 1,000,000 | 16.67% | 6.18% |
| Iglu.com Holidays Limited Online ski and cruise retailer |
878,249 | 878,249 | 878,249 | 7.15% | 5.43% |
| Westway Services Holdings (2010) Limited (formerly MC 440 Limited) Installation, maintenance and servicing of air-conditioning systems |
327,616 | 526,041 | 660,501 | 3.20% | 4.08% |
as at 31 July 2010
| Total cost at 31 July 2010 £ |
Total valuation at 31 January 2010 £ |
Total valuation at 31 July 2010 £ |
% of equity held |
% of portfolio by value |
|
|---|---|---|---|---|---|
| Higher Nature Limited Supplier of mineral, vitamin and food supplements |
500,127 | 682,568 | 650,882 | 10.69% | 4.02% |
| Youngman Group Limited Manufacturer of ladders and access towers |
500,026 | 349,983 | 349,983 | 4.24% | 2.16% |
| VSI Limited Provider of software for CAD and CAM vendors |
111,928 | 382,667 | 335,948 | 4.20% | 2.08% |
| British International Holdings Limited Operator of helicopter services |
295,455 | 191,887 | 333,626 | 2.50% | 2.06% |
| Racoon International Holdings Limited Supplier of hair extensions, hair care products and training |
406,805 | 59,138 | 195,903 | 5.70% | 1.21% |
| Vectair Holdings Limited Designer and distributor of washroom products |
100,000 | 170,535 | 168,738 | 2.14% | 1.04% |
| Blaze Signs Holdings Limited Manufacturer and installer of signs |
610,016 | 110,681 | 152,127 | 5.72% | 0.94% |
| Duncary 8 Limited (formerly Duncary 4/BG Consulting Limited)2 Technical training business |
126,995 | 33,725 | 120,836 | 5.10% | 0.75% |
| The Plastic Surgeon Holdings Limited Snagging and finishing of domestic and commercial properties |
458,837 | 114,709 | 114,709 | 6.88% | 0.71% |
| Campden Media Limited Magazine publisher and conference organiser |
152,620 | 34,024 | 54,118 | 1.75% | 0.33% |
| Letraset Limited Manufacturer and distributor of gaphic art products |
150,000 | – | 19,625 | 5.00% | 0.12% |
| PXP Holdings Limited (Pinewood Structures) Designer, manufacturer and supplier of timber frames for buildings |
679,549 | – | – | 4.98% | 0.00% |
| BOX-IT Data Management Limited (former investment in Stortext FM Limited) Software based solutions for document management |
25,759 | – | – | – | 0.00% |
| Total cost at 31 July 2010 £ |
Total valuation at 31 January 2010 £ |
Total valuation at 31 July 2010 £ |
% of equity held |
% of portfolio by value |
|
|---|---|---|---|---|---|
| Stortext FM Limited Software based solutions for document management |
– | 445,866 | – | – | 0.00% |
| Other investments in the portfolio 1 |
500,102 | 64,323 | – | – | 0.00% |
| Total | 15,728,200 | 15,208,418 | 16,130,545 | – | 99.66% |
| Former Elderstreet Private Equity Limited Portfolio Cashfac Limited Provider of virtual banking application software |
260,101 | 63,125 | 45,929 | 3.04% | 0.28% |
| Sift Limited Developer of business to business internet communities |
130,116 | 1,226 | 566 | 1.03% | 0.00% |
| Sparesfinder Limited Supplier of industrial spare parts on-line |
250,854 | 19,197 | 10,068 | – | 0.06% |
| Total | 641,071 | 83,548 | 56,563 | – | 0.34% |
| Investment Managers' totals | 16,369,271 | 15,291,966 | 16,187,108 | – | 100.00% |
1 Other investments in the portfolio comprises those investments that have been valued at nil and from which the Directors only expect to receive small recoveries ie Inca Interiors Limited (in administration) and Legion Group plc (in administration).
2 There was a reconstruction in the period of BG Consulting/Duncary 4 Limited into Duncary 8 Limited.
for the six months ended 31 July 2010
| Six months ended 31 July 2010 (unaudited) |
|||||
|---|---|---|---|---|---|
| Revenue | Capital | Total | |||
| Notes | £ | £ | £ | ||
| Unrealised gains on investments held at | |||||
| fair value | 9 | – | 1,522,221 | 1,522,221 | |
| Realised (losses)/gains on investments held at fair value |
9 | – | (80,807) | (80,807) | |
| Income | 2 | 321,660 | – | 321,660 | |
| Recoverable VAT | 3 | – | – | – | |
| Investment management expense | 4 | (51,901) | (155,703) | (207,604) | |
| Other expenses | (232,573) | – | (232,573) | ||
| Profit/(loss) on ordinary activities before taxation |
37,186 | 1,285,711 | 1,322,897 | ||
| Tax on profit/(loss) on ordinary activities | 5 | – | – | – | |
| Profit/(loss) attributable to equity shareholders |
37,186 | 1,285,711 | 1,322,897 | ||
| Basic and diluted earnings per Ordinary share |
6 | 0.18p | 6.17p | 6.35p | |
The total column of this statement is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.
There were no other recognised gains or losses in the period.
Other than revaluation movements arising on investments held at fair value through profit and loss there were no differences between the profit/(loss) as stated above and at historical cost.
The notes on pages 19 – 26 form part of these Half-Yearly financial statements.
| Six months ended 31 July 2009 | Year ended 31 January 2010 (audited) |
||||||
|---|---|---|---|---|---|---|---|
| Revenue | (unaudited) Capital |
Total | Revenue | Capital | Total | ||
| £ | £ | £ | £ | £ | £ | ||
| – | 139,431 | 139,431 | – | 700,336 | 700,336 | ||
| – | 289,185 | 289,185 | – | 268,469 | 268,469 | ||
| 222,835 | – | 222,835 | 489,753 | – | 489,753 | ||
| 1,051 | 3,155 | 4,206 | 1,051 | 3,155 | 4,206 | ||
| (45,477) | (136,431) | (181,908) | (97,204) | (291,610) | (388,814) | ||
| (192,829) | – | (192,829) | (360,819) | – | (360,819) | ||
| (14,420) | 295,340 | 280,920 | 32,781 | 680,350 | 713,131 | ||
| – | – | – | – | – | – | ||
| (14,420) | 295,340 | 280,920 | 32,781 | 680,350 | 713,131 | ||
| (0.07)p | 1.47p | 1.40p | 0.16p | 3.40p | 3.56p |
as at 31 July 2010
| 31 July 2010 (unaudited) |
31 July 2009 (unaudited) |
31 January 2010 (audited) |
||
|---|---|---|---|---|
| Notes | £ | £ | £ | |
| Non-current assets Investments at fair value |
9 | 16,187,108 | 7,484,707 | 15,291,966 |
| Current assets Debtors and prepayments Investments at fair value Cash at bank |
10 | 152,051 7,116,251 255,319 |
118,914 13,588,405 33,038 |
139,702 5,975,819 70,404 |
| Creditors: amounts falling due within one year |
7,523,621 (400,774) |
13,740,357 (167,673) |
6,185,925 (255,349) |
|
| Net current assets | 7,122,847 | 13,572,684 | 5,930,576 | |
| Net assets | 23,309,955 | 21,057,391 | 21,222,542 | |
| Capital and reserves Called up share capital Capital redemption reserve Share premium reserve Revaluation reserve Special distributable reserve Profit and loss account |
11 | 210,277 889,606 1,583,088 317,939 15,656,959 4,652,086 |
200,383 884,438 – (1,779,492) 16,776,720 4,975,342 |
199,576 885,245 – (1,473,847) 16,540,857 5,070,711 |
| Equity shareholders' funds | 23,309,955 | 21,057,391 | 21,222,542 | |
| Net asset value per Ordinary share | 8 | 110.85p | 105.09p | 106.34p |
for the six months ended 31 July 2010
| Notes | Six months ended 31 July 2010 (unaudited) £ |
Six months ended 31 July 2009 (unaudited) £ |
Year ended 31 January 2010 (audited) £ |
|
|---|---|---|---|---|
| Opening shareholders' funds | 21,222,542 | 21,035,698 | 21,035,698 | |
| Net share capital subscribed | 1,598,150 | – | – | |
| Net share capital bought back | (405,046) | (58,149) | (124,256) | |
| Profit for the period before dividends | 1,322,897 | 282,920 | 713,131 | |
| Dividends paid in period | 7 | (428,588) | (201,078) | (402,031) |
| Closing shareholders' funds | 23,309,955 | 21,059,391 | 21,222,542 |
The notes on pages 19 – 26 form part of these Half-Yearly financial statements.
for the six months ended 31 July 2010
| Notes | Six months ended 31 July 2010 (unaudited) £ |
Six months ended 31 July 2009 (unaudited) £ |
Year ended 31 January 2010 (audited) £ |
|
|---|---|---|---|---|
| Interest income received | 285,302 | 146,807 | 281,147 | |
| Dividend income | 22,653 | 84,140 | 156,673 | |
| Other income | – | 5,098 | 14,901 | |
| VAT received | 44,569 | 89,665 | 100,239 | |
| Investment management fees paid Cash payments for other expenses |
(327,610) (195,954) |
(118,181) (134,333) |
(224,334) (334,604) |
|
| Net cash (outflow)/inflow from operating activities |
(171,040) | 73,196 | (5,978) | |
| Investing activities | ||||
| Sale of investments | 9 | 548,848 | 1,084,665 | 1,784,500 |
| Purchase of investments | 9 | (2,576) | (373,376) | (8,302,196) |
| Net cash inflow/(outflow) from investing activities |
546,272 | 711,289 | (6,517,696) | |
| Cash inflow/(outflow) before financing and liquid resource management |
375,232 | 784,485 | (6,523,674) | |
| Dividends Equity dividends paid |
7 | (428,588) | (201,078) | (402,031) |
| Financing Share capital subscribed Purchase of own shares |
1,598,150 (219,447) |
– (90,331) |
– (156,439) |
|
| Management of liquid resources (Increase)/decrease in monies held in money-market funds |
(1,140,432) | (475,294) | 7,137,292 | |
| Increase in cash |
184,915 | 17,782 | 55,148 | |
| Reconciliation of net cash inflow/ (outflow) to movement in net funds Increase in cash for the period |
184,915 | 17,782 | 55,148 | |
| Net funds at the start of the period | 70,404 | 15,256 | 15,256 | |
| Net funds at the end of the period | 255,319 | 33,038 | 70,404 |
for the six months ended 31 July 2010
| Six months ended 31 July 2010 (unaudited) £ |
Six months ended 31 July 2009 (unaudited) £ |
Year ended 31 January 2010 (audited) £ |
|
|---|---|---|---|
| Profit on ordinary activities before | |||
| taxation | 1,322,897 | 280,920 | 713,131 |
| Net unrealised gains on investments | (1,522,221) | (139,431) | (700,336) |
| Net losses/(gains) on realisations of | |||
| investments | 80,807 | (289,185) | (268,469) |
| (Increase)/decrease in debtors | (12,349) | 159,187 | 100,314 |
| (Decrease)/increase in creditors | (40,174) | 61,705 | 149,382 |
| Net cash (outflow)/inflow from | |||
| operating activities | (171,040) | 73,196 | (5,978) |
The notes on pages 19 – 26 form part of these Half-Yearly financial statements.
The following accounting policies have been applied consistently throughout the period. Full details of principal accounting policies will be disclosed in the Annual Report.
The unaudited results cover the six months to 31 July 2010 and have been prepared under UK Generally Accepted Accounting Practice (UK GAAP), consistent with the accounting policies set out in the statutory accounts for the year ended 31 January 2010 and the 2009 Statement of Recommended Practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('the SORP').
The Half-Yearly Report has not been audited, nor has it been reviewed by the auditors pursuant to the Auditing Practices Board (APB)'s guidance on Review of Interim Financial Information.
In order to better reflect the activities of a VCT and in accordance with the SORP, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of profit attributable to equity shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 Income Tax Act 2007.
Investments are accounted for on a trade date basis.
All investments held by the Company are classified as "fair value through profit and loss" as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income. For investments actively traded in organised financial markets, recognition and fair value is determined by reference to Stock Exchange market trading rules and quoted bid prices at the close of business on the balance sheet date.
Unquoted investments are valued by the Directors at 'fair value through profit and loss'. Accordingly, in the absence of a market price, the Directors have valued unquoted investments in accordance with International Private Equity Venture Capital Valuation (IPEVCV) guidelines as updated in September 2009, which have not materially changed the results reported last year.
All investments are held at the price of a recent investment for an appropriate period where there is considered to have been no change in fair value. Where such a basis is no longer considered appropriate, the following factors will be considered:
Capital gains and losses on investments whether realised or unrealised, are dealt with in the profit and loss revaluation reserves and movements in the period are shown in the Income Statement.
| Six months ended 31 July 2010 (unaudited) £ |
Six months ended 31 July 2009 (unaudited) £ |
Year ended 31 January 2010 (audited) £ |
|
|---|---|---|---|
| Income from investments | |||
| Dividends | 74,794 | 16,070 | 50,190 |
| Money-market funds | 17,108 | 62,041 | 96,060 |
| Loan stock interest | 229,721 | 128,360 | 327,454 |
| Bank deposit interest | 37 | 4,722 | 354 |
| Interest received on VAT | – | 6,544 | 6,544 |
| Other income | – | 5,098 | 9,151 |
| Total Income | 321,660 | 222,835 | 489,753 |
As at 31 January 2010, a total of £93,695 of VAT recoverable had been received. Of this amount, £8,236 was in excess of the amount recognised in the year to 31 January 2009 accounts with £4,206 being credited to the Income Statement and £4,030 being not recognised as it may be repayable to a previous investment manager or service provider as it relates to VAT charged during a period when an expense cap applied to their fees. During the period to 31 July 2010, £44,569 of recoverable VAT, not previously recognised, was received. This again has not been recognised since this also relates to a period in which the investment manager was subject to an expense cap and hence may be repayable. Therefore, at 31 July 2010 other creditors includes £48,599 of VAT recovered.
In accordance with the policy statement published under "Management and Administration" in the Company's prospectus dated 8 February 1999, the Directors have charged 75% of the investment management expenses to the capital account. This is in line with the Board's expectation of the longterm split of returns from the investment portfolio of the Company.
There is no tax charge for the period, as there were taxable losses.
The basic earnings, revenue return and capital return per share shown below for each period are respectively based on numerators i)-iii), each divided by the weighted average number of shares in issue in the period - see iv) below
| Six months ended 31 July 2010 (unaudited) £ |
Six months ended 31 July 2009 (unaudited) (audited) £ |
Year ended 31 January 2010 £ |
|
|---|---|---|---|
| i) Total earnings after taxation Basic and diluted earnings per Ordinary share (pence) |
1,322,897 6.35p |
280,920 1.40p |
713,131 3.56p |
| ii) Revenue earnings/(loss) from ordinary activities after taxation Basic and diluted revenue earnings/(loss) per |
37,186 | (14,420) | 32,781 |
| Ordinary share (pence) | 0.18p | (0.07)p | 0.16p |
| Net unrealised capital gains | 1,522,221 | 139,431 | 700,336 |
| Net realised capital (losses)/gains |
(80,807) | 289,185 | 268,469 |
| Capital expenses net of taxation Capital element of VAT |
(155,703) | (136,431) | (291,610) |
| recoverable | – | 3,155 | 3,155 |
| iii) Capital return | 1,285,711 | 295,340 | 680,350 |
| Basic and diluted capital earnings per Ordinary share (pence) |
6.17p | 1.47p | 3.40p |
| Weighted average iv) number of shares in issue in the period |
20,831,585 | 20,075,742 | 20,032,743 |
| Six months ended 31 July 2010 (unaudited) £ |
Six months ended 31 July 2009 (unaudited) £ |
Year ended 31 January 2010 (audited) £ |
|
|---|---|---|---|
| Final dividend for the year ended 31 January 2010 of 2 pence per Ordinary share of 1 penny paid 9 June 2010 |
428,588 | – | – |
| Final income dividend for the year ended 31 January 2009 of 1 penny per Ordinary share of 1 penny paid 10 June 2009 |
– | 201,078 | 201,078 |
| Interim capital dividend for the year ended 31 January 2010 of 1 penny per Ordinary share of 1 penny paid 7 November 2009 |
– | – | 200,953 |
| 428,588 | 201,078 | 402,031 |
| As at | As at | As at | |
|---|---|---|---|
| 31 July 2010 | 31 July 2009 | 31 January 2010 | |
| (unaudited) | (unaudited) | (audited) | |
| £ | £ | £ | |
| Net assets | 23,309,955 | 21,057,391 | 21,222,542 |
| Number of shares in issue | 21,027,687 | 20,038,300 | 19,957,572 |
| Net asset value per share (pence) |
110.85p | 105.09p | 106.34p |
| Traded on AIM £ |
Unquoted equity shares £ |
Unquoted preference shares £ |
Loan stock £ |
Total £ |
|
|---|---|---|---|---|---|
| Valuation at 31 January 2010 Purchases at cost Sales – proceeds – realised (losses)/gains Unrealised gains |
64,323 – – (64,323) – |
5,969,444 2,571 (5,233) 5,233 1,113,540 |
7,572 – – – 250 |
9,250,627 25,759 (605,066) 13,980 408,431 |
15,291,966 28,330 (610,299) (45,110) 1,522,221 |
| Valuation at 31 July 2010 | – | 7,085,555 | 7,822 | 9,093,731 | 16,187,108 |
| Book cost at 31 July 2010 Unrealised gains/(losses) |
150,102 | 6,039,402 | 124,467 | 10,055,300 | 16,369,271 |
| at 31 July 2010 | – | 1,096,153 | (16,645) | (761,569) | 317,939 |
| Permanent impairment of investments |
(150,102) | (50,000) | (100,000) | (200,000) | (500,102) |
| Valuation at 31 July 2010 | – | 7,085,555 | 7,822 | 9,093,731 | 16,187,108 |
| (Losses)/gains on investments Less amounts recognised |
(150,102) | (180,626) | – | 16,053 | (314,675) |
| as unrealised losses in previous years |
85,779 | 185,859 | – | (2,073) | 269,565 |
| Realised (losses)/gains based on carrying value at 31 July 2010 Net movement in unrealised |
(64,323) | 5,233 | – | 13,980 | (45,110) |
| (depreciation)/appreciation in the period |
– | 1,113,540 | 250 | 408,431 | 1,522,221 |
| (Losses)/gains on investments for the period ended 31 July 2010 |
(64,323) | 1,118,773 | 250 | 422,411 | 1,477,111 |
Transaction costs of £35,697 were incurred in the period and are treated as realised losses on investments in the Income Statement. Deducting these from £45,110 realised losses above equals realised losses on Investments per the Income Statement of £80,807. These transaction costs also reconcile the difference between net additions and disposals per the cashflow statement of £546,272 and net additions and disposals per the investment note above of £581,969.
These comprise investments in 6 Dublin based OEIC money market funds managed by Royal Bank of Scotland, Blackrock Investment Management (UK) Ltd, Goldman Sachs, Scottish Widows Investment Management and Fidelity Investment Management.
£7,105,841 (31 July 2009: £13,578,048, 31 January 2010: £5,965,431) of this sum is subject to same day access, whilst £10,410 (31 July 2009: £10,357, 31 January 2010: £10,388) is subject to 2 day access.
| Called up share capital £ |
Capital redemption reserve £ |
Share premium reserve £ |
Revaluation reserve £ |
Special distributable reserve £ |
Profit and loss reserve £ |
Total £ |
|
|---|---|---|---|---|---|---|---|
| At 1 February 2010 |
199,576 | 885,245 | – | (1,473,847) | 16,540,857 | 5,070,711 | 21,222,542 |
| Shares bought back |
(4,361) | 4,361 | – | – | (405,046) | – | (405,046) |
| Shares issued via Dividend re-investment Scheme |
269 | – | 24,969 | – | – | – | 25,238 |
| Shares issued via Offer for Subscription |
14,793 | – | 1,558,119 | – | – | – | 1,572,912 |
| Profit/(loss) for the period |
– | – | – | 1,522,221 | – | (199,324) | 1,322,897 |
| Realised losses transferred to special reserve |
– | – | – | – | (478,852) | 478,852 | – |
| Realisation of previously unrealised depreciation |
– | – | – | 269,565 | – | (269,565) | – |
| Dividend – final paid for year ended 31 January 2010 |
– | – | – | – | – | (428,588) | (428,588) |
| At 31 July 2010 |
210,277 | 889,606 | 1,583,088 | 317,939 | 15,656,959 | 4,652,086 | 23,309,955 |
On 31 March 2010 and 3 April 2010, the Company issued 1,479,320 new ordinary shares at 112.4p per share under the Offer for Subscription launched on 20 January 2010.
Colin Hook (Chairman) Christopher Moore Helen Sinclair Andrew Robson (appointed 1 August 2010)
Secretary
Matrix-Securities Limited One Vine Street London W1J 0AH
Matrix Private Equity Partners LLP One Vine Street London W1J 0AH www.matrixgroup.co.uk
National Westminster Bank plc Financial Institutions Team First Floor Mayfair Commercial Banking Centre 65 Piccadilly London W1A 2PP
PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH
One Vine Street London W1J 0AH
Matrix-Securities Limited One Vine Street London W1J 0AH
Matrix Corporate Capital LLP One Vine Street London W1J 0AH
PKF (UK) LLP Farringdon Place 20 Farringdon Road London EC1M 3AP
Capita Registrars Northern House Woodsome Park Fenay Bridge Huddersfield West Yorkshire HD8 0GA
Martineau No1 Colmore Square Birmingham B4 6AA Also at 35 New Bridge Street London EC4V 6BW
Designed and printed by Fraser Hamilton Associates Tel: 0208 493 0123
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