Half-yearly Report
Matrix Income & Growth VCT plc ("the Company")
Half-yearly results for the six months ended 30 June 2009
Investment Objective
Matrix Income & Growth VCT plc ("MIG VCT" or the "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" or "the Investment
Manager").
The Company's objective is to provide investors with a regular income stream,
by way of tax free dividends, and to generate capital growth through portfolio
realisations, which can be distributed by way of additional tax free dividends.
Financial Highlights
Half-yearly results for the six months ended 30 June 2009
Initial net asset value (NAV) per share 94.5 p
Initial net assets £20,933,124
30 June 2009 30 June 2008 31 December 2008
Net assets £16,716,851 £21,381,357 £17,998,562
Net asset value (NAV) per 81.1 p 100.0 p 86.5 p
share
Net cumulative dividends paid* 16.3 p 12.0 p 15.3 p
Total return per share to 97.4 p 112.0 p 101.8 p
shareholders since launch
(NAV basis)**
Share price (mid-market 60.0 p 89.5 p 74.5 p
price)
* For a breakdown of recent dividends paid, please see Note 8 of the Notes to
the Unaudited Financial Statements below.
** Net asset value per share plus cumulative dividends 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.
Chairman's Statement
I am pleased to present this Half-Yearly Report covering the six month period
ended 30 June 2009.
Results and dividend
The continuing difficulties in the UK and world economies have remained over
the six month period covered by this report and your Company has not been
immune from their impact. The recession is affecting many of the companies in
the portfolio, particularly those exposed to the support services and
construction and materials sectors. However, the well-diversified nature of the
portfolio, including its underlying cash position, has helped to limit the
impact of this generally poor background on the value of the Company's
investments. Overall the total return to shareholders, based on NAV plus
dividends paid , declined by 4.3% in the period from 101.8 pence per share to
97.4 pence per share
Very disappointingly, in contrast to this relatively modest decline in total
return performance, income from the Company's investments has come under
considerable pressure. The revenue account generated a net return (after tax)
for the period of £26,214 (2008: £331,785). This significant fall in revenue
has been as a result of a substantial fall in the loan stock interest received
from investee companies and a significant decline in interest received from
money market funds which reflects the fall in interest rates from an average of
5.6% in the same period last year to 0.5% this year. Given this position the
Board will not be declaring an interim dividend.
Net asset value (NAV)
The NAV at 30 June 2009 was 81.1 pence per share compared with a NAV of 86.5
pence per share at the beginning of the period (after dividends). This
represents a fall of 6.2%.
Investment portfolio
MPEP has continued to pursue a very selective approach to investing in new
businesses. Investment activity has generally been quieter than in previous
periods, the reasons for which are explained in the Investment Manager's
Review. In June 2009, the Company participated in the management buy-out of
Westway Cooling, a company that specialises in the installation and servicing
of air conditioning systems. In January, we also made one small follow-on
investment into Monsal Holdings.
For further information on the investment portfolio please see the Investment
Manager's Review below.
Liquidity
The Company was holding £4 million in cash and liquidity fund balances as at 30
June 2009 in addition to the £3 million invested in the Operating Partner
acquisition vehicles. It is therefore well positioned both to make follow-on
investments to support the existing portfolio through this period of economic
uncertainty and take advantage of more favourable opportunities for new
investment that the Investment Manager believes will emerge in 2010.
The Board has been very conscious of the need to spread risk in the current
environment and is therefore continuing to hold the Company's cash deposits
across a range of leading money market funds.
Investment in qualifying holdings
The Company is required to meet the target set by HM Revenue & Customs of
investing 70% of the funds raised in qualifying unquoted and AiM quoted
companies, which it has achieved throughout the period. The Company was 80.78%
invested in qualifying companies (based on VCT cost as defined in tax
legislation which differs from actual cost given in the Investment Portfolio
Summary on page 9) at the period-end, with the balance of the portfolio
invested in a selection of readily realisable, money market funds with AAA
credit ratings.
Share buy-backs
During the six months to 30 June 2009, the Company bought back 174,873 of the
Company's own shares at an average price, excluding costs, of 60.06 pence per
share, which represented a discount of 30% to the published NAV at the time of
the buy-back adjusted for dividends payable.
These shares, representing 0.84% of the issued share capital at the beginning
of the period, were subsequently cancelled by the Company. The Board regularly
reviews its share buy-back policy.
VAT on management fees
As reported in the Annual Report for the year ended 31 December 2008 the
Company is no longer liable to pay VAT on investment management fees. The
Manager has been able to reclaim VAT previously paid on fees and the Company
has received a refund of £207,757, plus interest of £15,492 in the period.
These accounts recognise this interest together with £7,757 being the
additional VAT recovered to date, not anticipated as a debtor at 31 December
2008.
The Board is continuing to seek to recover additional amounts of VAT paid by
the Company together with compensation for loss of interest.
Communicating with shareholders
The Company maintains a programme of regular communication with Shareholders
through newsletters and a dedicated website www.migvct.co.uk, supplementing the
Half-Yearly and Annual Reports. The Board welcomes the opportunity to meet
Shareholders at the Company's General Meetings during which representatives of
the Investment Manager are present to discuss the progress of the portfolio.
The next AGM of the Company will be held in May 2010.
Outlook
Notwithstanding the very poor economic background, portfolio companies as a
whole are trading reasonably well. Almost all of the investee companies are
still forecast to be profitable before taking into account interest and
goodwill amortisation and several companies are showing real potential for
future development when the economy ultimately recovers. The decrease in NAV
arises from unrealised valuation movements rather than from realised losses and
the Board remains confident that the total return to shareholders should
recover as and when economic and financial conditions allow, although income
generation will remain under pressure for the foreseeable future
The Manager also expects that by 2010 business owners will return to the market
to raise risk capital or to sell their companies. This should provide sound
investment opportunities for cash rich investors and investment companies. The
substantial liquid resources held by the Company should ensure that the Manager
has the means to invest at attractive valuations as these arise.
Finally, I would like to thank all of our Shareholders for their continuing
support.
On behalf of the Board
Keith Niven, Chairman
31 July 2009
Directors' Responsibility Statement
The Directors confirm that to the best of their knowledge:
a. the condensed set of financial statements, which have been prepared in
accordance with UK Generally Accepted Accounting Practice (UK GAAP) and the
2009 Statement of Recommended Practice "Financial Statements of Investment
Trust Companies and Venture Capital Trusts", give a true and fair view of
the assets, liabilities, financial position and loss of the Company, as
required by DTR 4.2.4; and
b. the interim management report included within the Chairman's Statement and
Investment Manager's Review includes a fair review of the information
required by DTR 4.2.7 and in accordance with DTR 4.2.10.
Related Party Transactions
Details of related party transactions in accordance with DTR 4.2.8 can be found
in Note 13 to the Notes to the Unaudited Financial Statements below.
Principal risks and uncertainties
In accordance with DTR 4.2.7, the Board confirms that the principal risks and
uncertainties facing the Company have not materially changed since the
publication of the Annual Report and Accounts for the year ended 31 December
2008. The Board acknowledges that there is regulatory risk and continues to
manage the Company's affairs in such a manner as to comply with section 274
Income Tax Act 2007. Other risks relate to credit risk, market price risk,
liquidity risk, interest rate risk and currency risk. A more detailed
explanation of these can be found in Note 20 on pages 45 - 49 of the 2008
Annual Report, copies of which are available on the VCT's website,
www.migvct.co.uk.
Cautionary Statement
This Report may contain forward looking statements with regards to the
financial condition and results of the Company which are made in the light of
current economic and business circumstances. Nothing in this announcement
should be construed as a profit forecast.
On behalf of the Board
Keith Niven, Chairman
31 July 2009
Investment Manager's Review
Overview
We have continued to adopt a cautious approach to new investment and believe
that this remains the best path to take in the current market whilst vendors'
price expectations appear to us to be generally too high. The low level of
market activity which has persisted throughout the period is producing only
limited opportunities for deals where willing vendors are selling to strategic
buyers.
Investment portfolio
During the period, one new investment of £317,583 was completed to support the
MBO of Westway Cooling in June 2009. Based in Greenford, Middlesex, Westway has
been specialising in installing, servicing and maintaining high quality
air-conditioning systems and associated building services plant in the
refurbishment and maintenance market since 2001. With a turnover of £10 million
and a record order book, the company is well placed to grow, even in
challenging market conditions.
To date the investment portfolio has required very little additional funding
despite the worsening economic environment. One follow-on investment was
completed in January 2009 into Monsal Holdings of £68,433 to provide working
capital and headroom. The company is now doing well following a difficult year
in 2008. It has recently won a number of major contracts and is establishing a
reputation for its expertise in anaerobic technology.
At 30 June 2009, the portfolio comprised investments in nineteen companies at a
total current cost of £14.8 million and valued in accordance with International
Private Equity and Venture Capital Valuation (IPEVCV) Guidelines at £12.8
million. After adjusting for new investment and repayments during the period,
this now represents 86.4% of cost compared to 92.4% of cost at 31 December
2008. This further reduction reflects both the tightening trading conditions
being experienced by portfolio companies and falls in some of the PE ratios of
quoted companies by reference to which the Company's investments are valued.
Appropriate provisions have been made against the relevant investments to
reflect this.
£3 million of the investment cost is held in cash in the three acquisition
companies in the Operating Partner Programme. These companies, Aust
Construction Investors, Barnfield Management Investments and Calisamo
Management are respectively actively seeking to acquire investments in the
construction, food manufacturing and healthcare and wellbeing sectors but so
far have not found investment transactions at the right price.
Due to banking covenant breaches, six companies are not currently servicing
their VCT loan stock as at 30 June 2009; these represent just below 50% of the
portfolio of loan stock investments at cost.
With the exception of Plastic Surgeon, which is forecasting a modest loss, we
expect all of the companies in the portfolio to deliver operating profits (ie
prior to goodwill amortisation and servicing debt) in their current financial
year. The profitability of Plastic Surgeon, Youngman and PXP has been
particularly affected by their direct exposure to the downturn in the
construction and house-building sector.
Pressure on capital and maintenance expenditure in the UK retail sector has
also significantly affected Blaze Signs, although there is guarded optimism
that its clients are now beginning to invest again in signage. PastaKing and
Vectair continue to make good levels of profits which could be enhanced if
sterling were to strengthen against the euro, reducing the prices of their
ingredients and raw materials. Although the advertising revenue of ATG Media
has fallen, it remains on forecast to meet its budgeted profits due to the
higher than expected revenue arising from its on-line auction software. Campden
Media has also been affected by the reduction in advertising revenue but
remains profitable. British International reported reduced profits due to a
combination of poor operating conditions on the Penzance-Isles of Scilly route
and unscheduled maintenance costs.
DiGiCo continues to trade strongly, is well ahead of budget and is improving on
its performance to date. It has also repaid £217,391 of its loan stock in May
2009, earlier than anticipated. VSI is making steady progress after a year of
record profits in 2008.
SectorGuard has substantially re-organised its management and operations since
its acquisition of Manguard in March 2008 and has made further significant
acquisitions including the addition of Legion Group which has prompted a change
of name to Legion Group plc at the end of June. As a result of these changes,
brokers are now forecasting an improvement in profits.
Focus Pharma enjoyed solid progress in 2008 and has begun the current year
well. Racoon is finding trading conditions difficult but remains profitable,
before interest and goodwill amortisation.
Over the past months we have been working even more closely with management of
a number of companies in the portfolio which have been most affected by a more
challenging trading environment. Significant redundancies and other cost
savings have been implemented in recent months as businesses seek to reduce
their breakeven levels. The need for further cost reductions is kept under
continuous review.
In summary, the portfolio is being affected by the wider environment in terms
of a slow down in trading resulting in a number of reduced valuations. However,
the relatively modest reduction in overall value continues to provide
encouragement. It is important to note that the reduction arises from reduced
valuations rather than any realised investment losses and we remain confident
that values will therefore recover in the future.
Outlook for new investments
The financial performance of many smaller companies has, as yet, been better
than many commentators had forecast and owners are generally preferring to
trade through challenging conditions rather than sell their businesses or raise
capital at what they perceive to be a low point in the business cycle. Many
companies' revenue lines have benefitted from relative strength in consumer
expenditure due to low interest rates and therefore low mortgage costs.
Favourable exchange rates, particularly sterling's weakness against the euro,
are providing a degree of stimulus to certain UK business sectors, notably
tourism.
We believe that in seeking to help small companies through measures such as
reducing VAT and intervening through support from the state-owned banks, the
Government may turn out to be simply deferring future corporate failures. The
worst effects of recession do not yet appear to have significantly filtered
through to the real economy. However, the two main factors that could change
this picture are future cuts in unsustainable levels of public sector
expenditure and rising unemployment which could feed through to reduced
domestic retail demand. Many more companies will need to take action to cut
their cost base and in some cases the available padding has already been cut
away. As a consequence of this analysis we do not expect to complete many
investments in 2009. However, we believe that during 2010, business owners will
become much clearer as to their position and future prospects. They will then
be far better informed as to their need for capital or an outright sale and the
terms on which such a transaction can be completed. We therefore expect many
more vendors to come forward. The Company is a well-positioned buyer with
strong cash reserves and this should enable us to acquire good businesses, at
attractive valuations.
We are also mindful that there are an increasing number of distressed
competitors to many of our portfolio companies and these may represent good
acquisition opportunities for some investee companies. We continue to review
these opportunities with investee company management teams.
Matrix Private Equity Partners LLP
31 July 2009
Investment Portfolio Summary
as at 30 June 2009
Date of Total Valuation % value
of
initial book net
investment cost assets
£'000 £'000
Qualifying investments
AiM quoted investments
Legion Group plc (formerly SectorGuard Aug-05 150 54 0.32%
plc)
Provider of manned guarding, mobile
patrolling, and alarm response services
------ ------ ------
150 54 0.32%
Unquoted investments
DiGiCo Europe Limited Jul-07 783 1,564 9.36%
Designer and manufacturer of audio mixing
desks
VSI Limited Apr-06 390 1,273 7.62%
Developer and marketer of 3D software
PastaKing Holdings Limited Jun-06 464 1,238 7.41%
Supplier to the educational and food
service market
Aust Construction Investors Limited Oct-07 1,000 1,000 5.98%
Company seeking to acquire businesses in
the construction sector
Barnfield Management Investments Limited Oct-07 1,000 1,000 5.98%
Company seeking to acquire businesses in
the food sector
Calisamo Management Limited Dec-07 1,000 1,000 5.98%
Company seeking to acquire businesses in
the healthcare sector
British International Holdings Limited May-06 1,000 982 5.87%
Supplier of helicopter services
ATG Media Holdings Limited Oct-08 860 860 5.14%
Publisher and on-line auction platform
operator
Vectair Holdings Limited Jan-06 560 754 4.51%
Designer and distributor of washroom
products
Youngman Group Limited Oct-05 1,000 701 4.19%
Manufacturer of ladders and access towers
Focus Pharma Holdings Limited Oct-07 657 698 4.18%
Licensor and distributor of generic
pharmaceuticals
Blaze Signs Holdings Limited Apr-06 1,574 595 3.56%
Manufacturer and installer of signs
Monsal Holdings Limited Dec-07 684 513 3.07%
Supplier of engineering services to water
and waste sectors
MC 440 Limited (Westway Cooling) Jun-09 318 318 1.90%
Installation, maintenance and servicing of
air-conditioning systems
Campden Media Limited Jan-06 975 141 0.84%
Magazine publisher and conference
organiser
Plastic Surgeon Holdings Limited (The) Apr-08 390 97 0.58%
Snagging and finishing of domestic and
commercial properties
PXP Holdings Limited (Pinewood Structures) Dec-06 1,164 31 0.19%
Designer, manufacturer, supplier and
installer of timber-frames for buildings
Racoon International Holdings Limited Dec-06 874 - 0.00%
Supplier of hair extensions, hair care
products and training
------ ------ ------
14,693 12,765 76.36%
------ ------ ------
Total qualifying investments 14,843 12,819 76.68%
------ ------ ------
Non-qualifying investments
Fidelity Institutional Cash Fund plc* 1,249 1,249 7.46%
Global Treasury Funds plc (Royal Bank of 675 675 4.04%
Scotland)*
SWIP Global Liquidity Fund plc (Scottish 566 566 3.39%
Widows)*
Institutional Cash Series plc (BlackRock)* 515 515 3.08%
GS Funds plc (Goldman Sachs)* 424 424 2.54%
Insight Liquidity Funds plc (HBOS)* 413 413 2.47%
Barclays Global Investors Cash Selection 138 138 0.83%
Funds plc*
------ ------ ------
Total non-qualifying investments 3,980 3,980 23.81%
------ ------ ------
Total investments 18,823 16,799 100.49%
Other assets 134 134 0.80 %
Current liabilities (216) (216) (1.29)%
------ ------ ------
Net assets 18,741 16,717 100.00%
------ ------ ------
* Disclosed as Investments at fair value with Current assets in the Balance
Sheet
Unaudited Income Statement
for the six months ended 30 June 2009
Six months ended 30 June 2009 Six months ended 30 June 2008
(unaudited) (unaudited)
Notes Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Unrealised losses 10 - (906,568) (906,568) - (2,338,608) (2,338,608)
on investments
held at fair value
Realised gains on 10 - 16,189 16,189 - 86,966 86,966
investments held
at fair value
Income 3 223,535 - 223,535 649,235 - 649,235
Recoverable VAT 4 1,939 5,818 7,757 - - -
Investment 5 (37,150) (111,451) (148,601) (69,547) (208,643) (278,190)
management expense
Other expenses (160,440) - (160,440) (164,161) - (164,161)
------ ------ ------ ------ ------ ------
Profit/(loss) on 27,884 (996,012) (968,128) 415,527 (2,460,285) (2,044,758)
ordinary
activities before
taxation
Tax on profit/ 6 (1,670) 2,691 1,021 (83,742) 60,160 (23,582)
(loss) on ordinary
activities
------ ------ ------ ------ ------ ------
Profit/(loss) 26,214 (993,321) (967,107) 331,785 (2,400,125) (2,068,340)
attributable to
equity
shareholders
------ ------ ------ ------ ------ ------
Basic and diluted 7 0.13p (4.79)p (4.66)p 1.53p (11.06)p (9.53)p
earnings per share
Year ended 31 December 2008
(audited)
Notes Revenue Capital Total
£ £ £
Unrealised losses 10 - (4,848,208) (4,848,208)
on investments
held at fair value
Realised gains on 10 - 86,979 86,979
investments held
at fair value
Income 3 973,787 179,725 1,153,512
Recoverable VAT 4 35,893 107,680 143,573
Investment 5 (88,810) (266,428) (355,238)
management expense
Other expenses (336,510) - (336,510)
------ ------ ------
Profit/(loss) on 584,360 (4,740,252) (4,155,892)
ordinary
activities before
taxation
Tax on profit/ 6 (150,416) 42,319 (108,097)
(loss) on ordinary
activities
------ ------ ------
Profit/(loss) 433,944 (4,697,933) (4,263,989)
attributable to
equity
shareholders
------ ------ ------
Basic and diluted 7 2.02p (21.91)p (19.89)p
earnings per share
The total column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations.
There were no other recognised gains or losses in the period.
Other than revaluation movements arising on investments held at fair value
through profit and loss, there were no differences between the loss as stated
above and at historical cost.
The notes below form part of these half-yearly financial statements.
Unaudited Balance Sheet
as at 30 June 2009
As at As at As at
30 June 2009 30 June2008 31 December
2008
(unaudited) (unaudited) (audited)
Notes £ £ £
Non-current assets
Investments at fair value 1c, 10 12,818,934 15,043,401 13,556,878
Current assets
Debtors and prepayments 76,696 174,610 372,816
Investments at fair value 11 3,980,136 6,375,857 4,375,724
Cash at bank 57,594 49,740 71,812
------ ------ ------
4,114,426 6,600,207 4,820,352
------ ------ ------
Creditors: amounts falling (216,509) (362,251) (378,668)
due within one year
------ ------ ------
Net current assets 3,897,917 6,237,956 4,441,684
------ ------ ------
Net assets 16,716,851 21,281,357 17,998,562
------ ------ ------
Capital and reserves 12
Called up share capital 206,241 212,791 207,989
Capital redemption reserve 15,197 8,647 13,449
Revaluation reserve (2,023,784) 1,392,384 (1,117,216)
Special distributable 18,178,797 18,741,244 18,388,358
reserve
Profit and loss account 340,400 926,291 505,982
------ ------ ------
Equity shareholders' funds 16,716,851 21,281,357 17,998,562
------ ------ ------
Net asset value per 9 81.06p 100.01p 86.54p
Ordinary Share
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 June 2009
Six months Six months ended Year ended
ended
30 June 2009 30 June 2008 31 December 2008
(unaudited) (unaudited) (audited)
Notes £ £ £
Opening Shareholders' 17,998,562 25,727,915 25,727,915
funds
Purchase of own shares (106,617) (671,928) (1,056,868)
Loss for the period (967,107) (2,068,340) (4,263,989)
before dividends
Dividends paid in 8 (207,987) (1,706,290) (2,408,496)
period
------ ------ ------
Closing Shareholders' 16,716,851 21,281,357 17,998,562
funds
------ ------ ------
Unaudited Summarised Cash Flow Statement
for the six months ended 30 June 2009
Six months ended Six months ended Yearended
30 June 2009 30 June 2008 31 December 2008
(unaudited) (unaudited) (audited)
£ £ £
Operating activities
Investment income received 247,798 639,694 1,226,543
VAT recovered 207,757 - -
Investment management fees (101,242) (296,267) (498,733)
paid
Other cash payments (182,208) (139,331) (345,255)
------ ------ ------
Net cash inflow from 172,105 204,096 382,555
operating activities
Investing activities
Acquisitions of investments (386,016) (390,289) (1,554,680)
Disposals of investments 233,581 1,093,351 1,234,678
------ ------ ------
Net cash (outflow)/inflowfrom (152,435) 703,062 (320,002)
investing activities
Dividends
Equity dividends paid (207,987) (1,706,290) (2,408,496)
Taxation
Taxation repaid/(paid) - 587 (63,695)
------ ------ ------
Cash outflow before financing (188,317) (798,545) (2,409,638)
and liquid resource
management
Management of liquid
resources
Decrease in current 395,588 1,371,751 3,371,884
investments
Financing
Share capital bought back (221,489) (575,028) (941,996)
------ ------ ------
(Decrease)/increase in cash (14,218) (1,822) 20,250
for the period
------ ------ ------
Reconciliation of loss on ordinary activities before taxation to net cash
inflow from operating activities
for the six months ended 30 June 2009
Six months Six months Year ended
ended ended
30 June 2009 30 June2008 31 December 2008
(unaudited) (unaudited) (audited)
£ £ £
Loss on (968,128) (2,044,758) (4,155,892)
ordinary
activities
before taxation
Net unrealised 906,568 2,338,608 (87,009)
losses/(gains)
on investments
Net (gains)/ (16,189) (86,966) 4,848,208
losses on
realisations of
investments
Transaction - (30) -
costs
Decrease/ 296,120 (27,035) (225,241)
(increase) in
debtors
(Decrease)/ (46,266) 24,277 2,489
increase in
creditors
------ ------ ------
Net cash inflow 172,105 204,096 382,555
from operating
activities
------ ------ ------
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 unaudited results cover the six months to 30 June 2009 and have been
prepared under UK Generally Accepted Accounting Practice (UK GAAP), consistent
with the accounting policies set out in the statutory accounts for the year
ended 31 December 2008 and the 2009 Statement of Recommended Practice,
`Financial Statements of Investment Trust Companies and Venture Capital
Trusts'.
The Half-Yearly Report has not been audited, nor has it been reviewed by the
auditors pursuant to the Auditing Practices Board (APB)'s guidance on Review of
Interim Financial Information.
b) Presentation of the Income Statement
In order to better reflect the activities of a VCT and in accordance with the
SORP, supplementary information which analyses the Income Statement between
items of a revenue and capital nature has been presented alongside the Income
Statement. The revenue column of profit attributable to equity shareholders is
the measure the Directors believe appropriate in assessing the Company's
compliance with certain requirements set out in Section 274 Income Tax Act
2007.
c) Investments
All investments held by the Company are classified as "fair value through
profit and loss", in accordance with the International Private Equity and
Venture Capital Valuation ("IPEVCV") guidelines, as the Company's business is
to invest in financial assets with a view to profiting from their total return
in the form of capital growth and income. Purchases and sales of quoted
investments are recognised on the trade date where a contract of sale exists
whose terms require delivery within a time frame determined by the relevant
market. Purchases and sales of unlisted investments are recognised when the
contract for acquisition or sale becomes unconditional.
The fair value of quoted investments is the bid price value of those
investments at the close of business on 30 June 2009.
Unquoted investments are stated at fair value by the Directors in accordance
with the following rules, which are consistent with the IPEVCV guidelines:
(i) Investments which have been made in the last twelve months are at fair
value which, unless another methodology gives a better indication of fair
value, will be at cost;
(ii) Investments in companies at an early stage of their development are valued
at fair value which, unless another methodology gives a better indication of
fair value, will be at cost;
(iii) Where investments have been held for more than twelve months or have gone
beyond the stage in their development in (i) or (ii) above, the shares may be
valued by applying a suitable price-earnings ratio to that company's historic,
current or forecast earnings (the ratio used being based on a comparable sector
or comparable quoted companies but the resulting value being adjusted to
reflect points of difference identified by the Investment Manager, as well as
to reflect lack of marketability). Where overriding factors apply, alternative
methods of valuation will be used. These will include the application of a
material arms-length transaction by an independent third party, cost less
provision for impairment, discounted cash flow, or a net asset basis;
iv) Where a value is indicated by a material arms-length transaction by a third
party in the shares of a company, this value will be used.
v) Unquoted investments will not normally be re-valued upwards for a period of
at least twelve months from the date of acquisition. Where a company's
underperformance against plan indicates a diminution in the value of the
investment, provision against cost is made, as appropriate. Where the value of
an investment has become permanently impaired below cost, the loss is treated
as a permanent impairment and as a realised loss, even though the investment is
still held. The Board assesses the portfolio for such investments, and after
agreement with the Investment Managers, will agree the values that represent
the extent to which an investment has become permanently impaired. This is
based upon an assessment of objective evidence of that investment's future
prospects, to determine whether there is potential for the investment to
recover in value.
(vi) Premium on loan stock investments are accrued at fair value when the
Company receives the right to the premium and when considered recoverable.
Although the Company holds more than 20% of the equity of certain companies, it
is considered that the investments are held as part of an investment portfolio.
Accordingly, and as permitted by FRS 9 'Associates and Joint Ventures', their
value to the Company lies in their marketable value as part of that portfolio.
It is not considered that any of the holdings represents investments in
associated companies.
2. Capital gains and losses on investments, whether realised or unrealised, are
dealt with in the profit and loss and revaluation reserves and movements in the
period are shown in the Income Statement.
3. Income
Six months ended Six months ended Year ended
30 June 2009 30 June 2008 31 December 2008
(unaudited) (unaudited) (audited)
£ £ £
Dividends 19,933 93,304 209,009
Money-market funds 26,171 215,531 331,739
Loan stock interest 161,602 336,052 607,447
Bank deposits 337 4,348 5,317
Interest on VAT recovered 15,492 - -
------ ------ ------
Total income 223,535 649,235 1,153,512
------ ------ ------
4. Recoverable VAT
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. This
estimate was based upon information supplied by the Company's Investment
Managers, 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 this period £207,757 of
recoverable VAT was actually received. The excess of £7,757 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.
5. Investment management expense
In accordance with the policy statement published under "Management and
Administration" in the Company's prospectus dated 9 July 2004, the Directors
have charged 75% of the investment management expense to the capital reserve.
6. Taxation
There is no tax charge for the period as the Company has incurred taxable
losses. A small credit arises from a write-back of deferred tax.
7. Basic and diluted earnings and return per share
The basic and diluted earnings, revenue return and capital return per share
shown below for each period are respectively based on numerators i)-iii), each
divided by the weighted average number of shares in issue in the period - see
iv) below.
Six months Six months Year ended
ended ended
30 June 2009 30 June 2008 31 December
2008
(unaudited) (unaudited) (audited)
£ £ £
i) Total earnings after taxation (967,107) (2,068,340) (4,263,989)
Basic and diluted loss per (4.66)p (9.53)p (19.89)p
Ordinary share (pence)
ii) Net revenue from ordinary 26,214 331,785 433,944
activities after taxation
Basic and diluted revenue per 0.13p 1.53p 2.02p
Ordinary share (pence)
Net unrealised losses (906,568) (2,338,608) (4,848,208)
Net realised capital gains 16,189 86,966 86,979
Capital element of VAT recoverable 5,818 - 107,680
Dividends received treated as - - 179,725
capital
Capital expenses (net of taxation) (108,760) (148,483) (224,109)
------ ------ ------
iii) Total capital return (993,321) (2,400,125) (4,697,933)
Capital loss per Ordinary share (4.79)p (11.06)p (21.91)p
(pence)
iv) Weighted average number of 20,743,911 21,705,974 21,443,415
shares in issue in the period
8. Dividends paid
Six months Six months Year
ended ended
ended
30 June 2009 30 June 2008 31 December 2008
(unaudited) (unaudited) (audited)
£ £ £
Final income dividend paid for 207,987 - -
year ended 31 December 2008 of
1.0p per share
Interim income dividend for the - - 212,790
year ended 31 December 2008 of
1.0p per share
Interim capital dividend for the - - 489,416
year ended
31 December 2008 of 2.3p per share
Final income dividend paid for - 306,257 306,257
year ended
31 December 2007 of 1.4p per share
Final capital dividend paid for - 1,400,033 1,400,033
year ended 31 December 2007 of
6.4p per share
------ ------ ------
207,987 1,706,290 2,408,496
------ ------ ------
9. Net asset value per Ordinary share
As at As at As at
30 June 2009 30 June 2008 31 December
2008
(unaudited) (unaudited) (audited)
£ £ £
Net assets 16,716,851 21,281,357 17,998,562
Number of shares in issue as at 20,624,052 21,279,171 20,798,925
30 June 2009
Net asset value per share 81.06p 100.01p 86.54p
(pence)
10. Summary of non-current investments at fair value during the period
Traded Unquoted Unquoted Loan Total
on AiM equity preference stock
shares shares
£ £ £ £ £
Valuation at 1 January 64,324 4,469,458 42,433 8,980,663 13,556,878
2009
Purchases at cost - 32,907 76 353,033 386,016
Sales - proceeds - - - (233,581) (233,581)
- realised gains - - - 16,189 16,189
Unrealised (losses)/ (10,721) 389,824 (33,958) (1,251,713) (906,568)
gains
------ ------ ------ ------ ------
Valuation at 30 June 53,603 4,892,189 8,551 7,864,591 12,818,934
2009
Book cost at 30 June 150,106 4,332,822 45,782 10,314,008 14,842,718
2009
Unrealised (losses)/ (96,503) 559,367 (37,231) (2,449,417) (2,023,784)
gains at 30 June 2009
------ ------ ------ ------ ------
Valuation at 30 June 53,603 4,892,189 8,551 7,864,591 12,818,934
2009
Gains/(losses) on
investments
Realised gains based on - - - 16,189 16,189
carrying value at 31
December 2008
Net movement in (10,721) 389,824 (33,958) (1,251,713) (906,568)
unrealised depreciation
in the period
------ ------ ------ ------ ------
(Losses)/gains on (10,721) 389,824 (33,958) (1,235,524) (890,379)
investments at 30 June
2009
------ ------ ------ ------ ------
11. Current investments at fair value
These comprise investments in 7 Dublin based OEIC money market funds managed by
Royal Bank of Scotland, Blackrock Investment Management, Goldman Sachs, Insight
Investment Management, Barclays Global Investors, Scottish Widows Investment
Management and Fidelity Investment Management.
£3,980,136 (30 June 2008: £6,372,366; 31 December 2008: £4,372,136) of this sum
is subject to same day access, whilst £nil (30 June 2008: £3,491; 31 December
2008: £3,588) is subject to 2 day access.
12. Capital and reserves
Called Capital Revaluation Special Profit Total
up
share redemption reserve distributable and loss
capital reserve reserve account
£ £ £ £ £ £
At 1 January 207,989 13,449 (1,117,216) 18,388,358 505,982 17,998,562
2009
Shares bought (1,748) 1,748 - (106,617) - (106,617)
back
Written off to - - - (102,944) 102,944 -
special reserve
Dividend - final - - - - (207,987) (207,987)
for year ended
31 December 2008
Loss for the - - (906,568) - (60,539) (967,107)
period
------ ------ ------ ------ ------ ------
At 30 June 2009 206,241 15,197 (2,023,784) 18,178,797 340,400 16,716,851
------ ------ ------ ------ ------ ------
13. Related party transactions
Bridget Guérin is a director and 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. Bridget Guérin is also a director of Matrix-Securities
Limited who provided Company Secretarial and Accountancy Services to the
Company under agreements dated 9 July 2004 for a fee of £44,351 (30 June 2008:
£43,157; 31 December 2008: £87,030) in the period. The agreements with MPEP and
with Matrix-Securities Limited became effective from 5 October 2004.
14. The information for the year ended 31 December 2008 does not comprise full
financial statements within the meaning of Section 435 of the Companies Act
2006. The financial statements for the year ended 31 December 2008 have been
filed with the Registrar of Companies. The auditors have reported on these
financial statements and that report was unqualified and did not contain a
statement under section 498(2) of the Companies Act 2006.
15. This Half-Yearly Report will shortly be made available on our website:
www.migvct.co.uk and will be circulated by post to those shareholders who have
requested copies of the Report. Further copies are available free of charge
from the Company's registered office, One Vine Street, London W1J 0AH or can be
downloaded via the website.
Contact details for further enquiries:
Sarah Penfold of Matrix-Securities Limited (the Company Secretary) on 020 3206
7000 or by e-mail on MIG@matrixgroup.co.uk.
Matrix Private Equity Partners LLP (the Investment Manager), on 020 3206 7000
or by e-mail on info@matrixpep.co.uk.
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