Final Results
Matrix Income & Growth 4 VCT plc
Preliminary un-audited annual results for the year ended 31 January 2007
Investment Objective
Matrix Income & Growth 4 VCT plc ("MIG 4") is a Venture Capital Trust (VCT)
advised by Matrix Private Equity Partners LLP ("MPEP") investing in a diverse
selection of established profitable unquoted companies.
The Company's objective is to provide investors with a regular and growing
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.
Financial highlights
As at 31 January 2007
31 January 31 January Change
2007 2006
(%)
(restated)
Net assets (£000s) 9,772 9,287 5.22
Net asset value per share (p) 116.34 106.57 9.17
Discount (%) 21.78 20.24 (7.61)
Cumulative dividends paid since launch per 8.90 8.40 5.95
share (p)
Total return to shareholders since launch per 125.24 114.97 8.93
share (p)1
Share price (p)2 91.00 85.0 7.06
All figures have been restated to incorporate the restructuring of the share
capital that occurred on 18 October 2006 under which all existing Shareholders
received one Ordinary Share of 1 pence for every two Ordinary Shares of 5 pence
held before the re-structuring.
1 Net asset value per share plus cumulative net dividends paid to date
2 Source: London Stock Exchange
Chairman's Statement
I am pleased to present to Shareholders the Annual Report of the Company for
the year ended 31 January 2007 - the first in its new form as a single manager
VCT.
Inevitably, for the Company, this year has been dominated by the changeover
from being a multi-manager VCT to a single manager VCT, the capital
restructuring and name change from TriVen VCT plc to Matrix Income & Growth 4
VCT plc to reflect this, and the subsequent Offer for Subscription by the
Company. I will comment in more detail about these events below. Suffice it to
say at this stage that the Board has been much encouraged by the positive
Shareholder reaction received.
Net asset value
At 31 January 2007, the Company's Net Asset Value (NAV) per share was 116.34
pence (2006: 106.57 pence (restated)). Net Assets rose by 5.22% to £9.77m from
£9.29m. The Company has now distributed accumulated dividends of 8.90 pence per
share (restated) since launch.
Economic and stock market background
During the six-month period ended 31 January 2007 the FTSE 100 Index rose 6.08%
and the FTSE All Share Index by 8.32% whilst the AIM Index rose by 3.60%. The
AIM new issue market has been much less active during this period with a good
number of IPO prices being substantially lower at the end of the period as
compared with the beginning of the year.
On the investment side there is no shortage of equity and debt providers
looking for good propositions, and competition to finance such situations
continues to remain strong. The Investment Manager is wary of some high
valuations being placed on businesses in the current market, but continues to
remain confident of sourcing good quality new investments. Looking ahead in the
short term, it appears that the markets may have temporarily learned to live
with the current global security position, the prospect of higher energy prices
and the possibility of a return to higher inflation and interest rates.
However, since the year end global stock markets have experienced some
nervousness, which if it continues, could spill over into the wider financial
markets.
The portfolio
When considered by stage of development, the portfolio is dominated by
investments in management buy-out situations ("MBO") at some 66.65% with 30.39%
invested in development capital companies and the remaining 2.96% of the
portfolio invested in AIM stocks and early stage investments. Following the
change in investment strategy, the portfolio is now invested in a wider range
of market sectors with the largest of those being support services at 40.30%.
This spread of investments reflects the current investment strategy of
spreading risks whilst trying to maintain a steady, if not growing, dividend
yield.
Seven new investments have been made in the year. In December 2006, new
investments of £584,088 and of £406,803 were made in PXP Holdings Limited
(Pinewood Structures), a supplier of timber frame houses, and Castlegate 435
Limited (Racoon International), a supplier of hair extensions.
Within the previous Elderstreet portfolio, the investment in Computer Software
Group plc was sold in June and those in Mediasurface plc and Netstore plc were
disposed of in August 2006. In January 2007, an additional investment of £4,871
was committed to Mobile & Wireless Group plc, which took place just after the
year-end.
It is worth commenting that the Company now holds only a small number of
relatively early stage AIM quoted stocks with limited marketability. In such
cases, the price at which a sizeable block of shares could be traded, if at
all, may vary significantly from the market price used.
Revenue account
Income, excluding the capital dividend of £250,000 received last year, has
risen by £17,854 over the last year. Interest from liquidity funds fell by £
87,294 as funds were invested in new qualifying investments, but this
contributed to an increase in loan interest income of £51,368. There was also a
rise in dividend income of £53,429.
Fund management fees were constant compared to last year. Overhead costs were
at similar levels to last year, but there were exceptional professional fees
and costs of £63,000 relating to the cost of the Company's restructuring.
Dividend
The Company's revenue gain per Ordinary Share was 0.35 pence per share (2006:
0.67 pence per share restated). Your Board paid an interim dividend of 0.9
pence (equivalent to 1.8 pence per share after the capital restructuring) on 26
October 2006. Although no further dividend is proposed in respect of the year
under review, the Board aims to distribute income to Shareholders twice-yearly
and to include payments from capital when investments are successfully
realised.
Change from TriVen VCT plc to Matrix Income & Growth 4 VCT plc
In my Report to you last year I said that "…. The Board are looking actively at
ways of improving the performance of the portfolio and of increasing the value
to shareholders. …." The decision to move to being a single manager VCT
reflected the realisation by the Board, after considering a wide variety of
options, that with its size and 5-year performance history it was not going to
be easy to grow TriVen as a multi-manager VCT. MPEP had been the most
successful of TriVen's three managers and are currently one of the top VCT
managers in the marketplace (please see the paragraph on Awards below).
MPEP became the sole Manager of the Company on 1 August 2006 when the other two
Managers resigned. I would like to take this opportunity to thank both these
Managers for their efforts to rectify earlier problems and create value for
shareholders subsequently. The proposals to restructure the Company were put to
Shareholders at an Extraordinary General Meeting on 18 October 2006 and all
Resolutions were passed. A total of 130 Shareholders, representing 13.15% of
the Company, submitted proxy votes on the proposals. The Board was encouraged
by this response and, on behalf of the Board, I would like to thank all
Shareholders for their support.
Offer for Subscription
On 2 November 2006, the Offer for Subscription for MIG 4 was launched. The
reaction from independent commentators and the leading IFAs has been positive
and, I am pleased to report, subsequent to the Company's financial year end,
the Company has allotted a total of 13,006,193 new shares having raised £15.4
million. This outcome is particularly pleasing as the Company has more than
doubled its size.
Share buy-backs
During the year ended 31 January 2007 the Company continued to implement its
buy-back policy and bought back 280,000 Ordinary Shares of 5p before the
capital restructuring and 175,000 Ordinary Shares of 1p following the capital
restructuring, representing 3.61% of the shares in issue at 1 February 2006 at
a total cost of £278,975 (excluding expenses). These shares were subsequently
cancelled by the Company.
Investor Allstars 2006 Awards
At the Investor Allstars 2006 Awards ceremony, I am delighted to inform you
that Matrix Private Equity Partners won the award for the second year running
for the Venture Capital Trust Manager of the Year which included a review of
the performance of the MPEP portfolio within TriVen. The judging panel
commented " Matrix is one of the few VCs that has successfully defended its
title. ….. What differentiated Matrix (from the other finalists) was the
quality of the exits they achieved."
This has been a particularly busy year for the Board. Most importantly, the
Board continues to be pleased with the recent progress that the portfolio has
made and we look forward to the opportunities potentially offered from
investing from a larger pool of funds. Once again I would like to take this
opportunity to welcome new Shareholders and thank existing Shareholders for
their continued support.
Colin Hook
Chairman
Investment Manager's Review
MPEP was appointed sole adviser of the Company's investment portfolio with
effect from 1 August 2006. In addition to the eighteen investments it managed
at that date it assumed responsibility for ten additional investments,
previously managed by Elderstreet Private Equity, valued at £863k. Three of
these, European Telecommunications & Technology, Netstore and Mediasurface,
were realised by the end of October for proceeds of £610k compared with cost of
£648k and the valuation of £560k at 31 January 2006. The remaining seven
investments are now valued at a total of £125k.
The Company's new strategy is to invest in established, profitable, unquoted
companies. Typically these investee companies are cash-generative and therefore
capable of producing dividend income, as well as capital returns to
Shareholders on their ultimate sale or flotation. The Company focuses
principally on investments in MBOs.
Two MBO investments were completed in December 2006. The first was into PXP
Holdings Limited (Pinewood Structures), a leading supplier of timber frame
sections to the UK building sector, in which the Company invested £584k. This
was followed by an investment of £407k into the MBO of Castlegate 435 Limited
(Racoon International), the UK's largest supplier of hair extensions and
related products.
During the year MPEP invested £1.77 million on behalf of the Company into seven
companies across a range of industrial and commercial sectors, bringing the
cost of its current investments to £5.39 million; six of these investments were
MBOs, reflecting the success of the Company's focus on this type of investment.
The overall portfolio continues to mature and the more recent investments are
already beginning to demonstrate good performance which is expected to
translate into increases in valuation if progress is maintained during the next
year. Youngman Group, in particular, has enjoyed very strong trading conditions
and looks set to continue to grow. Higher Nature has generated record profits
and has recently acquired additional property in order to increase its
capacity. Letraset repaid the Company's £350k loan stock investment in January.
However, the investment in FH Ingredients has proved very disappointing. Poor
implementation of a major capital expenditure programme soon after the
investment led to cash pressures and efforts to re-finance the company proved
unsuccessful; the company entered into administration on 26 January 2007.
Investment Portfolio Summary
As at 31 January 2007
Cost at Valuation Valuation % of
31-Jan-07 at at portfolio by
31-Jan-07 31-Jan-06 value
Matrix Private Equity
Partners LLP
Higher Nature Limited 500,000 1,574,137 1,433,675 22.67%
Mail order distributor of
vitamins and natural
medicines
Youngman Group Limited 500,026 1,372,182 500,000 19.76%
Manufacturer of ladders and
access towers
PXP Holdings Limited 584,088 584,088 - 8.41%
(Pinewood Structures)
Designer, manufacturer and
supplier of timber frames for
buildings
Maven Management Limited 175,000 482,206 594,726 6.94%
Market research agency
Castlegate 435 Limited 406,805 406,805 - 5.86%
(Racoon International)
Supplier of hair extensions,
hair care products and
training
Stortext FM Limited 561,820 375,968 375,968 5.41%
Provider of document
management software and
services
Tottel Publishing Limited 235,200 375,664 400,163 5.41%
Publisher specialising in
legal and tax titles
Ministry of Cake (Holdings) 328,720 325,635 328,720 4.69%
Limited
Manufacturer of frozen cakes
and desserts for the
foodservice industry
British International 250,000 250,000 - 3.60%
Holdings Limited
Helicopter service operator
VSI Limited 177,213 177,213 - 2.55%
Provider of software for CAD
and CAM vendors
Blaze Signs Holdings Limited 164,510 164,510 - 2.37%
Manufacturer and installer of
signs
Sectorguard plc 150,000 160,714 135,000 2.31%
Provider of manned guarding,
patrolling and alarm response
services
Campden Media Limited 152,620 154,040 152,620 2.22%
Magazine publisher and
conference organiser
PastaKing Holdings Limited 133,055 133,055 - 1.92%
Manufacturer and supplier of
fresh pasta meals
Vectair Holdings Limited 100,000 100,818 100,000 1.45%
Designer and distributor of
washroom products
BBI Holdings plc 57,528 81,034 - 1.17%
Manufacturer of gold
conjugate for medical
diagnostic industry
BG Consulting Group Limited/ 230,796 52,383 27,967 0.75%
Duncary 4 Limited
Provider of financial
training services
Inca Interiors Limited 350,000 50,000 200,000 0.72%
Designer, supplier and
installer of contract
kitchens
Letraset Limited 150,000 - 291,268 0.00%
Manufacturer and distributor
of graphic art products
F H Ingredients Limited 183,804 - 183,804 0.00%
Processor of frozen herbs to
the food processing industry
------ ------ ------ ------
Total 5,391,185 6,820,452 4,723,911 98.21%
Former Elderstreet Private
Equity Limited portfolio
Mobile and Wireless Group 26,129 65,773 - 0.94%
Limited
Retailer of handheld
electrical products
Cashfac Limited 260,101 33,163 49,397 0.48%
Provider of virtual banking
application software
solutions to corporate
customers
Sparesfinder Limited 250,000 25,683 - 0.37%
Supplier of industrial spare
parts on-line
Computer Software Group plc 249,973 - 590,784 0.00%
Software vendor
European Telecommunications & - - 300,244 0.00%
Technology Limited
Telecom service integrator
providing enterprise network
Mediasurface plc - - 246,456 0.00%
Developer of web content
Netstore plc - - 13,500 0.00%
Provider of
enterprise-managed IT
services
Sift Group Limited 125,000 - 62,500 0.00%
Developer of on-line
community software and
services
Other investments in the 523,089 - - 0.00%
portfolio
------ ------ ------ ------
Total 1,434,292 124,619 1,262,881 1.79%
------ ------ ------ ------
Investment Managers' Total 6,825,477 6,945,071 5,986,792 100.00%
==== ==== ==== ====
Income Statement
For the year ended 31 January 2007
Year ended 31 January 2007 Year ended 31 January 2006
(Unaudited) (audited)
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Unrealised gains - 601,177 601,177 - 44,589 44,589
on investments
held at fair
value
Realised gains/ - 270,668 270,668 - (725,431) (725,431)
(losses) on
investments held
at fair value
Income 354,141 - 354,141 336,287 250,000 586,287
Investment (32,072) (96,215) (128,287) (31,774) (95,322) (127,096)
management fees
Other expenses (288,581) - (288,581) (232,828) - (232,828)
------ ------ ------ ------ ------ ------
Return on 33,488 775,630 809,118 71,685 (526,164) (454,479)
ordinary
activities before
taxation
Taxation on (3,119) 3,119 - (12,856) 12,856 -
ordinary
activities
------ ------ ------ ------ ------ ------
Return on 30,369 778,749 809,118 58,829 (513,308) (454,479)
ordinary
activities after
taxation
------ ------ ------ ------ ------ ------
Return per O 0.35p 9.06p 9.41p 0.67p (5.81)p (5.14)p
rdinary Share
(basic and
diluted)
The total column is the profit and loss account of the Company. All revenue and
capital items in the above statement derive from continuing operations. No
operations were acquired or discontinued in the year.
The revenue return as stated does not differ materially from that under the
historical cost basis of accounting.
Statement of Total Recognised Gains and Losses
For the year ended 31 January 2007
Year ended 31 January 2007 Year ended 31 January 2006
(audited)
(Unaudited)
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Return 30,369 778,749 809,118 58,829 (513,308) (454,479)
attributable to
equity
shareholders
Creditor for - - - - 7,510 7,510
previously
capitalised fees
no longer payable
------ ------ ------ ------ ------ ------
Total recognised 30,369 778,749 809,118 58,829 (505,798) (446,969)
gains/(losses) in
the year
==== ==== ==== ==== ==== ====
Total recognised 0.35p 9.06p 9.41p 0.67p (5.73)p (5.06)p
gain/(loss) per
Ordinary Share
Reconciliation of Movements in Shareholders' Funds
For the year ended 31 January 2007
Year ended Year ended
31 January 2007 31 January 2006
(audited)
(Unaudited)
£ £
Opening shareholders funds as 9,286,678 10,089,417
previously reported
Prior year adjustment - 51,280
------ ------
Opening shareholders funds (restated) 9,286,678 10,140,697
Purchase of own shares (280,076) (388,721)
Total recognised gains and losses 809,118 (446,969)
before dividends
Dividends paid (43,572) (18,329)
------ ------
Closing Shareholders' funds 9,772,148 9,286,678
Balance Sheet
As at 31 January 2007
Year ended Year ended
31 January 2007 31 January 2006
(audited)
(Unaudited)
£ £
Non-current assets
Investments at fair value 6,945,071 5,986,792
Current assets
Debtors and prepayments 223,072 67,469
Investments at fair value 694,526 2,038,915
Cash at bank 2,040,442 1,449,729
------ ------
2,958,040 3,556,113
Creditors: amounts falling due within
one year
Other creditors 69,435 159,634
Accruals 61,528 96,593
------ ------
(130,963) (256,227)
Net current assets 2,827,077 3,299,886
------------- -------------
Net assets 9,772,148 9,286,678
======== ========
Capital and reserves
Called up share capital 83,994 871,434
Capital redemption reserve 870,765 83,325
Special reserve 16,248,945 16,536,695
Capital reserve - realised (7,735,927) (6,048,574)
Capital reserve - unrealised 150,383 (2,315,719)
Revenue reserve 153,988 159,517
------------- -------------
Equity shareholders' funds 9,772,148 9,286,678
======== ========
Net asset value per Ordinary Share 116.34p 106.57p
Cash Flow Statement
For the year ended 31 January 2007
Year ended Year ended
31 January 2007 31 January 2006
(audited)
(Unaudited)
£ £
Operating activities
Interest income received 257,875 303,108
Dividend income 90,573 263,571
Other income - 2,446
Investment management fees paid (164,838) (95,671)
Cash payments for other expenses (439,056) (220,538)
Non-cash movement - 5,170
------ ------
Net cash (outflow)/inflow from (255,446) 258,086
operating activities
Investing activities
Sale of investments 1,716,004 144,569
Purchase of investments (1,799,354) (1,519,870)
------ ------
Acquisitions and disposals (83,350) (1,375,301)
Cash outflow before financing and (338,796) (1,117,215)
liquid resource management
Dividends
Equity dividends paid (43,572) (18,329)
Financing
Purchase of own Ordinary Shares (217,320) (263,020)
Payment to Ordinary Shareholders (153,988) -
------ ------
(371,308) (263,020)
Management of liquid resources
Decrease in monies held in money 1,344,389 2,145,168
market funds
------ ------
Increase in cash 590,713 746,604
==== ====
Notes
1. Net asset value per Ordinary Share
Net asset value per Ordinary Share is based on net assets at the end of the
year and on 8,399,337 Ordinary Shares of 1 pence (2006: 8,714,340 (restated)),
being the number of Ordinary Shares in issue on that date. To aid comparison of
the net asset value, the number of Ordinary Shares in issue at 31 January 2006
has been restated as if this year's two for one share consolidation had taken
place last year.
2. Return per Ordinary Share
The revenue return per Ordinary Share is based on the net revenue profit from
ordinary activities after taxation of £30,369 (2006: £58,829) and on 8,594,860
(2006: 8,834,477 (restated)) Ordinary Shares, being the weighted average number
of Ordinary Shares in issue during the year.
The capital return per Ordinary Share is based on a capital return of £778,749
(2006: £513,308) which includes the net of tax portion of the Investment
Manager's fees charged to the capital reserve of £96,215 (2006: £95,322) and
8,594,860 (2006: 8,834,477 (restated)) Ordinary Shares, being the weighted
average number of Ordinary Shares in issue during the year.
3. Investment Manager's Fees
Elderstreet Private Equity Limited (Elderstreet) and Nova Capital Management
Limited (Nova) resigned with effect from 31 July 2006. Matrix Private Equity
Partners Limited (MPEP) assumed responsibility for the entire portfolio with
effect from 1 August 2006. Under a new investment management agreement dated 1
November 2006, but effective from 18 October 2006, MPEP LLP is the sole adviser
to the Company on investments in qualifying companies.
In accordance with the policy statement published under "Management, Expenses
and Administration" in the Company's Prospectus dated 2 November 2006, the
Directors have charged 75% of the investment management expenses to the
realised capital reserve.
4. Dividend
Payment of a dividend of £153,988 has resulted in a deficit of £7,647 on
revenue reserve. This technical breach has been rectified, inter alia, by the
transfer of £7,674 from the Special Reserve to revenue reserve and by the
filing of interim accounts. Consequently the dividend is shown as receivable
from shareholders and under revenue reserve for the period. There should be no
effect on the tax relief available in respect of this dividend.
5. Financial Information
The financial information set out in these statements does not constitute the
Company's statutory accounts for the year ended 31 January 2007 but is derived
from those accounts. Statutory accounts for the year ended 31 January 2007 will
be delivered to Companies House following the Company's Annual General Meeting.
6. Annual Report
A Summary Annual Report will be circulated by post to all Shareholders shortly
and copies will be available thereafter to members of the public from the
Company's registered office. Shareholders who wish to receive a copy of the
full Annual Report may request a copy by writing to the Company Secretary,
Matrix-Securities Limited, One Jermyn Street, London SW1Y 4UH. Alternatively
copies may be downloaded via the Company Secretary's web site at
www.matrixgroup.co.uk.
7. Annual General Meeting
The Annual General Meeting will be held at 11.00 am on Wednesday 13 June 2007
at the offices of Matrix Group Limited, One Jermyn Street, London SW1Y 4UH.
Contact details for further enquiries:
Sarah Penfold of Matrix-Securities Limited (the Company Secretary) on 020 7925
3300 or by e-mail on mig4@matrixgroup.co.uk
Mark Wignall or Mike Walker at Matrix Private Equity Partners LLP (the
Investment Manager), on 020 7925 3300 or by e-mail on info@matrixpep.co.uk
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