Half-year Report
THE INCOME & GROWTH VCT PLC
Half-Year Results for the six months ended 31 March 2011
26 May 2011
Investment Objective
The objective of The Income & Growth VCT plc ("I&G VCT" or "the Company") is to
provide investors with an attractive return, by maximising the stream of
dividend distributions from the income and capital gains generated by a diverse
and carefully selected portfolio of investments.
The Company invests in companies at various stages of development. In some
instances this may include investments in new and secondary issues of companies
which may already be quoted on the Alternative Investment Mar ket ("AiM") or
PLUS.
Financial Highlights
Six months to 31 March 2011
Strong liquidity has been further enhanced by a successful fundraising in which
the Company raised an additional £5.1 million.
Dividends totalling 4.0* pence per share have been paid to shareholders during
the period.
Increase of 9.1% in total return (share price basis) to Shareholders
Increase of 5.1% in total return (net asset value (NAV) basis) to Shareholders
*6 months ended 31 March 2010: 0.5p Ordinary; 2p former `O' fund.
Year ended 30 September 2010: 0.5p Ordinary; 2p former `O' fund.
Performance Summary
The former 'O' Share Fund was merged into the 'S' Share Fund (which
subsequently became the current Ordinary Share Fund) on 29 March 2010. The
ratio used for the conversion of former `O' Shares into new Ordinary Shares was
approximately 0.758. All the issued and unissued former `S' Shares were
subsequently redesignated as Ordinary Shares on a 1 for 1 basis.
To help shareholders in each former share class understand the trend in
performance of their investment, comparative data for each former share class
is shown below:-
Net NAV per Cumulative Total return Share Total return
assets Share dividends (NAV basis) price2 (share price
(£m) (p) paid per to (p) basis) to
share (p) shareholders shareholders
since launch (p)
per
Share (p)
Ordinary Shares raised 2007/08
As at 31 March 2011 39.5 100.1 4.5 104.6 91.0 95.5
As at 30 September 36.6 99.0 0.5 99.5 87.0 87.5
2010
As at 30 September 11.0 93.2 0.0 93.2 94.5 94.5
2009
As at 30 September 11.2 94.6 0.0 94.6 100.0 100.0
2008
At close of Offer for 11.2 94.5 0.0 94.5 100.0 100.0
subscription
Net NAV Cumulativ Total return Share Total return
assets per dividends (NAV basis) price 2 (share price
(£m) Share paid per to (p) basis) to
(p) share (p) shareholders shareholders
since launch (p)
per Share
(p)
Former `O' Share Fund raised 2000/01
As at 31 March 2011 1 - 75.9 25.5 101.4 - -
As at 30 September - 75.0 22.5 97.5 - -
2010 1
As at 30 September 24.9 71.5 20.5 92.0 54.8 75.2
2009
As at 30 September 29.6 83.6 16.5 100.0 79.5 96.0
2008
1 Thedata for periods since 31 March 2010 for the former `O' Share Fund shows
the return on an initial subscription price of 100p at the date of inception of
each Fund taken from the table below divided by £10,000.
2 Source: London Stock Exchange.
Return before and after tax relief
The tables below show the total returns (NAV basis) at 31 March 2011 for a
shareholder in each original class that invested £10,000 at £1 a share at each
Fund's inception.
BEFORE BENEFIT OF INITIAL INCOME TAX RELIEF
Fund Original Number of NAV at Dividends Total return Profit
investmen shares held 31 paid to (NAV basis) before
(10,000 post-merger March shareholder to income
shares at 2011 since shareholders tax
£1 each) (£) subscription since relief
(£) (£) subscription 1
(£) (£)
Ordinary Share 10,000 10,000 10,010 450 10,460 460
Fund
2007/08 2
Former `O' Share 10,000 7,578 7,586 2,548 10,134 134
Fund
2000/2001
1 Total return (NAV basis) minus initial investment cost (before applicable
income tax relief) 2 Formerly, the `S' Share Fund
AFTER BENEFIT OF INITIAL INCOME TAX RELIEF
Fund Original Number Rate Cost NAV at Dividends Total Profit
investment of of net of 31 paid to return after
(10,000 shares Income income March shareholder (NAV basis) income
shares at held tax tax 2011 since to tax
£1 each) post relief relief (£) subscription shareholder relief
(£) merger % (£) (£) since 1
subscriptio (£)
(£)
Ordinary 10,000 10,000 30% 7,000 10,010 450 10,460 3,460
Share
Fund
2007/08 2
Former 10,000 7,578 20% 3 8,000 7,586 2,548 10,134 2,134
`O'
Share
Fund
2000/01
1 Total return (NAV basis) minus initial investment cost net of income tax
relief
2 Formerly, the `S' Share Fund
3 Additional capital gains tax deferral relief of up to £4,000 available to
qualifying shareholders
Chairman's Statement
I am pleased to present the Company's Half-Year Results for the six months
ended 31 March 2011.
The last six months have again been dominated by the continuing problems in the
UK and wider global economies. Nevertheless, there are now faint signs that as
the UK's economic indicators improve, albeit slightly, confidence may be
returning slowly with analysts predicting that the Bank of England may, towards
the end of 2011, turn its focus towards controlling inflation and raise
interest rates.
Many of the companies in the portfolio continue to make good progress in spite
of the challenging conditions that have prevailed in recent months. The Board
has been supportive of the Manager's selective approach to investing at a low
point in the economy.
Joint Offer for Subscription
A Joint Offer for Subscriptionwas launched on 12 November 2010 to raise £21
million across three Matrix VCTs of which the Company was one. To date the
Company has raised a highly encouraging £5.2 million gross. The Offer will
remain open until 30 June 2011.
* Performance
* As at 31 March 2011, the Company's NAV per Ordinary Share was 100.1 pence
(30 September 2010: 99.0 pence); adjusted for dividends paid to
Shareholders during this six month period this represents an increase of
5.1%.
* Cumulative dividends per share paid to date amount to 4.5 pence
(pre-merger: 0.5 pence; post-merger: 4.0 pence) for the current share class
(former `S' Shares) and 25.5 pence (pre-merger: 22.5 pence; 3.0 pence post
merger equivalent) for the former `O' Shares.
Portfolio
The MPEP invested portfolio overall has had an encouraging period and the
valuation is up £1.5 million, with Blaze Signs Holdings seeing the greatest
improvement of £987,073.
Four new investments have been completed since the end of October 2010. First,
in October the Company, through its acquisition vehicle Aust, invested £1.4
million to support the MBO of RDL Recruitment Corporation, a European
recruitment provider within the pharmaceutical, business intelligence and IT
sectors. In December 2010 the Company invested £487,744 to support the MBO of
Faversham House Group Limited, a broadly based publishing business. Also in
December, the Company invested £279,997 into the AiM-listed company Omega
Diagnostics Group plc, which operates in the healthcare sector. Finally, again
in December, the Company, using its acquisition vehicle, Apricot Trading,
invested in Automated Systems Group plc, a Cambridge based printer and copier
services business. The Company's investment in this company, which changed its
name to ASL Technology Holdings Limited, stood at £1.2 million on conclusion of
the transaction. In March, I&G VCT invested a further £575,884 (including a
commitment to invest of £419,667) to assist ASL in funding the acquisition of
Transcribe Copier Systems Limited, a complementary printer and copier services
business.
This six month period has also seen two of our investments demerge. In November
2010 Camwood completed the demerger of its AppDNA business. Following the
demerger, I&G VCT had an investment in each of Camwood Enterprises Limited and
AppDNA Limited comprising a 31.5% equity stake and a secured loan of £333,333,
(half of which has since been repaid). Both companies are leading specialists
in Application Migration SoftwareTM. In March 2011, VSI also completed the
demerger of its two operating subsidiary companies creating two separate
companies, namely MachineWorks Software Limited and LightWorks Software
Limited. Following the repayment of the VSI secured loan (which was transferred
to MachineWorks on the demerger) in April 2011, I&G VCT now has a 9.2% equity
stake in both companies.
There have been three realisations during the period under review. In January
2011 I&G VCT realised its entire investment in Campden Media for a cash
consideration of £287,239, compared to the year-end valuation of £125,921.
Together with interest paid over the life of the investment the total cash
return was marginally above cost. In February 2011, the Company also realised
its remaining investment in HWA Group. The total cash return over the life of
this investment was £5,070,682, compared to the £1,422,320 originally invested.
The Company sold a total of 220,000 shares in Tikit Group during the six months
to 31 March 2011 realising total net proceeds of £488,536 compared to a
year-end valuation of £424,600. It has sold a further 50,000 Tikit shares since
the period-end realising total net proceeds of £136,949 compared to
thevaluation at 31 March 2011 of £128,500. I&G VCT continues to retain a
residual holding in this company.
Very encouragingly during this six month period the Company has received a
total of £1.9 million in loan stock repayments. This suggests that many of the
Company's investments are maturing and continuing to trade well. In October
2010 ATG Media made a partial repayment of £111,111 and in the following month
DCG Group repaid its outstanding loan in full remitting £204,772 to the
Company. In the same month Westway made a further repayment of £99,681. Then,
in February 2011, Iglu.com repaid its loan stock in full realising £997,675 for
the Company. In March 2011, Vectair paid off its loan in full by remitting £
195,017 to I&G VCT. Camwood Enterprises and AppDNA both made repayments in
March of £166,667 per company and Camwood Enterprises has settled its loan in
full since the period-end by making a further repayment of £166,667.
Just after the period-end in April 2011, MachineWorks made a payment of £
255,818 in full settlement of its loan.
* In contrast, Monsal Holdings experienced some contract delays and
additional costs during recent months which have caused this investment to
require further funds. These new funds will have more attractive terms, at
the expense of the existing investment and consequently, the Manager has
advised the Board that the fair value of the Company's existing investment
should, for the time being, be reduced to nil. The Board has accepted this
advice, but remains hopeful that value can be still be realised in the
future. It has agreed to participate in this further funding.
* The valuation of Image Source has also reduced, as this company has
suffered from a downturn in trading.
* Generally, the ex Foresight portfolio continues to find these economic
trading conditions difficult. The exceptions to this are AppDNA and Camwood
Enterprises which are trading strongly and are valued at some £1.4 million
and £0.9 million above cost respectively.
* Cash available for investment
* During this economic downturn, both the Board and the Manager have
continued to work to ensure that the Company's cash deposits continue to
remain as secure as possible. We have for some time been spreading cash
deposits between a number of the leading global cash funds rather than
depositing directly to individual banks, thereby reducing our exposure to
any one particular bank. The Board and Manager both continue to believe
strongly that at this time the security and protection of the Company's
capital is more important than striving for a small increase in deposit
rates at the cost of much higher risk.
* Cash and liquidity fund balances as at 31 March 2011 amounted to £9.3
million. In addition, a further £5.0 million has been invested into a
series of acquisition vehicles pending further investment. As at the date
of this Report, cash and liquidity fund balances had increased to £5.1
million as a result of the subscriptions under the Joint Offer.
* Revenue Account
Pleasingly, the revenue account has shown a substantial improvement, achieving
a profit this half-year of £231,868 (2010: loss of £173,592). This improvement
is mainly due to a rise in loan stock income and dividends, and to reductions
in costs. I&G VCT has benefited from an increase of £286,705 in loan stock
interest. At the same time dividends from investee companies have nearly
doubled from £33,742 to £66,346.
* Investment management fees have fallen by £18,428 (after adjusting for the
treatment of costs previously treated as administrative) primarily due to a
slight fall in net assets under management during the period. Last year's
other expenses have reduced by £88,512, principally because last year's
figure included the costs of merging the `O' and `S' Share funds.
* Dividend
* An interim capital dividend in respect of the year ended 30 September 2010
of 2 pence per share was announced on 4 November 2010. The dividend was
paid, to Shareholders on the Register on 28 January 2011, on 22 February
2011. The Company's Dividend Investment Scheme applied to this dividend and
288 Shareholders, who between them held a total of 2,276,359 representing
5.9% of the Company were issued 52,473 Shares at an issue price of 86.70
pence per share.
* A final capital dividend of 2 pence per new share was recommended to
Shareholders at the Annual General Meeting of the Company held on 16
February 2011. This Resolution was passed for payment to Shareholders on
the register on 4 March 2011, on 28 March 2011. The Company's Dividend
Investment Scheme also applied to this dividend and 419 Shareholders, who
between them held a total of 3,590,904 Shares representing 9.36% of the
Company were issued 78,840 Shares on 29 March 2011 at an issue price of
91.0 pence per share.
The issue price used for both dividends above was equal to the average of the
middle market price for the Shares taken from the London Stock Exchange Daily
Official List for the five business days immediately preceding the payment
date.
* Share buy-backs
* During the period ended 31 March 2011 the Company bought back 904,909
Shares (representing 2.45% of the Shares in issue at the beginning of the
year) at a total cost of £805,142 (inclusive of expenses). These shares
were subsequently cancelled by the Company.
The Board regularly reviews its buyback policy and its current intention, given
the less volatile outlook for the valuation of the portfolio, is to continue
with its existing buy-back policy with the objective of maintaining the
discount to NAV at which the Company's Shares trade at 10% or less. At 26]May
2011, the mid-market price for the Company's Shares was 89.5 pence,
representing a discount of 10.5% to the NAV prevailing at 31 March 2011.
Shareholder communications
May I remind you that the Company continues to have its own website which is
available at www.incomeandgrowthvct.co.uk.
The Investment Manager held a successful and well attended Shareholder workshop
in December 2010 and intends to hold a similar event in late 2011.
Outlook
The uncertain times continue in the economic arena. After months of
negotiation, Portugal finally admitted defeat by asking its European partners
to bail it out via the Eurozone's stabilisation mechanism. It is not entirely
clear whether this will be the last member of the 'club' to have to seek
assistance or whether those nations having taken a bail-out will be able to
repay their debts when they become due. Nevertheless within the UK, the events
in Portugal have strengthened the arguments for the measures currently
undertaken by the Chancellor.
Against this economic backdrop a more encouraging picture is being seen in the
UK by the many individual companies that are producing better than expected
results, although overall economic growth is expected to be slow by comparison
with their US and German counterparts.
* As a result of this scenario, the Company has continued to retain a
significant cash position. Moreover, the recent fundraising will place the
Company in an excellent position to take advantage of what are expected to
be increasingly attractive purchase opportunities which should become
available as and when the economy climbs out of recession. Therefore, your
Board still expects to see attractive investment opportunities and is
confident of a continued recovery in performance and portfolio values over
the longer term.
* The current level of interest rates in the United Kingdom means that it may
still to be difficult for the Company to pay a dividend from revenue in the
forthcoming year, although some encouragement can be gained from the higher
loan interest payments received by the Company in the current period being
reported upon. The market view is that interest rates are not expected to
rise from this level until the end of 2011. However, the most recent UK
economic figures suggest that even this may be optimistic. Nevertheless,
the Board remains firmly committed to providing an attractive dividend
stream to shareholders.
Once again, I would like to take this opportunity to thank Shareholders for
their continued support.
Colin Hook
Chairman
Principal Risks and Uncertainties, Related Party Transactions, Responsibility
Statement and Cautionary Statement
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 30 September 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:
- economic risk;
- risk of loss of approval as a Venture Capital Trust
- investment and strategic risk;
regulatory risk;
- financial and operating risk;
- market risk;
- asset liquidity risk;
- market liquidity risk;
- counterparty risk.
A more detailed explanation of these risks can be found in the Directors'
Report on pages 29 - 30 and in Note 20 on pages 71 - 77 of the Annual Report
and Accounts for the year ended 30 September 2010 copies of which are available
on the VCT's website:
www.incomeandgrowthvct.co.uk.
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.
Responsibility Statement
In accordance with 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 Portfolio Summary and the Investment Manager's Review
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 are no related party transactions that are required to be
disclosed in accordance with DTR 4.2.8.
On behalf of the Board
Colin Hook
Chairman
Investment 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 30 September 2008, when it was a multi-manager VCT. This
includes investments in early stage and technology companies and in companies
quoted on the AiM or PLUS.
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,
in the case of funds raised under the original prospectus in 2000/01, and £7
million, in the case of funds raised after 6 April 2006, (including the former
`S' Share Fund raised in 2007/08) of gross assets at the time of investment to
be classed as a VCT qualifying holding.
VCT regulation
The investment policy is designed to ensure that the Company continues to
qualify and is approved as a VCT by HM Revenue & Customs ("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 period in shares or securities comprised in VCT qualifying
holdings, of which a minimum overall of 30% by value must be in ordinary shares
which carry no preferential rights (save as may be permitted under VCT rules).
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 70% 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 to maximise the amount which may be
invested in loan stock. 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.
Investment Portfolio Summary
as at 31 March 2011
Total cost Valuation Additional Valuation
at at at
31 March 30 investments 31 March
2011 September in the 2011
2010 period
(unaudited) (audited) (unaudited)
£ £ £ £
Amaldis (2008) Limited 80,313 1,965,586 - 1,996,026
(Original Additions)
Manufacturer and distributor
of beauty products
AppDNA Limited 1 347,424 1,091,346 - 1,795,640
Provider of software
repackaging services
IDOX plc 872,625 939,167 - 1,449,583
Provider of document storage
systems
Aust Recruitment Group 1,441,667 1,000,000 441,667 1,441,667
Limited
(formerly Aust Construction
Investors Limited)
Recruitment consultants for
the
pharmaceutical, business
intelligence
and IT sectors
ASL Technology Holdings 1,350,123 1,000,000 350,123 1,350,123
Limited
(formerly Apricot Tradng
Limited)
Printer and photocopier
services
ATG Media Holdings Limited 888,889 1,377,208 - 1,268,851
Publisher and online auction
platform operator
Blaze Signs Holdings Limited 1,338,500 242,090 - 1,229,163
Manufacturer and installer of
signs
CB Imports Group Limited 1,000,000 1,199,310 - 1,221,310
(Country
Baskets) Importer and
distributor of
artificial flowers, floral
sundries and
home decór products
Camwood Enterprises Limited 1 347,424 1 1,091,346 1 - 1,209,722
Provider of software
repackaging services
DiGiCo Europe Limited 325,594 1,201,553 - 1,192,759
Designer and manufacturer of
audio mixing desks
Westway Services Holdings 353,589 884,557 - 1,127,282
(2010) Limited
(formerly MC440 Limited)
Installation, service and
maintenance
of air conditioning systems
Backbarrow Limited 1,000,000 1,000,000 - 1,000,000
Company seeking to invest in
food
manufacturing, distribution
and
brand management services
Bladon Castle Management 1,000,000 1,000,000 - 1,000,000
Limited
Company seeking to invest in
the brand
management, consumer products
and retail sectors
Fullfield Limited 1,000,000 1,000,000 - 1,000,000
Company seeking to invest in
food
manufacturing, distribution
and
brand management services
Rusland Management Limited 1,000,000 1,000,000 - 1,000,000
Company seeking to invest in
brand
management, consumer products
and retail sectors
Torvar Limited 1,000,000 1,000,000 - 1,000,000
Company seeking to invest in
database management, mapping,
data mapping and management
services
to legal and building
industries.
Iglu.com Holidays Limited 152,326 1,616,116 - 867,323
Online ski and cruise travel
agent
British International 590,909 796,381 - 828,512
Holdings Limited
Helicopter service operator
Focus Pharma Holdings Limited 516,900 707,569 - 795,638
Licensor and distributor of
generic pharmaceuticals
Youngman Group Limited 1,000,052 700,992 - 700,992
Manufacturer of ladders and
access towers
Machineworks Software Limited 225,125 2 511,761 2 - 688,799
2
Software for CAM and machine
tool vendors
Brookerpaks Limited 55,000 498,095 - 603,296
Importer and distributor of
garlic
and vacuum-packed vegetables
Tikit Group plc 247,000 839,129 - 551,990
Provider of consultancy
services and
software solutions for law
firms
Duncary 8 Limited 634,923 683,746 - 515,015
Technical training business
Faversham House 487,744 - 487,744 487,744
Publisher, exhibition
organiser and
operator of web sites for the
environmental, visual
communications
and building services sectors
Image Source Group Limited 305,000 1,399,114 - 474,770
Royalty free picture library
Omega Diagnostics Group plc 279,996 - 279,997 338,239
In-vitro diagnostics for food
intolerance,
autoimmune diseases
and infectious diseases
Racoon International Holdings 550,852 243,664 - 246,970
Limited
Supplier of hair extensions,
hair care
products and training
Biomer Technology Limited 137,170 226,152 - 226,152
Developer of biomaterials for
medical devices
Letraset Limited 650,000 213,859 - 215,468
Manufacturer and distributor
of
graphic art products
Vectair Holdings Limited 53,400 366,575 - 174,848
Designer and distributor of
washroom products
NexxtDrive Limited 812,014 162,500 - 162,500
Developer and exploiter of
patented
transmission technologies
ANT plc 462,816 160,866 - 157,583
Provider of embedded browser/
email
software for consumer
electronics
and internet appliances
The Plastic Surgeon Holdings 406,082 101,521 - 101,521
Limited
Supplier of snagging and
finishing
services to property sector
Sarantel Group plc 1,881,252 102,117 - 74,885
Developer and manufacturer of
antennae for mobile phones
and
other wireless devices
Oxonica plc 2,524,527 - - 69,624
International nanomaterials
group
Aquasium Technology Limited 700,000 396,581 - 68,576
Design, manufacture and
marketing
of bespoke electron beam
welding
and vacuum furnace equipment
Lightworks Software Limited 2 20,471 2 266,177 2 - 58,886
Software for CAD vendors
Corero plc 600,000 24,558 - 34,381
Provider of e-business
technologies
Alaric Systems Limited 595,802 30,647 - 30,647
Software development,
implementation
and support in the credit/
debit card
authorisation and payments
market
Aigis Blast Protection 272,120 - - -
Limited
Specialist blast containment
materials
company
DCG Group Limited 83,324 181,771 - -
Design, supply and
integration of
data storage solutions
Legion Group plc 150,000 - - -
Provider of manned guarding,
mobile patrols and alarm
response services
Monsal Holdings Limited 426,164 768,505 - -
Supplier of engineering
services
to water and waste sectors
PXP Holdings Limited 920,176 - - -
(Pinewood Structures)
Designer, manufacturer and
supplier
of timber frames for
buildings
Campden Media Limited - 125,921 - -
Magazine publisher and
conference organiser
_____ _____ _____ _____
Total 29,087,293 28,116,479 1,559,531 28,756,485
_____ _____ _____ _____
1 On 23 November 2010, Camwood Limited undertook a demerger, such that I&G VCT
now holds separate investments in AppDNA Limited and Camwood Enterprises
Limited. As a result, the cost, and valuation as at 30 September 2010, of
Camwood Limited has been split equally between AppDNA Limited and Camwood
Enterprises Limited.
2 On 31 March 2011, VSI Limited undertook a demerger, such that I&G VCT now
holds separate investments in Machineworks Software Limited and Lightworks
Software Limited . As a result, the cost, and valuation as at 30 September
2010, of the ordinary and preference share investments in VSI Limited has been
split equally between Machineworks Software Limited and Lightworks Software
Limited. The former loan investment in VSI of £204,654 had been wholly
transferred to Machineworks Software Limited, so this loan's cost, and value at
30 September 2010, has been specifically allocated to that new investment.
Investment Manager's Review
The six month period to 31 March 2011 has shown signs of improvement in our
investment marketplace. As a result of this we have made four new investments
in the first few months of the period. Whilst this recovery may as yet be
uneven, we are increasingly confident that the UK economy is now robust enough
to generate the right environment for attractively priced new investment
opportunities. Portfolio boards are also becoming more confident in considering
their strategy for the future development of their companies.
Our strategic response to the significant increase in deal flow is to focus on
companies with strong and defensible market positions within their sectors,
rather than targeting specific market sectors. However, we remain alert to the
potential impact of cuts in public spending that are being implemented by the
coalition government on the UK economy.
New investment
Four new investments have completed since the end of October, two of which used
the existing acquisition vehicles Aust and Apricot.
In the first of these, in October the Company used its existing investment of £
1 million in the acquisition vehicle, Aust, to support the MBO of RDL
Recruitment Corporation, a European recruitment provider within the
pharmaceutical, business intelligence and IT sectors based in London and
Woking. The company, which employs 70 staff, was established in 1992. It
sources staff for over 300 major companies, matching niche professionals with
"hard to fill" contract assignments and staff positions. The VCT's total
investment in this company, which changed its name to Aust Recruitment Group
Limited following the MBO, now stands at £1.4 million.
Secondly, the VCT invested £487,744 in December to support the MBO of Faversham
House Group Limited. Based in Croydon, this is an established media company
providing magazines, exhibitions and online resources in the environment and
sustainability, visual communications and building services sectors.
Again in December, the VCT invested £279,997 into the AiM-listed company Omega
Diagnostics Group Plc. Based in Alva, Scotland this company provides high
quality in vitro diagnostics products for use in hospitals, blood banks,
clinics and laboratories in over 100 countries and specialises in the areas of
food intolerance, autoimmune disease and infectious disease. The share price
has moved up since investment, giving an early uplift from cost of £58,243 at
the period end.
Finally, also in December, the VCT used its existing acquisition vehicle,
Apricot Trading, to support the MBO of Automated Systems Group plc, a
Cambridge-based printer and copier services business with a broad customer base
of schools and SMEs. The VCT's total investment in this company, which changed
its name to ASL Technology Holdings Limited, stands at £1.35 million following
the MBO. The VCT made a follow-on investment of £575,884 to help fund the
acquisition of Transcribe CopierSystems Limited (of which £419,667 will be held
in escrow pending finalisation of the second tranche of this additional
investment until June 2011).
Our Operating Partner programme continues to pursue an active search for
investment opportunities. The Company's five acquisition vehicles Backbarrow,
Bladon Castle Management, Fullfield, Rusland Management and Torvar are all
actively seeking suitable investment opportunities in a variety of sectors
including food manufacturing, retailing, brand management, health and
well-being and IT. So far they, have not found sufficiently attractive
investment opportunities at the right price. Each of the acquisition vehicles
is headed by an experienced Chairman, well-known to us, who is working closely
with us in seeking to identify and complete investments in specific sectors
relevant to their industry knowledge and experience.
Realisations
We are pleased to report that a number of companies in the portfolio continue
to be strongly cash generative. As a result of this the Company has received a
total of £1.94 million in loan stock repayments during the six month period to
31 March 2011 (including any premiums paid). ATG Media made a partial repayment
of £111,111 in October 2010. In November 2010, DCG Group repaid its outstanding
loan in full remitting £204,772 to the Company and Westway made a further
repayment of £99,681. Iglu.com repaid its loan stock in full in February 2011,
realising £997,675 for the Company. It is particularly impressive that Iglu has
generated further cash in the short time since investment in December 2009,
making this prepayment possible. Vectair repaid its loan in full in March 2011
remitting £195,017 to the Company.
Camwood Enterprises and App-DNA Group both repaid their half of their secured
loans in March, remitting equal payments of £667. In April 2011, Camwood
Enterprises repaid its loan in full, by repaying the other £166,667.
Just after the period-end in April 2011, VSI (MachineWorks) made a payment of £
255,818 in full settlement of its loan.
In January 2011 the Company realised its entire investment in Campden Media for
a cash consideration of £287,239, compared to the previous quarter's valuation
of £125,921. This represented 85.8% of the total investment cost of £334,880.
Together with interest paid over the life of the investment the total cash
return was £349,013, representing 104.2% of cost.
In February 2011, the Company realised its remaining investment in HWA Group
Limited for a cash consideration. The total cash return over the life of this
investment was £5,070,682, compared to amounts originally invested of £
1,422,320, being 3.6 times cost.
The Company sold a total of 220,000 shares in Tikit Group during the six months
to 31 March 2011 realising total net proceeds of £488,536. The shares were sold
in two tranches in November 2010 and February 2011 at prices of £1.97 and £2.45
per share respectively, compared to an investment cost of £1.15 per share. A
further 50,000 shares were sold after period-end realising total net proceeds
of £136,949 compared to the valuation at 31 March 2011 of £128,500. The VCT
retains a residual holding in this company.
Portfolio review
The portfolio as a whole continues to demonstrate resilience. The period has
seen the demergers of the VCT's investments in Camwood and VSI. There have been
some strong performances in the portfolio whilst other companies, mainly in the
construction sector, are still contending with the worst effects of the
downturn.
Camwood completed the demerger of its AppDNA business in November 2010. As a
result of the demerger, the VCT has two identical investments in each of
Camwood Enterprises and App-DNA Group comprising a 31.5% equity stake. (The
original Camwood secured loan of £666,667 was initially divided equally between
the two companies but has since been substantially repaid as referred to above.
Both companies are leading specialists in Application Migration softwareTM.
Camwood, trading as Camwood Consulting, provides IT consultancy services to
blue chip customers and AppDNA sells its software via third party
consultancies. The demerger has established AppDNA as an independent business.
Just before the end of the period in March 2011, VSI also completed the
demerger of its two operating subsidiary companies, creating two separate
investee companies for the VCT, MachineWorks Software Limited and LightWorks
Software Limited. The original VSI loan, which was transferred to MachineWorks
on the demerger, was repaid by this company shortly after the period-end
leaving the VCT with separate investments in each of these companies of £
20,471. The demerger should enhance the prospects of both companies.
The three investments made during 2009 into Westway, CB Imports Group and
Iglu.com Holidays are all now valued above cost as a result of out performance
of their investment plans. Vectair continues to make good progress in the US
market. Focus Pharma continues to trade well, although it ended its financial
year slightly behind a stretching budget. It expects to progress further with
several new product launches due during 2011. Amaldis has recorded increased
profitability, as has British International, and Blaze Signs has also recovered
strongly in recent months. Youngman has also returned to profitability after a
prolonged period of slow trading.
Recovery in the construction and house building sectors remains fragile and
this continues to affect the performance of PXP and Plastic Surgeon. Monsal is
currently trading well behind budget reflecting ongoing project delays. As
reported in the Chairman's Statement, the Manager has assessed that the pending
round of additional funding that Monsal requires (which your Company intends to
participate in), is likely to have priority over the existing investment.
Accordingly, we have advised that the existing investment be valued at nil for
the time being. We retain the view that the potential for this environmental
business remains considerable, albeit that realisation of that potential has
been deferred. In addition, Image Source has continued to suffer from
deteriorating trading conditions in a challenging market.
Oxonica plc re-registered as Oxonica Limited in February 2011 and as part of a
capital distribution, returned £69,624 to the Company.
It is important to note that during the period, no further funding has been
required by any of the investee companies to help them deal with trading
downturns (with the exception of Monsal, as mentioned above, where a commitment
has been made after the period-end). Having retained significant uninvested
cash, which will be bolstered by the current fundraising, we consider the
Company is very well placed to cover both any portfolio needs and funding for
attractive new investment opportunities that may arise.
Unaudited Income Statement
for the six months ended 31 March 2011
Six months ended 31 March Six months ended 31 March
2011 2010
(Unaudited) (Unaudited)
Revenue Capital Total Revenue Capital Total
Notes £ £ £ £ £ £
Unrealised gains 7 - 1,541,682 1,541,682 - 1,187,618 1,187,618
on
investments
Net gains on 7 - 379,561 379,561 - 37,442 37,442
realisation of
investments
Income 2 576,851 - 576,851 277,682 - 277,682
Recoverable VAT - - - - -
Investment 3 (110,981) (332,942) (443,923) (96,270) (288,811) (385,081)
management expense
Other expenses (189,622) - (189,622) (355,004) - (355,004)
Merger costs - - - - - -
_____ _____ _____ _____ _____ _____
Profit/(loss) on 276,248 1,588,301 1,864,549 (173,592) 936,249 762,657
ordinary
activities
before taxation
Tax on profit/ 4 (44,380) 44,380 - - - -
(loss) on
ordinary
activities
_____ _____ _____ _____ _____ _____
Profit/(loss) on 231,868 1,632,681 1,864,549 (173,592) 936,249 762,657
ordinary
activities after
taxation
_____ _____ _____ _____ _____ _____
Basic and diluted 6 0.62p 4.36p 4.98p (0.75)p (0.71)p (0.04)p
earnings
per Ordinary Share
(formerly 'S'
Share)
Year ended 30 September 2010
(Audited)
Revenue Capital Total
Notes £ £ £
Unrealised gains on 7 - 2,986,059 2,986,059
investments
Net gains on realisation 7 - 15,412 15,412
of investments
Income 2 730,447 - 730,447
Recoverable VAT 12,295 36,886 49,181
Investment management 3 (204,246) (612,738) (816,984)
expense
Other expenses (513,840) - (513,840)
Merger costs (75,516) - (75,516)
_____ _____ _____
Profit/(loss) on (50,860) 2,425,619 2,374,759
ordinary activities
before taxation
- - -
Tax on profit/(loss) on 4 - - -
ordinary activities
_____ _____ _____
Profit/(loss) on (50,860) 2,425,619 2,374,759
ordinary
activities after
taxation
_____ _____ _____
Basic and diluted 6 (0.20)p 9.75p 9.55p
earnings per
Ordinary Share (formerly
'S' 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.
Unaudited Balance Sheet
as at 31 March 2011
31 March 31 March 30 September
2011 2010 2010
(unaudited) (unaudited) (audited)
Notes £ £ £
Non-current assets
Investments 7 28,756,485 21,534,682 28,116,479
Current assets
Debtors and 10 1,718,335 168,229 162,076
prepayments
Investments at fair 8 6,768,945 14,385,083 8,708,573
value
Cash at bank 9 2,566,232 20,385 106,536
_____ _____ _____
11,053,512 14,573,697 8,977,185
Creditors: amounts (291,383) (378,229) (488,968)
falling
due within one year
_____ _____ _____
Net current assets 10,762,129 14,195,468 8,488,217
_____ _____ _____
Net assets 39,518,614 35,730,150 36,604,696
_____ _____ _____
Capital and reserves 11
Called up share 394,792 379,300 369,709
capital
Share premium account 3,728,433 69,141 369,141
Capital redemption 179,860 161,220 170,811
reserve
Revaluation reserve 2,563,342 (4,208,921) 422,183
Special reserve 21,307,003 27,059,018 23,105,248
Profit and loss 11,345,184 11,970,392 12,167,604
account
_____ _____ _____
Equity shareholders' 39,518,614 35,730,150 36,604,696
funds
_____ _____ _____
Basic and diluted net 12 100.10p 94.20p 99.01p
asset
value per Ordinary
Share
The financial information for the six months ended 31 March 2011 and the six
months ended 31 March 2010 has not been audited.
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 31 March 2011
Six months Six months Year ended
ended ended
31 March 2011 31 March 2010 30 September
2010
(unaudited) (unaudited) (audited)
Notes £ £ £
Opening shareholders' 36,604,696 35,883,097 35,883,097
funds
Net share capital 11 (805,142) (225,911) (966,118)
bought
back in the period
Net share capital 3,393,424 61,721 61,721
subscribed
in the period
Profit for the period 1,864,549 762,657 2,374,759
Dividends paid in 5 (1,538,913) (751,414) (748,763)
period
_____ _____ _____
Closing shareholders' 39,518,614 35,730,150 36,604,696
funds
_____ _____ _____
Unaudited Cash Flow Statement
for the six months ended 31 March 2011
Six months Six months Year ended
ended ended
31 March 2011 31 March 2010 30 September
2010
(unaudited) (unaudited) (audited)
£ £ £
Operating activities
Investment income 424,952 185,905 687,327
received
Investment management (653,033) (381,259) (595,053)
fees paid
Recoverable VAT 34,370 143,757 144,206
and interest received
thereon
Other income 3,582 4,053 4,053
Other cash payments (136,645) (262,947) (508,610)
Merger costs paid - - (75,516)
by the company
_____ _____ _____
Net cash outflow from (326,774) (310,491) (343,593)
operating activities
Investing activities
Acquisitions of (1,559,531) (1,512,597) (6,514,315)
investments
Disposals of investments 2,835,173 1,093,303 1,289,635
_____ _____ _____
Net cash inflow/(outflow) 1,275,642 (419,294) (5,224,680)
from investing activities
Dividends
Equity dividends paid (1,538,914) (751,414) (748,763)
_____ _____ _____
Cash outflow before (590,046) (1,481,199) (6,317,036)
financing
and liquid resource
management
Management of liquid
resources
Decrease in current 1,939,628 1,576,987 7,253,497
investments
Financing
Issue of Ordinary shares 1,950,890 61,722 61,721
Purchase of own shares (840,776) (192,763) (947,284)
_____ _____ _____
1,110,114 (131,041) (885,563)
_____ _____ _____
Increase/(decrease) in 2,459,696 (35,253) 50,898
cash
for the period
_____ _____ _____
Reconciliation of profit on ordinary activities before taxation to net cash
outflow from operating activitiesfor the six months ended 31 March 2011
Six months Six months Year ended
ended ended
31 March 2011 31 March 2010 30 September
2010
£ £ £
Profit on ordinary 1,864,549 762,657 2,374,759
activities
before taxation
Net unrealised gains (1,541,682) (1,187,618) (2,986,059)
on
investments
Net gains on (379,561) (37,442) (15,412)
realisations
of investments
(Increase)/decrease (108,138) 17,647 23,800
in debtors
(Decrease)/increase (161,942) 134,265 259,319
in creditors
_____ _____ _____
Net cash outflow from (326,774) (310,491) (343,593)
operating activities
_____ _____ _____
The notes below form part of these half-year 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 March 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 30 September 2010 and the 2009 Statement of Recommended Practice,
`Financial Statements of Investment Trust Companies and Venture Capital Trusts'
("the SORP").
The Half-Year 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.
The results for the six months to 31 March 2010 and the year ended 30 September
2010 reflected the activities of what were previously the 'O' and 'S' Share
Funds of the Company. On 29 March 2010, the 'O' Share Fund and the 'S' Share
Fund were consolidated. New 'S' Shares were issued to 'O' Fund Shareholders in
proportion to its net assets relative to the 'S' Share Fund. The new 'S' Shares
were then redesignated as new Ordinary Shares.
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,
which have not materially changed the results reported last year. 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. Purchases 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 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.
(vi) 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.
2. Income
Six months Six months Year ended
ended ended
31 March 2011 31 March 2010 30 September
2010
(Unaudited) (Unaudited) (Audited)
Total Total Total
£ £ £
Dividends 66,346 33,742 200,605
Money-market funds 22,226 37,087 73,446
Loan stock 479,342 192,637 442,132
interest
Bank deposit 5,356 616 664
interest
Interest received - 9,547 9,547
on VAT
Other Income 3,581 4,053 4,053
_____ _____ _____
Total Income 576,851 277,682 730,447
_____ _____ _____
3. Investment Management Expense
Six months Six months Year ended
ended ended
31 March 2011 31 March 2010 30 September
2010
Total Total Total
£ £ £
_____ _____ _____
Investment management 443,923 385,081 816,984
fee
_____ _____ _____
The Directors have charged 75% of the fees payable under the investment
adviser's agreement, and charge 100% of the amounts payable under the Incentive
Agreement, to the capital reserve. The Directors believe it is appropriate to
charge the incentive fee wholly against the capital return, as any fee payable
depends on capital performance, as explained below.
After the merger, the Investment Manager's Incentive Agreement for the former
'O' Share Fund has been continued while the former 'S' Share Fund's Incentive
Agreement has been terminated. Under the terms of the pre-merger 'O' Share Fund
Incentive Agreement, each of the ongoing Investment Manager, Matrix Private
Equity Partners LLP ("MPEP") and a former Investment Manager, Foresight Group
LLP ("Foresight") are entitled to a performance fee equal to 20% of the excess
of the value of any realisation of an investment made after 30 June 2007, over
the value of that investment in an Investment Manager's portfolio at that date
("the Embedded Value"), which value is itself uplifted at the rate of 6% per
annum. No fee is payable in any year if the value of that Investment Manager's
portfolio at that year-end plus the cumulative value of any realisations made
up to that year-end is less than the value of that Investment Manager's
portfolio at 30 June 2007, "the High Watermark test".
However, two amendments were made to this agreement for MPEP, the ongoing
Investment Manager. Firstly, the High Watermark was increased by £811,430,
being the 'S Share Fund's shortfall in total net assets from net asset value of
£1 per 'S' Share, at 31 December 2009. Secondly, only 70% of any new investment
made by MPEP after the merger will be added to the calculation of the Embedded
Value and value of the Investment Manager's portfolio, for the purposes of
assessing any excess. No incentive fee is payable for the period ended 31 March
2011.
4.Taxation
There is no tax charge for the period as the Company has tax losses which can
be offset between revenue and capital.
5. Dividends on equity shares paid and payable
Six months Six months Year
ended ended ended
31 March 2011 31 March 2010 30 September
2010
£ £ £
Ordinary shares (formerly
`S'
Share Fund)
Ordinary Shares - interim 1,538,913 59,032 52,668
paid
of 2p and final paid of
2p
(30 September 2010 :
0.5p;
31 March 2010 : 0.5p)
pence
per share
Under/(over) provision - (56) -
re prior year
Former `O' Share Fund
Ordinary Shares - nil (31 - 696,488 696,095
March
2010 : 2p; 30 September
2010 : 2p) pence per
share
Under/(over) provision - (4,050) -
re prior year
_____ _____ _____
1,538,913 751,414 748,763
_____ _____ _____
6. Basic and diluted earnings and return per share
Six months Six months Year ended
ended ended 30
31 March 31 March 2010 September
2011 2010
Ordinary `O' Share `S' Share Ordinary
Shares Fund Fund (now shares
Ordinary
Share
Fund)
Total Total
£ £ £ £
i) Total earnings after 1,864,549 767,073 (4,416) 2,374,759
taxation:
Basic earnings per 4.98 p 2.22 p (0.04)p 9.55 p
share
ii) Net revenue from
ordinary activities
after taxation 231,868 (84,695) (88,897) (50,860)
Revenue return per 0.62 p (0.24)p (0.75)p (0.20)p
share
Net unrealised capital 1,541,682 1,021,916 165,702 2,986,059
gains/(losses)
Net realised capital 379,561 36,403 1,039 15,412
gains
Income from capital - - - -
dividends
Recoverable VAT - - - 36,886
Capital expenses (net (288,562) (206,551) (82,260) (612,738)
of taxation)
_____ _____ _____ _____
iii) Total capital return 1,632,681 851,768 84,481 2,425,619
Capital return per 4.36 p 2.45 p 0.71 p 9.75 p
share
iv) Weighted average
number
of shares
in issue in the period 37,412,969 34,578,490 11,807,017 24,854,456
7. Summary of movements on investments during the period
Traded on Unlisted or Preference Qualifying Total
AiM traded on Shares loans
PLUS
MARKETS
£ £ £ £ £
Valuation at 2,065,837 11,867,127 35,738 14,147,777 28,116,479
30 September 2010
Purchases at cost - 483,378 - 1,076,153 1,559,531
Sales - proceeds (490,500) (95,392) - (2,257,997) (2,843,889)
- realised gains 65,901 95,392 - 221,389 382,682
Reclassification - (175,383) 27,576 147,807 -
at
valuation
Unrealised gains 627,184 590,051 16,731 307,716 1,541,682
_____ _____ _____ _____ _____
Valuation at 2,268,422 12,765,173 80,045 13,642,845 28,756,485
31 March 2011
_____ _____ _____ _____ _____
Book cost at 4,063,693 11,253,729 96,766 13,673,105 29,087,293
31 March 2011
Unrealised (1,795,271) 4,405,594 (16,721) (30,260) 2,563,342
(losses)/gains at
31 March 2011
Permanent - (2,894,150) - - (2,894,150)
impairment
of valuation of
investments
_____ _____ _____ _____ _____
2,268,422 12,765,173 80,045 13,642,845 28,756,485
_____ _____ _____ _____ _____
Gains on
investments
Realised losses 237,500 (168,742) - (285,553) (216,795)
based
on historical
cost
Less amounts 171,599 (264,134) - (506,942) (599,477)
recognised as
unrealised
gains/(losses) in
previous years
_____ _____ _____ _____ _____
Realised gains 65,901 95,392 - 221,389 382,682
based
on carrying value
at
30 September 2010
Net movement in 627,184 590,051 16,731 307,716 1,541,682
unrealised
appreciation
in the period
_____ _____ _____ _____ _____
Gains on 693,085 685,443 16,731 529,105 1,924,364
investments
for the period
ended
31 March 2011
_____ _____ _____ _____ _____
Transaction costs of £3,121 were incurred in the period and are treated as
realised gains on investments in the Income Statement. Deducting these from
realised gains above gives £379,561 of gains as shown in the Income Statement.
Proceeds above of £2,843,889 differ from the cash flow statement figure of
£2,835,173 by £8,716. This is due to transaction costs of £3,121 and an amount
due from the liquidators of FH Ingredients of £5,595.
8. Current asset investments
Monies held pending investment
31 March 31 March 30 September
2011 2010 2010
Total Total Total
£ £ £
Royal Bank of Scotland 120,079 2,642,764 1,080,206
Sterling Liquidity Fund
Royal Bank of Scotland - 93,725 -
Sterling Liquidity Fund plus
Blackrock Investment 969,186 2,460,113 966,062
Management (UK)
Institutional Sterling Fund
Fidelity Institutional Cash 2,690,056 4,173,115 4,182,636
Fund
Prime Rate Capital Management 1,560,346 1,002,346 1,055,669
LLP
Sterling Liquidity Fund (UK
based)
Scottish Widows Investment 1,429,278 4,013,020 1,424,000
Partnership
Sterling Liquidity Fund
_____ _____ _____
Monies held pending investment 6,768,945 14,385,083 8,708,573
_____ _____ _____
9. Cash at Bank
Cash at bank includes £419,667 of cash committed to be subscribed for new loan
stock in investee company ASL Technology Holdings Limited, as part of a larger
commitment by other VCTs advised by the Manager to invest a sum totalling £
1,600,000. The subscription will take place in June 2011 and until that time
the cash is held in an escrow account in the Company's name but secured against
a bank bridging loan to ASL Technology Holdings Limited.
10. Debtors
31 March 31 March 30 September
2011 2010 2010
Total Total Total
£ £ £
Accrued Income 260,350 160,688 112,032
Prepayments 9,865 7,093 15,674
Other debtors 5,594 448 34,370
Share allotment proceeds 1,442,526 - -
receivable
(see note)
_____ _____ _____
1,718,335 168,229 162,076
_____ _____ _____
Note: This sum of £1,442,526 is due from allotments of shares on 28 February
2011 and 22 March 2011, arising from the Joint VCT fundraising offer. These
funds were received shortly after the period end.
11. Capital and reserves for the six months ended 31 March 2011
Called Share Capital Revaluation Special Profit and Total
up share premiu redemption reserve reserve loss
capital account reserve account
£ £ £ £ £ £ £
At 1 369,709 369,141 170,811 422,183 23,105,248 12,167,604 36,604,696
October
2010
Shares (9,049) - 9,049 - (805,142) - (805,142)
bought
back
Shares 32,819 3,243,235 - - - - 3,276,054
issued
Dividends 1,313 116,057 - - - - 117,370
re-invested
into new
shares
Dividends - - - - - (1,538,913) (1,538,913)
paid
Loss - - - - (993,103) 993,103 -
transferred
between
reserves
Other - - - - - (288,562) (288,562)
expenses
net of
taxation
Net - - - 1,541,682 - - 1,541,682
unrealised
gains on
investments
Gains on - - - - - 379,561 379,561
disposal of
investments
(net of
transaction
costs)
Realisatio - - - 599,477 - (599,477) -
of
previously
unrealised
appreciation
Profit for - - - - - 231,868 231,868
the period
_____ _____ _____ _____ _____ _____ _____
At 31 394,792 3,728,433 179,860 2,563,342 21,307,003 11,345,184 39,518,614
March
2011
12. Net asset value per share
31 March 2011 31 March 2010 30 September
2010
Ordinary Ordinary Ordinary shares
shares shares
Total Total Total
Net assets £39,518,614 £35,730,150 £36,604,696
Number of shares in 39,479,195 37,929,970 36,970,891
issue
Net asset value per 100.10p 94.20p 99.01p
share -
basis and diluted
Diluted NAV per share assumes that the Investment Manager's incentive fee is
satisfied by the issue of additional shares. No incentive fee is expected to be
triggered for the Company for the current period and therefore net asset value
per share and diluted net asset value per share are the same.
13. Contingent liability
The Company and another shareholder of one of its investee companies are
parties to an action brought by a former director and current shareholder of
that investee company. The Board is committed to defending the action. However
the litigation process has not yet reached a point at which it is possible for
the Board to quantify with any certainty the final costs that the Company may
ultimately incur from this action. The Board hopes to be able to assess these
with greater certainty by the year end.
14. Post balance sheet events
On 1 April, 5 April and 10 May 2011, the Company allotted a further 1,805,973
ordinary shares under the Matrix VCT Linked Offer launched on 12 November 2010,
raising net funds of £1,805,918.
15. The financial information for the six months ended 31 March 2011 and the
six months ended 31 March 2010 has not been audited.
The financial information contained in this Half-Year Report does not
constitute statutory accounts as defined in Section 434 of the Companies Act
2006.The financial statements for the year ended 30 September 2010 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 either section 498(2) or 498(3) of the Companies Act 2006.
16. Copies of this statement are being sent to all shareholders. Further copies
are available free of charge from the Company's registered office, One Vine
Street, London, W1J OAH.
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