Half-yearly Report

THE INCOME & GROWTH VCT PLC Half-yearly results for the six months ended 31 March 2008 Financial Highlights as at 31 March 2008 - Net Asset Value per `O' Share was 95.25p - a decrease of 3.25 per cent over the six month period if the 2p dividend paid in the period is excluded - Net Asset Value Total Return per `O' Share since launch in November 2000 has been 111.70p - an increase of 18.2 per cent - Share Price Total Return per `O' Share since launch in November 2000 has been 106.95p - an increase of 13.2 per cent - `S' Share Fund Offer raised £11.8 million by 5 April 2008 Performance Summary - ordinary shares of 1 pence (`O' Shares) Period Net Net asset NAV total return Share price Share price assets value (NAV) to shareholders (p)1 total return (£000s) per share since launch per to (p) share (p) 2 shareholders since launch per share (p) 2 Six months ended 31 March 2008 34,336 95.25 111.70 90.50 106.95 Year ended 30 September2007 36,778 100.52 112.97 87.50 99.95 2006 44,150 112.89 121.59 84.50 93.20 2005 49,205 122.53 127.98 87.50 92.95 2004 33,032 80.02 84.22 62.50 67.95 1 Source: London Stock Exchange 2 Total returns to shareholders include dividends paid Chairman's Statement I am pleased to present the Company's half-yearly results for the six months ended 31 March 2008 - the first results in its new form since moving to a single manager VCT. The last six months has been dominated by three events - the first has been the adverse economic climate; the second was the Offer for Subscription for `S' Shares the outcome of which was highly successful in this difficult economic environment and the third, the Company's change in March of this year from being dual managed to becoming a single manager VCT under the stewardship of Matrix Private Equity Partners LLP (MPEP). During all this the Company has enjoyed a number of profitable realisations from the MPEP portfolio. I will comment in more detail about all these events below. Offer for Subscription by the Company The Offer for Subscription under the Securities Note to raise up to £15 million for I&G was launched in December 2007. The reaction from independent commentators and the leading IFAs was positive, and I am pleased to report that, after the period end, the Offer for Subscription closed on 5 April 2008 having issued 11.8 million new `S' Shares at a price of 100 pence per share and having raised £11.8 million before costs. Of the total 11.8 million new `S' Shares, 3.7 million had been allotted as at 31 March 2008. In a year in which raising new money for the VCT sector has proved challenging, it is very encouraging to record such a successful outcome. I would like to welcome our new `S' Fund Shareholders and thank all Shareholders, both existing and new, for their support. Change to Single Manager In my last Report to you I stated that "Foresight and MPEP became, ..., the dual Investment Managers of the Company on 31 August 2007". Since that time the Board has extended MPEP's management role. Of the two, MPEP has shown itself, both on an absolute return basis, and on a risk reward analysis basis, to be the substantially better performing manager in the economic conditions faced by the Company so far. Its policy of investing in sound profitable businesses with established track records should make the portfolio more resilient when tested by an economic downturn. Your Board, in anticipation of more difficult times, took the view that investment in the more risky early stage technology sector should be curtailed, and as a result Foresight Group LLP's (Foresight) expertise in this area is now no longer needed. In March this year therefore, the Board gave Foresight notice of termination as a Manager to the Company. The final elements of the handover of the Foresight portfolio are being co-ordinated between the two Managers at this time. I am confident that to concentrate the portfolio in the hands of our best performing Manager, MPEP, was a good investment decision as well as being a prudent step. MPEP continues to be one of the top VCT managers in the marketplace. Performance At 31 March 2008 the Company's NAV per `O' Share was 95.25 pence (30 September 2007: 100.52p), a decrease of 3.25 per cent over the six month period if 2p dividend paid in the period is excluded. The NAV per `S' share was 94.47 pence. During the same period there was a fall of 14.83 per cent in the FTSE Small Cap Index. This movement in the NAV is disappointing and can be attributed to several countervailing reasons. On the positive side, the MPEP portfolio overall continued to perform well with their portfolio increasing by some £1.2 million during the period. However, several of the smaller investments in the core portfolio were affected by a reduction in the price-earnings ratios of directly comparable quoted companies. On the downside, first, most of the unquoted investments in the Foresight portfolio have been revalued downwards by some £1.2 million following the latest review of that portfolio. Many of these companies are still at a relatively early stage of development. Secondly, the Foresight quoted stocks, and the quoted stocks in the former Nova portfolio, contributed to a further fall of £700,000. Dividends to Shareholders of £731,000 and Share Buy-backs costing £564,000 also added to the fall in Net Assets. In the longer term the Company has continued to perform well with Net Asset Value Total Return per `O' Share since launch and Share Price Total Return per `O' share since launch both rising by 18.2 per cent and 13.2 per cent respectively. Cumulative dividends paid to date amount to 16.45 pence per share Portfolio All major stock markets have moved into volatile and uncertain territory. The US and European credit boom has been punctured resulting in the sub-prime crisis in the US and major bank rescues both in the US and Europe. Whatever government proclamations state, the UK economy is actively engaged in international trade, and, therefore, will be directly affected. UK economic performance has in recent years been strongly driven by expansion of the public sector, London's financial industry, and by strong growth in the property sector. These drivers are now losing impetus. In particular, leveraged property valuations in the UK could have negative consequences for the UK banking and property sectors. Investors will see from the Investment Managers' reviews that the six months to 31 March 2008 have been a busy and successful period for the MPEP portfolio. Advantage was taken of good market conditions to dispose profitably of the Company's investment in Ministry of Cake Holdings, BBI Holdings and to receive a further payment from Secure Mail Services. Shortly after the end of the period, further payments were received from a prepayment of loan stock from VSI and from a recapitalisation of Holloway White Allom. Two management buyouts, Focus Pharmaceuticals and Monsal, were added to the portfolio. The former Foresight portfolio is proving more problematical as tougher trading conditions make it more difficult for early stage companies to develop. Oxonica, the largest holding, has raised further funds to give it more time to deliver, and new contracts have been booked. The rest of the portfolio is showing the effects of a much harsher environment. However, taking into account the `S' share fundraising, only 22 per cent of the total portfolio is now accounted for by technology. Revenue Account At 31 March 2008, revenue reserves available for distribution to `O' Fund Shareholders were £433,705 (31 March 2007; £283,866). As in previous years, the Board expects to be able to propose a final dividend for the year ended 30 September 2008. Dividend Investment Scheme - `O' Fund 36,025 shares were issued to members of the Scheme on 24 October 2007 and a further 39,782 shares were issued to members of the Scheme on 5 March 2008. Presently there are 177 members of the Scheme, who between them hold a total of 1,978,154 `O' Shares representing 4 per cent of the Company. Share buy-backs During the six months ended 31 March 2008, the Company bought back 618,140 `O' Shares (representing 1.66 per cent of the `O' Shares in issue at the beginning of the period) at a total cost of £558,926 (net of expenses). These shares were subsequently cancelled by the Company. Valuation Policy Quoted stocks are valued at bid prices, rather than mid-market prices in accordance with accounting standards. It is worth commenting that the Fund does hold a number of relatively early stage AIM listed 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. Extraordinary General Meeting 17 September 2008 - Articles of Association, changes required by Companies Act 2006. Notice of an Extraordinary General Meeting of the Company is set out in the Annual Report, to be held on 17 September 2008 at 10.30 a.m. at Matrix Group Limited, One Vine Street, London, W1J 0AH ("EGM"). The resolution to be proposed at the EGM requests shareholder approval in relation to amendments to the articles of association of the Company ("Articles") to take account of the changes to be brought about by the Companies Act 2006 in relation to directors' duties and conflicts of interests. Under the Companies Act 2006, from 1 October 2008 a director must avoid a situation where he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the company's interests. The requirement is very broad and could apply, for example, if a director became a director of another company or a trustee of another organisation. The Companies Act 2006 allows directors of public companies to authorise conflicts and potential conflicts, where appropriate, where the articles of association contain a provision to this effect. The Companies Act 2006 also allows the articles of association to contain other provisions for dealing with a director's conflicts of interest to be dealt with in a similar way to the current position. There are safeguards which will apply when Directors decide whether to authorise a conflict or potential conflict. First, only directors who have no interest in the matter being considered will be able to take the relevant decision, and second, in taking the decision the Directors must act in a way they consider, in good faith, will be most likely to promote the Company's success. The Directors will be able to impose limits or conditions when giving authorisation if they think that this is appropriate. It is also proposed that the amendments to the Articles should contain provisions relating to confidential information, attendance at board meetings and availability of board papers to protect a Director being in breach of duty if a conflict of interest or potential conflict of interest arises. These provisions will only apply where the position giving rise to the potential conflict has previously been authorised by the Directors We are also taking this opportunity to bring the provisions requiring Directors to declare their material interests into line with market practice. The detailed proposed changes to the Articles are set out in the resolution in the notice of the EGM. The resolution will be proposed as a special resolution requiring the approval of at least 75 per cent of the votes cast on the resolution at the meeting. The resolution will also be conditional on the passing of the resolutions to be proposed at the Class Meetings referred to below. Class Meetings Notices for the Class Meeting of the holders of `O' Shares and `S' Shares ("Class Meetings") are set out in the Report and will be held at 10.40 a.m. and 10.50 a.m. respectively on 17 September 2008 at Matrix Group Limited, One Vine Street, London, W1J 0AH. At each Class Meeting a resolution will be proposed to approve the passing of the resolution to be proposed at the EGM and any variation of class rights resulting therefrom. The resolutions will be proposed as special resolutions requiring the approval of at least 75 per cent of the votes cast in the resolution at the relevant meeting. Action to be taken Shareholders will find enclosed a forms of proxy for the EGM and the Class Meetings. Whether or not you propose to attend the meetings, you are requested to complete and return the form of proxy so as to be received not less than 48 hours before the time appointed for holding of the relevant meeting. Completion and return of the forms of proxy will not prevent you from attending and voting in person at the meetings should you wish to do so. Recommendation The Board considers that the resolution in the best interests of the Company, and its Shareholders as a whole. Accordingly, the Board recommends you to vote in favour of the resolution to be proposed at the EGM and Class Meetings as they intend to do in respect of their own holdings of 91,908 shares (33,883 `O' Shares and 58,025 `S' Shares), representing approximately 0.19 per cent of the issued share capital of the Company (representing 0.09 per cent of the issued `O' Shares and 0.49 per cent of the issued `S' Shares). Outlook Looking ahead, most of the Company's portfolio is well placed to withstand an economic downturn. There is the capacity to provide additional funding should bank lending be curtailed. If there is a prolonged downturn, achieving exits at good prices could be more difficult. On the other hand there should be interesting opportunities to buy into good businesses on attractive valuations. The legacy Foresight portfolio will continue to be monitored closely. Most importantly though, the Board remains particularly pleased with the progress that the core MPEP portfolio is making, especially given the current financial background and we hope that there will be further profitable realisations over the next six months. Once again I would like to thank Shareholders for their continued support. Colin Hook Chairman Responsibility Statement The Directors confirm that to the best of their knowledge: (a) the condensed set of financial statements, which has been prepared in accordance with applicable accounting standards in the United Kingdom, gives a true and fair view of the assets, liabilities, financial position and loss of the Company, as required by D.T.R 4.2.4; and (b) the Chairman's Statement includes a fair review of the information required by D.T.R 4.2.7 and in accordance with D.T.R 4.2.10 (c) there were no relevant Related Party Transactions to be reported as required by D.T.R 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 announcement should be construed as a profit forecast. Investment Portfolio Summary as at 31 March 2008 Total cost at Valuation at Additional Valuation at 31 March 30 September 31 March 2008 2007 Investments 2008 (unaudited) (audited) in the period (unaudited) £ £ £ £ Matrix Private Equity Partners LLP (MPEP) HWA Limited (trading as Holloway White Allom) 69,105 4,691,649 - 4,672,367 Specialist contractor in the high-value residential and heritage property refurbishment market Image Source Group Limited 305,000 2,850,171 - 2,796,119 Royalty free picture library Youngman Group Limited 1,000,052 2,930,234 - 2,553,606 Manufacturer of ladders and access towers Blaze Signs Holdings Limited 1,338,500 1,704,694 - 1,704,694 Manufacturer and installer of signs Amaldis Limited 80,313 967,438 - 1,048,764 Manufacturer and distributor of beauty products Tikit Group plc 500,000 1,304,346 - 978,259 Provider of consultancy services and software solutions for law firms Tottel Publishing Limited 514,800 809,221 - 921,056 Specialist law and tax imprint PastaKing Holdings Limited 292,405 611,778 - 871,029 Manufacturer and supplier of fresh pasta meals VSI Limited 388,853 730,901 - 823,503 Provider of software for CAD and CAM vendors IDOX plc 872,625 775,833 - 735,000 Developer of products for document, content and information management PXP Holdings Limited (Pinewood Structures) 790,912 790,912 - 671,151 Designer, manufacturer and supplier of timber frames for buildings DiGiCo Europe Limited 656,900 656,900 - 656,900 Designer and manufacturer of audio mixing desks British International Holdings Limited 500,000 538,535 - 531,239 Helicopter service operator Focus Pharma Holdings Limited 516,900 - 516,900 516,900 Licensor and distributor of generic pharmaceuticals B G Consulting Group Limited/Duncary 4 Limited 1,153,976 332,212 - 495,934 Technical training business and outplacement careers consultancy Brookerpaks Limited 55,000 416,130 - 466,233 Importer and distributor of garlic and vacuum-packed vegetables Monsal Holdings Limited 424,447 - 424,447 424,447 Supplier of engineering services to water and waste sectors Vectair Holdings Limited 215,914 300,579 - 301,278 Provider of air care and sanitary washroom products Campden Media Limited 334,880 326,842 - 182,749 Magazine publisher and conference organiser SectorGuard plc 150,000 107,142 - 96,429 Provision of manned guarding, mobile patrolling, and alarm response services Racoon International Holdings Limited 550,852 413,139 - 82,656 Supplier of hair extensions, hair care products and training Inca Interiors Limited 350,000 50,000 - 50,000 Supplier of quality kitchens to house developers Letraset Limited 650,000 213,982 - 25,000 Manufacturer and distributor of graphic art products BBI Holdings plc - 1,430,231 - - Manufacturer of gold conjugate for the medical diagnostics industry Ministry of Cake (Holdings) Limited - 1,039,709 - - Manufacturer of desserts and cakes for the food service industry Other investments in the portfolio * 1,719,785 - - - ----- ----- ----- ----- 13,431,219 23,992,578 941,347 21,605,313 Foresight Group LLP (Foresight) Oxonica plc 2,524,527 1,944,060 387,764 2,297,606 Specialist in the design, manipulation and engineering of properties of materials at the nano-scale Biomer Technology Limited 137,170 753,837 - 753,837 Developer of biomaterials for medical devices NexxtDrive Limited 812,014 738,264 - 738,264 Developer of patented transmission technology Camwood Limited 1,028,181 1,028,181 - 591,249 Provider of software repackaging services Aquasium Technology Limited 700,000 567,310 - 363,954 Design, manufacture and marketing of bespoke electron beam welding and vacuum furnace equipment DCG Datapoint Group Limited 312,075 376,283 - 336,097 Design, supply and integration of data storage solutions Sarantel Group plc 1,881,251 408,465 - 272,311 Antennae for mobile phones and other wireless devices Alaric Systems Limited 595,802 446,822 - 148,941 Software development, implementation and support in the credit/debit card authorisation and payments market ANT plc 462,816 131,319 - 144,451 Provider of embedded browser/email software for consumer electronics and internet appliances Corero plc (formerly Mondas plc) 600,000 279,955 - 103,141 Specialist provider of software solutions to the banking and securities and education markets Aigis Blast Protection Limited 272,120 249,990 - 68,030 Specialist blast containment materials company ----- ----- ----- ----- 9,325,956 6,924,486 387,764 5,817,881 ==== ==== ==== ==== TOTAL 22,757,175 30,917,064 1,329,111 27,423,194 ==== ==== ==== ==== * '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: F H Ingredients Limited, Stortext-FM Limited and The Hunter Rubber Company in the MPEP portfolio. Investment Managers' Review Matrix Private Equity Partners LLP The six months to 31 March 2008 have proved an active and successful period for the MPEP portfolio, in terms of new investments, portfolio performance and, in particular, profitable realisations. Two new MBO investments were added to the portfolio during the period. In October, £517,000 was invested to support the MBO of Focus Pharmaceuticals, a specialist licensor and distributor of generic pharmaceuticals based in Burton upon Trent. In December, £424,000 was invested in the MBO of Monsal; headquartered in Mansfield, Monsal is engaged in anaerobic technology and consultancy in the water treatment and waste disposal industries. December also saw the sale of the Company's investment in Ministry of Cake (Holdings), when it was bought by Greencore Group. The £721,000 investment was realised in cash for total net capital proceeds of £1.75 million, representing a £1,03 million profit over cost and a £710,000 uplift on the valuation prevailing at 30 September 2007. In January a second investment was sold at a significant profit. BBI Holdings, the AIM-quoted manufacturer and distributor of point-of-care medical diagnostic products, became the subject of a recommended offer by Inverness Medical Innovations Inc., a US company quoted on the American Stock Exchange ("AMEX"). Favourable exchange rate movements and the strengthening share price of Inverness, which offered a share alternative to the cash offer of 185p per BBI share, enabled the Company to sell its shares in the market at just over 205p per share. The proceeds of £1.89 million produced a profit of £1.4 million over the Company's investment cost of £496,000 and a £460,000 increase over the valuation as at 30 September 2007. Following the successful realisation of Secure Mail Services in 2006, further amounts became payable on successful retention of a major contract and in December and March additional payments totalling £847,000 were received, bringing capital proceeds from this £1.3 million investment to £4.77 million. Further smaller payments may also be received over the coming year. A dividend of £68,000 was also paid out of the administration of The Hunter Rubber Company in December. Since the end of March 2008, a £143,000 prepayment of loan stock has been received from VSI, giving rise to a £14,000 profit to the Company. Also in early April, a debt-funded recapitalisation of HWA enabled £2.38 million of cash to be returned to the Company at a small uplift to its most recent valuation; the Company's shareholding in HWA has also increased to 21 per cent. A restructuring at Amaldis (formerly Original Additions) has further underpinned the value of the Company's investment. The current investments continue to perform well generally, with few exceptions, but the effects of wider economic conditions have begun to bear on private company valuations. This will inevitably slow the momentum of some portfolio companies and may create problems for others. However, we remain confident in respect of the overall quality of the portfolio. Foresight Group LLP The last six months have continued to see significant volatility in the performance of the portfolio's quoted holdings and as a consequence the underlying investment performance of Foresight's element of the portfolio has declined. In 2007 Oxonica's share price was impacted by the loss of its most significant contract with Petrol Ofisi of Turkey, for its fuel additive Envirox. The company's share price hit a low of 18p per share but has improved in recent weeks as a result of a successful fund raising and several positive announcements and was 33p as at 31 March 2008. Oxonica is gradually developing its revenues in its four main divisions and in December 2007 successfully raised in excess of £4 million from new and existing shareholders to provide ongoing finance to fund further commercial development of its products. In February it announced a successful trial and confirmation of continuing orders by Stagecoach for its fuel additive and significant commercial progress for the product in mainland Europe and Russia. Continued progress in Oxonica's security business was highlighted recently when the company secured a new $2.15 million contract for a number of development products. Despite continuing to achieve design wins for its filtering antenna for mobile and wireless devices, Sarantel announced a significant drop in sales to £2 million (2006: £4 million) for the year to 30 September 2007 although losses marginally narrowed to £5.8 million (2006: £7 million). The company has refocused the business, achieved a major cost breakthrough in its manufacturing process and made considerable progress in developing its GPS customer pipeline winning orders for example from Garmin and Iridium. Against this improved background, in April 2008 Sarantel announced that it had successfully raised some £3.4 million in ongoing funding for the business at a price of 3p per share. A combination of its recent poor results and the price of the recent funding round has resulted in a fall in the value of Income and Growth's holding in the period under review but Sarantel is now well positioned to take advantage of its growing pipeline. However, ANT announced a strong second half performance in 2007 with good growth in unit shipments of its software solutions for the digital TV market following a change in sales strategy. The improvement in the second half of 2007 demonstrates continuing growth in digital media subscribers and the company expects further growth in 2008 through selling its products to the cable, satellite and terrestrial TV markets. Following its selection by Scientific Atlanta/Cisco, the company is uniquely positioned to benefit from the worldwide roll out of SA/Cisco's IPTV platform as the latter's service platform and applications supplier of choice. Corero recently announced disappointing results for 2007. As a result of poor trading in the financial markets division and an increased cost base, sales fell to £5.2 million (2006: £6.3 million) and losses widened to £1.4 million from breakeven a year earlier. The company has recently restructured to address these issues including substantially reducing corporate costs and reducing headcount by 20 per cent. The company expects 2008 to be a transitional year with improved performance providing a stronger base for future growth. The unquoted portfolio generally has seen disappointing performance with a number of companies failing to make sufficient progress either in meeting milestones or growing earnings. Recognising this and anticipating challenging trading conditions ahead, further provisions have been applied to the valuations of the Income and Growth's investments in Aigis, Alaric, Aquasium, Camwood and Datapoint. Non-Statutory Analysis between the Ordinary Share and S Share Funds Profit and Loss Accounts For the six months ended 31 March 2008 Ordinary Share Fund S Share Fund Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ Unrealised losses on investments - (2,353,042) (2,353,042) - - - Gains on realisations of investments - 1,641,036 1,641,036 - - - Income 486,926 - 486,926 - - - Investment management fees (101,710) (660,130) (761,840) (1,315) (3,944) (5,259) Other expenses (237,860) - (237,860) (1,627) - (1,627) ----- ----- ----- ----- ----- ----- Profit/(loss) on ordinary activities before taxation 147,356 (1,372,136) (1,224,780) (2,942) (3,944) (6,886) Tax on ordinary activities (22,709) 22,709 - - - - ----- ----- ----- ----- ----- ----- Profit/(loss) attributable to equity shareholders 124,647 (1,349,427) (1,224,780) (2,942) (3,944) (6,886) ==== ==== ==== ==== ==== ==== Basic and diluted earnings per 1p share 0.34 p (3.71)p (3.37)p (0.66)p (0.88)p (1.54)p Total of both Funds (per statutory Profit and Loss Account) Revenue Capital Total £ £ £ Unrealised losses on investments - (2,353,042) (2,353,042) Gains on realisations of investments - 1,641,036 1,641,036 Income 486,926 - 486,926 Investment management fees (103,025) (664,074) (767,099) Other expenses (239,487) - (239,487) ----- ----- ----- Profit/(loss) on ordinary activities before taxation 144,414 (1,376,080) (1,231,666) Tax on ordinary activities (22,709) 22,709 - ----- ----- ----- Profit/(loss) attributable to equity shareholders 121,705 (1,353,371) (1,231,666) ==== ==== ==== Balance Sheets As at 31 March 2008 S Share Fund Ordinary Share Fund £ £ £ £ Non current assets Investments 27,423,194 - Current assets Debtors and prepayments 214,230 3,549,504 Current investments 7,189,315 - Cash at bank 95,347 - ------- ------ 7,498,892 3,549,504 Creditors: amounts falling due (6,886) within one year (586,301) ------ ------ Net current assets/(liabilities) 6,912,591 3,542,618 ------ ------ 3,542,618 34,335,785 Net assets ------ ------ Share capital and reserves 37,498 Called up share capital 360,472 Share premium account 213,062 3,512,006 Capital redemption reserve 59,516 - Special distributable reserve 18,813,238 - Revaluation reserve 6,259,311 - Profit and loss account 8,630,186 (6,886) ------ ------ Equity shareholders' funds 34,335,785 3,542,618 ==== ==== Number of shares in issue: 36,047,146 3,749,820 Net asset value per 1p share: 95.25p 94.47p Total of both Funds (per Statutory Balance Sheet) Non current assets Investments 27,423,194 Current assets Debtors and prepayments 3,763,734 Current investments 7,189,315 Cash at bank 95,347 ----- 11,048,396 Creditors: amounts falling due within one year (593,187) ----- Net current assets/(liabilities) 10,455,209 ----- Net assets 37,878,403 ----- Share capital and reserves Called up share capital 397,970 Share premium account 3,725,068 Capital redemption reserve 59,516 Special distributable reserve 18,813,238 Revaluation reserve 6,259,311 Profit and Loss account 8,623,300 ----- Equity shareholders' funds 37,878,403 ----- . Unaudited Profit and Loss Account For the six months ended 31 March 2008 Six months ended 31 March 2008 (unaudited) Revenue Capital Total £ £ £ Unrealised (losses)/gains on investments (2,353,042) (2,353,042) Net gains on realisation of investments 1,641,036 1,641,036 Income 486,926 - 486,926 Investment management expense (103,025) (664,074) (767,099) Other expenses (239,487) - (239,487) ----- ----- ----- Profit/(loss) before taxation 144,414 (1,376,080) (1,231,666) Tax on ordinary activities (22,709) 22,709 - ----- ----- ----- Profit/(loss) for the financial period 121,705 (1,353,371) (1,231,666) ----- ----- ----- Basic and diluted earnings per Ordinary Share (3.37)p Basic and diluted earnings per S Share (1.54)p Six months ended 31 March 2007 (unaudited) Revenue Capital Total £ £ £ Unrealised (losses)/gains on investments - 752,297 752,297 Net gains on realisation of investments - 160,181 160,181 Income 703,103 - 703,103 Investment management expense (114,298) (342,892) (457,190) Other expenses (228,203) - (228,203) ----- ----- ----- Profit/(loss) before taxation 360,602 569,586 930,188 Tax on ordinary activities (76,736) 76,736 - ----- ----- ----- Profit/(loss) for the financial period 283,866 646,322 930,188 ----- ----- ----- Basic and diluted earnings per Ordinary Share 2.38p Basic and diluted earnings per S Share - Six months ended 30 September 2007 (audited) Revenue Capital Total £ £ £ Unrealised (losses)/gains on investments - (3,150,761) (3,150,761) Net gains on realisation of investments - 85,906 85,906 Income 981,124 432,488 1,413,612 Investment management expense (225,226) (675,676) (900,902) Other expenses (495,435) - (495,435) ----- ----- ----- Profit/(loss) before taxation 260,463 (3,308,043) (3,047,580) Tax on ordinary activities (19,868) 19,868 - ----- ----- ----- Profit/(loss) for the financial period 240,595 (3,288,175) (3,047,580) ----- ----- ----- Basic and diluted earnings per Ordinary Share (7.85)p Basic and diluted earnings per S Share - The total column of this statement is the Profit and Loss Account of the Company. All the items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period. All operations were conducted in the United Kingdom. There were no other recognised gains or losses in the period. Unaudited Note of Historical Cost Profits and Losses For the six months ended 31 March 2008 Six months ended Six months Six months ended ended 30 September 31 March 2008 31 March 2007 2007 (unaudited) (unaudited) (audited) £ £ £ (Loss)/profit on ordinary activities before taxation (1,231,666) 930,188 (3,047,580) Add/(less) unrealised losses/(gains) on investments 2,353,042 (752,297) 3,150,761 Add/(less) realisation of revaluation gains/(losses) of previous years (186,809) (93,579) 1,042,522 ----- ----- ----- Historical cost profit on ordinary activities before taxation 934,567 84,312 1,145,703 ==== ==== ==== Historical cost profit/(loss) for the period after taxation and dividends 203,379 (1,382,310) (1,052,708) ==== ==== ==== Unaudited Balance Sheet as at 31 March 2008 31 March 2008 31 March 2007 30 September 2007 (unaudited) (unaudited) (audited ) £ £ £ Non current assets Investments 27,423,194 36,676,416 30,917,064 Current assets Debtors and prepayments 3,763,735 920,424 718,787 Investments at fair value 7,189,315 6,041,018 6,581,497 Cash at bank 95,347 53,516 46,862 ----- ----- ----- 11,048,397 7,014,958 7,347,146 Creditors: amounts falling due within one year (593,187) (251,808) (1,485,717) ----- ----- ----- Net current assets 10,455,210 6,763,150 5,861,429 ----- ----- ----- Net assets 37,878,404 43,439,566 36,778,493 - ----- ----- ----- Capital and reserves Called up share capital 397,970 388,788 365,895 Share premium account 3,725,068 136,594 136,594 Capital redemption reserve 59,516 30,441 53,334 Special reserve 18,813,238 24,509,138 21,508,270 Revaluation reserve 6,259,311 13,464,704 8,425,544 Profit and loss account 8,623,301 4,909,901 6,288,856 ----- ----- ----- Equity shareholders' funds 37,878,404 43,439,566 36,778,493 ----- ----- ----- Net asset value per Ordinary Share 95.25p 111.73p 100.52p Net asset value per S Share 94.47p - - Unaudited Reconciliation of Movements in Shareholders' Funds for the six months ended 31 March 2008 Six months ended Six months ended Year ended 31 March 2008 31 March 2007 30 September 2007 (unaudited) (unaudited) (audited) £ £ £ Opening Shareholders' funds 36,778,493 44,150,278 44,150,278 Net share capital subscribed/(bought back) for in the period 3,062,765 (174,278) (2,125,794) (Loss)/profit for the period (1,231,666) 930,188 (3,047,580) Dividends paid in period (731,188) (1,466,622) (2,198,411) ----- ----- ----- Closing Shareholders' funds 37,878,404 43,439,566 36,778,493 ----- ----- ----- Unaudited Cash Flow Statement for the six months ended 31 March 2008 Six months ended Six months ended Year ended 31 March 2008 31 March 2007 30 September 2007 (unaudited) (unaudited) (audited) £ £ £ Operating activities Net revenue on activities before taxation 144,414 360,602 260,463 Capitalised fees (664,074) (342,892) (675,676) Transaction costs (54,295) (148) (1,419) Decrease in debtors 504,557 16,348 217,985 Increase in creditors 387,668 63,748 17,430 Capital dividend received - - 432,488 ------ ------- ------ Net cash inflow from operating activities 318,270 97,658 251,271 Equity dividends paid (1,462,948) (1,466,622) (1,466,621) Acquisitions of investments (1,329,112) (1,553,841) (3,544,272) Disposals of investments 4,165,270 1,195,083 4,968,804 Management of liquid resources (607,818) (71,578) (612,057) Financing (1,035,177) (174,278) (1,577,357) ------ ----- ----- Increase/(decrease) in cash for the period 48,485 (1,973,578) (1,980,232) ------ ----- ----- Reconciliation of net cash flow to movement in net debt Increase/(decrease) in cash for the period 48,485 (1,973,578) (1,980,232) Net funds at the start of the period 46,862 2,027,094 2,027,094 ------ ----- ----- Net funds at the end of the period 95,347 53,516 46,862 ----- ------ ----- NOTES 1. The unaudited results cover the six months to 31 March 2008 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 2007 and, to the extent that it does not conflict with the Companies Act 1985, the 2003 Statement of Recommended Practice, `Financial Statements of Investment Trust Companies', revised December 2005. There are no comparatives for the S Fund for the year ended 30 September 2007, as this Fund had not allotted any shares by that date. 2. As a result of the Directors' decision to distribute capital profits by way of a dividend, the Company revoked its investment company status as defined under section 266 (3) of the Companies Act 1985, on 17 August 2004. 3. Investments are recognised on a trade date basis. All investments held by the Company are classified as "fair value through profit and loss" as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income. 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. Investments are stated at "fair value through profit and loss", in accordance with the International Private Equity and Venture Capital Valuation ("IPEVCV") guidelines. The fair value of quoted investments is the bid price value of those investments at the close of business on 31 March 2008. Unquoted investments are stated at fair value by the Directors in accordance with the following rules, which are consistent with the IPEVCV guidelines: (i) Investments which have been made in the last 12 months are at fair value which, unless another methodology gives a better indication of fair value, will be at cost; (ii) Investments in companies at an early stage of their development are valued at fair value which, unless another methodology gives a better indication of fair value, will be cost; (iii) Where investments have been held for more than 12 months or have gone beyond the stage in their development in (i) or (ii) above, 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 discounted to reflect points of difference identified by the Investment Manager compared to the sector, as well as to reflect lack of marketability). Where overriding factors apply, alternative methods of valuation will be used. These will include the application of a material arms-length transaction by an independent third party, cost less provision for impairment, discounted cash flow, or a net asset basis. (iv) Where a value is indicated by a material arms-length transaction by a third party in the shares of a company, this value will be used. (v) Unquoted investments will not normally be re-valued upwards for a period of at least twelve months from the date of acquisition. 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 become permanently impaired 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 Managers, will agree the values that represent the extent to which an investment has become permanently impaired. 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. (vi) Premium on loan stock investments are accrued at fair value when the Company receives the right to the premium and when considered recoverable. Although the Company holds more than 20 per cent of the equity of certain companies, it is considered that the investments are held as part of an investment portfolio. Accordingly, and as permitted by FRS 9 `Associates and Joint Ventures', their value to the Company lies in their marketable value as part of that portfolio. It is not considered that any of our holdings represents investments in associated companies. 4. Capital gains and losses on investments, whether realised or unrealised are shown in the Profit and Loss Account. 5. Earnings for the six months ended 31 March 2008 should not be taken as a guide to the results for the full year. 6. Earnings and return per share Six months ended Six months ended 31 March 2008 31 March 2008 Ordinary Share Fund S Share Fund £ £ i) Total earnings after taxation: (1,224,780) (6,886) Basic earnings per share (3.37)p (1.54)p ii) Net revenue from ordinary activities before taxation 124,647 (2,942) Revenue return per share 0.34 p (0.66)p Net unrealised capital gains/(losses) (2,353,042) - Net realised capital gains/(losses) 1,641,036 - Income from capital dividends - - Capital expenses (637,421) (3,944) ----- ----- iii) Total capital return (1,349,427) (3,944) Capital return per share (3.71)p (0.88)p iv) Weighted average number of shares in issue in the period 36,391,058 446,276 Six months ended Year to 31 March 2007 30 September 2007 Ordinary Share Fund S Share Fund £ £ i)Total earnings after taxation: 930,188 (3,047,580) Basic earnings per share 2.38 p (7.85)p ii)Net revenue from ordinary activities before taxation 283,866 240,595 Revenue return per share 0.73 p 0.62p Net unrealised capital gains/(losses) 752,297 (3,150,761) Net realised capital gains/(losses) 160,181 85,906 Income from capital dividends - 432,488 Capital expenses (266,156) (655,808) ----- ----- iii)Total capital return 646,322 (3,288,175) Capital return per share 1.65 p (8.47)p iv) Weighted average number of shares in issue in the period 39,081,898 38,802,180 7. Investment Management Expense Six months ended Six months ended 31 March 2008 31 March 2008 Ordinary Share Fund S Share Fund £ £ Fees payable under Investment Adviser's Agreement 406,840 5,259 Amounts payable under Incentive Agreement 355,000 - ----- ----- Total investment management expense 761,840 5,259 Six months ended Year to 31 March 2007 30 September 2007 Ordinary Share Fund Ordinary Share Fund £ £ Fees payable under Investment Adviser's Agreement 457,190 900,902 Amounts payable under Incentive Agreement - - ----- ----- Total investment management expense 457,190 900,902 The Directors have charged 75 per cent of the fees payable under the investment adviser's agreement, and 100 per cent 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. Under the terms of the Incentive Agreement, each Manager is entitled to a performance fee equal to 20 per cent of the excess of the value of any realisation of an investment made after 30 June 2007, over the value of that investment in a Manager's portfolio at that date, which value is itself uplifted at the rate of 6 per cent per annum. No fee is payable in any year if the value of that 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 Manager's portfolio at 30 June 2007. The amount shown above is an accrual based upon performance for the year-to-date. The eventual amount payable will depend on the actual performance at the year-end. 8. Net asset value per Ordinary Share is based on net assets at the end of the period, and on 36,047,146 (31 March 2007: 38,878,803, 30 September 2007: 36,589,479) Ordinary shares, being the number of Ordinary shares in issue on that date. Net asset value per S Share is based on net assets at the end of the period, and on 3,749,820 (31 March 2007: nil) S Shares being the number of S Shares in issue at that date. 9. The information for the year ended 31 March 2008 does not comprise full financial statements within the meaning of Section 240 of the Companies Act 1985. The financial statements for the year ended 30 September 2007 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 237(2) of the Companies Act 1985. 10. Copies of the Half-Year Report to Shareholders for the six months ended 31 March 2008 will be sent to all Shareholders shortly. Further copies will be available free of charge from the Company's registered office, One Jermyn Street, London SW1Y 4UH.

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