Preliminary Results

Matrix e-Ventures Fund VCT PLC 19 July 2001 Matrix e-Ventures Fund VCT plc Maiden Preliminary Results for the period ended 30 April 2001 Fund Objective The objective of the Fund is to provide private investors with an attractive return from a portfolio of investments in fast growing companies whose products or services depend to a significant effect on the application of new technology, including: * internet and e-business * information technology * telecommunications and media Performance Summary Capital values before proposed dividend Net asset value per Ordinary Share 88.69p Total assets £11,690,524 Revenue and dividend Earnings per Ordinary Share 1.07p Dividend per Ordinary Share 0.93p Chairman's Statement It is a pleasure to present the first annual report and financial statements of Matrix e-Ventures Fund VCT plc. You will remember that the public offer launched on 10 May 2000 at 100p per Ordinary Share raised £12,388,237 after expenses which amounted to 6 per cent. of the funds raised. Results for the period ended 30 April 2001 The results for the year from 10 May 2000 to 30 April 2001 are set out in the following pages. The total loss (after tax) attributable to the Ordinary Shareholders before the recommended dividend was £574,572 and the net asset value per Ordinary Share at 30 April 2001 was 88.69p compared with 94p (net of issue expenses) immediately following flotation. This compares with a net cost of 80p to those qualifying shareholders who were able to recover income tax relief of 20 per cent. on their original subscription. Dividend The Board recommends a dividend of 0.93p per Ordinary Share for the period ended 30 April 2001 to Ordinary Shareholders on the register at the close of business on 27 July 2001. Subject to shareholder approval at the Annual General Meeting on 3 September 2001, these payments should be received on 10 September 2001. The after tax revenue return for the year before capital losses was 1.07p per Ordinary Share for the year to 30 April 2001. Investment Position Initially, the proceeds of the offer were invested in a portfolio of gilts and other sterling-denominated fixed interest investments managed by Cazenove Fund Management Limited. As stated in the original prospectus published at launch, the Directors anticipate the fund being fully invested (whilst retaining an adequate cash reserve to provide follow-on funding), primarily in qualifying companies within 3 years. I am encouraged to see that the Company's fund advisers, Matrix Private Equity Limited have received over 50 proposals a month to evaluate, mostly from high quality intermediaries and other venture capital investors. Over the last year valuations of early stage businesses have fallen dramatically and now reflect a much more sensible level whereby the risk:reward ratio is more realistic. As at 30 April 2001, £5.2m had been invested in 10 companies. Together, these investments represent an aggregate investment of approximately 42 per cent. of the Venture Capital Fund. As at 30 April 2001, the capital reserves show, on a capital base of £11,690,524, a capital loss of £697,712. Details of the full Venture Capital Portfolio as at 30 April 2001 are given in the Adviser's and Manager's Reports. This rate of investment during the period under review, together with several additional investments sourced during the same period and anticipated to be completed during the next few months lead the Company's fund advisers, Matrix Private Equity Limited, and the Board to conclude that the Company is on target to achieve its Venture Capital Trust qualification investment target of having at least 70 per cent. by value invested in shares and securities by 30 April 2003. The investments held by the Company have been valued in accordance with the British Venture Capital Association guidelines under which unquoted investments are not normally revalued above cost for at least 12 months after the date of acquisition. The investments which are listed on AIM and the fixed interest securities are carried at market value. We will, in any event, always attempt to follow a consistent and prudent valuation policy. The Board has made a full provision of £350,000 against its investment in e-Gas & Power plc, which failed in June and has been put into liquidation. A further provision of £187,500 has been made against ImageCom Limited where the business is trading substantially below expectations due to the loss of a major customer. Company Name The Board has decided to recommend a change of name to 'Matrix Venture Fund VCT plc' and to clarify the investment objectives. These minor changes do not constitute a change in investment policy. Instead, they reflect the fact that, whilst all the investments made by the fund have had some association with the internet, for example, as a channel to market or as a support service, it is not necessarily prudent to invest in companies that are wholly reliant upon the internet whilst its development is in the early stages. CREST The Directors have decided for the present not to register with CREST, a paperless settlement system, as there have been no significant transfers of shares in the year under review and it is not anticipated that there will be any significant trading in the Company's shares in the near future. However, to comply with the UK Listing Authority Listing Rules and as a preparatory measure in case it becomes appropriate for the Company to register with CREST in the future, the Company's shares must be eligible for electronic settlement. Accordingly, the Directors take this opportunity to give notice, in accordance with the Uncertificated Securities Regulations 1995 ('the Regulations'), that the Company intends to pass a resolution of its Directors to the effect that title to Ordinary Shares in the capital of the Company, in issue or to be issued, may be transferred by means of the CREST system. The effect of this resolution will be to disapply provisions of the Company's Articles of Association which are inconsistent with the holding and transfer of Ordinary Shares in electronic form. Conclusion I believe we have made a good start to our investment programme and I would also like to take this opportunity to thank all shareholders for their support and very much hope to have the pleasure of welcoming you to the Annual General Meeting on 3 September 2001. Michael Cumming Chairman 19 July 2001 ADVISER'S AND MANAGER'S REPORT Venture Capital Fund Adviser's Report Portfolio Summary Matrix Private Equity Limited advises the Company in respect of investments made within the Venture Capital Fund. During the period ended 30 April 2001, the team received and evaluated over 600 investment proposals, from which Matrix e-Ventures Fund VCT plc made 10 investments at a cost of £5,200,000. This was the first period in which funds were available for investment in qualifying companies for VCT purposes. The full investment portfolio of the Company as at 30 April 2001 is detailed below. Callserve Communications Limited The company provides internet telephony services or Voice over Internet Protocol ('VoIP') from PCs to telephones, worldwide. Using software which is pre-installed, downloaded from the company's website, or available from retailers, a telephone caller can use the internet to route a telephone call at a much reduced cost. Matrix invested as part of a syndicate arranged by Peel Hunt, raising £8.25m to finance the roll-out of the service and facilitate partnering arrangements with software and hardware providers. Results from the latest audited accounts for the period from 11 June 1999 to 31 March 2000: loss before tax £1,324,624, net assets £1,598,303. Date of investment Amount invested Valuation % Equity/Voting % of Portfolio Rights October 2000 £300,000 At cost 0.78% 2.55% Clarity Commerce Solutions plc (AIM Listed) The company provides EPOS (electronic point of sale) solutions, Customer Relationship Management ('CRM') products and services to the UK hospitality and leisure markets. It floated on AIM in July 2000, raising £2.5m primarily to increase its marketing activities and acquire two small complementary businesses. The flotation was sponsored by Williams de Broe Plc. Results from the latest audited accounts for the period ended 31 March 2001: loss before tax £1,111,000, net assets £4,398,000. Date of investment Amount invested Valuation % Equity/Voting % of Portfolio Rights July 2000 £250,000 £262,000 2.08% 2.25% The investment is valued at the mid-market price on 30 April 2001 of 131p per share. e-Gas & Power plc The Business offered an e-B2B exchange for gas and electricity to UK customers. The Internet exchange failed to attract sufficient customers quickly enough to demonstrate the success of the business model. At the same time, the previously profitable offline brokerage business had to be closed down when it suffered an unsustainable loss of business in a highly competitive market. Alternative sources of funding were not forthcoming and the institutional investors (including Matrix e-Ventures Fund VCT plc) declined to invest further sums. The business went into liquidation in June 2001. Date of investment Amount invested Valuation % Equity/Voting % of Portfolio Rights November 2000 £350,000 Nil 3.5% - e-go systems plc The group provides Unified Messaging ('UM') services to global enterprises. UM consolidates messages delivered to voicemail, mobile phone, e-mail and fax into one mailbox. Telemesser (a subsidiary based in Israel) provides UM support services, including CRM. The enterprise UM service went live in May 2001 and the first customers are signed up. We invested as part of a £7.2m fund-raising. The group is raising further funds at present to enable the business to expand. Results from the latest audited accounts for the twelve months to 31 March 2000: loss before tax £1,151,198, net assets £3,329,413. Date of investment Amount invested Valuation % Equity/Voting % of Portfolio Rights September 2000 £500,000 At cost 0.65% 4.25% Flightstore Inflight Retailing Limited Flightstore creates electronic airline branded shopping malls containing branded retailers with international delivery capabilities. The proprietary software developed by Flightstore uses existing seatback hardware to deliver a quasi-internet shopping experience on long haul flights. The company is in discussions with over 150 retailers and several major airlines and expects to launch the service in the second half of 2001. No audited accounts have been produced since incorporation on 21 September 1999. Date of investment Amount invested Valuation % Equity/Voting % of Portfolio Rights March 2001 £750,000 At cost 11.1% 6.38% i-Desk plc i-Desk is a leading provider of internet e-services focused on outsourced customer and technical support and electronic bill presentment and payment (Ebillity). The customers include telecommunications companies and Internet Service Providers, whose customers are supported via the i-Desk call centre. The fund invested as part of a £10.3m fund-raising to be used for continued development of the business. Results from the latest audited accounts for the period to 31 December 1999: loss before tax £1,398,464, net liabilities £989,723. Date of investment Amount invested Valuation % Equity/Voting % of Portfolio Rights November 2000 £750,000 At cost 2.17% 6.38% ImageCom Limited The company's core expertise is in providing the technology to enable high quality live video images to be transmitted over telephone networks by compressing and decompressing the images at either end. This technology has historically been product based but the company is developing it for incorporation in a microchip, thereby dramatically broadening the range of applications. The company was originally the product of a management buy-out supported by Thompson Clive who invested £750,000 alongside a similar sum from Matrix to fund the development of the new business. Results from the latest audited accounts for the year ended 30 April 2000: loss before tax £541,000, net assets £28,000. Date of investment Amount invested Valuation % Equity/Voting % of Portfolio Rights December 2000 £750,000 £562,500 8.33% 4.79% This investment is shown at cost less the £187,500 provision. Magicalia Limited Magicalia has established a network of six community websites focused on enthusiast-based participation sports such as cycling, golf, fishing and outdoor activities. The websites have over 30,000 registered users, forming an important and unique link between manufacturers, retailers and consumers. No audited accounts have been produced since incorporation in August 1999. Date of investment Amount invested Valuation % Equity/Voting % of Portfolio Rights March 2001 £400,000 At cost 12.73% 3.41% Sit-up.com Limited The company provides interactive broadcasting material and aims to create a suite of programming concepts for digital TV and the internet. The first service is Bid-up.TV, the UK's first interactive TV-based auction site. Bid-up. TV auctions create an opportunity for manufacturers and distributors to sell a wide range of products across Sky, Telewest and BT Openworld platforms. The company also owns Screenshop, an infomercial channel broadcast on Sky. Matrix initially invested £500,000 as part of a £2.2m syndicate arranged by Peel Hunt. A further £150,000 was provided when the business raised over £5m of expansion capital in February 2001. Results from the latest audited accounts for the year ended 31 December 2000: loss before tax £3,785,446, net assets £2,661,941. Date of investment Amount invested Valuation % Equity/Voting % of Portfolio Rights October 2000/ £650,000 At cost 1.74% 5.53% February 2001 Xpert Client Systems Limited XCS are a leading provider of software asset management tools, having developed products based on innovative technology including automatic recognition, and a client-based, rather than server-based approach (i.e. using resident agents on PCs) to monitor software usage. Results from the latest audited accounts for the year ended 31 July 2000: loss before tax £220,800, net liabilities £287,249. Date of investment Amount invested Valuation % Equity/Voting % of Portfolio Rights March 2001 £500,000 At cost 11.93% 4.26% Portfolio Overview As the majority of the investments in the portfolio have been made within the last 9 months it is too early to comment on their trading performance or exit - prospects other than the loss of a major customer at ImageCom Limited and problems at e-gas and Power plc mentioned above. e-Gas & Power plc unfortunately failed to develop its revenue stream as quickly as anticipated with the result that it required further funds to survive. After careful evaluation, we decided that, although the business had made progress, this was insufficient to demonstrate that a further investment would be successful. Therefore, we (along with the other institutional investors) declined to invest more money and the business failed. This experience has provided us with some useful lessons in evaluating similar businesses. It is also true that 'the lemons ripen before the plums', but we are optimistic that the portfolio will mature successfully overall in the long term. Market Overview The investment environment over the last year has been exceptional, with extremes of valuation and performance expectation, initially wild over-enthusiasm, followed by disappointment as reality set in and the over-hyped expectations of many 'new economy' businesses failed to be delivered. Nevertheless, deal flow has been strong throughout the period and continues to be so. There are a number of transactions at relatively advanced states of appraisal and due diligence, which we expect will complete over the next few months. Valuations have declined markedly over the last 18 months and currently reflect a better balance of risk and reward. Matrix Private Equity has enormous admiration for those entrepreneurs who embark on starting up a business, but as ever it remains the case that only the most talented management teams will succeed. The vast majority of companies should not seek to raise money from the public markets until they have a proven business model. Professional venture capital managers such as Matrix Private Equity aim to support early stage businesses before they have reached a level of maturity suitable for the public markets and the Government supports such relatively high risk investment through the VCT and associated legislation. In current markets it should be expected that venture capital investments will take longer to mature to a stage suitable for exit. Historically, this time period has been between 3 and 5 years. We believe that the spread of investments so far, together with the continuing strong flow of deals from good quality sources, will provide a sound portfolio over the long term. Fixed Interest Fund Manager's Report The net proceeds from the Company's share issue are managed by Cazenove Fund Management Limited and have been invested to yield interest. As the Company has been investing, the amount of funds in the fixed interest portfolio has reduced. As at 30 April 2001, the fixed interest portfolio was invested wholly in the Cazenove Iceberg cash deposit scheme. During May the portfolio was 87 per cent. invested across four short-dated sterling bonds. Statement of Total Return Period ended 30 April 2001 Revenue Capital Total Notes £ £ £ Gains and losses on investments - (552,075) (552,075) Income 1 470,587 - 470,587 Investment management fees 2 (60,682) (182,047) (242,729) Other expenses (250,355) - (250,355) ------------- ---------- ---------- Return on ordinary activities before 159,550 (734,122) (574,572) taxation Taxation on ordinary activities 3 (36,410) 36,410 - ------------- ---------- ---------- Return on ordinary activities after 123,410 (697,712) (574,572) taxation Dividends in respect of equity (123,410) - (123,410) shares ------------- ---------- ---------- Transfer to reserves - (697,712) (697,712) Return to shareholders per Ordinary 4 1.07p (6.1p) (5.03p) Share The Statement of Total Return incorporates the profit and loss account of the Company. All revenue and capital items in the Statement of Total Return derive from continuing operations. The Company has only one class of business and derives its income from investments in shares, securities, loans and bank deposits. Balance Sheet As at 30 April 2001 Notes £ Fixed Assets Investments 5 4,677,596 Monies held pending investment 7,195,517 -------------- 11,873,113 -------------- Current Assets Debtors and prepayments 6 84,315 Cash at bank 75,998 -------------- 160,313 -------------- Creditors: amounts falling due within one year 7 (342,902) -------------- Net current liabilities (182,589) -------------- Net assets 11,690,524 -------------- Capital and reserves Called up share capital 131,806 Share premium account 12,256,431 Capital reserve - realised 8 (175,213) Capital reserve - unrealised 8 (522,500) Revenue reserves - -------------- 11,690,524 -------------- Net asset value per Ordinary Share 9 88.69p Cash Flow Statement £ Net cash inflow from operating activities 104,050 -------------- Taxation UK corporation tax paid - -------------- Net cash inflow 104,050 -------------- Capital expenditure and financial investment Purchase of investments - fixed income securities (6,529,575) Purchase of investments - equities (5,199,997) ---------------- (11,729,572) Disposals of fixed income securities 6,500,000 ---------------- Net cash outflow (5,229,572) Dividends Equity dividends paid - ---------------- Net cash inflow before financing (5,125,522) ---------------- Financing Issue of ordinary shares 13,152,348 Repurchase of ordinary shares - Expense of share issue/repurchase (755,311) ---------------- Net cash inflow from financing 12,397,037 ---------------- Net cash inflow as at 30 April 2001 7,271,515 ---------------- The Company holds gilts and bonds primarily as investments and not as liquid resources. Accordingly, movements in the holdings of these investments are shown within investing activities in the Cash Flow Statement rather than within management of liquid resources. Notes to the Financial Statements Period ended 30 April 2001 1. Income 2001 £ Interest receivable - from fixed interest securities 119,345 - from bank deposits 351,242 ------------- 470,587 ------------- 2. Investment advisers and manager's fees Revenue Capital Total 2001 2001 2001 £ £ £ Matrix Private Equity Ltd 59,051 177,154 236,205 Cazenove Fund Management 1,631 4,893 6,524 ---------------- ---------------- --------- 60,682 182,047 242,729 ---------------- ---------------- --------- Matrix Private Equity Limited advise the Company on investments in qualifying companies under an agreement dated 10 May 2000 made between the Company and Matrix Private Equity (Managers) Limited, a subsidiary of the Company. This agreement was novated to Matrix Private Equity Limited on 3 July 2001, a subsidiary of Matrix Group Limited which had previously provided to Matrix Private Equity (Managers) Limited the services of Mark Burgess and Helen Sinclair. The Fund Advisers agreement is for an initial period of five years from 10 May 2000 and thereafter until their appointment is terminated by not less than one year's notice in writing to expire at any time after the initial period. Matrix Private Equity Limited have received an annual advisory fee of 2.5 per cent. of the net assets attributable to the Ordinary Shares Fund. The annual management fees are calculated and payable quarterly in advance, together with any applicable VAT. This fee has been reduced by an amount equivalent to the excess total management fees over 3.75 per cent. of opening net assets, being the agreed cap on the management fee. The Fund is responsible for external costs such as legal and accounting fees, incurred on transactions that do not proceed to completion ('abort expenses') subject to the agreed cap on expenses referred to above. In line with common practice, Matrix Private Equity Limited retain the right to charge arrangement and syndication fees and Directors' or monitoring fees ('deal fees') to companies in which the Company invests. Matrix Private Equity Limited, Mark Burgess, Helen Sinclair and the Investment Committee are entitled to be issued with performance warrants granting the right to subscribe for ordinary shares at par which represent 16.67 per cent. of the sum of (i) the number of Ordinary Shares allotted pursuant to the Company's prospectus dated 10 May 2000 ('the Offer') plus (ii) the number of Ordinary Shares allotted pursuant to the exercise of performance warrants. The condition for the issue of performance warrants is that cumulative dividend payments are declared or paid amounting to the equivalent of not less than 80p for each Ordinary Share in issue ('the hurdle') at any time before the seventh anniversary of the launch of the Offer. If the hurdle is not reached until after the seventh anniversary of the launch of the Fund the entitlement to subscribe for a lesser number of shares at a rate of 1.5 per cent. per annum until the twelfth anniversary, after which, if the hurdle has not been reached, the performance warrants lapse. Cazenove Fund Management Limited ('Cazenove') manages the Company's portfolio of gilts and other fixed interest securities under an agreement dated 10 May 2000. The agreement may be terminated by either party with immediate effect. Cazenove receives an annual fee of 0.15 per cent. of funds under management, with a minimum of £10,000 per annum plus VAT. 3. Taxation on ordinary activities 2001 £ Based on the results for the period: (574,572) UK corporation tax at 20% Nil ------------ Tax relief relating to investment management fees is allocated between Revenue and Capital in the same proportion as such fees. 4. Return per Ordinary Share The revenue return per Ordinary Share is based on the net revenue from ordinary activities after taxation of £123,140 and on 11,405,565 Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the period. The capital return per Ordinary Share is based on net realised capital losses of £175,212, net unrealised capital losses of £522,500 and 11,405,565 Ordinary Shares. 5. Investments Movements in investments during the period are summarised as follows: Traded Unlisted Fixed on Interest Total AIM Securities Purchases at cost 250,000 4,950,096 6,529,575 11,729,671 Disposals - -(6,529,575)(6,529,575) Revaluations 15,000 (537,500) - (522,500) ---------- ---------- --------- ----------- Cost/valuation at 30 April 2001 265,000 4,412,596 - 4,677,596 ---------- ---------- --------- ----------- Book cost at 30 April 2001 250,000 4,950,096 - 5,200,096 Unrealised gains/(losses) at 30 April 2001 15,000 (537,500) - (522,500) ---------- ---------- ---------- ---------- 265,500 4,412,596 - 4,677,596 Monies held on deposit pending investment comprise cash temporarily on deposit with Cazenove and available for future investment. Within unlisted investments is £99 attributable to the 99 per cent. holding in the Company's subsidiary, Matrix Private Equity (Managers) Limited, a company incorporated in England and Wales. The net assets of the subsidiary at 30 April 2001 are £99 and the net profit for the period is nil. 6. Debtors 2001 £ Other debtors 33,504 Prepayments 50,811 ----------- 84,315 ----------- 7. Creditors: amounts falling due within one year 2001 £ Trade creditors 22,857 Other creditors 14,562 Accruals 182,343 Proposed dividend 123,140 ----------- 342,902 ----------- 8. Reserves Share Capital Capital Revenue Pemium Reserve Reserve Reserve account (realised) (unrealised) £ £ £ £ Proceeds received for shares 13,180,612 - - - Allocated to share capital (131,806) - - - Share issue costs (755,311) - - - Commissions waiver (37,064) - - - Profit/(loss) on disposal of investments - (29,575) - - Increase/(decrease) in unrealised appreciation - - (522,500) - Capitalised management fees less tax charge - (145,638) - - Retained net profit for the period - - - - ----------- ---------- ----------- ---------- At 30 April 2001 12,256,431 (175,213) (522,500) (Nil) ----------- ---------- ---------- ---------- The net funds available for investment following the share offer were £12,388,237. 9. The financial information set out above does not comprise the Company's fall statutory accounts within the meaning of Section 240 of the Companies Act 1985. The 2001 Annual Report and Financial Statements, which received an unqualified auditor's report will be filed with the Registrar of Companies following the Annual General Meeting.

Companies

Mobeus Income & Growth 2 Vct (MIG)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today