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31 Jul 2009 16:26
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 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" or "the InvestmentManager").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 portfoliorealisations, 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 GBP20,933,124 30 June 2009 30 June 2008 31 December 2008 Net assets GBP16,716,851 GBP21,381,357 GBP17,998,562 Net asset value (NAV) per 81.1 p 100.0 p 86.5 pshare 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 pshareholders since launch (NAV basis)** Share price (mid-market 60.0 p 89.5 p 74.5 pprice)
* 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 dividendThe continuing difficulties in the UK and world economies have remained overthe six month period covered by this report and your Company has not beenimmune from their impact. The recession is affecting many of the companies inthe portfolio, particularly those exposed to the support services andconstruction and materials sectors. However, the well-diversified nature of theportfolio, including its underlying cash position, has helped to limit theimpact of this generally poor background on the value of the Company'sinvestments. Overall the total return to shareholders, based on NAV plusdividends paid , declined by 4.3% in the period from 101.8 pence per share to97.4 pence per shareVery disappointingly, in contrast to this relatively modest decline in totalreturn performance, income from the Company's investments has come underconsiderable pressure. The revenue account generated a net return (after tax)for the period of 26,214 (2008: 331,785). This significant fall in revenuehas been as a result of a substantial fall in the loan stock interest receivedfrom investee companies and a significant decline in interest received frommoney market funds which reflects the fall in interest rates from an average of5.6% in the same period last year to 0.5% this year. Given this position theBoard 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.
LiquidityThe Company was holding 4 million in cash and liquidity fund balances as at 30June 2009 in addition to the 3 million invested in the Operating Partneracquisition vehicles. It is therefore well positioned both to make follow-oninvestments to support the existing portfolio through this period of economicuncertainty and take advantage of more favourable opportunities for newinvestment 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 ofinvesting 70% of the funds raised in qualifying unquoted and AiM quotedcompanies, which it has achieved throughout the period. The Company was 80.78%invested in qualifying companies (based on VCT cost as defined in taxlegislation which differs from actual cost given in the Investment PortfolioSummary on page 9) at the period-end, with the balance of the portfolioinvested in a selection of readily realisable, money market funds with AAAcredit ratings.
Share buy-backs
During the six months to 30 June 2009, the Company bought back 174,873 of theCompany's own shares at an average price, excluding costs, of 60.06 pence pershare, which represented a discount of 30% to the published NAV at the time ofthe buy-back adjusted for dividends payable.These shares, representing 0.84% of the issued share capital at the beginningof the period, were subsequently cancelled by the Company. The Board regularlyreviews its share buy-back policy.
VAT on management fees
As reported in the Annual Report for the year ended 31 December 2008 theCompany is no longer liable to pay VAT on investment management fees. TheManager has been able to reclaim VAT previously paid on fees and the Companyhas received a refund of 207,757, plus interest of 15,492 in the period.These accounts recognise this interest together with 7,757 being theadditional VAT recovered to date, not anticipated as a debtor at 31 December2008.
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 Shareholdersthrough newsletters and a dedicated website www.migvct.co.uk, supplementing theHalf-Yearly and Annual Reports. The Board welcomes the opportunity to meetShareholders at the Company's General Meetings during which representatives ofthe 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 awhole are trading reasonably well. Almost all of the investee companies arestill forecast to be profitable before taking into account interest andgoodwill amortisation and several companies are showing real potential forfuture development when the economy ultimately recovers. The decrease in NAVarises from unrealised valuation movements rather than from realised losses andthe Board remains confident that the total return to shareholders shouldrecover as and when economic and financial conditions allow, although incomegeneration will remain under pressure for the foreseeable futureThe Manager also expects that by 2010 business owners will return to the marketto raise risk capital or to sell their companies. This should provide soundinvestment opportunities for cash rich investors and investment companies. Thesubstantial liquid resources held by the Company should ensure that the Managerhas 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 BoardKeith Niven, Chairman31 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 anduncertainties facing the Company have not materially changed since thepublication of the Annual Report and Accounts for the year ended 31 December2008. The Board acknowledges that there is regulatory risk and continues tomanage the Company's affairs in such a manner as to comply with section 274Income Tax Act 2007. Other risks relate to credit risk, market price risk,liquidity risk, interest rate risk and currency risk. A more detailedexplanation of these can be found in Note 20 on pages 45 - 49 of the 2008Annual 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 BoardKeith Niven, Chairman31 July 2009Investment Manager's ReviewOverviewWe have continued to adopt a cautious approach to new investment and believethat 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 ofmarket activity which has persisted throughout the period is producing onlylimited opportunities for deals where willing vendors are selling to strategicbuyers.Investment portfolio
During the period, one new investment of 317,583 was completed to support theMBO of Westway Cooling in June 2009. Based in Greenford, Middlesex, Westway hasbeen specialising in installing, servicing and maintaining high qualityair-conditioning systems and associated building services plant in therefurbishment and maintenance market since 2001. With a turnover of 10 millionand a record order book, the company is well placed to grow, even inchallenging market conditions.To date the investment portfolio has required very little additional fundingdespite the worsening economic environment. One follow-on investment wascompleted in January 2009 into Monsal Holdings of 68,433 to provide workingcapital and headroom. The company is now doing well following a difficult yearin 2008. It has recently won a number of major contracts and is establishing areputation for its expertise in anaerobic technology.At 30 June 2009, the portfolio comprised investments in nineteen companies at atotal current cost of 14.8 million and valued in accordance with InternationalPrivate Equity and Venture Capital Valuation (IPEVCV) Guidelines at 12.8million. 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 December2008. This further reduction reflects both the tightening trading conditionsbeing experienced by portfolio companies and falls in some of the PE ratios ofquoted companies by reference to which the Company's investments are valued.Appropriate provisions have been made against the relevant investments toreflect 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, weexpect all of the companies in the portfolio to deliver operating profits (ieprior to goodwill amortisation and servicing debt) in their current financialyear. The profitability of Plastic Surgeon, Youngman and PXP has beenparticularly affected by their direct exposure to the downturn in theconstruction and house-building sector.Pressure on capital and maintenance expenditure in the UK retail sector hasalso significantly affected Blaze Signs, although there is guarded optimismthat its clients are now beginning to invest again in signage. PastaKing andVectair continue to make good levels of profits which could be enhanced ifsterling were to strengthen against the euro, reducing the prices of theiringredients and raw materials. Although the advertising revenue of ATG Mediahas fallen, it remains on forecast to meet its budgeted profits due to thehigher than expected revenue arising from its on-line auction software. CampdenMedia has also been affected by the reduction in advertising revenue butremains profitable. British International reported reduced profits due to acombination of poor operating conditions on the Penzance-Isles of Scilly routeand unscheduled maintenance costs.DiGiCo continues to trade strongly, is well ahead of budget and is improving onits performance to date. It has also repaid 217,391 of its loan stock in May2009, earlier than anticipated. VSI is making steady progress after a year ofrecord profits in 2008.SectorGuard has substantially re-organised its management and operations sinceits acquisition of Manguard in March 2008 and has made further significantacquisitions including the addition of Legion Group which has prompted a changeof 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 ofa number of companies in the portfolio which have been most affected by a morechallenging trading environment. Significant redundancies and other costsavings have been implemented in recent months as businesses seek to reducetheir breakeven levels. The need for further cost reductions is kept undercontinuous review.In summary, the portfolio is being affected by the wider environment in termsof a slow down in trading resulting in a number of reduced valuations. However,the relatively modest reduction in overall value continues to provideencouragement. It is important to note that the reduction arises from reducedvaluations rather than any realised investment losses and we remain confidentthat values will therefore recover in the future.
Outlook for new investments
The financial performance of many smaller companies has, as yet, been betterthan many commentators had forecast and owners are generally preferring totrade through challenging conditions rather than sell their businesses or raisecapital at what they perceive to be a low point in the business cycle. Manycompanies' revenue lines have benefitted from relative strength in consumerexpenditure 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, notablytourism.We believe that in seeking to help small companies through measures such asreducing VAT and intervening through support from the state-owned banks, theGovernment may turn out to be simply deferring future corporate failures. Theworst effects of recession do not yet appear to have significantly filteredthrough to the real economy. However, the two main factors that could changethis picture are future cuts in unsustainable levels of public sectorexpenditure and rising unemployment which could feed through to reduceddomestic retail demand. Many more companies will need to take action to cuttheir cost base and in some cases the available padding has already been cutaway. As a consequence of this analysis we do not expect to complete manyinvestments in 2009. However, we believe that during 2010, business owners willbecome much clearer as to their position and future prospects. They will thenbe far better informed as to their need for capital or an outright sale and theterms on which such a transaction can be completed. We therefore expect manymore vendors to come forward. The Company is a well-positioned buyer withstrong cash reserves and this should enable us to acquire good businesses, atattractive 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 2009Investment Portfolio Summaryas at 30 June 2009 Date of Total Valuation % value of initial book net investment cost assets GBP'000 GBP'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 GBP GBP GBP GBP GBP GBP 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 GBP GBP GBP 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 Sheetas at 30 June 2009 As at As at As at 30 June 2009 30 June2008 31 December 2008 (unaudited) (unaudited) (audited) Notes GBP GBP GBP 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 18,388,358reserve 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 86.54pOrdinary 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 GBP GBP GBP Opening Shareholders' 17,998,562 25,727,915 25,727,915funds 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 17,998,562funds ------ ------ ------
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) GBP GBP GBP 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 172,105 204,096 382,555operating 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 3,371,884investments Financing Share capital bought back (221,489) (575,028) (941,996) ------ ------ ------ (Decrease)/increase in cash (14,218) (1,822) 20,250for 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) GBP GBP GBP 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) 4,848,208losses on realisations of investments Transaction - (30) -costs Decrease/ 296,120 (27,035) (225,241)(increase) in debtors (Decrease)/ (46,266) 24,277 2,489increase in creditors ------ ------ ------ Net cash inflow 172,105 204,096 382,555from operating activities ------ ------ ------
Notes to the Unaudited Financial Statements
1. Principal accounting policies
The following accounting policies have been applied consistently throughout theperiod. Full details of principal accounting policies will be disclosed in
theAnnual 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 theauditors pursuant to the Auditing Practices Board (APB)'s guidance on Review ofInterim Financial Information.
b) Presentation of the Income Statement
In order to better reflect the activities of a VCT and in accordance with theSORP, supplementary information which analyses the Income Statement betweenitems of a revenue and capital nature has been presented alongside the IncomeStatement. The revenue column of profit attributable to equity shareholders isthe measure the Directors believe appropriate in assessing the Company'scompliance with certain requirements set out in Section 274 Income Tax Act2007.
c) Investments
All investments held by the Company are classified as "fair value throughprofit and loss", in accordance with the International Private Equity andVenture Capital Valuation ("IPEVCV") guidelines, as the Company's business isto invest in financial assets with a view to profiting from their total returnin the form of capital growth and income. Purchases and sales of quotedinvestments are recognised on the trade date where a contract of sale existswhose terms require delivery within a time frame determined by the relevantmarket. Purchases and sales of unlisted investments are recognised when thecontract 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 valuedat fair value which, unless another methodology gives a better indication offair value, will be at cost;(iii) Where investments have been held for more than twelve months or have gonebeyond the stage in their development in (i) or (ii) above, the shares may bevalued by applying a suitable price-earnings ratio to that company's historic,current or forecast earnings (the ratio used being based on a comparable sectoror comparable quoted companies but the resulting value being adjusted toreflect points of difference identified by the Investment Manager, as well asto reflect lack of marketability). Where overriding factors apply, alternativemethods of valuation will be used. These will include the application of amaterial arms-length transaction by an independent third party, cost lessprovision 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 ofat least twelve months from the date of acquisition. Where a company'sunderperformance against plan indicates a diminution in the value of theinvestment, provision against cost is made, as appropriate. Where the value ofan investment has become permanently impaired below cost, the loss is treatedas a permanent impairment and as a realised loss, even though the investment isstill held. The Board assesses the portfolio for such investments, and afteragreement with the Investment Managers, will agree the values that representthe extent to which an investment has become permanently impaired. This isbased upon an assessment of objective evidence of that investment's futureprospects, to determine whether there is potential for the investment torecover 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, itis considered that the investments are held as part of an investment portfolio.Accordingly, and as permitted by FRS 9 'Associates and Joint Ventures', theirvalue to the Company lies in their marketable value as part of that portfolio.It is not considered that any of the holdings represents investments inassociated companies.2. Capital gains and losses on investments, whether realised or unrealised, aredealt with in the profit and loss and revaluation reserves and movements in theperiod 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) GBP GBP GBP 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 VATAt 31 December 2008, the Directors considered it reasonably certain that theCompany would obtain a repayment of VAT of not less than 200,000. Thisestimate was based upon information supplied by the Company's InvestmentManagers, and discussions with the Company's professional advisors as a resultof the European Court of Justice ruling and subsequent HMRC briefing thatmanagement fees be exempt for VAT purposes. During this period 207,757 ofrecoverable VAT was actually received. The excess of 7,757 has been creditedto the Income Statement, allocated 25% to revenue and 75% to capital return andis in the same proportion as that in which the irrecoverable VAT was originallycharged.
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 shareshown below for each period are respectively based on numerators i)-iii), eachdivided by the weighted average number of shares in issue in the period - seeiv) below. Six months Six months Year ended ended ended 30 June 2009 30 June 2008 31 December 2008 (unaudited) (unaudited) (audited) GBP GBP GBP 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)pOrdinary share (pence) ii) Net revenue from ordinary 26,214 331,785 433,944activities after taxation Basic and diluted revenue per 0.13p 1.53p 2.02pOrdinary 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 - - 179,725capital 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) GBP GBP GBP
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 - - 489,416year ended
31 December 2008 of 2.3p per share Final income dividend paid for - 306,257 306,257year 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) GBP GBP GBP Net assets 16,716,851 21,281,357 17,998,562 Number of shares in issue as at 20,624,052 21,279,171 20,798,92530 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 GBP GBP GBP GBP GBP Valuation at 1 January 64,324 4,469,458 42,433 8,980,663 13,556,8782009 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 12,818,9342009 Book cost at 30 June 150,106 4,332,822 45,782 10,314,008 14,842,7182009 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 12,818,9342009 Gains/(losses) on investments Realised gains based on - - - 16,189 16,189carrying 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 byRoyal Bank of Scotland, Blackrock Investment Management, Goldman Sachs, InsightInvestment Management, Barclays Global Investors, Scottish Widows InvestmentManagement and Fidelity Investment Management. 3,980,136 (30 June 2008: 6,372,366; 31 December 2008: 4,372,136) of this sumis subject to same day access, whilst nil (30 June 2008: 3,491; 31 December2008: 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 GBP GBP GBP GBP GBP GBP At 1 January 207,989 13,449 (1,117,216) 18,388,358 505,982 17,998,5622009 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 Guerin 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. Bridget Guerin is also a director of Matrix-SecuritiesLimited who provided Company Secretarial and Accountancy Services to theCompany 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 andwith Matrix-Securities Limited became effective from 5 October 2004.14. The information for the year ended 31 December 2008 does not comprise fullfinancial statements within the meaning of Section 435 of the Companies Act2006. The financial statements for the year ended 31 December 2008 have beenfiled with the Registrar of Companies. The auditors have reported on thesefinancial statements and that report was unqualified and did not contain astatement 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 haverequested copies of the Report. Further copies are available free of chargefrom the Company's registered office, One Vine Street, London W1J 0AH or can bedownloaded 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.
MATRIX INCOME & GROWTH VCT PLC