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22 Sep 2011 15:47
Matrix Income & Growth 4 VCT plc
Half-Yearly Report for the six months ended 31 July 2011
INVESTMENT OBJECTIVE
The objective of Matrix Income & Growth 4 VCT plc ("the Company" or "MIG4") is to provide investors with a regular income stream by way of tax free dividends and to generate capital growth through portfolio realisations which can be distributed by way of additional tax free dividends.
The portfolio comprises a number of diverse investments over a wide range of different business sectors, thus spreading risk by avoiding over-concentration in any one sector.
FINANCIAL HIGHLIGHTSAs at 31 July 2011
- Increase in total shareholder return (net asset value basis) over the six month period of 1.8%
- Increase in total shareholder return (share price basis) over the six month period of 1.2%
- Further net funds of £3.5 million raised in period
Performance Summary - Ordinary Shares of 1 penny
Period Net assets Net NAV total Share Share price asset return to price (p)1 total return to (£ million value shareholders shareholders ) (NAV) since launch since launch per (p)2 per share (p)2 share (p) Six months ended 31 July 2011 28.3 111.9 133.6 101.75 123.5 31 July 2010 23.3 110.9 128.6 95.5 113.2 Year ended 31 January 2011 25.3 112.9 131.6 103.5 122.2 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
1 Source: London Stock Exchange 2 Total returns to Shareholders include dividends paid
The tables below show the NAV total returns at 31 July 2011 for a shareholder that invested £10,000 in the different fundraisings undertaken by the Company:
RETURN BEFORE AND AFTER INCOME TAX RELIEF Fundraising 1999/2000 2006/2007 2010 2011 (Top-up (Linked Offer) 3 Offer) 4 Issue price per share (p) 200 1 120.9 2 112.4 121.6 Number of shares held 5,000 8,271 8,896 8,225 Net asset value (NAV) at 31 5,594 9,253 9,953 9,202July 2011 (£) Dividends paid to 1,085 910 534 2475shareholder since subscription (£) NAV total return to 6,679 10,163 10,487 9,448shareholder since subscription (£) Profit/(loss) before income (3,321) 163 487 (552) 7tax relief (£) 6 Income tax relief 20% 8 30% 30% 30% Cost net of income tax 8,000 7,000 7,000 7,000relief (£) Profit/ (loss) after income (1,321) 3,163 3,487 2,448tax relief (£) 9
1 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 Weighted average issue price of shares.
3 Top-Up Offer to raise up to £2.18 million.
4 Linked Offer for Subscription with Matrix Income & Growth VCT plc and The Income & Growth VCT plc to raise up to £21 million in total. The issue price is a weighted average for all shares issued.
5 As all investors except for the last allotment received this period's dividend, it has been shown in these figures
6 NAV total return minus initial investment cost (before income tax relief).
7 Current unrealised loss results from initial Offer costs of 5.5% paid on subscription.
8 Additional capital gains tax deferral relief of up to £4,000 available to qualifying shareholders.
9 NAV total return minus cost net of income tax relief.
The data for the initial fundraising above includes the period up to 1 August 2006, when the Company used three investment advisers. The three subsequent fundraisings have raised capital which has been solely managed by MPEP.
DIVIDEND HISTORY Year ended 31 Dividends per share paid in Cumulative dividendsJanuary respect of each year per share paid and proposed since launch (p) (p) 2011 4.00 21.70 2010 3.00 17.70 2009 2.00 14.70 2008 2.00 12.70 2007 1.80* 10.70 2006 0.50* 8.90 2005 0.20* 8.40 2004 0.50* 8.20 2003 0.50* 7.70 2002 1.00* 7.20 2001 3.10* 6.20 2000 3.10* 3.10
Dividends paid include distributions from both income and capital.
* re-stated following capital reorganisation in 2006.
CHAIRMAN'S STATEMENT
I am pleased to present the Company's Half-Yearly Report for the six months ended 31 July 2011.
Performance
As at 31 July 2011 the Company's NAV per share was 111.9 pence (31 January 2011: 112.9 pence). Adjusted for dividends of 3p per share paid in the 6 month period, this represents an increase of 1.8% in NAV per share for the period. Total shareholder return on a share price basis has risen by 1.2% during the period. These figures compare with a decline of 0.9% in the FTSE SmallCap CR Index and a rise of 2.7% in the FTSE AIM CR Index.
This result principally reflects a small net uplift in the value of the portfolio companies.
Portfolio
Quoted markets have remained volatile during the six months under review with most sector price earnings multiples (by reference to which unquoted investments are valued) declining slightly. Notwithstanding this, overall, the portfolio showed a net increase of £0.5 million over the six month period. The significant contributors to this increase were Iglu.com Holidays, Blaze Signs, Focus Pharma and DiGiCo. Blaze Signs and Youngman are affected by the recession, but have seen their profits begin to recover.
The increase in deal activity in the smaller companies market reported in the Annual Report has been sustained over this six month period, leading to more prospective opportunities being reviewed by the Investment Manager. An investment of £1,280,880 has been made into Motorclean Group, the UK's leading provider of vehicle cleaning and valet services to the car dealership market. A follow-on investment of £409,067 was made in ASL Technology Holdings Limited, to enable that Company to acquire the assets of a similar company, Transcribe Copier Systems Limited, as part of ASL's acquisition strategy.
It is encouraging to note that Iglu.com Holidays Limited made a final loan repayment in February of £876,207, (of which £131,737 was premium), while in March, Vectair Limited made a full loan repayment of £90,322 (of which £15,054 was a premium) and Machineworks fully repaid a loan of £116,588 (including a premium of £23,318) in April. Further details of transactions in the period and the performance of investee companies are contained in the Investment Manager's Review of the Half-Yearly Report for the six months ended 31 July 2011.
Cash and liquidity fund balances as at 31 July 2011 amounted to £9.3 million.
Dividend
The Board has an objective of providing shareholders with a regular dividend. For reasons of administrative efficiency, your Board has decided not to make a relatively small interim payment, but intends to pay a dividend after considering the year-end results.
Revenue Account
The revenue return for the six months to 31 July 2011 was £208,189 (after tax) or 0.86p per share. This compares to a revenue return of £37,186 in the six months to 31 July 2010. Income has benefited from the higher level of loan stock interest received from companies as well as a notably higher dividend from DiGiCo.
Interest received from money market funds continues to be low, at an average rate of around 0.6%.
Investment Management expenses charged to revenue have increased by £29,672 compared to 2010, due to the increase in net assets, as a result of the funds raised under the Top-up Offer earlier this year and the reclassification of administration costs previously shown in other expenses. Other expenses have decreased by £76,656, following the reclassification referred to above, lower professional fees and trail commission.
Share buy-backs
During the six months ended 31 July 2011 the Company continued to implement its buy-back policy and bought back 160,752 Ordinary Shares, representing 0.72% of the shares in issue as at 1 February 2011 at a total cost of £163,990. These shares were subsequently cancelled by the Company.
The Board regularly reviews its buyback policy and endeavours to maintain the discount to NAV at which the Company's shares trade at around 10%. On 22 September, the mid-market price for the Company's shares was 101.5 pence, representing a discount of 10.1% to the latest NAV announced before today.
Linked offer
A further 2,960,632 new shares were allotted under the linked offer which closed on 30 June 2011. A total of £16.2m before expenses was subscribed across the three VCTs of which £5.4 million was raised by the Company.
Future fundraising
The Company expects to be participating again in a linked fundraising with Matrix Income & Growth VCT plc and The Income & Growth VCT plc which is expected to launch later this year. The funds raised will further add to the Company's capability to capitalise on new investment opportunities, should provide further support, if needed, for the share buyback program, and should spread fixed running costs over a larger asset base. Details of the Offer are expected to be posted to shareholders shortly.
Shareholder communication
May I remind you that the Company has its own website which is available at www.mig4vct.co.uk.
Following a successful Matrix VCT shareholder workshop held last December the Investment Manager will be holding a second workshop on Wednesday, 14 December 2011 in central London. The workshop will include a presentation on the VCTs' investment activity and performance. All shareholders will receive an invitation to this event nearer to the date.
The Board also welcomes the opportunity to meet Shareholders at the Company's General Meetings during which representatives of the Investment Manager are present to discuss the progress of the portfolio. The next AGM of the Company will be held in June 2012.
Outlook
There has been a sharp correction in global equity markets since the end of July. This has been principally due to continued concerns over European sovereign debt and the deteriorating prospects for economic growth in many countries within the developed world. The UK is not immune from these fears. The outlook for the domestic economy remains highly uncertain. Government debt remains at relatively high levels and public expenditure needs to be far more disciplined.
However, almost all of the portfolio companies are trading profitably at the operating level. Having held back on investment during the downturn, the Company retains a significant cash position. The Investment Manager is now seeing more investment opportunities at realistic pricing levels. Your Board expects that investments recently made, and to be made over the next year, will contribute to enhancing the Company's performance which includes the objective of making attractive dividend payments.
Finally, I would like to thank all of our Shareholders for their continuing support.
Christopher MooreChairman22 September 2011
PRINCIPAL RISKS AND UNCERTANTIES
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 2011. 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:
* economic risk;
* investment and strategic risk;
* regulatory risk (including loss of VCT status);
* financial and operating risk;
* market risk;
* asset liquidity risk;
* market liquidity risk;
* credit/counterparty risk.
A more detailed explanation of these risks can be found in the Directors' Report on pages 21 - 30 and in Note 20 on pages 62 - 68 of the Annual Report and Accounts for the year ended 31 January 2011 copies of which are available on the VCT's website, www.mig4vct.co.uk.
Responsibility Statement
In accordance with Disclosure and Transparency Rule (DTR) 4.2.10 the Directors confirm that to the best of their knowledge:
a. the condensed set of financial statements, which has been prepared in
accordance with the statement, "Half-Yearly Reports", issued by the Accounting Standards Board, gives a true and fair view of the assets, liabilities, financial position and profit of the Company, as required by DTR 4.2.4; and
b. the interim management report, included within the Chairman's Statement,
Investment 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.
c. a description of the principal risks and uncertainties facing the Company
for the remaining six months is set out above, in accordance with DTR
4.2.7; and
d. there were no related party transactions in the first six months of the
current financial year that are required to be reported, in accordance with
DTR 4.2.8.
Cautionary Statement
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 BoardChristopher MooreChairman22 September 2011INVESTMENT POLICY
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.
Uninvested funds are held in cash and lower risk money market funds.
UK companies
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 £20.2 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.
VCT regulation
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 (save as may be permitted under VCT rules).
The VCT regulations in respect of funds raised after 6 April 2011 will change, such that 70% of such funds must be invested in equity.
Asset mix
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 diversification and maximum exposures
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. No holding in any one company will represent more than 10% of the value of the Company's investments 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.
Co-investment
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.
Borrowing
The Company has no current plans to undertake any borrowing.
Management
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.
INVESTMENT MANAGER'S REVIEW
Overview
We have been encouraged by positive signs of improvement in our marketplace during the six month period to 31 July 2011. The number of quality potential new investments that we have seen has increased considerably and more company boards are confident about making decisions to market their businesses for sale or raise new capital for expansion. Over these six months, we have continued our measured approach in assessing the opportunities that are emerging. We remain aware that we are yet to see the full effect of the UK Government's cuts in public spending on the UK smaller company sector and are therefore particularly mindful of the risks of deteriorating economic conditions on prospective new investments. We have rejected a number of prospective deals either on the grounds that they would not deliver forecast growth or because the required sale price was too high, but there are still a number of opportunities that we are progressing and expect to complete in the second half of the year.
The Portfolio
The MPEP-invested portfolio at 31 July 2011 comprised thirty-one investments with a cost of £17.9 million and a valuation of £19.0 million. On a like-for-like basis the value of the portfolio has increased by 2.4% in the first six months of the year.
This uplift in value principally derives from higher valuations for five companies: Iglu.com Holidays, Blaze Signs, Focus Pharma, DiGiCo and CB Imports. All other companies experienced relatively little change in their valuations.
Iglu.com continues to trade ahead of expectation at the time of investment, and has repaid all of its loan stock, realising total proceeds of £876,207, including a premium of £131,737. Blaze Signs' recovery in trading has continued. Focus Pharma continues to perform satisfactorily and is planning to progress further with several new product launches due during 2011. DiGiCo continues to grow its business and generate strong profits and has paid a dividend of £135,283 to the Company in the period.
The value of CB Imports has risen as trading continues to be robust and this company has paid its first dividend since investment. ATG Media has traded particularly well and returned good results. Racoon's profitability continues to improve through sales of core hair extension products in the UK, although export sales have been disappointing. Vectair's trading has been satisfactory, and it has repaid all of its loan stock to the Company, realising £90,322, including a premium of £15,054.
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 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 only one portfolio company has required modest additional funding during the past two years.
VSI completed the demerger of its two operating subsidiary companies in March 2011, creating two separate investee companies for the Company, MachineWorks Software Limited (MachineWorks) and LightWorks Software Limited. It also paid a dividend of £11,796. The original VSI loan of £93,270, which was transferred to MachineWorks on the demerger, was repaid in April 2011, releasing £116,588 including a premium of £23,318. The Company now has separate investments in each of these companies with a cost of £9,329 each. The boards of these companies believe that the demerger will enhance the prospects of both companies.
One new investment and two follow-on investments have been made. The Company used £1m already invested in acquisition vehicle Fullfield Limited as part of a total investment of £1,280,880 to support the MBO of Motorclean Group, the UK's leading provider of vehicle cleaning and valet services to the car dealership market. Following its original investment into ASL in December 2010, the Company made a further investment totalling £409,067 in March 2011 to support the acquisition of the assets of Transcribe Copier Systems Limited. ASL is a Cambridge-based printer and copier services business with a broad customer base of schools and small and medium sized enterprises. This acquisition is part of ASL's strategy to acquire similar businesses, thereby consolidating a highly fragmented market in order to become of interest to larger corporate acquirers in this sector.
As reported in the Annual Report and Accounts for the year ended 31 January 2011, Monsal experienced completion delays on an existing contract and in the commissioning of new contracts. These delays led to a requirement for additional funding. In June your Company approved a further loan stock investment commitment totalling £158,577 as part of a £1.75 million fundraising alongside other Matrix VCTs and other shareholders. The terms of this new investment provide that it ranks ahead of the previous rounds of investment made up to 31 January 2011. We continue to hold the value of the Company's previous rounds of investment at nil. £42,287 of the new commitment had been drawn down by 31 July, which is valued at cost and a further £21,144 was drawn down after 31 July. With this additional funding Monsal now has the ability to pursue a number of major contracts in the waste and water sectors. Assuming contract awards, the potential for recovery of value in the original investment should become a more realistic prospect.
The investments previously made by Elderstreet are now unlikely to have a significant impact on the Company's performance. Cashfac has increased its headcount in anticipation of an increase in sales in the financial sector, and this has started to occur. Sift has experienced a weakening in advertising revenues and incurred losses. sparesFinder has been trading ahead of its budget for the year, the budget itself being ahead of its previous financial year.
Outlook
The prospects for increased investment activity over the coming months have improved now that the UK economy appears to have recovered from the worst of the recession. We are also well-positioned to offer an attractive combination of equity and debt to companies as the availability of external debt from the major banks is harder to access. The positive performance of some of our investee companies has enabled the value of our portfolio to be resilient overall. We expect to be able to crystallise this value over time through realisations, and we are seeing interest in a number of our investee companies from larger private equity firms.
However, much uncertainty remains concerning the quality of the economic recovery and we remain vigilant about the potential impact on the portfolio and cautious when evaluating new opportunities.
Matrix Private Equity Partners LLP
22 September 2011
INVESTMENT PORTFOLIO SUMMARY
As at 31 July 2011 Total cost Total Total % of % of at valuation at valuation equity portfolio 31 Jan 11 at 31-Jul-1 held by value 31 Jul 11 1 Matrix Private Equity £ £ £ Partners LLP DiGiCo Europe Limited 495,652 1,900,210 1,962,646 6.52% 10.33% Design and manufacture of audio mixing desks ATG Media Holdings 888,993 1,293,507 1,337,986 8.50% 7.04%Limited Publisher and online auction platform operator CB Imports Group 1,000,000 1,242,622 1,301,140 6.00% 6.85%Limited Importer and distributor of artificial flowers, floral sundries and home decor products Fullfield Limited 1,280,880 1,000,000 1,280,880 8.75% 6.74%(Motorclean Group) Vehicle cleaning and valet services ASL Technology 1,257,133 848,066 1,257,133 6.78% 6.62%Holdings Limited Printer and photocopier services Focus Pharma Holdings 772,451 1,060,749 1,126,107 3.10% 5.93%Limited Licensor and distributor of generic pharmaceuticals Backbarrow Limited 1,000,000 1,000,000 1,000,000 16.67% 5.26% Food manufacturing, distribution and brand management Bladon Castle 1,000,000 1,000,000 1,000,000 16.67% 5.26%Management Limited Brand management, consumer products and retail RDL Corporation 1,000,000 1,000,000 1,000,000 9.05% 5.26%Limited (formerly Aust Recruitment Group Limited) Recruitment consultants for the pharmaceutical, business intelligence and IT industries Rusland Management 1,000,000 1,000,000 1,000,000 16.33% 5.26%Limited Brand management, consumer products and retail Torvar Limited 1,000,000 1,000,000 1,000,000 16.33% 5.26% Database management, mapping, data mapping and management services to legal and building industries Vanir Consultants 1,000,000 1,000,000 1,000,000 16.67% 5.26%Limited Database management, mapping, data mapping and management services to legal and building industries IGLU.com Holidays 133,779 1,420,200 763,425 7.15% 4.02%Limited Online ski and cruise retailer Westway Services 236,096 646,071 650,946 3.20% 3.43%Holdings (2010) Limited (formerly MC440 Limited) Installation, maintenance and servicing of air-conditioning systems Blaze Signs Holdings 610,016 560,223 644,612 5.72% 3.39%Limited Manufacturer and installer of signs Higher Nature Limited 500,127 429,671 401,840 10.34% 2.11% Supplier of mineral, vitamin and food supplements British International 295,455 433,545 395,030 2.50% 2.08%Holdings Limited Operator of helicopter services Youngman Group 500,026 349,983 389,045 4.24% 2.05%Limited Manufacturer of ladders and access towers Faversham House 346,488 346,488 346,488 6.26% 1.82% Publisher, exhibition organiser and operator of web sites for the environmental, visual communications and building services sectors Omega Diagnostics plc 199,998 241,664 241,664 1.96% 1.27% In-vitro diagnostics for food intolerance, autoimmune diseases and infectious diseases Machineworks Software 9,329 306,331 189,321 4.20% 1.00%Limited 2 Software for CAM and machine tool vendors Racoon International 406,805 174,507 178,128 5.70% 0.94%Holdings Limited Supplier of hair extensions, hair care products and training Plastic Surgeon 458,837 114,709 114,709 6.88% 0.60%Holdings Limited Snagging and finishing of domestic and commercial properties Duncary 8 Limited 126,995 104,769 103,420 5.10% 0.54%(formerly Duncary 4/ BG Consulting Limited) Technical training business Vectair Holdings 24,732 181,406 78,148 2.14% 0.41%Limited Designer and distributor of washroom products Monsal Holdings 678,300 - 42,287 6.14% 0.22%Limited Supplier of engineering services to water and waste sectors BOX-IT Data 25,759 25,759 25,759 - 0.14%Management Limited (former investment in Stortext FM Limited Software based solutions for document management Lightworks Software 9,329 63,248 21,337 4.20% 0.11%Limited 2 Software for CAD vendors Letraset Limited 150,010 19,540 18,272 5.26% 0.10%(formerly Creative Opportunities) Manufacturer and distributor of graphic art products PXP Holdings Limited 679,549 - - 4.98% 0.00%(Pinewood Structures) Designer, manufacturer and supplier of timber frames for buildings Other investments in 150,102 - - - 0.00%the portfolio 1 ----- ----- ----- ----- ----- Total 17,236,841 18,763,268 18,870,323 - 99.30% Former Elderstreet Private Equity Limited Portfolio Cashfac Limited 260,101 111,054 99,311 3.04% 0.52% Provider of virtual banking application software Sparesfinder Limited 250,854 26,568 31,712 1.70% 0.18% Supplier of industrial spare parts on-line Sift Limited 130,116 - - 1.03% 0.00% Developer of business to business internet communities ----- ----- ----- ----- ----- Total 641,071 137,622 131,023 - 0.70% ----- ----- ----- ----- -----
Investment Managers' 17,877,912 18,900,890 19,001,346 - 100.00% totals
===== ===== ===== ===== =====
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 i.e. Legion Group plc (in administration) in the MPEP portfolio.
2 On 31 March 2011, VSI Limited undertook a demerger, such that MIG 4 VCT now holds separate investments in Machineworks Software Limited ("Machineworks") and Lightworks Software Limited ("Lightworks"). As a result, the cost as at 31 January 2011, of the ordinary and preference share investments in VSI Limited has been split equally between Machineworks and Lightworks. The valuation of the ordinary shares at 31 January 2011 has been split 75:25 between Machineworks and Lightworks respectively. The former loan investment in VSI of £93,270 had been wholly transferred to Machineworks, so this loan's cost and value at 31 January 2011 has been specifically allocated to that new investment.
UNAUDITED INCOME STATEMENT
For the six months ended 31 July 2011
Six months ended 31 July 2011 (unaudited) Notes Revenue Capital Total £ £ £ Unrealised gains on 8 - 451,225 451,225investments held at fair value Realised gains/ 8 - 2,551 2,551(losses) on investments held at fair value Income 2 459,395 - 459,395 Recoverable VAT - - - Investment 3 (81,573) (244,718) (326,291)management expense Other expenses (155,917) - (155,917) ----- ----- ----- Profit on ordinary 221,905 209,058 430,963activities before taxation Tax on profit on 4 (13,716) 13,716 -ordinary activities ----- ----- ----- Profit attributable 208,189 222,774 430,963to equity shareholders ===== ===== ===== Basic and diluted 5 0.86p 0.91p 1.77pearnings per Ordinary share Six months ended 31 July 2010 (unaudited) Notes Revenue Capital Total £ £ £ Unrealised gains on 8 - 1,522,221 1,522,221investments held at fair value Realised gains/ 8 - (80,807) (80,807)(losses) on investments held at fair value Income 2 321,660 - 321,660 Recoverable VAT - - - Investment 3 (51,901) (155,703) (207,604)management expense Other expenses (232,573) - (232,573) ----- ----- ----- Profit on ordinary 37,186 1,285,711 1,322,897activities before taxation Tax on profit on 4 - - -ordinary activities ----- ----- ----- Profit attributable 37,186 1,285,711 1,322,897to equity shareholders ===== ===== ===== Basic and diluted 5 0.18p 6.17p 6.35pearnings per Ordinary share Year ended 31 January 2011 (audited) Notes Revenue Capital Total £ £ £ Unrealised gains on 8 - 2,119,702 2,119,702investments held at fair value Realised gains/ 8 - 16,077 16,077(losses) on investments held at fair value Income 2 636,426 - 636,426 Recoverable VAT (264) (794) (1,058) Investment 3 (120,335) (361,003) (481,338)management expense Other expenses (396,019) - (396,019) ----- ----- ----- Profit on ordinary 119,808 1,773,982 1,893,790activities before taxation Tax on profit on 4 - - -ordinary activities ----- ----- ----- Profit attributable 119,808 1,773,982 1,893,790to equity shareholders ===== ===== ===== Basic and diluted 5 0.57p 8.47p 9.04pearnings per Ordinary share
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 below form part of these Half-Yearly financial statements.
UNAUDITED BALANCE SHEETAs at 31 July 2011 31 July 2011 31 July 2010 31 January 2011 (unaudited) (unaudited) (audited) Notes £ £ £ Non-current assets Investments at fair 8 19,001,346 16,187,108 18,900,890value Current assets Debtors and prepayments 191,511 152,051 1,948,065 Current Investments 9 6,853,014 7,116,251 3,644,741 Cash at bank 2,460,293 255,319 1,061,164 ----- ----- ----- 9,504,818 7,523,621 6,653,970 Creditors: amounts (183,711) (400,774) (209,681)falling due within one year ----- ----- ----- Net current assets 9,321,107 7,122,847 6,444,289 ----- ----- ----- Net assets 28,322,453 23,309,955 25,345,179 ===== ===== ===== Capital and reserves 10 Called up share capital 253,166 210,277 224,558 Share premium reserve 6,847,570 1,583,088 3,413,664 Capital redemption 892,958 889,606 891,351reserve Revaluation reserve 1,273,536 317,939 992,420 Special distributable 14,861,009 15,656,959 15,256,001reserve Profit and loss account 4,194,214 4,652,086 4,567,185 ----- ----- ----- Equity shareholders' 28,322,453 23,309,955 25,345,179funds ===== ===== ===== Net asset value per 7 111.87p 110.85p 112.87pOrdinary share
UNAUDITED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the six months ended 31 July 2011
Six months Six months Year ended 31 ended 31 July ended 31 July January 2011 2011 2010 (unaudited) (unaudited) (audited) £ £ £ Opening Shareholders' 25,345,179 21,222,542 21,222,542Funds Net share capital 3,464,121 1,598,150 3,444,752subscribed Net share capital bought (163,990) (405,046) (582,286)back Profit for the period 430,963 1,322,897 1,893,790before dividends
Dividends paid in period 6 (753,820) (428,588) (633,619)
----- ----- ----- Closing shareholders' 28,322,453 23,309,955 25,345,179funds ===== ===== =====
The notes below form part of these Half-Yearly financial statements.
UNAUDITED SUMMARISED CASH FLOW STATEMENT
For the six months ended 31 July 2011
Six months Six months Year ended 31 ended 31 July ended 31 July January 2011 2011 2010 (unaudited) (unaudited) (audited) Notes £ £ £ Interest income received 263,398 285,302 494,974 Dividend income 128,616 22,653 144,366 Other income - - 2,544 VAT (paid)/recovered (to)/ (15,287) 44,569 10,199from from Investment managers Investment management fees (326,080) (327,610) (561,799)paid Cash payments for other (131,059) (195,954) (397,775)expenses ----- ----- ----- Net cash outflow from (80,412) (171,040) (307,491)operating activities Investing activities Sale of investments 8 1,085,668 548,848 923,983 Purchase of investments 8 (732,348) (2,576) (2,397,128) ----- ----- ----- Net cash inflow/(outflow) 353,320 546,272 (1,473,145)from investing activities ----- ----- ----- Cash inflow/(outflow) 272,908 375,232 (1,780,636)before financing and liquid resource management Dividends Equity dividends paid 6 (753,820) (428,588) (633,619) Financing Share capital 5,297,186 1,598,150 1,611,231subscribed Purchase of own shares (208,872) (219,447) (537,294) Management of liquid resources (Increase)/decrease in (3,208,273) (1,140,432) 2,331,078monies held in money market funds ----- ----- ----- Increase in cash 1,399,129 184,915 990,760 ===== ===== ===== Reconciliation of net cash inflow to movement in net funds Increase in cash for 1,399,129 184,915 990,760the period Net funds at the start 1,061,164 70,404 70,404of the period ----- ----- ----- Net funds at the end of 2,460,293 255,319 1,061,164the period ===== ===== =====
RECONCILIATION OF PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION TO NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES
For the six months ended 31 July 2011
Six months Six months Year ended 31 ended 31 ended 31 July January 2011 July 2011 2010 (unaudited) (unaudited) (audited) £ £ £
Profit on ordinary activities before 430,963 1,322,897 1,893,790 taxation
Net unrealised gains on investments (451,225) (1,522,221) (16,077)
Net (gains)/ losses on realisations of (2,551) 80,807 (2,119,702) investments
(Increase)/decrease in debtors (76,511) (12,349) 24,702 Increase/(decrease) in creditors 18,912 (40,174) (90,204) ----- ----- ----- Net cash outflow from operating (80,412) (171,040) (307,491)activities ===== ===== =====
The share capital subscribed figure per the cash flow statement of £5,297,186 above differs to elsewhere in the financial statements by £1,833,065, which was included within debtors at 31 January 2011.
The notes below form part of these Half-Yearly financial statements.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
Notes to the Unaudited Financial Statements
1. Principal accounting policies
The following accounting policies have been applied consistently throughout the period. Full details of principal accounting policies will be disclosed in the Annual Report.
a. Basis of accounting
The unaudited results cover the six months to 31 July 2011 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 2011 and the 2009 Statement of Recommended Practice, `Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('the SORP') issued by the Association of Investment Companies.
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.
b. Presentation of the Income Statement
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.
c. Investments
All investments held by the Company are classified as "fair value through profit and loss", in accordance with the International Private Equity and Venture Capital Valuation ("IPEVCV") guidelines, as updated in September 2009. This classification is followed 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, fair value is generally determined by reference to Stock Exchange market quoted bid prices at the close of business on the balance sheet date. Purchases and sales of quoted investments are recognised on the trade date where a contract of sale exists whose terms require delivery within a time frame determined by the relevant market. Purchase and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional.
Unquoted investments are stated at fair value by the Directors in accordance with the following rules, which are consistent with the IPEVCV guidelines:
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:
i. Where a value is indicated by a material arms-length transaction by an
independent third party in the shares of a company, this value will be
used.
ii. In the absence of i), and depending upon both the subsequent trading
performance and investment structure of an investee company, the valuation
basis will usually move to either:-
a) an earnings multiple basis. The shares may be valued by applying a suitable price-earnings ratio to that company's historic, current or forecast post-tax earnings before interest and amortisation (the ratio used being based on a comparable sector but the resulting value being adjusted to reflect points of difference identified by the Investment Manager compared to the sector including, inter alia, a lack of marketability).
or:-
b) where a company's underperformance against plan indicates a diminution in the value of the investment, provision against cost is made, as appropriate. Where the value of an investment has fallen permanently below cost, the loss is treated as a permanent impairment and as a realised loss, even though the investment is still held. The Board assesses the portfolio for such investments and, after agreement with the Investment Manager, will agree the values that represent the extent to which an investment loss has become realised. This is based upon an assessment of objective evidence of that investment's future prospects, to determine whether there is potential for the investment to recover in value.
iii. Premiums on loan stock investments are accrued at fair value when the
Company receives the right to the premium and when considered recoverable.
iv. Where an earnings multiple or cost less impairment basis is not appropriate
and overriding factors apply, discounted cash flow or net asset valuation
bases may be applied.
Capital gains and losses on investments, whether realised or unrealised, are dealt with in the profit and loss and revaluation reserves and movements in the period are shown in the Income Statement.
2. Income 3. Year Six months ended Six months ended ended 31 July 2011 31 July 2010 31 January 2011 (unaudited) (unaudited) (audited) Income from £ £ £investments Dividends 156,589 74,794 127,836 Money-market funds 22,240 17,108 34,092 Loan stock interest 270,851 229,721 469,393 Bank deposit interest 9,715 37 2,561 Other Income - - 2,544 ----- ----- ----- Total Income 459,395 321,660 636,426 ===== ===== =====
3. Investment management expense
In accordance with the policy statement published under "Management and Administration" in the Company's prospectus dated 8th 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 long-term split of returns from the investment portfolio of the Company.
4. Taxation
There is no tax charge for the period as the Company has tax losses from the current year and from previous periods, both of which can be offset between revenue and capital.
5. Basic and diluted earnings per share
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 Six months ended Year ended 31 ended 31 July 31 July 2010 January 2011 2011 (unaudited) (unaudited) (audited) £ £ £ i) Total earnings after 430,963 1,322,897 1,893,790taxation ----- ----- ----- Basic and diluted earnings 1.77p 6.35p 9.04pper Ordinary share (pence) ii) Revenue earnings/ 208,189 37,186 119,808(loss) from ordinary activities after taxation ----- ----- ----- Basic and diluted revenue 0.86p 0.18p 0.57pearnings/(loss) per Ordinary share (pence) Net unrealised capital 451,225 1,522,221 2,119,702gains Net realised capital gains 2,551 (80,807) 16,077/(losses) Capital expenses net of (231,002) (155,703) (361,003)taxation Capital element of VAT - - (794)recoverable iii) Capital return 222,774 1,285,711 1,773,982 ----- ----- ----- Basic and diluted capital 0.91p 6.17p 8.47pearnings per Ordinary share (pence) ----- ----- ----- iv) Weighted average 24,337,457 20,831,585 20,946,842number of shares in issue in the period 6. Dividends paid 7. Six Six Year months months ended ended ended 31 31 31 January July July 2011 2011 2010 (unaudited) (unaudited) (audited) £ £ £ Final income 100,509 - -dividend for the year ended 31 January 2011 of 0.4 pence per Ordinary share paid 24 June 2011 Final capital 653,311 - -dividend for the year ended 31 January 2011 of 2.6 pence per Ordinary share paid 24 June 2011 Final capital - 428,588 423,331dividend for the year ended 31 January 2010 of 2 pence per Ordinary Share paid 9 June 2010 Interim - - 210,288capital dividend for the year ended 31 January 2011 of 1 pence per Ordinary Share paid 5 November 2010 ----- ----- ----- 753,820 428,588 633,619 ===== ===== =====
7. Net asset value per Ordinary Share
8. As at As at As at 31 July 2011 31 July 2010 31 January 2011 (unaudited) (unaudited) (audited) £ £ £ Net assets 28,322,453 23,309,955 25,345,179 Number of shares in issue 25,316,557 21,027,687 22,455,802 ----- ----- ----- Net asset value per share 111.87p 110.85p 112.87p(pence)
8. Summary of non current asset investments at fair value during the period
9. Unquoted Unquoted Traded on AIM equity preference Loan Stock Total shares shares £ £ £ £ £ Valuation at 31 241,664 7,967,196 16,448 10,675,582 18,900,890January 2011 Purchases at cost - 5,726 - 726,622 732,348 Reclassification - 932 (932) - -at value Sales - proceeds - (2,551) - (1,083,117) (1,085,668) - realised gains - 2,551 - - 2,551 Unrealised gains - 408,542 - 42,683 451,225 ----- ----- ----- ----- ----- Valuation at 31 241,664 8,382,396 15,516 10,361,770 19,001,346July 2011 Book cost at 31 199,998 6,717,752 24,535 10,935,627 17,877,912July 2011 Unrealised gains/ 41,666 1,814,746 (9,019) (573,857) 1,273,536(losses) at 31 July 2011 Permanent - (150,102) - - (150,102)impairment of investments ----- ----- ----- ----- ----- Valuation at 31 241,664 8,382,396 15,516 10,361,770 19,001,346July 2011 Gains on - 2,551 - 170,109 172,660investments Less amounts - - - (170,109) (170,109)recognised as unrealised gains in previous years ----- ----- ----- ----- ----- Realised gains - 2,551 - - 2,551based on carrying value at 31 July 2011 Net movement in - 408,542 - 42,683 451,225unrealised appreciation in the period ----- ----- ----- ----- ----- Gains on - 411,093 - 42,683 453,776investments for the period ended 31 July 2011 ===== ===== ===== ===== =====
9. Current investments at fair value
These comprise investments in 8 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.
£6,842,545 (31 July 2010: £7,105,841, 31 January 2011: £3,634,303) of this sum is subject to same day access, whilst £10,469 (31 July 2010: £10,410, 31 January 2011: £10,438) is subject to 2 day access.
10. Capital and reserves
11.
Called up Share Capital Revaluation Special Profit and share Premium redemption reserve distributable loss Total capital account reserve reserve reserve £ £ £ £ £ £ £ At 1 224,558 3,413,664 891,351 992,420 15,256,001 4,567,185 25,345,179February 2011 Shares 29,606 3,373,214 - - - - 3,402,820issued via Linked Offer for Subscription Dividends 609 60,692 - - - - 61,301re-invested into new shares Shares (1,607) - 1,607 - (163,990) - (163,990)bought back Profit/ - - - 451,225 - (20,262) 430,963(loss) for the period Realised - - - - (231,002) 231,002 -losses transferred to special reserve Realisation - - - (170,109) - 170,109 -of previously unrealised appreciation Dividend - - - - - - (753,820) (753,820)final paid for year ended 31 January 2011 ----- ----- ----- ----- ----- ----- ----- At 31 July 253,166 6,847,570 892,958 1,273,536 14,861,009 4,194,214 28,322,4532011 ===== ===== ===== ===== ===== ===== =====
During the six months to 31 July 2011, the Company issued 2,960,632 new ordinary shares at an average price of 121.46 pence per share under the linked offer for subscription launched on 12 November 2010.
11. Related party transactions
All amounts raised from the Joint VCT fundraising offer were held in a bank account called "The Income & Growth VCT plc For Matrix VCTs Linked Offer" prior to each allotment. Following each allotment, the Company became entitled to these amounts, which were subsequently received, totalling £5,236,340.
12. Post balance sheet events
On 9 August 2011, a further £21,144 was invested in loan notes issued by Monsal Holdings Limited.
13. The financial information for the period ended 31 July 2011 does not
comprise full financial statements within the meaning of Section 435 of the Companies Act 2006. The financial statements for the year ended 31 January 2011 have been filed with the Registrar of Companies. The auditors have reported on these financial statements and that report was unqualified and did not contain a statement under section 498(2) of the Companies Act 2006.
14. This Half-Yearly Report will shortly be made available on our website:
www.mig4vct.co.uk and will be circulated by post to those shareholders who have requested copies of the Report. Further copies are available free of charge from the Company's registered office, One Vine Street, London W1J 0AH or can be downloaded via the website. CORPORATE INFORMATION Directors (Non-executive) Christopher Moore (Chairman) Andrew Robson Helen Sinclair Secretary Matrix Private Equity Partners LLP One Vine Street London W1J 0AH Company's Registered Office and Head Office One Vine Street London W1J 0AH Company Registration Number 3707697 Investment Manager Matrix Private Equity Partners LLP One Vine Street London W1J 0AH www.matrixgroup.co.uk Telephone: 020 3206 7000 Website: www.mig4vct.co.uk Solicitors Independent Auditors Martineau PKF (UK) LLP No 1 Colmore Square Farringdon Place Birmingham 20 Farringdon Road B4 6AA London EC1M 3AP Stockbroker VCT Status Adviser Matrix Corporate Capital LLP PricewaterhouseCoopers LLP One Vine Street 1 Embankment Place London W1J 0AH London WC2N 6RH Registrars Bankers Capita Registrars National Westminster Bank plc The Registry Financial Institutions Team 34 Beckenham Road First Floor Beckenham Mayfair Commercial Banking Centre Kent 65 Piccadilly BR3 4TU London W1A 2PP Tel: 0871 664 0300 (calls cost 10p per minute plus net work extras. Lines are open 8.30am-5.30pm Mon-Fri. If calling from overseas please ring +44 208 639
2157)
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