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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