Interim Results

Matrix Venture Fund VCT PLC 21 January 2002 MATRIX VENTURE FUND VCT PLC INTERIM RESULTS CHAIRMAN'S STATEMENT I have pleasure enclosing the Interim Report and Financial Statements of Matrix Venture Fund VCT plc (the new name of the Company) for the period from 1 May 2001 to 31 October 2001. The results for this period are set out in the following pages and show a revenue return (after tax) attributable to Ordinary Shareholders of 0.62 pence per Ordinary Share. The total loss (after tax) attributable to Ordinary Shareholders was 9.33 pence per Ordinary Share and the net asset value per Ordinary Share at 31 October 2001 was 79.36 pence (compared with 88.69 pence as at 30 April 2001 and 93.87 pence as at 31 October 2000). It is generally in the nature of investing at an early stage in the life of technology companies that they are vulnerable and this is even more the case in the current challenging trading environment. In view of this we have made provisions against the valuations of certain investments, as detailed in the Venture Capital Fund Adviser's Report, which have contributed to the recent fall in Net Asset Value. We are, however, encouraged by the fact that a number of companies in the portfolio showed improved trading performances during the financial period. Details of the current portfolio are given in the Venture Capital Fund Adviser's Report on the following pages. As at 31 October 2001, 44% of net funds raised under the public offer had been invested in ten companies. The Company's investment advisers, Matrix Private Equity Limited, have confirmed that the Company is on target to achieve its Venture Capital Trust qualification investment target of having more than 70% of its portfolio invested in qualifying shares and securities within its first three years. While the Company has made no new investments in the period under review, it has made two further investments to support existing portfolio companies. £100,000 was invested in e-go systems and £150,000 was invested in ImageCom, in both cases as a part of larger refinancing rounds. The Board is not recommending the payment of an interim dividend. The Board will, however, give consideration to the level of any dividend at the time of finalising the year-end accounts. I would like to take this opportunity to thank all shareholders for their continuing support of the Company. My next statement will be in respect of the year to 30 April 2002. M Cumming Chairman 21 January 2002 VENTURE CAPITAL FUND ADVISER'S REPORT As at 31 October 2001, the fund had completed ten venture capital investments. Summarised details of the remaining nine investments appear on page 3. We did not complete any new investments in the six months to 31 October 2001 despite the team having evaluated almost 400 business plans. Deal flow has shown no sign of slowdown despite the current economic climate. Many companies seeking venture capital have struggled to demonstrate a sustainable business model and to establish a viable customer base. We have not recommended investment in any company that has been unable to substantiate its revenue forecasts to our satisfaction. In addition, over the last six months, although valuations of technology shares in the public markets have shown wide fluctuations, in the private equity market they have tended to stabilise at levels which reflect a more realistic balance of risk and return. However, it has taken time for management teams to accept these lower investment valuations. In December 2001, the fund completed an investment of £500,000 into espotting, a company which provides performance-based advertising services. Current deals in progress should lead to one or more investments being completed in the next few months. In line with many other investors, we have paid close attention to the current portfolio. Two of the portfolio companies received further funding in October 2001, ImageCom raising £750,000 and e-go systems over £5.25m. The Company participated in both refinancings, investing £150,000 and £100,000 respectively. We have carefully reviewed the performance of all of the investments and their valuations as at 31 October. The valuation of the investment in ImageCom has been adjusted to reflect a serious liquidity crisis arising from the failure of one of the parties to the October refinancing to complete its investment. This has resulted in the company having discussions with its creditors to ensure that it has sufficient funds to continue trading. This investment has been valued at £225,000 against cost of £900,000. The trading performance of i-Desk has been substantially behind plan and therefore the Board has valued the investment at £187,500 against cost of £750,000. Clarity Commerce Solutions, which is listed on AIM, has seen its share price fall significantly in the last six months, from £1.31 at 30 April to £0.81 at 31 October. This compares with a cost of £1.25 and therefore the current price leads to an unrealised loss of £87,000 compared with an unrealised gain of £15,000 as at 30 April. Despite these provisions against cost, the portfolio as a whole is showing good progress in business development. All of the companies, except i-Desk and ImageCom, are growing turnover and several are approaching break-even levels of trading. Overall, as at 31 October 2001, the Venture Capital Portfolio is valued at £3,775,500 against cost of £5,450,000. The Company also holds approximately £6,700,000 in gilts, bonds and cash, awaiting investment. The Net Asset Value is £10,460,186, or 79.36 pence per share compared with 88.69 pence per share as at 30 April. The Venture Capital Portfolio as at 31 October 2001 comprised: COMPANY BUSINESS COST CURRENT VALUATION Callserve Voice-over internet protocol £300,000 £300,000 Communications Limited Clarity Commerce Solutions plc Customer relationship £250,000 £163,000 management software for hospitality/leisure venues e-go systems plc Unified communications for £600,000 £600,000 Enterprises Flightstore Inflight Retailing Ltd Inflight retail services £750,000 £750,000 i-Desk plc Customer management & £750,000 £187,500 Support services ImageCom Limited Video compression technology £900,000 £225,000 Magicalia Limited Community websites £400,000 £400,000 Sit-up.com Limited Interactive auction TV £650,000 £650,000 Monactive Limited (formerly Software asset management £500,000 £500,000 Xpert Client Systems Limited) tools & services Further details of each company's activities are included in the Annual Report and Accounts for the Company published in July 2001 or can be viewed through the Matrix Private Equity website at www.matrixpe.com. Matrix Private Equity Limited Venture Capital Fund Adviser 21 January 2002 STATEMENT OF TOTAL RETURN 6 months ended 31 October 2001 Revenue Capital Total Notes £ £ £ Unrealised gains and losses on investments - (1,198,978) (1,198,978) Realised gains and losses on investments - (3,864) (3,864) Income 234,929 - 234,929 Management fees 4 (43,198) (129,594) (172,792) Other expenses (89,633) - (89,633) ------------ ------------- ------------- Return on ordinary activities before taxation 102,098 (1,332,436) (1,230,338) Tax on ordinary activities (20,307) 20,307 - ------------ ------------ ------------ Return attributable to equity shareholders 81,791 (1,312,129) (1,230,338) Dividends in respect of equity shares - - - ------------ -------------- ------------- Transfer to/(from) reserves 81,791 (1,312,129) (1,230,338) ------------ -------------- ------------- Return per ordinary share (pence) 5 0.62 (9.95) (9.33) Period ended 31 October 2000 Revenue Capital Total £ £ £ Unrealised gains and losses on investments - 3,425 3,425 Realised gains and losses on investments - - - Income 215,187 - 215,187 Management fees (27,692) (83,076) (110,768) Other expenses (126,184) - (126,184) ------------ ------------- ------------- Return on ordinary activities before taxation 61,311 (79,651) (18,340) Tax on ordinary activities (16,615) 16,615 - ------------ ------------ ------------ Return attributable to equity shareholders 44,696 (63,036) (18,340) Dividends in respect of equity shares - - - ------------ ------------ ------------- Transfer to/(from) reserves 44,696 (63,036) (18,340) ------------ ------------ ------------- Return per ordinary share (pence) 0.5 (0.7) (0.2) Period ended 30 April 2001 Revenue Capital Total £ £ £ Unrealised gains and losses on investments - (522,500) (522,500) Realised gains and losses on investments - (29,575) (29,575) Income 470,587 - 470,587 Management fees (60,682) (182,047) (242,729) Other expenses (250,355) - (250,355) ------------ ------------- ------------- Return on ordinary activities before taxation 159,550 (734,122) (574,572) Tax on ordinary activities (36,410) 36,410 - ------------ ------------ ------------ Return attributable to equity shareholders 123,140 (697,712) (574,572) Dividends in respect of equity shares (123,140) - (123,140) ------------ -------------- ----------- Transfer to/(from) reserves - (697,712) (697,712) ------------ -------------- ----------- Return per ordinary share (pence) 1.07 (6.10) (5.03) BALANCE SHEET As at As at As at 31 October 31 October 30 April 2001 200 2001 Note £ £ £ Fixed Assets Investments in stocks 1(b) 3,775,500 1,569,999 4,677,596 Investments in fixed interest securities 5,482,775 6,513,000 - Moneys held pending investment 1,184,369 3,410,994 7,195,517 ------------- ------------- ------------- 10,442,644 11,493,993 11,873,113 Current Assets Debtors and prepayments 221,705 340,795 84,315 Cash at bank 10,943 300,201 75,998 ------------ ------------ ------------ 232,648 640,996 160,313 Creditors: amounts falling due within one year Other creditors 38,471 63,504 37,419 Accruals 176,635 239,883 305,483 ------------ ------------ ------------ (215,106) (303,387) (342,902) ------------ ------------ ------------ Net current assets 17,542 337,609 (182,589) ------------ ------------ ------------ Net assets 10,460,186 11,831,602 11,690,524 ------------ ------------ ------------ Capital and reserves Called up share capital 131,806 126,042 131,806 Share premium account 12,256,431 11,723,900 12,256,431 Capital reserve - realised (288,364) (66,461) (175,213) Capital reserve - unrealised (1,721,478) 3,425 (522,500) Revenue reserves 81,791 44,696 - -------------- -------------- -------------- 10,460,186 11,831,602 11,690,524 -------------- -------------- -------------- NAV per share (pence) 79.36 93.87 88.69 CASH FLOW STATEMENT 6 months Period Period ended ended ended 31 October 31 October 30 April 2001 2000 2001 £ £ £ Operating activities Net investment interest - non-qualifying 65,596 (17,095) 437,283 Investment management fees paid (90,960) - (197,468) Other cash payments (144,739) (36,137) (135,765) ------------- ------------- ------------- Net cash inflow/(outflow) from operating (170,103) (53,232) 104,050 activities Investing activities Acquisition of investments (6,473,520) (8,079,574) (11,729,572) Disposalof investments 690,000 - 6,500,000 ------------ ------------ ------------ Net cash outflow from investing activities (5,783,520) (8,079,574) (5,229,572) Dividends Dividend (122,580) - - ------------- ------------- ------------- Net cash outflow before financing (6,076,203) (8,132,806) (5,125,522) Financing Issue of ordinary shares - 11,844,001 13,152,348 Expenses of share issue - - (755,311) ------------- ------------- ------------- Net cash inflow from financing - 11,844,001 12,397,037 ------------- ------------- ------------- (Decrease)/Increase in cash (6,076,203) 3,711,195 7,271,515 ------------- ------------- ------------- 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 financial statements have been prepared under the historical cost convention, modified to include the revaluation of fixed asset investments and in accordance with the applicable Accounting Standards in the United Kingdom. b) Investments Listed investments traded on AIM are stated at middle market prices as at 31 October. Unlisted investments are stated at the Directors' valuation. Investments in unlisted companies are valued in accordance with the British Venture Capital Association ('BVCA' guidelines). The Directors' policy in valuing unlisted investments is to carry them at cost except in the following circumstances: - Where the company's under-performance against plan indicates a diminution in value of the investment, provision against cost is made as appropriate in bands of 25%. - Where a company is well established and profitable, the shares may be valued by applying a suitable price earnings ratio to the company's historic post-tax earnings. The ratio used is based on comparable listed companies or sectors but discounted to reflect lack of marketability. - Where a value is indicated by a material arms length transaction by a third party in the shares of a company. Unquoted investments will not normally be revalued upwards for a period of at least twelve months from the date of acquisition. Capital gains and losses on investments, whether realised or unrealised, are dealt with in the capital reserve. 2. The comparative periods are from the date of commencement of trading of 10 May 2000, up to the date shown. 3. Basic revenue and capital items in the Statement of Total Return derive from continuing operations. 4. In accordance with the Company's prospectus dated 10 May 2000, the Directors have charged 75% of the investment management expenses to the capital reserve. 5. Basic revenue return per Ordinary share is based on the net revenue on ordinary activities after taxation, and on 13,180,612 Ordinary shares, being the number of Ordinary shares in issue during the period. (Period ended 30 April 2001: 11,405,565 Ordinary shares; period ended 31 October 2000: 8,974,377 Ordinary shares being the weighted average number of Ordinary shares in the relevant periods.) 6. The financial information set out in this report has not been audited and does not comprise full financial statements within the meaning of section 240 of the Companies Act 1985. The audited accounts for the Company for the period to 30 April 2001, on which the auditors gave an unqualified report, have been delivered to the Registrar of Companies. 7. Copies of this statement are being sent to all shareholders. Further copies are available free of charge from the Company's registered office, St Philips House, St Philips Place, Birmingham B3 2PP. This information is provided by RNS The company news service from the London Stock Exchange

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