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12 Mar 2009 17:28
Matrix Income & Growth VCT plc
Annual Results Announcement for the year ended 31 December 2008
12 March 2009
Investment Objective
Matrix Income & Growth VCT plc ("the VCT" or "MIG VCT") is a Venture CapitalTrust ("VCT") listed on the London Stock Exchange. Its investment portfolio,which invests primarily in established and profitable unquoted companies, ismanaged 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, followingportfolio realisations, can be distributed by way of additional tax freedividends.
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 2008 31 December 2007 Net assets £17,998,562 £25,727,915 Net asset value per share 86.5 p 116.9 p Net cumulative dividends paid 15.3 p 4.2 p Total return per share to Shareholders 101.8 p 121.1 psince launch* Share price (mid-market price) 74.5 p 100.5 p Total expense ratio 3.8 % 3.4 %
* 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.
A final income dividend of 1 penny per share will be recommended to Shareholders at the AGM on 6 May 2009 to be paid on 15 May 2009, thereby increasing net cumulative dividends paid since launch to 16.3 pence per share.
Chairman's Statement
I am pleased to present the annual results of Matrix Income & Growth VCT plcfor the year to 31 December 2008 and to report on a year of satisfactoryprogress in the context of the very challenging economic and market conditionsin the period.Overview2008 has been a year in which the economic environment has seriously andsharply deteriorated and these difficult conditions are expected to persist forsome time. The collapse in confidence within the banking system and the extremedeterioration in bank balance sheets has significantly curtailed bank lendingwhich is now adversely affecting the wider economy. As yet the measures takenby the Government to counter these problems, particularly the drought oflending, have yet to yield any signs of improvement. The UK smaller companiessector in which your Company invests is clearly affected by this poorenvironment.As your Company had already achieved the level of investment required by theVCT regulations, our strategy has been to retain healthy liquidity. This hasbeen a year in which the Investment Manager has considered that few attractivenew investment opportunities have presented themselves. The Board has supportedthe Investment Manager's view that most opportunities generally remainedover-priced in 2008 and that it was more advantageous to maintain the Company'shigh cash balances until investment opportunities look reasonably priced. TheCompany has adopted a patient stance, in the expectation that betteropportunities to add longer term value for Shareholders should start to comeforward later as vendors realign their price expectations with the currenteconomic climate. Nevertheless, your Company chose to make two new investmentsin 2008, and one follow-on investment, representing £1.6 million in aggregate.Disposal proceeds from one sale, and one partial divestment represented £1.2million and therefore the Company's total investment in qualifying companiesremained broadly neutral in the year.The Company's qualifying portfolio has seen a number of valuations reduced inresponse to falls in quoted markets and worsening trading conditions. However,the trading performance of a number of investee companies remains encouraging.Full details of these companies and the year's transactions are contained inthe Investment Manager's Review which follows below.
Review of results
Inevitably, the investment portfolio has not been immune to the factorsoutlined above, but value has held up reasonably well. The qualifyinginvestment portfolio is currently valued at 92.4% of cost. Net asset value("NAV") per share at 31 December 2008 is 86.5 pence (2007: 116.9 pence), a fallover the year of 30.4 pence (26.0%). However, 11.1 pence of this fall is due todividends paid to shareholders. Excluding dividends paid, the NAV has fallen by16.5%. The total NAV return per share, including dividends paid to date, is now101.8 pence (2007: 121.1 pence), compared with the initial NAV per share, netof initial costs, of 94.5 pence. This represents a positive total return pershare since inception of 7.7% (2007: 28.1%).Income from the Company's loan stock investments was running at an aggregateannualised rate of 5.8% at 31 December 2008 (2007: 8.0%). The annual runningyield on the qualifying investment portfolio as a whole was 3.6% (2007: 4.0%),while the yield on all assets was 3.4% (2007: 4.6%). These figures havedeclined from last year as certain investee companies are not currently fullyservicing loans the Company has made to them while those assets linked tovariable interest rates are now yielding considerably lower levels of income,most notably the Company's holdings in OEIC money-market funds. Together, thesefactors have and will continue to reduce income dividends from the level theCompany has been able to pay in recent periods.Shareholders should note that income in this year has been increased by theanticipation of recoverable VAT. Legislation has been introduced exempting VCTsfrom paying VAT on investment management fees and enabling them to pursuereclaims for VAT previously paid. At this juncture, the Board is unable toquantify precisely the amount of VAT that will eventually be recovered, but hasrecognised a prudent amount that should be recoverable. An amount of £200,000has therefore been recognised in these accounts for VAT paid in the past.
Dividends
The revenue account generated a decreased net revenue return (after tax) forthe year of £433,944 (2007: £567,323) and your Directors will be recommending afinal income dividend of 1 penny per share, making a total of 2.0 pence pershare in respect of the current year compared with the total income dividend of2.4 pence per share paid in respect of the year ended 31 December 2007.It should be noted that Shareholders have also received 8.7 pence per share incapital dividends in 2008, which mainly related to the profits realised uponthe disposals of the investments in Ministry of Cake (Holdings) Limited in 2007and BBI Holdings plc this year.This final income dividend will be recommended to Shareholders at the AGM on 6May 2009 to be paid on 15 May 2009 to Shareholders on the Register on 17 April2009. If approved, dividends paid since inception will increase to 16.3 pence.
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 2008, the Company was 78% invested in qualifying companies (based upon the tax values, which differ from the Investment Portfolio Summary below).
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.
Share buy-backs
The Company bought back 1,210,827 Ordinary Shares during the year under reviewat an average price of 87.3 pence per share and at discounts to the latestpublished NAVs of between 10% and 15%. These shares, representing 5.5% of theissued share capital at the beginning of the year, were subsequently cancelledby the Company. The Board regularly reviews its share buy back policy,considering a number of factors, including the Company's liquidity, and seeksto balance the interests of both continuing and departing shareholders.
Awards for Matrix Private Equity Partners and PastaKing
I am pleased to inform you that our Investment Manager, Matrix Private EquityPartners, won the award for "VCT Investment Manager of the Year" at the recent unquote" British Private Equity Awards 2008. We were also pleased to hear thatone of our investee companies, PastaKing, won the "The Small to Medium SizedBusiness of the Year" award at the 2008 National Business Awards.
Outlook
Stock markets are experiencing extreme volatility, uncertainty and low levelsof confidence, reflecting significant concerns over the prospects for theglobal economy and the extent and length of the recession in the UK. YourCompany's fortunes will be affected by this wider context, but nevertheless, weconsider the Company to be in relatively good health and with a welldiversified portfolio of investee companies.
Our strategy of preserving strong cash balances means the Company should be able to support its existing portfolio where required and justified and, in addition, capitalise on what are expected to be attractive new investment opportunities going forward.
In the foreseeable future, the Company's ability to pay dividends as high asthose paid to date will be adversely affected by the ability of certaininvestee companies to service the Company's loans to them, the lower interestrate environment and the lack of profitable exit opportunities. However, theBoard still remains confident that the Company should continue to provideShareholders with an attractive long term combination of capital growth andincome.
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:
a. The financial statements, which have been prepared in accordance with UK
Generally Accepted Accounting Practice (UK GAAP) and the Statement of
Recommended Practice, `Financial Statements of Investment Trust Companies'
issued by the Association of Investment Trust Companies in 2003 and revised
in 2005, give a true and fair view of the assets, liabilities, financial
position and loss of the Company; and
b. The management report, comprising the Chairman's Statement, Investment
Policy, Statement of Principal Risks, Management and Regulatory
Environment, Investment Portfolio Summary and the Investment Manager's
Review, 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 they face.
On behalf of the BoardKeith NivenChairman
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 interestrates could affect trading conditions for smaller companies and consequentlythe value of the VCT's qualifying investments.Loss of approval as a Venture Capital Trust - the VCT must comply with Section274 of the Income Tax Act 2007 which allows it to be exempted from capitalgains tax on investment gains. Any breach of these rules may lead to the VCTlosing its approval as a VCT, qualifying shareholders who have not held theirshares for the designated holding period having to repay the income tax reliefthey obtained and future dividends paid by the VCT becoming subject to tax. TheVCT would also lose its exemption from corporation tax on capital gains.Investment and strategic risk - inappropriate strategy or consistently weak VCTqualifying investment recommendations might lead to under performance and poorreturns 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 tomisappropriation of assets. Inappropriate accounting policies might lead tomisreporting or beaches of regulations. Failure of the Investment Manager's andAdministrator's accounting systems or disruption to its business might lead toan inability to provide accurate reporting and monitoring.Market risk - Investment in unquoted companies, by its nature, involves ahigher degree of risk than investment in companies traded on the London StockExchange main market. In particular, smaller companies often have limitedproduct lines, markets or financial resources and may be dependent for theirmanagement 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 byundertaking a key risk management review at each quarterly Board meeting.Performance is regularly reviewed and assurances in respect of adequateinternal controls and key risks are sought and received from the InvestmentManager and Administrator on a six monthly basis. In the mitigation andmanagement of these risks, the Board applies rigorously the principles detailedin the AIC Code of Corporate Governance. The Board also has a Share Buy Backpolicy to try to mitigate the Market Liquidity risk. This policy is reviewed ateach quarterly Board Meeting.
Investment Policy
The VCT's policy is to invest primarily in a diverse portfolio of UK unquotedcompanies. Investments are structured as part loan and part equity in order toreceive regular income and to generate capital gains from trade sales andflotations 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 qualifyand is approved as a VCT by HMRC. Amongst other conditions, the VCT may notinvest more than 15% of its investments in a single company and must have atleast 70% by value of its investments throughout the period in shares orsecurities comprised in Qualifying Holdings, of which a minimum overall of 30%by value must be ordinary shares which carry no preferential rights. Inaddition, although the VCT can invest less than 30% of an investment in aspecific company in ordinary shares it must have at least 10% by value of itstotal investments in each Qualifying Company in ordinary shares which carry
nopreferential rights.Asset MixThe VCT initially holds its funds in a portfolio of readily realisable interestbearing investments and deposits. The investment portfolio of qualifyinginvestments is built up over a three year period with the aim of investing andmaintaining 80% of net funds raised in qualifying investments.
Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses acrossdifferent industry sectors. To reduce the risk of high exposure to equities,each qualifying investment is structured using a significant proportion of loanstock (up to 70% of the total investment in each VCT qualifying company.)Initial investments in VCT qualifying companies are generally made in amountsranging from £200,000 to £1 million at cost. No holding in any one company willrepresent more than 10% of the value of the VCT's investments at the time ofinvestment. Ongoing monitoring of each investment is carried out by theInvestment Manager generally through taking a seat on the Board of each VCTqualifying company.
Co-investment
The VCT aims to invest in larger more mature unquoted companies throughinvesting alongside four other Income and Growth VCTs advised by the InvestmentManager with a similar investment policy. This enables the VCT to participatein 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 thedetermination of its investment policy. Investment and divestment proposals areoriginated, negotiated and recommended by the Investment Manager and are thensubject to formal approval by the Directors. Matrix Securities provides CompanySecretarial and Accountancy services to the VCT.
Investment Manager's Review
Over the year, one disposal and one partial divestment were made. Theinvestment in BBI was realised in January 2008 through the sale of that companyto Inverness Medical Innovations Inc. The proceeds of £842,889 produced a £460,889 profit on the Company's investment cost of £382,000. In April, an earlyrepayment of loan stock was received from VSI. Proceeds of £250,474 produced aprofit from the premium of £22,770 on the Company's investment cost of £227,704During 2008, the Company has pursued a very cautious approach to newinvestment. This was based on our view that vendors' price expectations wouldprove unsustainable. We also avoided transactions requiring high levels of bankborrowing, believing that economic conditions were deteriorating and that thiswould make over-leveraged companies much too vulnerable in a tougherenvironment.A part of this strategy has been our Operating Partner programme. This involvesestablishing acquisition companies alongside experienced entrepreneurs wellknown to us. Using the operating partner's specialised knowledge and businesscontacts they offer additional opportunities to access prospective investmentsthat might not otherwise be sourced. This programme has met the twin aims ofmaintaining at least 70% of the monies raised in VCT qualifying investmentswhile at the same time, importantly, maintaining significant cash balances forthe VCT over a period we judged unattractive for new investment. This has beenpossible because these acquisition companies, which are structured as VCTqualifying investments, have two years in which to invest in established VCTqualifying businesses. We believe this strategy has proved to be extremelybeneficial in protecting the value of the Company's asset base in difficultmarket conditions.Just two new investments were completed during the year; the first was inApril, when £390,289 was invested in the MBO of Plastic Surgeon for loan stockand a 5.9% equity holding. The company offers snagging and finishing servicesto domestic and commercial properties and is based in Bovey Tracey, Devon.The second was in ATG Media in October. This was the first target company andMBO transaction to be sourced and completed under our Operating Partnerprogramme. Derringfield, the acquisition company in which the Company hadinvested £1 million in July, was renamed ATG Media and acquired the publisherof the leading weekly newspaper serving the UK antiques trade, the AntiquesTrade Gazette, via a MBO. This London-based business also offers an on-lineauction capability. The Company now holds an £859,640 investment in ATG Mediaby way of loan stock and 7.6% of the equity (the balance of £141,315 from theoriginal investment in Derringfield having been repaid to the Company).Our other Operating Partners' companies have been active during 2008, with AustConstruction Investors, Barnfield Management Investments and CalisamoManagement all seeking investments in the sectors of expertise relevant to thepartners. However, we were unable to identify sufficiently attractive targetsin the period and they therefore remained invested in liquid funds.The qualifying investment portfolio has not been immune to the widerdeteriorating trading environment and appropriate provisions have been appliedagainst those investments where the investee company's trading has beenaffected. A number of valuations have also had to be reduced in response tofalls in the value of comparable quoted companies. However, other investmentshave continued to trade well. Of a total of eighteen investments, four arecurrently held at cost, eight valued at below cost and six above cost.The Company's investments in PXP, Youngman Group and Plastic Surgeon each haveexposure to the house building and construction markets and all have sufferedfrom the rapid decline of this sector during the year. Youngman has seen asharp fall in revenues from its trade customers in particular although it hasremained profitable and expects to continue to do so. PXP carried forward astrong order book into the year but the outlook for next year is moreuncertain. In anticipation of this, the Company invested a further £163,436 aspart of a £1 million funding round to provide capital to support PXP in what isexpected to remain a difficult market. Plastic Surgeon has made strong progressin reducing its dependence on the new housing market and has diversified intothe commercial property and insurance markets and has substantially reduced itsdirect and indirect cost base. Nevertheless, in view of the continuingdifficult conditions in this sector we have deemed it appropriate to apply a50% impairment provision against the Company's investment.Blaze Signs, having had a record year in 2007-8, is seeing the effects of anumber of major retail clients deferring work which has reduced revenue. Monsaltoo, has suffered from delays in new contract awards and a resultant deferralof construction work on both water and waste contracts; accordingly animpairment provision of 25% has been made. However, it enters 2009 with anencouraging level of contracted revenue and since the year end shareholdershave advanced a further £500k, including £68,433 from the Company, to provideadditional working capital. Campden also has suffered from the uncertainties ofthe financial services clients of its growing US conference business which hasled to a disappointing year. Racoon again continued to struggle to growrevenues although it remains profitable. British International's helicopterservice to the Scilly Isles from Penzance experienced possibly the worst summerweather in two decades which decimated the day trip market, but it hasbenefited from the solidity of its long-term military contract revenue.Nevertheless, there have continued to be portfolio highlights. DiGiCo Europehas enjoyed a strong first year post-investment following the successful launchof its new digital audio mixing desk. PastaKing has posted its highest everprofits of £2.7 million, a year-on-year increase greater than 20%, despiteincreasing pressure on ingredient prices. Focus Pharma has also had a goodfirst year since its MBO.Vectair had an outstanding year, producing record profits and making inroadsinto potentially significant markets in India and the US. VSI is stronglyprofitable and cash-generative and is benefiting from the relative weakness ofsterling as well as seeing increased customer demand. ATG Media is performingin line with expectations, whilst SectorGuard has now been substantiallyre-organised following the acquisition of Manguard, a manned guarding business,earlier in 2008; its share price recovered somewhat towards the year end.The investment portfolio at 31 December 2008 comprises eighteen investmentswith a cost of £14.7 million and valued at £13.6 million (92.4% of cost). £3.0million of the investment cost is held in cash in the three acquisitioncompanies in the Operating Partner programme. Whilst the fall in valuationsover the year is disappointing, the adverse movement in public market indiceshas made some decreases inevitable. It is important to recognise that all ofthe reduction in the year has been in unrealised valuations as opposed to anyactual realised investment losses. This offers the prospect of significantfuture recovery as we continue to believe that the portfolio, taken as a whole,is resilient and of high quality.Over the coming period, the need for additional investment to support portfoliocompanies may become a focus. We also anticipate much more attractive buyingconditions emerging as the year progresses. Having retained significantuninvested cash, we feel the Company is well placed to cover both the portfolioneeds that may arise and the new investment opportunities presented.Investment Portfolio Summaryas at 31 December 2008 Date of Total book Valuation % value % of initial cost of net equity investment assets held by funds managed by MPEP* £'000 £'000 Qualifying investments AIM quoted investments SectorGuard plc Aug-05 150 64 0.4% 4.32% Provider of manned guarding, mobile patrolling, and alarm response services ----------- ------------- --------- 150 64 0.4% Unquoted investments Blaze Signs Holdings Apr-06 1,574 1,520 8.4% 52.50%Limited Manufacturer and installer of signs PastaKing Holdings Limited Jun-06 464 1,457 8.1% 27.50% Manufacturer and supplier of fresh pasta meals VSI Limited Apr-06 390 1,082 6.0% 48.91% Provider of software for CAD and CAM vendors DiGiCo Europe Limited Jul-07 1,000 1,045 5.8% 30.00% Manufacturer of digital sound mixing consoles Aust Construction Investors Oct-07 1,000 1,000 5.6% 49.00%Limited Company seeking to acquire businesses in the construction sector Barnfield Management Oct-07 1,000 1,000 5.6% 49.00%Investments Limited Company seeking to acquire businesses in the food sector Calisamo Management Limited Dec-07 1,000 1,000 5.6% 49.00% Company seeking to acquire businesses in the healthcare sector Youngman Group Limited Oct-05 1,000 985 5.5% 29.70% Manufacturer of ladders and access towers Vectair Holdings Limited Jan-06 560 965 5.4% 24.00% Designer and distributor of washroom products British International May-06 1,000 943 5.2% 34.93%Holdings Limited Helicopter service operators ATG Media Holdings Limited Oct-08 860 860 4.8% 40.00% Publisher of the leading newspaper serving the UK antiques trade and on-line platform operator Focus Pharma Holdings Oct-07 657 646 3.6% 13.00%Limited Licensor and distributer of generic pharmaceuticals Monsal Holdings Limited Dec-07 616 462 2.6% 46.51% Supplier of engineering services to water and waste sectors PXP Holdings Limited Dec-06 1,164 254 1.4% 37.33%(Pinewood Structures) Designer, manufacturer and supplier of timber-frames for buildings The Plastic Surgeon Apr-08 390 195 1.1% 30.00%Holdings Limited Supplier of snagging and finishing services to the domestic and commercial property markets Campden Media Limited Jan-06 975 79 0.4% 28.44% Magazine publisher and conference organiser Racoon International Dec-06 874 - 0.0% 49.00%Holdings Limited Supplier of hair extensions, hair care products and training ------------ ------------- -------- 14,524 13,493 75.1% ------------ ------------- -------- 14,674 13,557 75.5% ------------ ------------- -------- Non-qualifying investments Fidelity Institutional Cash 1,241 1,241 6.9% Fund plc** Global Treasury Funds plc 1,094 1,094 6.1% (Royal Bank of Scotland)** SWIP Global Liquidity Fund 563 563 3.1% plc (Scottish Widows)** Institutional Cash Series 510 510 2.8% plc (BlackRock)** GS Funds plc (Goldman 422 422 2.3% Sachs)** Insight Liquidity Funds plc 409 409 2.2% (HBOS)** Barclays Global Investors 137 137 0.8% Cash Selection Funds plc** ------------ ------------- -------- Total non-qualifying 4,376 4,376 24.2% investments ------------ ------------- -------- ------------ ------------- -------- Total investments 19,050 17,933 99.7% Other assets 445 444 2.4% Current liabilities (378) (378) (2.1)% ------------ ------------- -------- Net assets 19,117 17,999 100.0% ------------ ------------- --------
* The other funds managed by MPEP include Matrix Income & Growth 2 VCT plc (MIG2), Matrix Income & Growth 3 VCT plc (MIG3), Matrix Income & Growth 4 VCT plc (MIG4) and The Income & Growth VCT plc (I & G VCT).
** Disclosed as Investments at fair value within Current assets in the Balance Sheet.
Profit and Loss Account
for the year ended 31 December 2008
Year ended 31 December 2008 Year
ended 31 December 2007
Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ Realised gains on - 86,979 86,979 - 1,433,612 1,433,612investments Unrealised - (4,848,208) (4,848,208) - 2,386,239 2,386,239(losses)/gains on investments Income 973,787 179,725 1,153,512 1,231,117 - 1,231,117 Recoverable VAT 35,893 107,680 143,573 - - - Investment (88,810) (266,428) (355,238) (137,119) (411,357) (548,476)manager's fees Other expenses (336,510) - (336,510) (337,887)
- (337,887)
------------ ------------ ------------ ------------
------------ ------------
Profit/(loss) on 584,360 (4,740,252) (4,155,892) 756,111 3,408,494 4,164,605ordinary activities before taxation
Tax on ordinary (150,416) 42,319 (108,097) (188,788)
132,958 (55,830)activities ------------ ------------ ------------ ------------
------------ ------------
Profit/(loss) for 433,944 (4,697,933) (4,263,989) 567,323 3,541,452 4,108,775the year ------------ ------------ ------------ ------------
------------ ------------
Basic and diluted 2.02p (21.91) p (19.89) p 2.58 p
16.07 p 18.65 pearnings per ordinary share The total column is the profit and loss account of the Company. All the aboveitems in the above statement derive from continuing operations. There were noother recognised gains or losses in the year. Other than revaluation movementsarising on investments held at fair value through the Profit and Loss Account,there were no differences between the profit/(loss) as stated above and at
historical cost.Balance Sheetas at 31 December 2008 31 December 2008 31 December 2007 £ £ Fixed assets Investments at fair value 13,556,878 17,998,075 Current assets Debtors and prepayments 372,816 147,575 Current investments 4,375,724 7,747,608 Cash at bank 71,812 51,562 4,820,352 7,946,745 Creditors: amounts falling due within (378,668) (216,905)one year Net current assets 4,441,684 7,729,840 ---------------- ---------------- Net assets 17,998,562 25,727,915 ---------------- ---------------- Capital and reserves Called up share capital 207,989 220,097 Capital redemption reserve 13,449 1,341 Revaluation reserve (1,117,216) 4,127,530 Special distributable reserve 18,388,358 19,561,655 Profit and loss account 505,982 1,817,292 ---------------- ---------------- Equity shareholders' funds 17,998,562 25,727,915 ---------------- ---------------- Net asset value per Ordinary share 86.54p
116.89p
Reconciliation of Movements in Shareholders' Funds
for the year ended 31 December 2008
Year ended 31 December Year ended31 December 2007 2008 £ £ As at 1 January 2008 25,727,915 22,244,902 Purchase of own shares (1,056,868) (95,275) (Loss)/profit for the (4,263,989) 4,108,775year Dividends paid in year (2,408,496) (530,487) --------------- --------------- Closing shareholders' 17,998,562 25,727,915funds Cash Flow Statement
for the year ended 31 December 2008
Year ended Year ended 31 December 2008 31 December 2007 £ £ £ £ Operating activities Investment income received 1,226,543 1,227,519 Investment management fees (498,733) (548,476) paid Other cash payments (345,255) (399,250) --------------- -------------- -------------- --------------- Net cash inflow from 382,555 279,793operating activities Investing activities Acquisitions of investments (1,554,680) (6,272,922) Disposals of investments 1,234,678 2,499,490 --------------- -------------- -------------- --------------- Net cash outflow from (320,002) (3,773,432)investing activities Taxation Taxation paid (63,695) (46,000) Equity dividends Payment of dividends (2,408,496) (530,487) -------------- --------------- Cash outflow before (2,409,638) (4,070,126)financing and liquid resource management Management of liquid resources Decrease in current 3,371,884 4,158,713investments Financing Purchase of own shares (941,996) (95,275) -------------- --------------- Increase/(decrease) in cash 20,250 (6,688)for the year -------------- ---------------
Reconciliation of loss on ordinary activities before taxation to net cash inflow from operating activities
2008 2007 £ £ (Loss)/profit on ordinary activities before (4,155,892) 4,164,605taxation Net gains on realisations of investments (87,009)
(1,508,876)
Net unrealised losses/(gains) on investments 4,848,208 (2,386,239) Increase in debtors (225,241) (5,060) Increase in creditors and accruals 2,489 15,363 ----------- ----------- Net cash inflow from operating activities 382,555
279,793
Analysis of changes in net funds
Cash Liquid Total resources £ £ £ At beginning of year 51,562 7,747,608 7,799,170 Cash flows 20,250 (3,371,884) (3,351,634) ----------- ----------- ----------- At 31 December 2008 71,812 4,375,724 4,447,536Notes1. Basis of accountingThis announcement of the annual results of the Company for the year ended 31December 2008 has been prepared using accounting policies consistent with thoseadopted in the full audited annual accounts which have been prepared under UKGenerally Accepted Accounting Practice (UK GAAP) and the Statement ofRecommended Practice, `Financial Statements of Investment Trust Companies'("SORP") issued by the Association of Investment Trust Companies in January2003, revised December 2005 ("the SORP").2. Income 2008 2007 £ £ Income from bank deposits 5,317 4,342 Income from investments - from equities 209,009 63,834 - from overseas based OEICs 331,739 583,935 - from loan stock 607,447 579,006 1,148,195 1,226,775 -------------- -------------- Total income 1,153,512 1,231,117 Total income comprises Dividends 540,748 647,769 Interest 612,764 583,348 -------------- -------------- 1,153,512 1,231,117 Income from investments comprises Listed overseas securities 331,739 583,935 Unlisted UK securities 209,009 63,834 Loan stock interest 607,447 579,006 -------------- -------------- 1,148,195 1,226,775
3. Net asset value per Ordinary Share
Net asset value per Ordinary Share is based on net assets at the end of the year, and on 20,798,925 (2007: 22,009,752) Ordinary Shares, being the number of Ordinary Shares in issue on that date.
4. Return per Ordinary Share
The revenue return per Ordinary Share is based on the net revenue profit from ordinary activities after taxation of £433,944 (2007 £567,323) and on 21,443,415 (2007: 22,031,665) Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the year.
The capital return per Ordinary Share is based on a capital loss of £4,697,933(2007: return of £3,541,452) which includes the net of tax portion of theInvestment Manager's fees charged to the capital reserve of £224,109 (2007: £278,399) and on 21,443,415 (2007: 22,031,665) Ordinary Shares, being theweighted average number of Ordinary Shares in issue during the year.
5. 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.
6. Taxation
Although the Company incurred a loss in the year, a tax charge arises principally because the unrealised losses for the year are disallowed for taxation purposes.
7. Dividends
The Company proposes to pay a final dividend of 1 penny per Ordinary Share fromincome. The dividend will be recommended to members at the Annual GeneralMeeting and, if approved, will be paid on 15 May 2009 to shareholders on theRegister on 17 April 2009.
8. Related party transactions
Bridget Gu©rin is a director and shareholder (2.0%) of Matrix Group Limited,which owns 100% of the equity of MPE Partners Limited. MPE Partners Limited hasa 50% interest in Matrix Private Equity Partners LLP ("MPEP"), the Company'sInvestment Manager. The fee arrangements and the fees payable are set out inNote 4 of the full accounts. £12,481 (2007: £nil) was payable to the Manager atthe year-end, while £99,550 (2007:£nil) is recoverable from the Manager inrespect of the expense cap for the year. Bridget Gu©rin is also a director ofMatrix-Securities Limited who provided Company Secretarial and AccountancyServices to the Company under agreements dated 9 July 2004, disclosed in Note 5of the full accounts as administration fees. The agreements with MPEP and withMatrix-Securities Limited became effective from 5 October 2004. £21,119 was dueto Matrix-Securities Limited at the end of the year (2007: £21,579).Matrix Group Limited also holds a significant interest in Matrix CorporateCapital LLP ("MCC"), who became the Company's brokers shortly before theyear-end. One share buyback was undertaken by MCC on the Company's instruction,costing £114,301, which was owed to MCC at the year-end. No fees were payableto MCC for the period up to the year-end.
9. Financial Information
The financial information set out in these statements does not constitute theCompany's statutory accounts for the year ended 31 December 2008 in terms ofsection 240 of the Companies Act 1985 but is derived from those accounts.Statutory accounts for the year ended 31 December 2008 will be delivered toCompanies House following the Company's Annual General Meeting. The auditorshave reported on those accounts: their report was unqualified and did notcontain a statement under Section 237 (2) or (3) of the Companies Act 1985.
10.Annual Report
The Annual Report for the year ended 31 December 2008 will shortly be madeavailable on our website: www.migvct.co.uk. and will be circulated by post tothose Shareholders who have requested to receive copies of the Report. Copieswill be available thereafter to members of the public from the Company'sregistered office.
11.Annual General Meeting
The Annual General Meeting will be held at 11.00 am on Wednesday, 6 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.
MATRIX INCOME & GROWTH VCT PLC