Annual Financial Report
Matrix Income & Growth VCT plc
Annual Results Announcement for the year ended 31 December 2009
17 March 2010
Investment Objective
Matrix Income & Growth VCT plc ("the VCT" or "MIG VCT") is a Venture Capital
Trust ("VCT") listed on the London Stock Exchange. Its investment portfolio,
which invests primarily in established and profitable unquoted companies, is
managed by Matrix Private Equity Partners LLP ("MPEP").
The Company's objective is to provide investors with a regular income stream,
by way of tax free dividends, and to generate capital growth which, following
portfolio realisations, can be distributed by way of additional tax free
dividends.
Financial Highlights
Ordinary Shares (listed on 8 October 2004)
Initial net asset value per share 94.5 pence
Initial net assets £20,933,124
31 December 2009 31 December 2008
Net assets £16,979,370 £17,998,562
Net asset value per share 83.3 p 86.5 p
Net cumulative dividends paid 16.3 p 15.3 p
Total return per share to Shareholders 99.6 p 101.8 p
since launch 1
Share price (mid-market price) 57.0 p 74.5 p
Total expense ratio 3.7% 3.8 %
1 Net asset value per share plus cumulative dividends paid per share. This
compares with an original investment cost of 60 pence per share after allowing
for income tax relief of 40 pence per share.
An interim dividend of 5.0 pence per share comprising 0.5 pence from income and
4.5 pence from capital was declared by the directors on 16 March 2010 to be
paid on 21 April 2010, thereby increasing net cumulative dividends paid since
launch to 21.3 pence per share (2008: 16.3 pence).
Chairman's Statement
I am pleased to present the annual results of Matrix Income & Growth VCT plc
for the year to 31 December 2009.
Overview
The economic downturn has brought challenging conditions for smaller companies
during 2009 and in spite of some small positive signs of recovery we expect
these conditions to continue well into 2010. The smaller company sector in
which your Company invests is still volatile and will continue to be affected
by this difficult trading environment. The Manager, supported by the Board, has
therefore adopted a cautious strategy in its approach to new investment,
deciding not to invest in over-priced or over-leveraged companies which have
all too frequently appeared on the market particularly in the first six months
of last year.
Encouragingly, there have been indications in the second half of 2009 of
improved deal flow and companies becoming available for sale at more realistic
prices. This might in part be due to a general belief that the worst of the
global banking industry crisis is now behind us which has restored confidence
to some extent. Two of the Company's acquisition vehicles made investments
totalling £1.7 million in December 2009 to support the management buy-outs of
Country Baskets and Iglu.com respectively. In addition, as reported in the
Half-Yearly Report, the Company made a new investment into Westway Cooling in
June 2009. Meanwhile the disposal proceeds from the sale of PastaKing and
repayment of loan stocks by DiGiCo Europe and Westway resulted in a £1.8
million repayment to the Company. In addition, £252,986 was returned to the
Company from the acquisition vehicle Barnfield Management Investments as a
result of the investment in Iglu.com. Therefore, the Company's total investment
in qualifying companies remained broadly the same for the second year running.
Of particular note was the successful disposal of the Company's investment in
PastaKing to NBGI Private Equity for net proceeds of £1,245,096. This
realisation contributed to total proceeds of £1,515,651 to the Company over the
life of the investment, representing a multiple of 3.27 of the Company's
original investment of £464,047.
Although the Company's qualifying portfolio has seen five of the valuations
reduced compared to last year in response to worsening trading conditions, the
majority of investee companies remain cash-generative. Full details of these
companies and the year's transactions are contained in the Investment Manager's
Review which follows below.
Your Company continued to meet the level of investment required by the VCT
regulations throughout the year under review to retain qualifying tax status
for shareholders and our strategy has been to maintain the Company's high cash
balances until sensibly priced investment opportunities of the right quality
begin to emerge. In the Board's view, this is the correct strategy to build
longer term value for Shareholders.
Merger with Matrix Income & Growth 3 VCT plc
The Board announced on 9 February 2010 that agreement in principle had been
reached for the merger of the Company with Matrix Income & Growth 3 VCT plc
("MIG3 VCT"). Discussions between the two companies have now concluded and
details of the proposals to be put to Shareholders will be circulated shortly.
The intention is that the proposed merger will be completed pursuant to a
section 110 scheme of reconstruction under the Insolvency Act 1986 by
transferring the assets and liabilities of MIG3 VCT to the Company in
consideration for new shares in the Company to be issued to MIG3 VCT
shareholders on a relative net asset value basis. The proposals will, if
effected, result in the creation of an enlarged company with net assets of over
£34 million and which is expected to deliver cost savings and strategic
benefits. An Extraordinary General Meeting ("EGM") will be held during May at
which the Board will seek Shareholder approval to effect the proposals and full
details of the EGM will be included in the Shareholder Circular.
Review of results
The net asset value ("NAV") per share at 31 December 2009 is 83.3 pence (2008:
86.5 pence), a fall over the year of 3.2 pence (3.7%). The total NAV return per
share, including dividends paid to date, is now 99.6 pence (2008: 101.8 pence),
a fall over the year of 2.2 pence (2.2%). This compares with the initial NAV
per share, net of initial costs, of 94.5 pence representing a positive total
return per share since inception of 5.4% (2008: 7.7%). Whilst it is
disappointing to report any reduction in shareholder value, it is encouraging
that the decline has been modest in the context of prevailing economic
conditions.
Far less encouraging has been the significant drop in income received by the
Company. Income from the Company's loan stock investments was running at an
aggregate annualised rate of 5.1% at 31 December 2009 (2008: 5.8%). The annual
running yield on the qualifying investment portfolio as a whole was 3.1% (2008:
3.6%), while the yield on all assets was 2.5% (2008: 3.4%). Revenue is still
suffering from a general decline in interest rates and those assets linked to
variable interest rates such as the Company's holdings in OEIC money-market
funds are continuing to yield considerably lower levels of income. In addition,
certain of the investee companies are not currently fully servicing the loans
that the Company has made to them. Together, these factors have and may
continue to reduce income dividends for the foreseeable future. For further
details explaining the fall in income, please see Note 2 to the accounts below.
Dividends
Although the revenue account generated a much reduced net return (after tax)
for the year of £8,797 (2008: £433,944), the successful realisation of the
investment in PastaKing generated a net profit of £1,051,604. Largely as a
result of this gain your Directors are pleased to declare a total dividend in
respect of 2009 of 5.0 pence per share (2008: 4.3 pence) comprising an interim
income dividend of 0.5 pence per share and an interim capital dividend of 4.5
pence per share. The Board do not propose to recommend a final dividend in
respect of the year just ended.
The interim income and capital dividend will be paid on 21 April 2010 to
Shareholders on the Register on 26 March 2010. Dividends paid since inception
will increase to 21.3 pence per share.
Investment in qualifying holdings
The Company has continued to meet the target set by HM Revenue & Customs of
investing 70% of total funds raised in qualifying unquoted and AiM quoted
companies ("the 70% test"). At 31 December 2009, the Company was 73% invested
in qualifying companies (based upon the tax values, which differ from the
Investment Portfolio Summary below).
Share buy-backs
The Company bought back 425,411 Ordinary Shares during the year under review at
an average price of 58.1 pence per share. These shares, representing 2.1% of
the issued share capital at the beginning of the year, were subsequently
cancelled by the Company. Purchases were made at discounts to the latest
published NAVs per share ranging between 30% and 32% compared with with a range
of 12% to 18% during 2008. This sharp increase in the discount at which the
Company was prepared to buy-back shares reflected the uncertain economic,
financial and market conditions prevailing at the time and very largely
explains the decline in the Company's share price from 74.5 pence per share to
57.0 pence per share during the period under review. On a more positive note,
these share purchases enhanced the Company's NAV by around 0.5 pence per share
during the year to the benefit of continuing Shareholders
The Board regularly reviews its share buy back policy, considering a number of
factors, including the Company's liquidity, and seeks to balance the interests
of both continuing and departing shareholders.
The Board
Christopher Moore has been approached to assume a position which, under the
provisions of the AIC Code and the revised Listing Rules shortly to come into
effect for VCTs, will mean that he will be required to stand down as a Director
of your Company. Christopher has made an outstanding contribution to the
development of the Company since its launch in 2004 both as a member of the
Board but particularly as Chairman of its Investment Committee. His knowledge
of the private equity market and his forthright and perceptive views will be
greatly missed. We thank him and wish him all the very best for the future.
Articles of Association
At the Annual General Meeting it is proposed to adopt new Articles of
Association. The amendments to the existing articles reflect the changes in
company law introduced by those elements of the Companies Act 2006 which came
into force on 1 October 2009.
Communication with shareholders
We aim to communicate regularly with our Shareholders. In addition to the
half-yearly and annual reports, an Investment Manager's Newsletter, approved by
the Board, is circulated twice-yearly. The May AGM will provide a useful
platform for the Board to meet Shareholders and exchange views. Your Board
welcomes your attendance at General Meetings to give you the opportunity to
meet your Directors and representatives of the Investment Manager.
Outlook
There are many conflicting opinions as to the state of the economy and
prospects for recovery both worldwide and in the UK although official
statistics are starting to indicate that we may be coming out of recession. We
have seen some signs of improved deal flow in the latter half of 2009 but it is
difficult to predict how permanent this trend will be and we do not believe
that the real economy is yet out of the woods. The effects of the downturn will
continue to impact the investments held by your Company over the coming year.
In the foreseeable future, the Company's ability to pay income dividends may be
adversely affected by the inability of certain investee companies to service
the Company's loans to them and the lower interest rate environment. Capital
dividends will continue to reflect the level of profitable exit opportunities
available in the market.
Overall, we consider that, the Company has performed relatively well in these
conditions and could have fared considerably less well if it was not for its
diversified portfolio of investee companies and the strong cash position that
we continue to maintain through this period of economic uncertainty. This will
ensure that the Company is able support existing investments, if necessary, and
take advantage of attractive new investment opportunities as they present
themselves. The Board, therefore, remains confident that the Company will
provide long term investors with an attractive combination of capital growth
and income.
Finally, I would like to express my thanks to all Shareholders for their
continuing support of the Company.
Keith Niven
Chairman
Responsibility Statement of the Directors in respect of the Annual Financial
Report
The Directors confirm that to the best of their knowledge that:
(a) the financial statements, prepared in accordance with UK Generally Accepted
Accounting Practiceand the 2009 Statement of Recommended Practice,
`Financial Statements of Investment Trust Companies and Venture Capital
Trusts' (SORP), give a true and fair view of the assets, liabilities,
financial position and the loss of the Company.
(b) the management report, comprising the Chairman's Statement, Investment
Portfolio Summary, Investment Manager's Review and Directors' Report includes a
fair review of the development and performance of the business and the position
of the Company, together with a description of the principal risks and
uncertainties that it faces.
On behalf of the Board
Keith Niven
Chairman
Principal risks, management and regulatory environment
The Board believes that the principal risks faced by the VCT are:
* Economic risk - events such as an economic recession and movement in
interest rates could affect trading conditions for smaller companies and
consequently the value of the VCT's qualifying investments.
* Loss of approval as a Venture Capital Trust - the VCT must comply with
Section 274 of the Income Tax Act 2007 which allows it to be exempted from
capital gains tax on investment gains. Any breach of these rules may lead
to the VCT losing its approval as a VCT, qualifying shareholders who have
not held their shares for the designated holding period having to repay the
income tax relief they obtained and future dividends paid by the VCT
becoming subject to tax. The VCT would also lose its exemption from
corporation tax on capital gains.
* Investment and strategic risk - inappropriate strategy or consistently weak
VCT qualifying investment recommendations might lead to under performance
and poor returns to shareholders.
* Regulatory risk - the VCT is required to comply with the Companies Acts,
the rules of the UK Listing Authority and United Kingdom Accounting
Standards. Breach of any of these might lead to suspension of the VCT's
Stock Exchange listing, financial penalties or a qualified audit report.
* Financial and operating risk- inadequate controls might lead to
misappropriation of assets. Inappropriate accounting policies might lead to
misreporting or beaches of regulations. Failure of the Investment Manager's
and Administrator's accounting systems or disruption to its business might
lead to an inability to provide accurate reporting and monitoring.
* Market risk - Investment in unquoted companies, by its nature, involves a
higher degree of risk than investment in companies traded on the London
Stock Exchange main market. In particular, smaller companies often have
limited product lines, markets or financial resources and may be dependent
for their management on a smaller number of key individuals.
* Asset liquidity risk - The VCT's investments may be difficult to realise
especially in the current economic climate.
* Market liquidity risk - Shareholders may find it difficult to sell their
shares at a price which is close to the net asset value.
* Credit/counterparty risk
A counterparty may fail to discharge an obligation or commitment that it has
entered into with the Company.
The Board seeks to mitigate the internal risks by setting policy and by
undertaking a key risk management review at each quarterly Board meeting.
Performance is regularly reviewed and assurances in respect of adequate
internal controls and key risks are sought and received from the Investment
Manager and Administrator on a six monthly basis. In the mitigation and
management of these risks, the Board applies rigorously the principles detailed
in the AIC Code of Corporate Governance. The Board also has a Share Buy Back
policy to try to mitigate the Market Liquidity risk. This policy is reviewed at
each quarterly Board Meeting.
Investment Policy
The VCT's policy is to invest primarily in a diverse portfolio of UK unquoted
companies. Investments are structured as part loan and part equity in order to
receive regular income and to generate capital gains from trade sales and
flotations of investee companies.
Investments are made selectively across a number of sectors, primarily in
management buyout transactions ("MBOs") i.e. to support incumbent management
teams in acquiring the business they manage but do not own. Investments are
primarily made in companies that are established and profitable.
Uninvested funds are held in cash and lower risk money market funds.
* UK Companies
The companies in which investments are made must have no more than £15 million
of gross assets at the time of investment to be classed as a VCT qualifying
holding.
* VCT regulation
The investment policy is designed to ensure that the VCT continues to qualify
and is approved as a VCT by HMRC. Amongst other conditions, the VCT may not
invest more than 15% of its investments in a single company and must have at
least 70% by value of its investments throughout the period in shares or
securities comprised in Qualifying Holdings, of which a minimum overall of 30%
by value must be ordinary shares which carry no preferential rights. In
addition, although the VCT can invest less than 30% of an investment in a
specific company in ordinary shares it must have at least 10% by value of its
total investments in each Qualifying Company in ordinary shares which carry no
preferential rights.
* Asset Mix
The VCT holds funds awaiting investment in a portfolio of readily realisable
interest-bearing investments and deposits. The investment portfolio of
qualifying investments will be maintained at approximately 80% of net assets.
* Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses across
different industry sectors. To reduce the risk of high exposure to equities,
each qualifying investment is structured using a significant proportion of loan
stock (up to 70% of the total investment in each VCT qualifying company.)
Initial investments in VCT qualifying companies are generally made in amounts
ranging from £200,000 to £1 million at cost. No holding in any one company will
represent more than 10% of the value of the VCT's investments at the time of
investment. Ongoing monitoring of each investment is carried out by the
Investment Manager generally through taking a seat on the Board of each VCT
qualifying company.
* Co-investment
The VCT aims to invest in larger more mature unquoted companies through
investing alongside four other Income and Growth VCTs advised by the Investment
Manager with a similar investment policy. This enables the VCT to participate
in combined investments by the Investment Manager of up to £5 million.
* Borrowing
The VCT has no current plans to undertake any borrowing.
* Management
The Board has overall responsibility for the Company's affairs including the
determination of its investment policy. Investment and divestment proposals are
originated, negotiated and recommended by the Investment Manager and are then
subject to formal approval by the Directors. Matrix Securities provides Company
Secretarial and Accountancy services to the VCT.
Investment Manager's Review
The continued economic deterioration in the UK and worldwide has made this a
challenging year for the Company and specifically for new investment. In the
first six months of the year, a large proportion of the new deals we looked at
seemed unattractive and we have frequently taken the view that vendors' price
expectations would prove unsustainable over the medium term.
Whilst there have been some encouraging signs that the rate of new deal
activity was starting to increase towards the end of 2009 it is still too early
to say whether this will be sustained. Some sellers have lowered their price
expectations in order to stimulate interest from buyers but it is premature to
see this as a clear trend. We therefore continue to be cautious and selective
in our consideration of potential new deals. We think this caution has been a
significant factor in maintaining value in the portfolio through a very
volatile period.
The predominance in the investment portfolio of management buy-out investments
reflects our strategy of seeking to capitalise companies properly at the time
of investment so that they are well positioned to contend with adverse market
conditions. Since commencing the investment programme five years ago, just one
investee company representing 1% of the portfolio value at cost has ceased
trading and the investment failed. Furthermore, it is notable that further
funding has been provided by the VCT to only two investments, Monsal and
British International, both of which have received very modest additional
funding during the year totalling £250,251 and each of these companies appears
to be financially sound and is showing profits at the operating level.
Given recent general comment on the tightening of bank lending, we do not
consider that the portfolio is exposed to unsustainable levels of third party
debt. We have generally not invested during this period of economic uncertainty
since the end of 2007 in companies which have required high levels of bank
borrowing, believing that the economy was still deteriorating and that this
would make over-leveraged companies much too vulnerable in a tougher
environment.
We have been working actively with the management teams of investee companies
encouraging them to take cost cutting measures and looking with them at
planning, forecasting and cost systems, where appropriate, to ensure that they
are as resilient as possible in the current market. The majority of investee
companies have managed their cashflow well and remain cash-generative.
The portfolio
As at 31 December 2009, the portfolio comprised eighteen (2008: eighteen)
investments with a cost of £14.1 (2008: 14.7) million and valued at £11.8
(2008: 13.6) million representing 83.7% (2008: 92.5%) of cost. Three of these
investments are currently held at cost, ten are valued at below cost and five
above cost. Realisations during the year generated cash proceeds of £1.75
million.
As reported in the Half-Yearly Report, MIG VCT made a new investment in June
2009 of £317,583 to support the MBO of Westway Cooling, a company specialising
in the installation, servicing and maintenance of high quality air-conditioning
systems and associated building plant. With a turnover of £9.6 million and a
record order book, we believe that this company is well placed to grow.
Two further new investments were made in December 2009. The first of these was
an investment of £1 million, using the acquisition vehicle Calisamo Management
(now re-named CB Imports Group), to support the management buy-out of Country
Baskets. The investment comprises loan stock of £825,000 and a 6% equity stake.
Founded in 1990 and operating from a national distribution centre in Leeds, the
company has a turnover of circa £20 million. It is a leading importer and
distributor of artificial flowers, floral sundries, glassware, giftware, basket
ware and Christmas decorations. The company is planning to roll out further
outlets across the UK as part of a new growth phase funded by this investment.
The second new investment was into Iglu.com Holidays, the UK's largest online
specialist ski holiday operator and fastest growing cruise holiday travel
agent. MIG VCT invested £747,014 comprising loan stock of £633,224 and an
equity stake of 7%. Based in Wimbledon, Iglu.com is a profitable and cash
generative business with a strong management team that has a successful track
record of building a profitable niche business. The investment was made through
the acquisition vehicle Barnfield Management Investments.
As evidence that high quality investments remain in demand, MIG VCT
successfully sold its investment in PastaKing, to NBGI Private Equity in
November 2009 for net proceeds of £1,245,096. This realisation contributed to
total proceeds of £1,515,651 to the Company over the life of the investment,
representing a 3.27x return on the Company's original investment of £464,047.
PastaKing has benefited from healthy eating trends since investment in 2006 and
at the time of the sale had grown to a staff of 71 and an annual turnover of £
12 million.
Some of the companies in the portfolio continue to be strongly cash generative
and amongst these Westway repaid £38,922 of loan stock considerably earlier
than expected in October 2009; and DiGiCo Europe repaid a total of £434,782 in
two instalments in May and December of 2009 plus a premium of £32,378.
The Company's acquisition vehicles that we have established in conjunction with
our Operating Partners have been active during 2009, with Barnfield Management
Investments and Calisamo Management making new investments into Iglu.com and
Country Baskets respectively. Aust Construction Investors has commenced
trading, providing management consultancy services whilst continuing to seek
suitable investment opportunities.
The qualifying investment portfolio has not been immune to the wider
deteriorating trading environment and fair values have fallen in those
investments where the investee company's trading has been affected. A number of
valuations have been reduced as a result of lower levels of profitability of
portfolio companies. However, other investments have continued to trade well.
We are hopeful that value will start to return to some of the investments in
the portfolio during 2010 as trading conditions start to improve.
The Company's investments in PXP, Youngman Group and Plastic Surgeon each have
exposure to the house building and construction markets and all have continued
to suffer from the decline of this sector over the last two years. These
companies have seen business volumes shrink significantly and reduced demand
from major customers has impacted revenue. Youngman, having substantially
de-geared since investment, is well positioned to benefit from an upturn in its
markets. Plastic Surgeon has made strong progress in reducing its dependence on
the new housing market and has diversified into the commercial property and
insurance claim markets. It has also substantially reduced its direct and
indirect cost base. PXP has responded similarly, moving away from its
dependence on private sector house building towards public sector funded
housing associations. It is still too early to assess when we are likely to see
signs of recovery in these areas.
Blaze Signs, which has suffered the largest write-down in the portfolio, has
also continued to experience a fall in activity arising from much reduced
levels of new signage rollouts from its major customers. Again it has responded
by reducing its cost base.
A number of companies in the portfolio are trading strongly and expanding their
businesses. DiGiCo Europe has continued to roll out new products following the
successful launch of its new digital audio mixing desk last year and this has
led to sustained profit growth since investment. The performance of Monsal
during the year has also improved materially and the outlook is further
enhanced by the prospect of new capital contracts as water companies commit to
new waste management projects and the company exploits its expertise in
anaerobic digestion. ATG Media has performed in line with expectations over
last year and the progress of its online auction platform looks particularly
promising.
SectorGuard acquired Legion Group in March 2009 following the acquisition of
Manguard in 2008 and subsequently changed its name to Legion Group plc.
Whilst the fall in valuations over the year is disappointing, the reduction in
profitability of portfolio companies has made some decreases inevitable. It is
important to recognise that all of the reduction in the year has been in
unrealised valuations as opposed to any actual realisations below cost. The
realised loss shown in the Income Statement in the accounts reflects the fall
in the valuation of PastaKing from its valuation last year before its disposal,
which as reported earlier was a successful investment overall. We aim to invest
in strong, profitable companies and believe that the prospect of significant
future recovery over the medium term is good as we continue to believe that the
portfolio, taken as a whole, is resilient and of high quality.
Over the next year, the need for additional investment to support certain
portfolio companies may emerge. We also anticipate much more attractive buying
conditions emerging as the year progresses. Having retained significant
uninvested cash, we feel the Company is well placed to cover both the portfolio
needs that may arise and the new investment opportunities presented.
Investment Portfolio Summary
as at 31 December 2009
Date of Total book Valuation % value of % of
initial cost net assets equity
investment held by
funds
managed
by MPEP*
£'000 £'000
Qualifying investments
AIM quoted investments
Legion Group plc (formerly Aug-05 150 75 0.4% 2.9%
SectorGuard plc)
Provider of manned guarding,
mobile patrolling, and alarm
response services
---------- ----------- ----------
Total AIM quoted investments 150 75 0.4%
Unquoted investments
DiGiCo Europe Limited Jul-07 565 1,582 9.3% 30.0%
Manufacturer of digital
sound mixing consoles
VSI Limited Apr-06 390 1,305 7.7% 48.9%
Provider of software for CAD
and CAM vendors
British International May-06 1,182 1,015 6.0% 34.9%
Holdings Limited
Helicopter service operator
Aust Construction Investors Oct-07 1,000 1,000 5.9% 49.0%
Limited
Company seeking to acquire
businesses in the
construction sector
CB Imports Group Limited Dec-07 1,000 1,000 5.9% 24.0%
(formerly Calisamo
Management Limited)
Importer and distributor of
artificial flowers and
floral sundries.
Vectair Holdings Limited Jan-06 560 964 5.7% 24.0%
Designer and distributor of
washroom products
ATG Media Holdings Limited Oct-08 860 788 4.6% 40.0%
Publisher and on-line
platform operator
Iglu.com Holidays Limited Oct-07 747 747 4.4% 35.0%
(formerly Barnfield
Management Investments
Limited)
On-line ski and cruise
travel agent
Focus Pharma Holdings Oct-07 657 725 4.3% 13.0%
Limited
Licensor and distributer of
generic pharmaceuticals
Youngman Group Limited Oct-05 1,000 701 4.1% 29.7%
Manufacturer of ladders and
access towers
Monsal Holdings Limited Dec-07 684 665 3.9% 46.5%
Supplier of engineering
services to water and waste
sectors
MC440 Limited (Westway Jun-09 279 466 2.7% 13.0%
Cooling)
Designer and distributor of
air conditioning units.
Blaze Signs Holdings Limited Apr-06 1,574 337 2.0% 52.5%
Manufacturer and installer
of signs
Campden Media Limited Jan-06 975 182 1.1% 28.0%
Magazine publisher and
conference organiser
Racoon International Dec-06 874 130 0.8% 49.0%
Holdings Limited
Supplier of hair extensions,
hair care products and
training
The Plastic Surgeon Holdings Apr-08 390 98 0.6% 30.0%
Limited
Supplier of snagging and
finishing services to the
domestic and commercial
property markets
PXP Holdings Limited Dec-06 1,164 - 0.0% 37.3%
(Pinewood Structures)
Designer, manufacturer and ---------- ----------- ----------
supplier of timber-frames
for buildings
Total unquoted investments 13,901 11,705 69.0%
---------- ------------ ----------
Total qualifying investments 14,051 11,780 69.4%
---------- ------------ ----------
Non-qualifying investments
Global Treasury Funds plc 1,863 1,863 11.0%
(Royal Bank of Scotland)**
Fidelity Institutional Cash 1,251 1,251 7.4%
Fund plc**
SWIP Global Liquidity Fund 568 568 3.3%
plc (Scottish Widows)**
Institutional Cash Series 517 517 3.0%
plc (BlackRock)**
GS Funds plc (Goldman Sachs) 425 425 2.5%
**
Insight Liquidity Funds plc 415 415 2.4%
(HBOS)**
Blackrock Sterling Liquidity 138 138 0.8%
first institutional share
class (formerly BGI)**
-------- ------------ ----------
Total non-qualifying 5,177 5,177 30.4%
investments
-------- ------------ ----------
-------- ------------ ----------
Total investments 19,228 16,957 99.8%
-------- ------------ ----------
Other assets 140 0.8%
Current liabilities (118) (0.6)%
------------ ----------
Net assets 16,979 100.0%
------------ ---------
* The other funds managed by MPEP include Matrix Income & Growth 2 VCT plc,
Matrix Income & Growth 3 VCT plc, Matrix Income & Growth 4 VCT plc and The
Income & Growth VCT plc.
** Disclosed as Investments at fair value within Current assets in the Balance
Sheet.
Income Statement
for the year ended 31 December 2009
Year ended 31 December 2009 Year ended 31 December 2008
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Realised - (177,845) (177,845) - 86,979 86,979
(losses)/gains
on investments
Unrealised - (161,173) (161,173) - (4,848,208) (4,848,208)
losses on
investments -
Income 399,661 - 399,661 973,787 179,725 1,153,512
Recoverable VAT 1,939 5,818 7,757 35,893 107,680 143,573
Investment (79,923) (239,769) (319,692) (88,810) (266,428) (355,238)
manager's fees
Other expenses (312,239) - (312,239) (336,510) - (336,510)
------------ ------------ ------------
Profit/(loss) on 9,438 (572,969) (563,531) 584,360 (4,740,252) (4,155,892)
ordinary
activities
before taxation
Tax on ordinary (641) - (641) (150,416) 42,319 (108,097)
activities
------------ ------------ ------------
Profit/(loss) 8,797 (572,969) (564,172) 433,944 (4,697,933) (4,263,989)
for the year
------------ ------------ ------------
Basic and 0.04p (2.77)p (2.73)p 2.02p (21.91) p (19.89) p
diluted earnings
per ordinary
share
All the items in the above statement derive from continuing operations. There
were no other recognised ains or losses in the year. The total column is the
profit and loss account of the Company. Other than revaluation movements
arising on investments held at fair value through the profit and loss account,
there were no differences between the return as stated above and at historical
cost.
Balance Sheet
as at 31 December 2009
31 December 2009 31 December 2008
£ £
Fixed assets
Investments at fair value 11,779,583 13,556,878
Current assets
Debtors and prepayments 94,327 372,816
Current investments 5,177,570 4,375,724
Cash at bank 46,253 71,812
------------------------ ------------------------
5,318,150 4,820,352
Creditors: amounts falling due (118,363) (378,668)
within one year
------------------------ ------------------------
Net current assets 5,199,787 4,441,684
------------------------ ------------------------
Net assets 16,979,370 17,998,562
------------------------ ------------------------
Capital and reserves
Called up share capital 203,735 207,989
Capital redemption reserve 17,703 13,449
Revaluation reserve (2,271,608) (1,117,216)
Special distributable reserve 17,907,374 18,388,358
Profit and loss account 1,122,166 505,982
------------------------ ------------------------
Equity shareholders' funds 16,979,370 17,998,562
------------------------ ------------------------
Net asset value per ordinary 83.34p 86.54p
share
Reconciliation of Movements in Shareholders' Funds
for the year ended 31 December 2009
Year ended 31 December Year ended31 December 200
2009 8
£ £
As at 1 January 2008 17,998,562 25,727,915
Purchase of own shares (247,033) (1,056,868)
Loss for the year (564,172) (4,263,989)
Dividends paid in year (207,987) (2,408,496)
------------------------ ------------------------
Closing shareholders' 16,979,370 17,998,562
funds
Cash Flow Statement
for the year ended 31 December 2009
Year ended Year ended
31 December 2009 31 December 2008
£ £ £ £
Operating activities
Investment income received 398,184 1,226,543
VAT received and interest 223,249 -
thereon
Investment management fees (239,743) (498,733)
paid
Other cash payments (357,430) (345,255)
-------------- -------------- -------------- --------------
Net cash inflow from 24,260 382,555
operating activities
Investing activities
Acquisitions of investments (567,834) (1,554,680)
Disposals of investments 1,996,610 1,234,678
-------------- -------------- -------------- --------------
Net cash inflow/(outflow)from 1,428,776 (320,002)
investing activities
Taxation
Taxation paid (106,857) (63,695)
Equity dividends
Payment of dividends (207,987) (2,408,496)
-------------- --------------
Cash inflow/(outflow)before 1,138,192 (2,409,638)
liquid resource managementand
financing
Management of liquid
resources
(Decrease)/increase in (801,846) 3,371,884
current investments
Financing
Purchase of own shares (361,905) (941,996)
-------------- --------------
(Decrease)/increase in cash (25,559) 20,250
for the year
--------------
Notes
1. Basis of accounting
This announcement of the annual results of the Company for the year ended 31
December 2009 has been prepared using accounting policies consistent with those
adopted in the full audited annual accounts which have been prepared under UK
Generally Accepted Accounting Practice (UK GAAP) and the Statement of
Recommended Practice, `Financial Statements of Investment Trust Companies
and Venture Capital Trusts' ("SORP") issued by the Association of Investment
Companies in January 2009.
2. Income
2009 2008
£ £
Income from bank deposits 919 5,317
------------------ ------------------
Income from investments
- from equities 26,345 209,009
- from overseas based OEICs 37,254 331,739
- from loan stock 315,598 607,447
- from VAT recoverable 15,492 -
------------------ ------------------
394,689 1,148,195
Other income 4,053 -
------------------ ------------------
Total income 399,661 1,153,512
------------------ ------------------
Total income comprises
Dividends 63,599 540,748
Interest 332,009 612,764
Other income 4,053 -
399,661 1,153,512
Income from investments comprises
Listed overseas securities 37,254 331,739
Unlisted UK securities 26,345 209,009
Loan stock interest 315,598 607,447
------------------ ------------------
379,197 1,148,195
------------------ ------------------
Loan stock interest above is stated after deducting an amount of £nil (2008: £
14,320), being a provision made against loan stock interest regarded as
collectable in previous years.
Total loan stock interest due but not recognised in the year was £451,904
(2008: £223,603). This increase was the main cause of the fall in loan stock
interest from last year. Dividends from equities have fallen from last year's
level, which contained several capital dividends that were not repeated this
year. The fall in income from overseas based OEICs, being the money-market
funds, reflected the fall in interest rates to exceptionally low levels.
3. Recoverable VAT
Revenue Capital Total Revenue Capital Total
2009 2009 2009 2008 2008 2008
£ £ £ £ £ £
VAT recoverable 1,939 5,818 7,757 35,893 107,680 143,573
As at 31 December 2008 the Directors considered it reasonably certain that the
Company would obtain a repayment of VAT of not less than £200,000. Last year's
accounts recognised this amount as income of £143,573 above, and £56,427
deducted from last year's investment manager's fees. This estimate was based
upon information supplied by the Company's Investment Manager, and discussions
with the Company's professional advisors as a result of the European Court of
Justice ruling and subsequent HMRC briefing that management fees be exempt for
VAT purposes. During the year, a total of £207,757 of VAT recoverable has been
received. The excess of £7,757 over the £200,000 recognised in 2008's accounts
has been credited to the Income Statement, allocated 25% to revenue and 75% to
capital return and is in the same proportion as that in which the irrecoverable
VAT was originally charged.
The £207,757 of income recognised in both the 2008 and current year accounts,
together with related interest of £15,492 shown in note 2 above, equals the sum
of £223,249 shown in the cash flow statement as part of cash flow from
operating activities.
4. Basic and diluted net asset value per share
Net asset value per Ordinary share is based on net assets at the end of the
year, and on 20,373,514 (2008: 20,798,925) Ordinary Shares, being the number of
Ordinary Shares in issue on that date.
5. Return per Ordinary Share
2009 2008
£ £
Total earnings after taxation: ( 564,172) ( 4,263,989)
Basic and diluted earnings per share (note a) (2.73)p (19.89)p
Revenue profit from ordinary activities after 8,797 433,944
taxation
Basic and diluted revenue earnings per share 0.04p 2.02p
(note b)
Net realised capital (losses)/gains on ( 177,845) 86,979
investments
Net unrealised capital losses on investments ( 161,173) ( 4,848,208)
Recoverable VAT 5,818 107,680
Dividends received treated as capital - 179,725
Capital management fees less taxation ( 239,769) ( 224,109)
------------------ ------------------
Total capital earnings ( 572,969) ( 4,697,933)
Basic and diluted capital earnings per share (2.77)p (21.91)p
(note c)
Weighted average number of shares in issue in 20,648,175 21,443,415
the year
Notes
a) Basic earnings per share is total earnings after taxation divided by the
weighted average number of shares in issue.
b) Revenue earnings per share is the revenue profit after taxation divided by
the weighted average number of shares in issue.
c) Capital earnings per share is the total capital loss after taxation divided
by the weighted average number of shares in issue.
d) There are no instruments that will increase the number of shares in issue in
future. Accordingly, the above figures currently represent both basic and
diluted earnings per share.
6. Investment Manager's Fees
In accordance with the policy statement published under "Management, Expenses
and Administration" in the Company's Prospectus dated 9 July 2004, the
Directors have charged 75% of the investment management expenses to the
realised capital reserve.
7. Dividends paid and payable
The directors have declared an interim dividend in respect of the year ended 31
December 2009 of 5.0 pence per share comprising 4.5 pence from capital and 0.5
pence from income. The dividend will be paid on 21 April 2010 to shareholders
on the Register on 26 March 2010.
8. Related party transactions
Bridget Guérin was until 22 December 2009 a director and remains a shareholder
(2.0%) of Matrix Group Limited, which owns 100% of the equity of MPE Partners
Limited. MPE Partners Limited has a 50% interest in Matrix Private Equity
Partners LLP ("MPEP"), the Company's Investment Manager. £nil (2008: £12,481)
was payable to the Investment Manager at the year-end, while £26,293 (2008: £
99,550) is recoverable from the Investment Manager in respect of the expense
cap for the year. Bridget Guérin was also until 22 December 2009 a director of
Matrix-Securities Limited, a wholly-owned subsidiary of Matrix Group Limited,
who provided Company Secretarial and Accountancy Services to the Company under
agreements dated 9 July 2004. The agreements with MPEP and with
Matrix-Securities Limited became effective from 5 October 2004. £21,861 was due
to Matrix-Securities Limited at the end of the year (2008: £21,119).
Matrix Group Limited also holds a significant interest in Matrix Corporate
Capital LLP ("MCC"). Four share buybacks were undertaken by MCC on the
Company's instruction, costing £247,033. Fees of £9,161 were paid to MCC during
the year.
9. Post balance sheet events
The Directors announced on 9 February 2009 that the Board had reached agreement
in principle with the board of Matrix Income & Growth 3 VCT plc ("MIG3 VCT") to
merge the two Companies, subject to approval by Shareholders. The intention is
that the proposed merger will be completed pursuant to a section 110 scheme of
reconstruction under the Insolvency Act 1986 by transferring the assets and
liabilities of MIG3 VCT to the Company in consideration for new shares in the
Company to be issued to MIG3 VCT shareholders on a relative net asset value
basis. The Company estimates that it will share merger costs, estimated to
total approximately £250,000, with MIG3 VCT.
The Directors are in the process of finalising formal proposals for the merger
which should be circulated to Shareholders shortly.
10. Financial Information
The financial information set out in these statements does not constitute the
Company's statutory accounts for the year ended 31 December 2009 in terms of
section 434 of the Companies Act 2006 but is derived from those accounts.
Statutory accounts for the year ended 31 December 2009 will be delivered to
Companies House following the Company's Annual General Meeting. The auditors
have reported on those accounts: their report was unqualified and did not
contain a statement under Section 498 of the Companies Act 2006.
11.Annual Report
The Annual Report for the year ended 31 December 2009 will shortly be made
available on the Company's website: www.migvct.co.uk. and Shareholders will be
notified of this by email or post or sent a hard copy in the post in accordance
with their instructions. Copies will be available thereafter to members of the
public from the Company's registered office.
12.Annual General Meeting
The Annual General Meeting will be held at 11.00 am on Wednesday, 12 May 2009
at the offices of Matrix Group Limited, One Vine Street, London W1J 0AH.
Contact details for further enquiries:
Sarah Penfold of Matrix-Securities Limited (the Company Secretary) on 020 3206
7000 or by e-mail to mig@matrixgroup.co.uk
Mark Wignall or Mike Walker at Matrix Private Equity Partners LLP (the
Investment Manager), on 020 3206 7000 or by e-mail to info@matrixpep.co.uk.
Latest directors dealings
- 1 day ago The Renewables Infrastructure Group Limited
- 1 day ago The Renewables Infrastructure Group Limited
- 1 day ago Smurfit Westrock (DI)
- 1 day ago Menhaden Resource Efficiency
- 1 day ago BP