Interim Results

Matrix Venture Fund VCT PLC 16 December 2002 Matrix Venture Fund VCT Plc Interim Results for the six months ended 31 October 2002 CHAIRMAN'S STATEMENT I have pleasure enclosing the Interim Report and Financial Statements of Matrix Venture Fund VCT plc for the period from 1 May 2002 to 31 October 2002. The results for this period are set out in the following pages and show a revenue return (after tax) attributable to Ordinary Shareholders of 0.35 pence per Ordinary Share (31 October 2001: Loss 0.62p). The total loss (after tax) attributable to Ordinary Shareholders was 1.07 pence per Ordinary Share (31 October 2001: 9.33p) and the net asset value per Ordinary Share at 31 October 2002 was 69.28 pence (compared with 70.34p as at 30 April 2002 and 79.36 pence as at 31 October 2001). The trading environment for technology businesses remains extremely challenging, and a number of the portfolio companies will require careful monitoring and ongoing support to ensure longer term success. However, all of our current investee companies have shown improved revenue growth year on year, and several are trading on or above their budgeted levels. Details of the current portfolio are given in the Venture Capital Fund Adviser's Report that follows. The Board believes, on the basis of advice from its Venture Capital Fund Adviser, that the target of investing 70% of its portfolio in qualifying shares and securities ought to be achieved within the time period prescribed by the VCT legislation. If it becomes possible that current market conditions might prevent the Company from completing a sufficient number of suitable investments for this target to be achieved, then the Company would, as advised by its Venture Capital Fund Adviser and VCT Tax Advisers, take the appropriate steps to ensure that the Company retains its qualifying status as a VCT in order to preserve VCT tax benefits for its shareholders. In the period under review, the Company has made one new investment and two further investments to support existing portfolio companies. £750,000 was invested in Footfall Limited, as part of a syndicate investing £2.65m. A further £50,000 was invested in Espotting Media (UK) Limited as part of a £3m syndicate, and an additional £74,443 in Sit-up Limited together with a £5m fundraising from a new investor. As last year, 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. Matrix Private Equity Limited has informed the Board that Mark Burgess will be leaving the company in February 2003 to work overseas. The Board has been assured by Matrix Private Equity Limited that this will not lead to any alteration in the level of service that the Company receives. 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 2003. M Cumming Chairman 16 December 2002 VENTURE CAPITAL FUND ADVISER'S REPORT As at 31 October 2002, the Fund held eight venture capital investments summarised details of which are set out below. In the six months to 31 October 2002 the team evaluated almost 250 business plans. The Fund completed one new investment of £750,000 (as part of a £2.65m fund raising) into Footfall Limited, which provides people counting services and statistics to retailers and shopping centre operators. Deal flow has slowed down as a result of the economic climate, specifically as it affects early stage technology companies. Many companies continue to struggle to achieve forecast levels of turnover and we are unable to recommend investment in any company that is not able to substantiate its revenue forecasts to our satisfaction. Over the last 6 months, valuations of many technology companies in the public markets have continued to fall, and overall levels of corporate activity are extremely low. This is inevitably impacting on the number of deals completed and levels of confidence in the private equity market. However, we expect that current deals in progress should lead to one or more investments being completed in the next few months. At 31 October 2002 the Venture Capital Portfolio was valued at £4,287,511 against cost of £7,024,440 for all investments made to date. The Company also held £4.8m in gilts, bonds and cash, awaiting investment. We continue to pay close attention to the current portfolio which comprises: COMPANY BUSINESS COST CURRENT VALUATION Callserve Voice over Internet Protocol £300,000 £300,000 Communications Limited Callserve provides prepaid Internet Telephony services (or Voice over Internet Protocol, "VoIP") from PC's to telephones, worldwide. Turnover has grown dramatically over the last year and the existing shareholders are considering providing further investment to support the working capital needs of the growing business. Clarity Commerce Customer Relationship £250,000 £147,000 Solutions plc Management software for hospitality/ (AIM listed) leisure venues Clarity, which is listed on AIM, provides EPOS solutions to hospitality and leisure companies. It has more than doubled in size in the last year and the company's brokers are forecasting that the business will become profitable in the current year. Despite this, there has been a further fall in the share price, from £0.79 at 30 April 2002 to £0.735 as at 31 October 2002. This compares with a cost of £1.25 per share and therefore the current price leads to an unrealised loss of £103,000. Espotting Media (UK) Performance based internet £550,000 £732,471 Limited search engine Espotting is the European market leader in performance-based advertising through Internet search engines. It recently raised a further £3m, with the Fund investing £50,000, in order to finance the acquisition of a contract with Lycos Europe. This investment is at a higher price than the original investment, giving an unrealised profit on the entire investment of £182,471. Flightstore Inflight Inflight retail services £750,000 £750,000 Retailing Limited Flightstore software enables airlines to use existing seatback hardware to create information, shopping and reservation services for passengers. The service has been installed on Swiss, Lauda and Austrian Airlines and is expected to be launched on two major Far East airlines in 2003. FootFall Limited People counting services £750,000 £750,000 Footfall provides business performance information derived from monitoring and analysing pedestrian traffic in shopping centres and retail outlets. It has operations in France and the Far East as well as being the UK market leader. Magicalia Limited Community websites £400,000 £400,000 Magicalia has a network of six community websites supporting enthusiast-based participation sports such as cycling, golf, fishing and sailing. Turnover has increased substantially in the last year and steps are being taken to accelerate the growth of the online publishing business. Monactive Limited Software asset management £500,000 £500,000 tools & services Monactive provides a range of software asset management tools. Whilst turnover has grown over the past year, this was less than budget, leading to increased losses. Steps have now been taken to reduce overheads. Sit-up Limited Interactive auction TV £924,443 £708,040 Sit-up operates two TV shopping channels. The first service is Bid-up.TV, the UK's first TV-based, interactive auction channel, the second is Screenshop. The existing investors provided a mezzanine loan earlier in the year and the final tranche of £50,000 from the Fund was drawn down in the period. More recently the company raised a further £5m to finance the launch of a new TV channel planned for Spring 2003 and the Fund invested £24,443 in addition to the new investor. However the investment has been revalued in line with this third party valuation leading to an unrealised loss of £216,403, compared with an unrealised profit of £35,000 as at 30 April 2002. Further details of each company's activities are included in the Annual Report and Accounts for the Company published in July 2002 or can be viewed through the Matrix Private Equity website at www.matrixpe.com. Matrix Private Equity Limited Venture Capital Fund Adviser 16 December 2002 Statement of Total Return 6 months ended 31 October 2002 Notes Revenue Capital Total £ £ £ Unrealised gains and losses on investments - (97,932) (97,932) Realised gains and losses on investments - (21,940) (21,940) Income 205,456 - 205,456 Management fees 3 (25,865) (77,596) (103,461) Other expenses (122,561) - (122,561) ----------- ----------- ----------- Return on ordinary activities before taxation 57,030 (197,468) (140,438) Tax on ordinary activities (10,719) 10,719 - ----------- ----------- ----------- Return attributable to equity shareholders 46,311 (186,749) (140,438) Dividends in respect of equity shares - - - ----------- ----------- ----------- Transfer to/(from) reserves 46,311 (186,749) (140,438) ----------- ----------- ----------- Return per ordinary share 4 0.35p (1.42)p (1.07)p 6 months ended 31 October 2001 Notes Revenue Capital Total £ £ £ 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 3 (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 4 0.62p (9.95)p (9.33)p Year ended 30 April 2002 Notes Revenue Capital Total £ £ £ Unrealised gains and losses on investments - (2,210,627) (2,210,627) Realised gains and losses on investments - (68,047) (68,047) Income 469,379 - 469,379 Management fees 3 (60,094) (180,282) (240,376) Other expenses (186,596) - (186,596) ----------- ----------- ----------- Return on ordinary activities before taxation 222,689 (2,458,956) (2,236,267) Tax on ordinary activities (44,352) 39,690 (4,662) ----------- ----------- ----------- Return attributable to equity shareholders 178,337 (2,419,266) (2,240,929) Dividends in respect of equity shares (177,938) - (177,938) ----------- ----------- ----------- Transfer to/(from) reserves 399 (2,419,266) (2,418,867) ----------- ----------- ----------- Return per ordinary share 4 1.35p (18.35)p (17.00)p Balance Sheet 31 October 30 April 31 October 2002 2002 2001 Notes £ £ £ Fixed Assets Venture capital investments 1(b) 4,287,610 3,493,099 3,775,500 Fixed interest securities 3,526,236 5,047,590 5,482,775 Monies held pending investment 1,272,692 810,979 1,184,369 ------------ ------------ ------------ 9,086,538 9,351,668 10,442,644 Current Assets Debtors and prepayments 139,330 155,639 221,705 Cash at bank 11,552 14,679 10,943 ------------ ------------ ------------ 150,882 170,318 232,648 Creditors: amounts falling due within one year Corporation tax 4,662 - - Other creditors 32,081 5,815 38,471 Accruals 69,458 244,514 176,635 ------------ ------------ ------------ (106,201) (250,329) (215,106) ------------ ------------ ------------ Net current assets/(liabilities) 44,681 (80,011) 17,542 ------------ ------------ -------------- Net assets 9,131,219 9,271,657 10,460,186 ------------ ------------ -------------- Capital and reserves Called up share capital 131,806 131,806 131,806 Share premium account 12,256,431 12,256,431 12,256,431 Capital reserve - realised (509,049) (383,852) (288,364) Capital reserve - unrealised (2,794,679) (2,733,127) (1,721,478) Revenue reserves 46,710 399 81,791 ------------ ------------ -------------- 9,131,219 9,271,657 10,460,186 ------------ ------------ -------------- NAV per share 69.28p 70.34p 79.36p Cash Flow Statement 6 months ended Year ended 6 months ended 31 October 30 April 31 October 2002 2002 2001 £ £ £ Operating activities Net investment interest - non-qualifying 221,675 370,172 65,596 Investment management fees paid (52,465) (282,659) (90,960) Other cash payments (139,657) (268,463) (144,739) ------------ ------------ ------------ Net cash inflow/(outflow) from operating activities 29,553 (180,950) (170,103) Investing activities Acquisition of investments (2,368,029) (13,344,340) (6,473,520) Disposal of investments 2,975,000 7,202,573 690,000 ------------ ------------- -------------- Net cash inflow/(outflow) from investing activities 606,971 (6,141,767) (5,783,520) ------------ ------------- -------------- Dividends Dividend (177,938) (123,140) (122,580) ------------ ------------ ------------ Net cash inflow/(outflow) before liquid resource management 458,586 (6,445,857) (6,076,203) Management of liquid resources Movement in money market and other deposits (461,713) 6,384,538 6,011,148 ------------ ------------ ------------ Decrease in cash (3,127) (61,319) (65,055) ======= ======= ======= 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 Financial 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 Director's 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 company or sector 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. Basic revenue and capital items in the Statement of Total Return derive from continuing operations. 3. 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. 4. 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 (Year ended 30 April 2002: 13,180,612 Ordinary Shares; Period ended 31 October 2001: 13,180,612 Ordinary Shares). 5. The cancellation of the Company's share premium account (as approved by Resolution 6 of the Annual General Meeting held on 6 September 2002 and order of the Court dated 30 October 2002 as registered with the Registrar of Companies on 2 November 2002) will provide the Company with a special reserve out of which it can fund buy-backs of Ordinary Shares as and when it is considered by the Board to be in the interests of the shareholders. Under Resolution 9 of the Annual General Meeting held on 6 September 2002, the shareholders authorised the Company to purchase its own shares pursuant to section 166 of the Companies Act 1985. The authority is limited to a maximum of 14.99 per cent of the issued Ordinary Share Capital of the Company and will unless previously revoked or renewed expire on the conclusion of the Annual General Meeting of the Company to be held in 2003. The maximum price that may be paid for an Ordinary Share will be an amount equal to 105 per cent of the average of the middle market quotation for Ordinary Shares taken from the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which the Ordinary Shares are purchased. The minimum price that may be paid for Ordinary Shares is 1 pence per share. The authority provides that the Company may make a contract to purchase Ordinary Shares under the authority conferred by this resolution prior to the expiry of such authority which will or may be executed wholly or partly after the expiration of such authority and may make a purchase of Ordinary Shares pursuant to such contract. 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 2002, 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, Gossard House, 7-8 Savile Row, London, W1S 3PE. This information is provided by RNS The company news service from the London Stock Exchange

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